Lease versus Buy Essay

When an individual is trying to decide whether or not to lease or buy, he or she needs to know the purchase cost, the lease cost, as well as the interest rate of a loan that will be used to purchase the item. The residual value of the item also must be known up front to help determine if leasing is the better option. When determining whether to lease or buy, the cash flow for both should be compared so the best decision can be made. Below is a chart on lease vs buy. (www.smartcomputing.com; Retrieved November 6, 2006) Lease/Buy Cash Flow – Usually better from a short-term cash flow perspective. Frees up cash for other purposes while you generate income to pay the leases. You pay less overall but need to have available cash. Financing as an alternative costs more than a lease. Tax Treatment – If properly structured, a lease may give your company a larger expense write-off than a purchase. Consult your tax advisor. Depreciation write-off is based on IRS rules for the type of equipment that you are buying. Consult your tax advisor. Upgrades- Many lease companies let you upgrade to newer equipment during the term of the lease without renegotiating. If you need newer equipment, you are on your own. However, simple upgrades (RAM, hard drive, etc.) cost you only whatever the upgrade is. Equity- At the end of a lease, you don’t own the property, and you will need to replace it or buy it from the lease company.You own the equipment and can do with it whatever the needs of your business dictate. Disposal – The lessor is responsible for whatever it costs to dispose of the equipment. You are on to your next set of computers. You can use the equipment for a different purpose within your company, sell it, or pay someone to recycle it for you, but disposal is up to the owner of the equipment. The first scenario is an organization called Bonnesante Research based out of Irvine, California. Bonnesante is set up with Venture Capitalist (VC) Funding. Bonnesante major focus is asset acquisition, which is why the Chief Financial Officer has to weigh the pros and cons of leasing vs buying. Bonnesante’s is trying to determine if purchasing or leasing is the better option for a mainframe computer. I chose to lease the mainframe computer because the loan options have a higher outflow whereas the lease option of 18 months with no down payment has the lowest present value of cash outflows. Because the Mainframe would not be used through its entire economic life, it was better for the organization to lease the mainframe. If a loan was acquired to purchase the mainframe, the organization would have to record the purchase on the balance sheet and the depreciation and the interest payments would be recorded as expenses. If the organization was taxed then purchasing the mainframe would be beneficial because the depreciation and the interest payment would lower the outflows. In the second scenario Bonnesante Research is tasked with finding the best option to acquire a spectrometer. The options Bonnesante Research is faced with are: – Operating Lease – Capital Lease – Loan After evaluating all the information, buying the spectrometer would be the best option for Bonnesante. Buying the spectrometer is beneficial because it is considered to be a long term asset with no threat of becoming obsolete. The spectrometer can be used for its entire economic life. An operating lease would not be beneficial because an operating lease is considered when equipment is to be acquired on a short term basis. The capital lease was another option but was not chosen because the 60 month capital lease would have cost more in present value terms than what the loan amount would have  been to purchase the spectrometer. If the organization had cash flow issues, then the capital lease might have been a better option. Whether the company pursued a capital lease or received a loan to purchase the spectrometer, both options can be recorded on the balance sheet so the organization can reap the benefits of depreciation. The final scenario is Bonnesante Research has been in operation for 6 years and wants to acquire a manufacturing facility. Bonnesante Research already has a facility in mind but that facility will require an upgrade. Bonnesante Research has the options of a capital lease or Bonnesante can purchase the facility by obtaining a loan. Also, Bonnesante Research has to keep in mind the organization is having a cash flow crisis that needs to be resolved. The challenge Bonnesante was faced with was to acquire the facility at the lowest cost possible and to resolve the cash flow shortage. Although the buy option was more expensive than the lease option, it gave Bonnesante more flexibility to upgrade the facility and to carry out a sale and leaseback transaction. Due to the leaseback transaction, Bonnesante was able to resolve the cash flow crisis. The leaseback option was more beneficial to Bonnesante rather than the bridge loan. The bridge loan is a short-term loan with a higher interest rate compared to long term borrowing. A bridge loan would have been more costly to Bonnesante Research and the organization could not afford to go with this type of loan. A sale and leaseback is beneficial to any organization that has a cash flow shortage. Selling the asset can bring forth a large amount of cash and the organization can retain use of the asset by leasing it back hence the name sale and leaseback. The risks involved with lease vs buying depends on an organizations financial status. Whether or not an organization decides to lease or buy is determined by what option is more beneficial to the organization. An organizations attitude toward acquiring assets and financial strength all affect the decision on leasing vs buying. Whether an organization leases or buys, the organization needs to make sure the asset that is being acquired will add value to the organizations capital budget. â€Å"The advantage of computing present value considers all factors such as  inflation and forgone interest on money. That is, account must be taken of the fact that utilizing capital in ‘investing’ in equipment could result in the loss of income that would have been earned if it were invested elsewhere. To properly evaluate the alternative cash flows, it is necessary to discount them and express them in terms of their present values, to determine their net present values. In summary the Net Present Value calculation determines today’s value of future cash flows.† (www.pngbd.com Retrieved November 6, 2006). When determining when to lease vs buy, an organization should take into account the financial and non-financial issues. When considering the financial aspect, it should include the cost to acquire an asset; if there will be a tax advantage, cash flow, and the benefits to the organizations balance sheet. The non-financial issues that should be considered are asset-management and the cost to dispose of obsolete equipment. In conclusion, under certain circumstance leasing is the better way to go rather than purchasing a capital item outright and vice versa. By leasing, it gives an organization a way to acquire up-to-date equipment while maintaining cash flow. By maintaining cash flow through leasing, an organization can use the cash flow for more pertinent renovations such as office expansion or research and development. Leasing has less of an impact on an organizations budget whereas purchasing an item outright has more of an impact on an organizations budget. Overall, leasing is a way for an organization to recognize operational savings and production improvements in a timely manner. Reference: Smart Computing; Lease vs Buy; Executive Decisions; March 2004, Vol. 8 Issue 2 Page(s) 55-57. (www.smartcomputing.com) Papua New Guinea Business & Tourism; Making Capital Expenditure Decisions-Leasing vs Buying vs Borrowing; (www.pngbd.com Retrieved November 6, 2006).

Supporting Positive Behaviour

1. 1 Describe the Policies and Procedures of the setting relevant to promoting Children and Young People’s positive behaviour. Every setting should have a behaviour policy, in England, it is a legal requirement for early years setting. This is a document to promote a positive behaviour of children and adults involved in the setting, it will help all staff to know what we should do in different situations.As a part of this policy there will also be procedures for staff to follow, such as, showing respect to children and other adults or, giving a explanation to the child who is finding it difficult to observe boundaries or, being a positive role model with appropriate behaviour. Also, the policy should detail the strategies that will never be used in the setting. The codes of conduct relate to the behaviour of staff as well as the behaviour of children. These must be managed in a manner appropriate for children age, stage of development and individual needs.For the staff, the co de of conduct will include, for example, keeping calm to stop children hurting each other or behaving in a unsafe way, such as, listening to both sides of the story in a conflict or, not make any negative comments in front of the children. For children, the codes of conduct are about playing safely, respecting others or taking turns. These codes are discussed with children making a Golden Rules, for example, please walk no running or we should share toys with our friends; this helps them to take responsibility for their behaviour and they feel part of the process.To support children’s positive behaviour we will use Rewards, it is based on the idea that, if they receive approval, they are likely to want to repeat that behaviour There are many types of rewards that work well with children. Praise is a very effective way of reinforcing positive behaviour, saying to children ‘well done’ or ‘good boy/girl’ helps them to know that they have shown positive behaviour and stating clearly what it is that is good, e. g. ‘Thank you for sharing the toy, that was very kind’. Attention is one of the best ways of reinforcing positive behaviour.Making eye contact, smiling or nod, it helps the child to know that we have seen what they have done. In my setting, at the end of each session, teachers ask children who has followed the golden rules that day and they get a smiley face. The children are invited to sit in the fairytale chair or on the fairytale step. Sanctions will help us to respond to inappropriate behaviour. For example, saying ‘no’ in a quiet but firm way or, explaining the consequences of actions to their level of understanding helps children to understand why they must no carry on with their behaviour.Rewards and Sanctions should be used appropriately and fairly. For dealing with conflict and inappropriate behaviour we may use different strategies to show that we can manage that situation. For example, ign oring the behaviour, if children are not getting any response from the adult, they will then change what they are doing, when they stop that behaviour we must give them plenty of positive attention. To removal equipment, this sends a message to children that what they are doing is not acceptable or safe. Also we can use facial expression to make children realise that what they are doing is not acceptable.Guidance on inclusion will be a tool to collate all policy relating to all children with additional needs as Special Education Needs or, Gifted and Talented, also the nursery has a policy of having available to all, a variety of items which reflect the cultural diversity of our country. The nursery displays many pictures and posters of children and people from all areas of the world to reflect the inclusion policy. There are many puzzles and other materials available which reflect our diverse society. We want children recognise that certain actions are right and that other are wrong .Children must be encouraged to recognise that bullying, fighting or hurting are not acceptable behaviour and they will not be tolerated. Anti-bullying policy is to ensure that children learn in a safe, supportive and caring environment, without fear of being bullied. Bullying is a complex issue and takes many forms (racial, sexual, disability,†¦ ). It can be physical, verbal or emotional and can be cause serious psychological damage. A child often bullies for a reason, it is important to try to find out why a child may be bullying others, usually a child that is bullying has some personal difficulty that needs addressing.Biting policy will follow in the event of a child being bitten. Biting is a form of behaviour that is particularly prevalent in children whose language skills are only just developing and can often be an expression of frustration because they cannot yet express their feeling and it can become a habit. In this cause we must act immediately, to explain to the bi ting child why biting is unacceptable, that it hurts the other child and show the mark. Remove the biting child from the circumstances and keep him busy at all times. We will always inform the parents about the incident and should keep confidentiality.Attendance policy is usually part of a school’s code conduct because children’s education can be affected if they do not attend regularly or are often later for lessons, being absent from the school means a lost learning opportunity. To ensure that each child is encouraged to attend from the first day that they enrol at reception. However, in an early years setting, this is not likely to be part of a behaviour policy. In any case, there must be a time control input and output. 1. 2 In your own words describe what your setting behaviour policy expects from adults and children.In my setting we believe that children grow up best when their personal, social and emotional needs are met and where there are clear expectations fo r their behaviour. The aim is to teach children to behave in socially acceptable ways and to understand the needs and rights of others. To help children to learn to empathise with others, understanding that they have feelings too. Where children behave in inconsiderate way, we help them to understand the outcomes of their action and support them in learning how to cope more appropriately.All staff, volunteers and students must provide a positive role model of behaviour by treating children, parents and one another with friendliness, care and courtesy. Also we must use positive strategies to resolve any inconsiderate behaviour, by helping children to find solutions in ways are appropriate for their age and stage of development. We must be calm and patient helping to manage children’s feelings. 1. 3 Describes with examples the importance of all staff consistently and fairly applying boundaries and rules for children and young people’s behaviour.It is very important that all staff consistently and fairly apply boundaries and rules for children’s and young people’s behaviour. For example, if we want to teach children that they must eat sitting and not playing, all staff must apply the same rules every single day in the lunch time, not allowing toys and remind them to sit down when they stand up, because if children with a staff member can run and play while they eat but with another member they must eat sitting. They are confused about this change in the rules from one day to another and they cannot know which behaviour is the correct.

No end to this disgrace in sight! Essay

†¢ U. S. Prison Population Soars in 2003, ’04 The population of the nation’s prisons and jails has grown by about 900 inmates each week between mid-2003 and mid-2004, according to figures released Sunday by the Bureau of Justice Statistics. By last June 30 the system held 2. 1 million people, or one in every 138 U. S. residents. †¦ [The] increase can be attributed largely to get-tough policies enacted in the 1980s and 1990s. Among them are mandatory drug sentences, â€Å"three-strikes-and-you’re-out† laws for repeat offenders and â€Å"truth-in-sentencing† laws that restrict early releases. †¦ [M]any of those incarcerated are not serious or violent offenders, but are low-level drug offenders — ABC News, 2005-04-25 It’s a rosy future for the prisons-for-profit industry. †¢ Gregory Palast: Gilded Cage: Wackenhut’s Free Market in Human Misery †¢ A Letter to Barbara Bush †¢ Noam Chomsky: The War on (Certain) Drugs †¢ Lee Rodgers: The Duplicity of the War on Drugs Looking at the accumulated evidence that the Contras and the CIA engaged in cocaine smuggling to fund the covert war in Nicaragua, suspicion arises concerning the apparent coincidence that CIA-Contra drug smuggling was contemporaneous with the ‘war on drugs’. From a CIA covert action in Latin America the cocaine has made its way NORTH (ala Oliver North) to the American consumer, who is consistently portrayed as African-American by the mass media, even though the majority of cocaine consumption is by whites. The disturbing prospect arises that this ‘war on drugs’ was nothing more than CIA-style psychological warfare which sought to acquire as much as possible of the sum total of our civil liberties while particularly targeting minorities. †¢ Daniel Hopsicker: The Secret Heartbeat of America: A New Look at the Mena Story. I will never, as long as I live, forget our ‘Midnight ride to Mena,’ seated beside tour guide and American hero Russell Welch. I’m convinced that what I saw there that night was a fully functional and operational secret government installation. By that, I do not mean a secret installation of the government of the United States of America. Unh-uh. What I believe I saw, and what I believe exists in Mena, Arkansas today †¦ is an installation of the secret government that runs the government of the United States of America. And here’s what I suspect: that today, long after Oliver North has become nothing but a minor league radio DJ †¦ and long after the contra war is just a fading memory of yet another minor league war, our government — yours and mine — is going about the lucrative worldwide business of drug production and distribution. †¢ Peter Webster: Anatomy of a Fiasco: a review of The Swedish Drug Control System As with the understanding of crowd madnesses and ritual persecutions of old, a satisfactory and general theory of our great modern Prohibitionist folly will probably have to await not only the final demise of the madness, but an intervening period of normalization and healing recuperation lasting perhaps several generations. From the perspective of the distant future, historians may well conclude that the centuries-long phenomenon of Substance Prohibition †¦ reached its dizzying peak in the late 20th Century as a climactic exaggeration ad absurdum of a long-enduring collective delusion and paranoia. But even if we could, by virtue of a time machine, read such a theory today, the continued existence of the crowd madness in our midst would certainly preclude any general recognition or acceptance of its validity. Thus, although there now exist a few obscure essays which may someday be seen as harbingers of that still-distant revelation, they will probably have minimal influence on the immediate course of events and we can today do little more than study local details of the Prohibitionist phenomenon and force society to look at the ugly and counterproductive results of its obsession in the ongoing attempt at curing the malady by stages. There seems absolutely no possibility that a great and general truth about Prohibition, no matter how brilliantly expressed, could today awaken Western Civilization from its present nightmare. But in the meanwhile, to assist the growing number of individuals who can see the inevitable if distant dawn of a new rationality, a wealth of excellent literature exists and continues to grow at a gratifying pace. Such literature deals with the â€Å"local details† of the Prohibitionist phenomenon in ways which both illustrate its illogic and destructiveness to society, and suggests practical if only provisional tactics and strategy for limiting the ravages of Prohibition and tackling the difficult task of awakening the general public to its complicity and participation in a crowd madness of major proportions. †¢ Kristianna Tho’Mas: Opium War: Britain Stole Hong Kong From China Governments have been behind the drug trade for a long time. †¢ Illicit Lemon Drops Get Boy a School Suspension — from the Los Angeles Times, 1997-11-20: COLORADO SPRINGS, Colo. — A 6-year-old boy has been suspended for half a day for bringing â€Å"drugs† to school: lemon drops bought in a health food store. The fire department and an ambulance were called after a teacher found first-grader Seamus Morris giving the candies to a fellow pupil on the playground Oct. 29, said his mother, Shana Morris. She said both boys’ parents were urged to take their children to the hospital for tests, despite her assurances that the lemon drops were harmless. John Bushey, an administrator at Taylor Elementary School, said the half-day suspension was consistent with the district’s drug policy, which treats unfamiliar products as controlled substances. Here’s the original Denver Post story. †¢ How the U. S. Drug War Plays in the European Media According to â€Å"Juan,† the US government is chiefly concerned with getting political and economic advantages from the drug trade †¦ â€Å"Washington uses the DEA to pressure other countries politically. † At times, the US permits drug trafficking so that it can get information to use to â€Å"blackmail foreign governments. † As the Hopsicker article shows, the U. S. State of Arkansas is one of the murky epicenters of the CIA’s smuggling of addictive drugs into America. Finally some light is falling upon the creepie-crawlie characters in this cesspool. The case of Dan Harmon is interesting: †¢ Dan Harmon Indicted. He â€Å"is charged with running a drug-related ‘criminal enterprise’ while serving as prosecuting attorney for the state’s 7th Judicial District and heading its federally funded drug task force. † †¢ Dan Harmon Convicted Despite the apparent wish of the federal prosecutors to take a dive, the jury convicts. †¢ Arkansas Justice An editorial from the Wall Street Journal. †¢ A Question Regarding Harmon â€Å"Harmon ran what a lawyer in Pulaski County recently described as ‘a reign of terror’ in the counties he was sworn to serve. All of that raises the question of why the man was not stopped earlier. † This is just the tip of the iceberg. Those interested in the drug scandals of Arkansas can read more on the CIA page and in the selected messages from the CIADRUGS mailing list. †¢ Crime and the War on Drugs — from Harry Browne’s 1996 U. S. presidential election campaign platform †¢ Vin Suprynowicz: The Big Lie †¢ U. S. to Criminalize Trade in Vitamins Are you a vitamin C abuser? †¢ DEA raid on Shulgin Laboratory †¢ Further information and ongoing reports from the trustee of the Alexander T. Shulgin Trust (including the final report). †¢ Drug lawyer speculates on the future. †¢ The Marijuana Policy Project The MPP is working to chip away at the excesses of the current prohibitionist policies, gradually replacing them with reasonable regulations. †¢ Interview with Michael Levine, former DEA agent, in which he relates his involvement as an undercover agent in heroin and cocaine smuggling in S. E. Asia and South America. †¢ Cocaine Politics — Drugs, Armies and the CIA in Central America A book by an academic and a journalist which exposes the lies and hypocrisy behind the â€Å"war on drugs†. †¢ A review of Smoke and Mirrors: The War on Drugs and the Politics of Failure †¢ A review of The Politics of Consciousness: A Practical Guide to Personal Freedom †¢ The Arguments against Cannabis are Flimsy! from the Usenet newsgroup uk. politics. drugs. †¢ The Introduction from the 1996 Positronics Sinsemilla Fanclub Catalogue. There are some countries (considerably more enlightened than the U. S. ) where the â€Å"war on drugs† is perceived even by the government itself to be a lie and a fraud. †¢ Paul Staines: Acid House Parties Against the Lifestyle Police and the Safety Nazis †¢ Costs of cannabis laws outweigh their alleged benefit, an excerpt from Marijuana: The New Prohibition by Professor John Kaplan. †¢ Civil Asset Forfeiture — the end of the rule of law Legal theft in America. †¢ The Introduction to Brenda Grantland’s Your House is Under Arrest You may say this could never happen in America because the U. S. Constitution protects you. There you are wrong, because it is happening in the U. S. — at an alarmingly increasing pace. †¢ Judy Aita: U. N. Drug Report †¢ Licensed to Deal, Marijuana Sellers Put Arizona on the Spot †¢ U. S. prosecutions of pro-marijuana doctors barred At the end of April 1997 a U. S. district judge issued an order temporarily barring the federal government from prosecuting California doctors who recommend marijuana to their patients. †¢ Court gives pot back to epileptic Judge Sheppard stressed that his decision had nothing to do with the recreational use of marijuana but was based on solid proof that the substance is an irreplaceable aid to Mr.Parker’s health problems. He said that to deny Mr. Parker the substance would be to interfere with his right to life, liberty and security of person. Liberty includes the right of an individual to make decisions of personal importance, the judge said, and health is surely one of them. †¢ Steven Silverman: A Harsh Civics Lesson †¢ Dr. Bernhard Haisch: A Viagra-model Solution to the War on Drugs †¢ Medical Use of Cannabis ‘Could Soon be Legal’ †¢ Illicit drug use in the EU: legislative approaches (372 Kb PDF file) †¢ Edgar J. Steele: Pogo Was Right.

History of the Geology of Earth Research Paper Example | Topics and Well Written Essays - 1500 words

History of the Geology of Earth - Research Paper Example The earth has undergone very many physical changes on its geological features since its formation. The earth’s continents have been drifting apart for millions of years since their formation. 760 million years ago, during the initial stages of drifting, the earth’s continents had combined to form the Rodinia super continent. Around 600 million years ago, after rodinia broke apart, the continents drifted and formed Pannotia. Pannotia broke apart and the continents later formed Pangaea. Pangaea broke apart and the continents started drifting away from each other, 180 million years ago. The history of the geology of the earth is divided into chronological eras during which the earth had some outstanding characteristics and major geological events took place. This paper addresses the history of the geology of the earth. The Precambrian eon The Precambrian is the era began at the time of the formation of the earth and lasted till around 570 years ago. This period of time mak es up to about 90% of the earth’s geology history. In the initial period of the Precambrian, the earth was cooling down and it formed a crust that made its surface. The rocks that were formed were mainly volcanic and igneous intrusions rocks which were spread all over the surface of the crust. The Precambrian had three long eras, the hadean, Archean and the Proterozoic. The Hadean lasted almost 700 million years after the earth’s formation. During this period, the earth cooled down and there was the formation of the earth’s surface which was mainly composed of volcanic belts. The temperature of the earth’s surface was still very hot but it was gradually cooling down due to the reduction in collisions with huge rocks in the earth’s orbit. It is also during this period that the earth’s moon was formed. Archean is the era that followed. It lasted from 3900 to 2500 million years ago. The earth experienced tectonic processes that formed sedimenta ry basins on its surface (Stanley 55). The rocks dated from this period reveal that there was simple life; bacteria and algae fossils were present on the rocks. The proterozoic period, 2500 to 570 million years ago, was characterized by the formation of vast rifts on the earth’s crust. The rifts were filled with volcanic rocks as well as the sedimentary rocks from the sedimentary basins (Sasso 59). This period also saw the formation of seas in which a lot of iron minerals were formed. There was early life in the seas and the amounts of oxygen kept increasing in the atmosphere. In the proterozoic eon, the Rodinia super continent drifted apart and later the Pannotia super continent was formed. Glaciers also started forming on the earth’s surface in the eon. The Phanerozoic Eon This is the eon in which the earth is currently in. It wraps the geology history of the earth from 550 years ago to date. After the breaking of the Pannotia super continent, the continents drifted and recombined to for the Pangaea. Pangaea then broke into the current continents. The continents have been constantly drifting apart. The phanerozoic eon is also categorized into three eras, the Paleozoic, Mesozoic and the current Cenozoic eras. All these eras experienced significant geological changes of the earth (Zhao, Sun,Wilde & Li 94). The Paleozoic Era The Paleozoic era, 570 to 245 million years ago, marked the end of the ice age and the beginning of early life on earth in the seas. It

Organization Strategies Essay Example | Topics and Well Written Essays - 1500 words

Organization Strategies - Essay Example Key environmental factors are predicted and their influence on the organization looked at and then optimum measures are taken so the organization can benefit from these environmental factors (Mintzberg 1976). Strategy looks at long-term direction and guides short term plans. It is understood at the top and middle levels of the organization. A strategy is as such clear that there is no way delicate. The results are defined; this is involved with the translation of strategies in to realities of the organizational structure, operations, policies and products. This in essence closes the gap between the companies' current position and where it would like to be. At last significant matters are identified and prioritized. Outcomes are positive statements of the changes the company needs to make to it and the results that it must carry out in its environment to fulfill strategic requirements. Outcomes are the steps for an organization towards strategic closure. Organization strategic plans are in general prepared of many interconnected elements; Vision, mission, Values, assessment, goals/objectives, strategy and outcomes. They have also major role in integration of strategic management principles and models. A feasible example of a strategic plan follows: The Vision gives a proposal about the objectives of the organization and broadly capture future services, markets and structures but do not go in to great detail. The Mission statement delineates customers, competitors and markets. It demonstrate a preferred location in a predicted future world" and a "bulls eye or target of the strategy."A mission should not consign a firm to what it must do in order to survive but what it chooses to do in order to thrive. Values are what the company believes to be true; values offer guides for staff on how to act within the company and ethical standards for all the stakeholders. Values set the company independently from its competitors and show the reliability of the organization. Measurements of the organization are the external and the internal forces, which will affect the company in making its mission and vision successful. These can be carried out in an environmental scan, which includes the following components; 1. Internal analysis of the firm 2. Analysis of the firm's industry (task environment) External macro environment (PEST analysis) A SWOT (Strengths/Weaknesses/ Opportunities/Threats) task can also capture the overviews of a business. Outside factors can vary from economic condition to changing technology and competition and are shown as threats and weaknesses. Inside factors can be anything which may belong from assets to liabilities and are usually shown as threats and weaknesses. Then the transition to the future is assessed with regard to industry and competitive environment, general and organization specific environment. PEST stands for political, economic, environmental and technological. The PEST analysis and explain the components of a macro environment within the organization and these can also be converted to fir in with a SWOT analysis. To create competitive advantage for an organization, it is identified that there are three strategies, Cost Leadership, Differentiation and Focus. The suitable standard strategy will make location of the firm to leverage its strengths and defend against the adverse effects of the five forces (Porter 1980). Cost Leadership comprehends

Recycling in the US Essay Example | Topics and Well Written Essays - 1500 words

Recycling in the US - Essay Example It should however be noted that all this developments in waste management took place against the backdrop of lack of mandatory legislations on recycling. Consequently, states like New York, California, Connecticut, Massachusetts, Michigan, and Hawaii among others introduced measures to popularize and enforce recycling as a waste management strategy. Through legislations, disposal of recyclable wastes was penalized and the offenders had to part with heavy fines. Keywords: recycling, waste materials, legislations Recycling in the United States of America Recycling entails collecting and processing materials that would otherwise end up in trash. The recycling process converts such material into new products. As such, recycling is very beneficial to both the community and the environment. Many countries across the globe have embraced the concept of recycling. For instance, the United States has been in the frontline in ensuring that recycling is done in an effective way. As much as there lack any federal law that mandates recycling in the United States, various states and local government have taken it upon themselves to institute a wide range of recycling requirements and procedures. Various states have established law oversee the recycling of various products. In a nutshell, mandatory and voluntary methods were employed in implementing the introduction and adoption of recycling. While the mandatory strategy drew its backing from compulsory laws and regulations, voluntary techniques were enforced without coercion and were built around winning the goodwill of concerned parties and letting them participate at will. Many states employ the two strategies combined in order to increase the avenue for effective waste management and so far the results are tremendous. The country has lived to see trucks which collect garbage being combined with waste processing trucks to speed up the recycling of unwanted materials Waste management is currently a burning issue as the world dawns to the harsh realities of global warming together with the ever changing climatic patterns. Many conventions and declarations have been made to try reversing the trend but still there remains a substantive work to be done (Pellow, 2007).Garbage has been identified as a contributor to this threat to sustainable human, animal and plant life on the planet earth. The question then comes to how best can these wastes disastrous as they are be managed with the least of resources to attain an efficient pollution free environment? It is upon this basis that recycling as a waste management technique comes in. This presentation critically looks at the advantages and disadvantages of employing it as a waste management strategy in the United States of America (Pellow, 2007). Advantages of Recycling It promotes the conservation of scarce natural resources. Due to their limited availability, resources like timber, minerals and water need to be protected from depletion as they play a crucial role in ensuring the sustainability of life and minimizing conflicts that may result from the scramble for the little available resources. Trees play a crucial role in the gaseous exchange of the ecosystem besides providing ground cover and protecting water catchments. Water is a necessity of life for both the flora and fauna. Its absence or limited presence thus poses a great risk to the environment. Minerals are limited in supply meaning their continued extraction leaves nothing. It is thus

The Battle to be Top Dog PetSmart vs. Petco Essay

The Battle to be Top Dog PetSmart vs. Petco - Essay Example This created the popularity of the company and improved the customers trust in the benefit of the company. Handling competition is not an easy job and it needs committed resources of manual labor, system, and financial plan. Any trail off from a company would lead in decline of market share and profit. This made the Petsmart advance, widens its market thus included services such as, adoption, training, veterinary, grooming, day care, and more so pet hotel. . The article illustrates how Petsmart has vastly managed to strike equilibrium between being wholly alert on availability and pricing, which is highly vital in competing with strong merchandisers and looking into value added- services. The previous year the company groomed 7.5 million dogs, a 16% increase over the year before. It provided 378,000 training classes, another 16% increase. Overall, services are to generate $450 million sales this year, about 10% of the companys $4.5 billion total, but representing 26% annual growth since the initiation of the strategy in 2000. The structure of the company itself is a competitive strategy since it pleases the sight of the customer and the pet. For example, the inner dà ©cor was in blue color, decorated with brick and sliding to be attractive to the public. Petco uses a highly different approach compared to Petsmart. It Diversifies its market products Moreso for other animals not necessarily pets products. It recently introduced a â€Å"reptile rendezvous†. This Includes, the demonstration of products, and the photo contest. This strategy has improved its income since the effectiveness of the program pleases customers. Although petco has not embraced the services aggressively like Petsmart, it features grooming services and more so providing doggie day care at various locations. These Strategies have made it succeed thus withstanding the stiff competition from the Petsmart. Other sources say

Can other parts of a crime lab be as scientific as the DNA lab Essay

Can other parts of a crime lab be as scientific as the DNA lab - Essay Example Many police and anti-crime organizations the world over still rely on fingerprint evidence to track down a criminal but this technique has recently been put into doubt. Part of the reason is that new DNA technique is more accurate and reliable but most organizations lack the expensive equipment and expertise to do DNA testing. However, experts claim fingerprinting is not 100% fool-proof or reliable. Overview of fingerprinting – the first-ever precedent-setting criminal case in which the only evidence of fingerprints left at the crime scene was used to convict a suspect was the Rojas murders; this was a case in Necochea, Argentina back in 1892 in which the mother killed her two young children but originally accused her neighbor of the twin murders. However, when she was confronted with the incriminating evidence of bloody fingerprints on her door post, she admitted to the crime. Prior to fingerprinting, there was also the Bertillion system that had utilized a set of body measurements to identify and classify people; it was named after Alphonse Bertillion who was a French anthropologist. However, the famous case of Will West – William West in which two people had the same measurements, had almost the same names also and almost identical facial features (based from their photographs) called his systems reliability into question and caused doubts among criminologists. Fingerprinting was found to be reliable than the Bertillion system, in the same way that DNA testing is today more reliable than fingerprinting. Basic scientific principles – the method of fingerprinting was first developed by a great British anthropologist named Sir Francis Galton who first suggested the use of fingerprints based on the uniqueness of very minute details. It was another Englishman named Sir Edward Henry, assigned to Bengal, India as inspector general of the police during the

Costco Cracks Taiwan Market Essay Example | Topics and Well Written Essays - 250 words

Costco Cracks Taiwan Market - Essay Example For example, company adjusted its American brands after analyzing local tastes / desires and then offered at one of its Taiwan’s stores. Indeed, Costco sold an experience that was highly appreciated by Taipei buyers. In addition, the company has also adopted the strategy of localization thereby introducing new and existing products in a specific region or area that suit local customers. (Cheng, 2010) For instance, the company has focused on market penetration (low prices for existing products), product development (offering new and innovated products to current markets) and market development (expanding in new regions) strategies. In fact, Costco focuses on differentiation of its global products to obtain a clear and distinctive image in the minds of consumers. For example, Costco offered some new brands at lower prices to penetrate in Sydney market. (Stafford, 2010) The above mentioned strategies, indeed, have resulted in Costco’s global expansion and growth. The sales in US market grew by 6% while in international market, the retailer observed a staggering 25% growth. (Talley, 2010) and (Associated Press, 2010) Stafford, Patrick (2010) â€Å"Costco Sydney site approved, and local retailers must adapt† Smart Company Available at http://www.smartcompany.com.au/retail/20100416-costco-sydney-site-approved-and-local-retailers-must-adapt.html Talley, Karen (2010) â€Å"Costcos Profit Jumps as Sales Growth Speeds Up† Wall Street Journal Available at

Speech on Dicken and Chandler or Presentation Example | Topics and Well Written Essays - 500 words

On Dicken and Chandler - Speech or Presentation Example The multinational companies do not always fulfil their share of bargain of developing the country they are in economically (Dicken, 2010) and this becomes a great challenge to the local people. In order for the government to ensure that their people benefit from the revenue and work by the multinational companies, they should insist on being shareholders in the project as well as provide its own set of conditions before allowing the company to set base in the nation. By the companies including the local people, it will mean that soon the locals will have knowledge, expertise and financial means to start their own businesses which will contribute towards competitiveness as well as building up industries (Reich, 2010). The more the multinational companies set camp in the country, the more the revenue will be collected and the more the national competition will be on the increase. The more the revenue is generated by the companies which goes to the government, the more the government wi ll be in a position to build its own industries as well as develop the others already present and modernize them. This will be possible only if the human capital is being fully utilized as well as the managers and top officials of the government are coordinating with each other.

What Should Medicine Do When It Cant Save Your Life Essay

What Should Medicine Do When It Cant Save Your Life - Essay Example Atul Gawande sees hospice as a morphine drip. It serves as a way to minimize the terminally ill patient’s anxiety on death and provides the family with opportunities to accept and seize every important moment that can make it easier for the patient and family to accept the natural course of faith resulting from the disease. I do believe that hospice care has relatively high importance with the families of patients suffering from terminal illnesses, not only that it addresses the sufferings that are bound to be experienced by the patient but also some observations indicate that hospice care prolongs the survivability. Creed refers to patients that are in a situation in their life wherein they have already understood that they have a have a fatal illness however they do not fully consider it as a condition which will end up in their demise. There are various approaches, some of which may not be applicable to other patients. This is primarily due the differences in the character of each individual. However, Dr Creed is able to effective apply this approach to patients. Instead of explicitly conveying a notion of being sorry for the condition of the patient, Creed says to her patients that she there to make their life better and that they have a lot of time to waste, given such condition. Dr Block focuses more on helping the patients identify what is most important to them and provide them with information and advice on the best approach that could help them address the salient activities that would the most impact on those important matters that the patient pointed out.  

Radio-Frequency identification technologies Essay Example for Free

Radio-Frequency identification technologies Essay REID technologies Introduction   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   RFID is an acronym that stands for, Radio-Frequency identification. This refers to a small devise that has a small chip and antenna. This chip can carry at most 2,000 bytes of data. This device mainly serves the same purpose as the bar code or a magnetic strip at the back of an ATM or any other credit card and provides a unique identifier for the said object. Just as the magnetic strip is always scanned to gain information, the RFID must also be scanned so as to get the saved information (Angell, I. ; Kietzmann, J. 2006). There is a significant advantage of RFID devices over the barcodes because this device does not require to be precisely positioned relative to its scanner. The RFID devices do not have to be in contact with the scanner itself as we have witnessed in many instances in the case of barcodes. One may be able to count all his/her purchases by just collecting all of them into one bag which is placed over the scanner. The scanner will read all the RFID without having to manually move these products across the scanner. For high frequency scanners it could be able to read up to 20 feets above it. (Angell, I.; Kietzmann, J. 2006) argues that these devices are also very minute and they could be embedded in the product labels, the environment and other strategic sites so as to track the movement of the holders. They are activated by receivers and they transmit a lot of information which ranges from product information like the purchase location, manufacturer’s date and the route of delivery, the credit history of the person who is holding the card along with his/her the address. The active RFIDs are very capable of data transmission even if they have not been activated by any receiver. They could be linked with inbuilt sensors so that they can continuously monitor the conditions of the environment and the applications that are of interest to the US military and the environmental groups. The information amount that is accessible and also generated through the RFIDs is so big the it may overwhelm all the data sources that is in existence and also become from the humans view point as infinite. So in a society where every individual is embedded with an RFID chipset, they will always be under a constant surveillance as it was put forward by Cloud Atlas with the resistance taking the form of a struggle to transmit  the information to the present and also the future stakeholders in the globe in case of any catastrophe. Hayles PropositionHayles (2009) argues that that the RFID issues should not be used to beat a retreat to the liberal humanism but on the other hand sees it as RFIDs are just like the human cognition that is multi layered and context aware which is capable of generating novel meanings along with interpretations just like the RFIDs. He continues his argument by adding that consciousness should not be taken just as being the only arbiter of meaning and hence gives non-human agents a room to contribute to the cognition of the humans. And in this view, the RFID technology therefore ceases to be part of the distributed cognition system which have for a very long time been extended and amplified human cognition (Hayles, 2009). Arguments   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   (Galloway , 2004) argues that the calm technology concept emanated from cultural and political-economic environment that reflected on the researcher’s own desire for minimalist, high technology living and aesthetically pleasing living in the work places and this does not change the fact that the seamless computing concept are so much inherent in the present day computing technologies. Also the central thing in the ubiquitous and pervasive technologies is the ability of the computer to have the capability of perceiving, interpreting and reacting to the information that has been fed into it. The information infrastructures also must be able to shift from the periphery into the centre and hence to be able to recognize and also respond to the actual context of use. The context computing will therefore rely on two types of information namely: physical location and user identity, where both require very big data acquisition and also stora ge and delivery mechanisms. The GPS or the Global Positioning systems are now familiar locations awareness technology. Galloway being a sociologist is always very keen to make it clear that the technologists always work on bridging the sociology into the Ubiquitous computing framework and sees it as a very good idea that collaboration between the sociologists who are concerned on how people lead their lives on a day to day basis and the innovators of technology is something that needs to be encouraged (Galloway, 2004). He is keen to put it that the use of RFID technology could be very useful to the supply chain but on the other hand it can be used to collate and gather information behind the scenes from some of the desperate sources. The Data matching that comes with these technologies, along with personal identification and the information from locating sensing abilities; once they are combined they could pose a very big problem to the citizen’s ability to act in the world. This concept of a utopian or dystopian future which is created by these technologies comes from a technological determinist view that the society is shaped by technologies. But (Hayles, 2009) on the other hand was trying to show that the distributed cognition model that could be identified as ubiquitous computing could change the environment to pave way for a utopian or dystopian world is not just a new development that has cropped up but something that has existed for long. I think the epistemological or the ontological distinction could be of a great use in this context. Hayles (2009) points out that the epistemological question is where we could and should discuss the privacy issues as it gets the same sort of things in the data or information distinction, which is that something very fundamental than disclosure of the data could be at stake. My thinking in the way that Hayles (2009) formulates the question as one that changes the way that we think of human subjectivity could be basically useful; which is the general direction as she indicates. On this point, I would like to notice one part of the argument; the RFID tags on what she portrays exist as both virtual presences and devices negotiating the boundary through the transmission of data from the things world to the information world. In my argument, they are just active participants in what could be seen like informatics of subjectivity, taking subjectivity as the primary informatics as being the product of or by constituted by the information. (Gordon Hull, 2014)One thing that is worth noting about this is that the formula here is directly bio-political, as far as subjectivity is neither Cartesian (being generated and also guaranteed by something which is besides the material world interactions) nor is it Juridical (in a sense that Locke applies in Essay 11.27 in opposition to Rene Descartes and in which Foucault means the term) but just an emergent product of the interactions of the environment and the humans. The informatics of subjectivity brings into account general biological information in bio-politics understanding. The next implication of this formulation gives one the freedom to address the question of resistance and also how we should work to ensure that the RFID technology will form a part of a better world but not lead the worsening of it. As she put forward, resistance in the etiological register is so much understood even though not all that effective with the ontological things being more difficult. â€Å"Epistemological issues lend themselves to strategy and tactics (from sophisticated counter-surveillance techniques to brute force methods like smashing RFID tags with a hammer or frying them in a microwave), but how do we understand the ontological effects of animate environments† (49-50). The reading from Philip K. Dick’s Ubik (1969) stresses that capitalism on itself could not be the only trusted to come up with salutary results (65) and she also closes the argument by saying that, â€Å"The idea that meaning and interpretation can occur across and between human and mec hanical phyla contributes to an expanded sense of ethics necessary when the contexts for human actions are defined by information-intensive environments and include relational and context-aware technologies such as RFID† (69). Conclusion   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   To me, it seems as far as RFID tags settle the boundary between the informatics and the objects and the transition in between those, they should be seen as sites for the primitive capital accumulation. This is to mean that they are places where the objects becomes subsumed into the capitalist structures of the market as they are dispossessed of whatever the value they might had before. So when RFID technologies contribute to this process as for instance when they are utilized in generating revenues in case of metadata processing for the huge corporations through consumer purchases tracking is the time that they should be carefully scrutinized, with their political and economical subject to the highly careful critique, specifically as it is at this moment that they make up us as the subjects of global capital, and or where the resistance of the constitution is needed or called for (Gordon Hull, 2014). References Gordon Hull, (2014). RFID Tags, Informatized Subjects and Biopolitics. A group blog with people from all over the map. HYPERLINK http://www.newappsblog.com/ New APPS: Art, Politics, Philosophy, Science.11 September 2014 Galloway, Anne. ‘Intimations of Everyday Life: Ubiquitous Computing and the City’, Cultural Studies, vol. 18, nos. 2/3, 2004 Hayles, Katherine, N. ‘RFID: Human Agency and meaning in Information-Intensive Environments’, Theory, Culture Society, vol. 26, nos. 2/3, 2009. Angell, I., Kietzmann, J. (2006). RFID and the end of cash?. Communications of the ACM 49 (12): 90–96. doi:10.1145/1183236.1183237. Retrieved 9 November 2013. Philip Dick Ubik (1969). One of Time’s. Mariner book. Library of congress cataloging in publication data Source document

Corporate Policy of Starbucks Coffee

Corporate Policy of Starbucks Coffee Starbucks Corporation is a multinational corporation based in the United States and is the most famous and largest coffeehouse company in the world. It boasts of 15,000 stores in 45 countries. Starbucks specializes in coffee in all its forms: brewed, espresso, served hot or cold along with other related snacks and raw coffee beans. This conglomerate started in 1985 as a coffee bean roaster and retailer in Seattle, Washington where it still holds its corporate offices. From the 1900s up to now, a new store is opened every day. As of the last quarter of 2007, Starbucks owns 8,505 stores around the world, and 6,500 stores are franchised. As of last quarter of 2007, Starbucks reported a gross profit of $1.5 billion and a net income of $208 million. According to the financial report for Starbucks that is published in the web, Revenue and earnings have grown at roughly 25% annually for the past five years, and should continue at an above-average rate given Starbucks competitive position an d already proven record. Management is expecting 18% top-line annual growth and 20-22% in the bottom-line for the next several years. Domestic same-store sales have been stabilizing at around 4%, with transactions accounting for 1%. Internationally, same-store sales increased 7% for Q3 driven by 5% transaction growth. International comparable sales growth has been north of 5% every quarter. It would be wise to invest in shares of stock for Starbucks since it can be seen in their financial statements that since they have expanded their operations, there is a steady increase of revenues and profits. Starbucks have produced a more than average sales and earnings growth in the past years. The companys very impressive earnings growth projections are a good indicator to go ahead and invest. Starbucks still focuses on their expansion ventures across the United States and abroad in the companys owned stores and the franchises. Majority if not all exhibited a solid financial performance. The increase of revenue is caused by the opening of more and more stores across the globe to accomplish its vision to establish the most respected brand in coffeehouses. With 1,288 new stores in 2007 and a planned 2,400 more in the next months, revenues and sales would surely shoot up higher. According to the Starbucks Quarterly Report (Mary 2007), Global comparable store sales for Company-operated markets increased by 4% for the 13-week period ended April 1, 2007, and increased 5% over the first half of fiscal 2007. Comparable store sales growth for fiscal 2007 is expected to be in the target range of 3% to 7%. The Company purchased a 90% stake in its previously-licensed operations in Beijing and Tianjin, China. Starbucks in the United Kingdom It was in May 1998 that Starbucks gained foothold in the coffee shop market in Europe by acquiring 65 Seattle Coffee Company establishment in the United Kingdom. Starbucks and Seattle Coffee shared the same culture that centers on the desire to customize coffee. Moreover, they also have almost the same company values of respecting people and the environment. In the UK, the Starbucks store designs and ambiences are meant to be cozy and intimate, at the same giving its coffee drinkers a personal area to stay anytime. Tables, chairs, sofas, armchairs, and stools are specifically designed to make every customer feel important. Anyone who wants serenity apart from the home and solace after the chaos of office work can relax and stay deep in a book or magazine. Some even bring their work along and meet friends and prospects in Starbucks stores. Exclusive Starbucks music is made available in all its coffee shops around the  world. In the UK, the head office and support center of Starbucks is located in Chiswick in South West London. Starbucks Losing in the United Kingdom Costa Coffee is giving Starbucks a hard time in the UK. According to financial sources,  £10 million have been lost by Starbucks since 2009. The figure show a loss before taxes of over  £9 million for one year in the middle of this year compared to only  £2 million in 2009. This poor performance emphasizes the concerns of CEO Howard Schultz last year when he made an evaluation of the UK economy. He himself gave the reason for the companys bad financial showing in the UK: unemployment, mortgage crisis, and low consumer confidence. Value Chain Starbucks is synonymous to coffee. They are present in 41 countries except in Africa. Its mission statement: Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. Starbucks created a niche in the coffee culture. It has penetrated markets that are not coffee connoisseurs. Schultz envisioned coffee consciousness in his customers hoping that coffee drinkers would take coffee seriously as wine connoisseurs take fine wine. It developed unique coffee taste experiences through coffee blend concept which traditionally is a method done to mask off flavors contributed by mediocre to atrocious beans and to save money. The coffee brand which has penetrated the world sans few places, aimed to deliver high quality and consistent products to keep customers. To achieve this consistency, Starbucks entry to other markets was in the form  of licensing its brand and the technology it has developed through the years. This encompasses all areas in the operation of a coffee shop. Several international coffee shops like Brazilian Coffee Shops, House of Coffees, Seattle Coffee Shops have penetrated many countries through franchising. However, Starbucks opted to licensing agreements for store locations in areas where it did not have the capacity to put up its own outlets. This is handled by Starbucks Coffee International (SCI). It has opened stores in Japan, Singapore, Philippines, South Korea and Taiwan. It has opened its market also in Europe. Starbucks has yet to launch its coffee bars in an African country. Starbucks has become a byword in the global business. It has become an epitome of a corporation that has reached its zenith in corporate and service endeavors. Franchising styles and its marketing strategies merit the following of many other companies. It is sufficed to say that Starbucks has become one best examples of a corporation that has not only brewed up the world but created a good aroma for other businesses to emulate. Mission-Vision Statements In 1998, Starbucks announced its vision: 2000 stores in the year 2000. Its mission is to inspire and nurture the human spirit one person, one cup, and one neighborhood at a time. Its mission statement: Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. According to the financial report for Starbucks that is published in the web, there is a significant increase in the revenue and earnings in the last five years of up to 25%. A prediction by economic analysts that this trend will continue at an advantageous rate if the competitive position of the company stays  at par. It would be wise to invest in shares of stock for Starbucks since it can be seen in their financial statements that since they have expanded their operations, there is a steady increase of revenues and profits. Starbucks have produced a more than average sales and earnings growth in the past years. The companys very impressive ea rnings growth projections are a good indicator to go ahead and invest. Starbucks still focuses on their expansion ventures across the globe in the companys owned stores and the franchises. Majority if not all exhibited a solid financial performance (Michelli, 2007). Business Strategy The technology that Starbucks packaged includes real estate, store design, store planning and construction, product line, store ambiance, building a top management team, employee training, product supply, coffee roasting and its marketing strategies. It is called Starbuck System. All supplies will come from suppliers approved by Starbucks. These ensure control in all areas of the operation. Starbucks is an established business and its success in the domestic and global market can be derived from the socially responsible movement that they promote in their corporate behaviors. Business ethics has always been an integral part of Starbucks as management base their principles on the internal stakeholder issues like product quality, customer satisfaction, employee wages and benefits, and local community and environmental responsibilities. The leadership of Starbucks sees to it that all these responsibilities toward their internal stakeholders are taken care of since they are largely responsible for what Starbucks has achieved today. The internal stakeholders of Starbucks has created a collaboration that work closely with the  executives and business units to fully incorporate the companys values into developing and implementing its positions on key legislative and public policy issues.   Furthermore, it develops and maintains an extensive network of internal contact s (senior management, legal, marketing, category, QA, RD, regulatory, strategy and others) to align strategy, issues and business impact.   Among internal stakeholders, Starbucks sees to it that there is a uniform code of conduct to be followed in all its stores around the world. This is to make sure that the mission-vision of the company is upheld at all times. Internal stakeholders treat each other with professionalism as guided by these uniform codes of conduct. SWOT Analysis Strengths of Starbucks lies on their unique and chef-inspired menu and their market position which is remains in the top five, according to surveys. Unlike other big corporations and franchises, Starbucks has an enormous advertising budget that drives the business. Their comprehensive, award-winning training programs provide franchises and employees with the specific tools and skills that can be used for success in the competitive food industry. Weaknesses of Starbucks lie on some bad-for-the-business lawsuits on their franchising scheme. Another weakness would be the often criticized television advertisements and campaigns that seem to be intended to be funny and outrageous rather than sell their food. Another weakness could be their franchising scheme worldwide where they only allow one franchise holder for a particular country. For example, in China, only one franchise holder owns all the Starbucks stores there. This limits opportunities for other interested franchisers; thus, also limit the full expansion of Starbucks. Opportunities at Starbucks lie in their staff and crew to further develop and grow in their career at the company since a very comprehensive training and development is made available for store managers and staff. Threats come in the form of the existing competitions in the food industry. Problem Areas Advertising With a brand name such as Starbucks, who needs advertisement? Just very recently, Starbucks put on air their television advertisement. Critics say that it is too late for this since a company should start advertising (print and broadcast) when they need it most or when everything is iron hot. From a marketing perspective, this television ad came in late. Still, with a global brand that is popular enough that many think the name itself is enough advertisement, Starbucks do need advertisement. One just needs to look around and see how such immense and successful global brands can still be seen on billboards, television, and magazine. Starbucks advertising campaign continues from word of mouth especially. The logo is enough to persuade patrons and customers to partake of their products. Being the leading retailer and roaster of specialty coffee in the world, Starbucks has been criticized in the past for being very ambitious, expanding throughout the world at a fast speed. But Starbucks has been successful in making a name for itself in record time while achieving a 20% rise in earnings for 2008. Many articles came out written about how and why Starbucks decided to start a television advertisement when they do not really need one. Management of this conglomerate have their  reasons and the prime one is in order to reach across or convince those who have not tried sipping their coffee while lounging in their free WI-FI zone stores to come and see for themselves the difference of being in a Starbucks shop. More reasons are obvious just like what their other competitors would say. For Starbucks, there is no such thing as being late nor is there a set time when to advertise or not. This new ad is not purported to sell but to remind and create more impact to their captured market. Competition In the United Kingdom, Starbucks major rival is Costa, followed by Caffe Nero. The UK coffee shop market is actually being slowly dominated by these three competing brands. Fierce competition aggravated into a bitter fight this year when Starbucks filed a complaint to the Advertising Standards Authority (ASA) that the Costa advertising campaign that says: Starbucks drinkers prefer Costa and Seven out of ten coffee lovers prefer Costa. However, ASA came with a decision that favored Costa, saying that all these claims by the latter were based on blind tasting tests. Coffee is the second largest imported product of the United States and specialty coffee market is approximated to be $11 billion a year in worth. To lure coffee drinkers (and other variants of coffee) from Starbucks, competitors of the same product line have come up with all sorts of gimmicks and come-ons as well trying to make a niche in the coffeehouse industry. In a report written by Georgia Flight (2006), the top five competitors of Starbucks show how each is different from the other and identify some salient points in their competitions with the leading brand. Founded in 1981, Green Mountain Coffee Roasters that originated from Vermont has used the slogan Be Green to portray the kind of coffee they serve. Starting as a small cafe, it has stuck to its use of organic roots and organic coffees. Keep Innovating is the slogan of Coffee Bean Tea Leaf which is headquartered in Los Angeles. It has 400 outlets. The company is famous for the wide choice of coffees and teas and its reputation preceded its brand for its innovation. Furthermore, it has established branches in places/countries where Starbucks is absent like Israel. Costa coffee was founded in 1971 in London. Even with Starbucks abounding in that city, Costa is a lead ahead in India where it has adapted its coffee flavors to suit Indian taste. Their strategy? Head East. Having 120 outlets in the country, Peets of California uses the strategy: Go Upscale. Java connoisseurs love the strength of the taste of its coffee. The special and complicated process of working on the coffee makes the taste unique. Caribou Coffee coffee business based in Minneapolis was founded in 1992. The strategy to Sell a Lifestyle features their cafes and stores in a mountain-lodge-style decoration including the chairs and a fireplace. They have made a deal with some airlines and some other fitness establishments. Starbucks has got itself many competitors, many of which got their inspiration from it. Since the product is a beverage that many would patronize, it is no wonder that Starbucks as well as other related businesses are rising. Marketing: Franchising: Expanding in Africa Putting up a Starbucks coffee bar in South Africa guarantees presence of Starbucks in almost all of the continents in the future. As a gateway to the African continent, the country is convenient path for businesses to expand in the area. Since the first national elections in 1994, government policies have been enacted to encourage foreign investments. Granting a license to a local company or close corporation to operate Starbucks stores in the country would benefit both parties. This would allow transfer of Starbucks System technology that would benefit the employment program of the government through its program Broad Based Black Economic Empowerment Act (BEE). The partnership of Starbucks and a local closed corporation can enjoy the economic incentives given to new foreign investments that are brought into the country. While there will plus and minuses for both the licensor and licensee, they will get benefits from the license agreement (Andover, 55.) However, because of different cultures, Starbucks will have to make adjustments in their marketing and strategies to achieve its growth. Several standards will have to be altered to accommodate the different palate and eating habits of the people. Whatever criteria in its service and product Starbucks has come up, changes have to be made to accommodate the new market. Starbucks has to consider also an important observation made by the franchise sector of South Africa that 90% of South Africas franchise opportunities are based on locally developed concepts which is in contrast to most countries outside the USA where foreign brands trend to dominate the market (Handsenn, 40). This is also true to the restaurant and fast food market where the business Starbucks can be compared. Most food brands (restaurant type) are franchised out in other countries. Recommendations On Advertising Problem Area Starbucks can save their millions by forgetting about putting up television advertisements and commercials. The company is so established that making a commercial now would not have that much impact. Moreover, the company should enjoy its business success by being contented with posters on their stores, occasional promotions and announcements of new products, etc. Business and advertising analysts say that Starbucks can live without such domineering advertisements on television. Actually, they do not need any. On Marketing/Franchising in Africa Problem Area This is also true to the restaurant and fast food market where the business Starbucks can be compared. Most food brands (restaurant type) are franchised out in other countries. Also, the following factors are as important from a prospective franchisees point of view: The advantage of operating under a local brand is that the product has been designed from scratch with the local conditions in mind. Only a professionally managed operation can be relied upon to deliver on the implied promise of franchising. This is considered a threat to Starbucks. With the experience of the local companies developing its market strategies, most likely, Starbucks will have difficulty in guarding its technology. Penetration in the market is also a challenge. Also, the company had encountered problems in its image, paying low price for coffee beans from another African country. Having a  local partner may help to quell the threat and open a huge market. Perhaps it would be wise to brainstorm on these possibilities. If the company wants to grow more and succeed more, then they should review their policies on franchising. Recommendations on Competition Problem Area It is a fact that all people eat in order to survive. However, not all people can afford the same food and luxuries that these businesses offer. While Starbucks is known to cater to class A and B market because of the prices of their products, Caribou Coffee grabs the C and D with a lot lower prices of the almost the same products. McDonalds, being the leader of fast foods and affordable prices, remains to top the market monopoly. People around the world are reported to patronize their products, thanks to the non-stop advertising and maintaining the quality of their food. Dunkin Donuts has a limited list of food, mostly sweet pastries and yes, doughnuts. The taste and type of food offered by this establishment continue to serve as a come on to many customers and a specified market. Starbucks should take seriously the growing number of rivals in the food industry, especially in the same products they are selling. Pricing is a very important aspect to take into consideration. With these hard times, people become practical. If they can have the same taste and quality coffee from another store, why go to Starbucks? Although the company wants to maintain its unique quality brand, it should consider their consumers satisfaction when it comes to expenditures.

Role of Asset Securitization in Present Financial Crisis

Role of Asset Securitization in Present Financial Crisis Abstract Banks, to get rid of illiquid assets they posses and to attain financial freedom in lending, searched for new innovative techniques. This innovative method of converting these illiquid assets in to liquid assets technique is called asset securitization. Banks pool up these illiquid assets like mortgage loans and sell it to agencies called as special purpose vehicle (SPV). These special purpose vehicles convert these loans in to securities and sold to investors. Before agencies sold these securities they got it rated from rating agencies. Asset securitization as a process reduced information asymmetries; increased financial slack; served as a lower cost of financing source; reduced regulatory capital; and reduced bank risk. The process of asset securitization as a whole has many advantages but by the end of year 2007 it started to crack with financial crisis. It is therefore necessary to study what went wrong in the process of asset securitization that lead to financial crisis. The study analyzes the role of asset securitization in financial crisis by analyzing the economics of asset securitization process as whole. Then in depth analysis of credit rating agencies methodologies and economics of how they rate these securities is studied. As it is difficult to analyze the rating processes and methodologies of all rating companies in this thesis I have decided to analyze Moodys investor service. Moodys has been selected because its name is synonym with quality in the market. The growth and fall of mortgage industry performance of mortgage industry have been analyzed. The factors that led to financial crisis have been analyzed. The study analyze the moodys rating methodologies and rating models and updates to rating models. The short comes in rating methodologies and rating process has been discussed. The rating models updates effect on default rate of rating has been analyzed. Finally the effect of these default rates on financial crisis has been studied and analysis of role of asset securitization in financial crisis is studied. Chapter 1 Introduction The process of asset securitization started in the year 1870 when Government National Mortgage Association (GINNIE MAC) purchased pools of loans and converted in to securities and sold these securities to investors. In the year 1970 special innovative technique called tranching were used to distribute losses involved in these pools of loans backed by mortgages and sold to investors. Kaptan and Telang (2002) Asset securitization is the process of converting illiquid assets in to cash flows. Both financial intermediates such as banks and investors benefited from this process. Banks benefited with extra liquidity to lend more loans to able borrowers where as investors got opportunity to invest in capital market for more returns. In the process of asset securitization, rating agencies rating securities is crucial because rating influence the marketability of the securities. There are many rating agencies which rate Residential Mortgage Backed Securities, of these three largest credit rating agencies with overseas market that are based in United States are Moodys, Standard and Poor (â€Å"SP†) and Fitch. These rating agencies use statistical models to analyze risk involved. Rating agencies constantly review performance of these securities and according to performance they upgrade or downgrade rating. To lessen the effects of a mild recession in 2000, the Federal Reserve cut interest rates. This interest rate cut along with increasing housing price made people to invest in housing this helped to drive growing demand for nontraditional mortgages products. Banks have extra liquidity to lend more loans to borrowers and started to lend more and more loans to non prime borrowers, which led to poor performance of loans and in turn effected whole asset securitization. This report will explore what is the role of asset securitization in financial crisis. In order to research what is the role of asset securitization in financial crisis the following have done 1. Analysis of asset securitization process 2. Analysis of Evolution of financial crisis 3. Analysis of Rating agencies methodologies and procedures in rating process. The details of analysis techniques are explained in methodology chapter. And extensive literature review is done to get hold of the subject. Finally in depth analysis has been done to reach the goal of the report. CHAPTER-2 Professional And Academic Context 2.1 Asset Securitization Kaptan and Telang (2002) defined Asset securitization as an innovative process which channelizes flow of funds from investors to issuers in efficient manner. In simple words, the process of asset securitization starts with financial institutions like banks which pools up individual loans and create securities against them. These securities are rated and sold to investors. In words of these authors, asset securitization is the process of converting assets in to securities and in turn in to liquid cash. Origins of securitizations can be traced back to 1870`s where Government National Mortgage Association (GINNIE MAC) started selling securities that are backed by pool of mortgage loans. These securities were named as mortgage pass through securities. This process of securitization has changed in 1970 where new innovative concept of tranching was introduced in issuing the securities (tranched securities). These tranched securities are sold to investors. Kaptan and Telang (2002) (Uzun and Web, 2007) makes understanding of asset securitization more simple through an illustration of the process of asset securitization, banks which are financial intermediaries in capital market has various types of assets such as mortgage loans, car loans, leasing contracts etc on their balance sheets. These assets are not marketable so these are illiquid assets. Banks, to get rid of these illiquid assets and to attain financial freedom in lending search for new techniques. This innovative method of converting these illiquid assets in to liquid assets technique is called asset securitization. So asset securitization plays a major role in converting these illiquid assets in to cash flows (liquid assets). Uzun and Web, also provide information on what kind of assets the banks securitize. These authors explain this as, the process of asset securitization starts with banks deciding which assets they want to securitize for example mortgage loans. Then bank pools these mortgage loans and sell it to trustee or separate entity which is called special purpose vehicle. (Uzun and Web, 2007) Role of Special purpose vehicle (SPV) is explained by the Securities and Exchange Staff (2008) as, SPVs either government backed agencies or private agencies such as Fannie Mac, Friede Mac, Ginnie Mac buys these loan pools and are entitled to interest and principal of underlying loans in the pools. Then SPV issues different classes of securities known as tranched securities backed by pool of loans. The role of SPV is to separate risk of newly created securities from the origin bank loans. If these SPV are not there it is very difficult to assess the risk involved with those securities underlying the loans. It is difficult to access risk because risk involved is closely related to origination bank practices. Information of origination bank practices such as how they lend loans what documentation they check before issuing loans and credit quality of loans. Securities and Exchange Staff (2008) conclude that these securities issued from this SPV isolates the risk involved from origination bank. Investors invest on these securities and investment risk is directly interrelated to credit quality of loan borrowers whose loans are offered as collateral for the securities. To boost the demand for these securities the SPV enhances credit quality by process called over collateralization and subordination. Over collateralization, is the process in which credit quality is improved by giving payment guarantee by insurer. So if there is any principal or interest default it is insured there by making investors clear in mind that there is no risk involved in investing in these securities. Over collateralization is one way of credit enhancement but the principle way of credit enhancement is done by subordination. In subordination process SPV issues different layers of tranches (securities) such as junior, mezzanine, senior tranches. If the trust experience any loss in interest or principal payment, lower most tranches, junior tranche absorb all the losses and then mezzanine tranche absorbs any more remaining losses that are left over by junior tranche leaving top most tranches, senior tranche safe from any kind of losses. So senior tranche is safe from all interest and principal default. So by process of tranching top most tranches (securities) get more demand from investors and demand reduces when it goes down the ladder up to junior tranches. Junior tranches are backed by over collateralization for its marketability in capital market. The process of tranching differentiates structured finance from normal securitization process. In normal securitization process assets are converted into securities and sold. In structured finance these securities are tranched so that at least one class of securities gets better rating when compared to average rating of all securities. The asset securitization makes calculation of risk more complex using technique called tranching. The calculation of risk is more complex because the risks involved in these pools are distributed.( Securities and Exchange Staff) (2008) Asset securitization is the process of converting illiquid assets in to cash flows (liquid assets). Both financial intermediates such as banks and investors benefited from this process. Banks benefited with extra liquidity to lend more loans to able borrowers where as investors got opportunity to invest in capital market for more returns. Kaptan and Telang (2002) In brief benefits of asset securitization are reducing information asymmetries; increasing financial slack; serving as a lower cost of financing source; reducing regulatory capital; and reducing bank risk (Greenbaum and Thakor, 1987) (Kaptan, Telang (2002), (Uzun and Web, 2007) conclude that asset securitization is the process in which illiquid assets of banks are converted into cash flows or liquid assets. (Greenbaum and Thakor, 1987) conclude these techniques of asset securitization as benefits for banks as well as for investors in capital market. Securities and exchange staff concludes the process of credit enhancement using process called subordination distributed risk of loss in the whole tranche. And the process of over collateralization increased demand for these securities in capital market. Securities and Exchange Staff (2008) concluded that the process of tranching evenly distributed risk and assessing this risk is a complicated process. 2.2 Rating Agencies The main role of rating agencies in capital market is to rate the bonds and securities in specific scale. Rating agencies use qualitative and quantitative methods to access cash flows of these bonds or tranched securities. These ratings are used by investors in capital market as bench mark in investing. Thus rating agencies helped the investors in making decision to invest in capital markets by reducing information asymmetries between issuers and investors. (Committee on the Global Financial System), (2005). 2.2.1 Evolution And Role Of Rating Process According to Ruth Rudden, the evolution of rating industry started when there was a big demand for the corporate bonds in USA. The investors interested to invest in these corporate bonds were very skeptical about risk involved as they were not provided with companys credit information that issued these bonds. So there was a pressing need for an independent and third party institution to analyze credit risk of these bonds which helped the investors in making decision to invest according to their criteria. Thus credit rating agencies came into existence. (Ruth Rudden, 2007), John moody was the first to introduce credit ratings in 1909. He used rating scale to rate the bonds. These ratings were useful for investors to understand credit risks. Credit rating agencies (CRAs) stressed more on expected cash flow generated by the issuer (special purpose vehicle) ongoing business in determining the rating. In general CRAs revenues were generated from subscribes who subscribed to receive rating on debt securities. Rating agencies from the start has been rating bonds on specific scale. Mason and Rosner, concluded that the rating doesnt give information on whether particular bonds must be bought or sold. They give their opinion on relative safety of the bonds. (Mason and Rosner, 2007) The main importance for the credit ratings rose in the capital market because of US treasury department. US treasury department said the quality of the bonds rated by rating agencies is appropriate. Ruth Rudden, concluded that the importance of credit rating agencies in the capital market became prominent and the investors relayed on these ratings to invest on the bonds. (Ruth Rudden, 2007) Then with the introduction of new structure finance products, rating agencies started to rate these products as well. In one of the reports by the Committee on the Global Financial System, (2005), wrote about the Rating agencies, rated the structured finance products like asset backed securities, CDOs, RMSBs etc, same as the traditional bonds. Rating agencies performed the same function as with traditional bonds that was reducing information asymmetries between issuers and investors. Committee on the Global Financial System, (2005) Issuers of structured finance products wanted these securities to be rated on the same scale as traditional bonds so that investors think structured finance has same kind of risk that of bonds. (Mason and Rosner, 2007) spoke about the structured finance as, for past few years with the introduction of newly formed structure finance products; these CRAs are chasing the agencies that issue these structured finance products instead of subscribers for revenue. This lead to three fold increase in the revenues by CRAs and effected the integrity and base source of the aim on which rating industries are build. To meet the demand of these newly introduced structured finance products; CRAs have introduced many new models and approaches to access these products for ratings. (Mason and Rosner, 2007) The three largest credit rating agencies with overseas market that are based in United States are Moodys, Standard and Poor (â€Å"SP†) and Fitch. 2.2.2 Rating methodologies of RMBS According to (Rousseau Stephane, 2009), all the rating agencies methodologies are almost same for rating RMBS products. First issuer of these securities approach rating agencies to rate their securities so that they can sell it in capital market. And issuer provide all the data information of the assets underlying the securities like loan data, proposed capital structure of SPV, proposed credit enhancement for each tranche of the securities. Rating agency will assign an analyst to analyze the tranches for rating it. First probable looses incurred on all tranches are calculated. Rating agencies used complex statistical models for analyzing loss. The loss analysis gives rough idea of how much credit enhancement is required for each tranche to give particular rating. Then analyst analyzes proposed capital structure of SPV to check whether it meets particular rating. Then finally analyst analysis the cash flow which gives information of interest and principal paid out of SPV and analyzes whether particular asset which is under tranche meets payment obligation. Analyst then rates each tranche and submits his rating to committee where they vote on the analyst view. Once rating is confirmed they send the rating to issues rather than publishing it. If the issuer is satisfied with the rating he makes it public. If issuer makes rating public, rating Agencies get paid if not they get breakup fee. (Rousseau Stephane, 2009). 2.2.3 Concerns on models used in RMBS According to (Danà ­elsson J, 2002), Rating traditional bonds is much easier because of availability of historical data where as rating structural products like RMBS you need much more complex models than that of normal models. As the financial system become more complex, the need for complicated statistical models becomes greater. More the complexity, lesser the reliability on these models, so does these models tends to be less reliable. It is clear from the credit crisis of 2007 that the rating agencies used over optimistic input data, inappropriate modeling and insufficient checking of data quality and permitting gaming of models. Despite of advanced models, stress tests, and all the numbers, risk models do have important role to play in modeling risk as long as its limitations are known. Risk models are good at managing particularly trading desk but when asked to model whole institution it fails. So relying on such folly statistical models to model risk is foolishness. And the numbers that these models give are inappropriate. Financial models are not simple and do not have basic or fundamental thermos to build on. These models can easily make you believe the results are accurate, the reason for these are; 1. Endogenous risk: In finance we can only model aggregate behavior. Financial modeling changes the statistical laws governing the financial system in real-time, leaving the modelers to play catch-up. This becomes especially pronounced as the financial system gets into a crisis. This is a phenomenon is called endogenous risk. 2. Quality of assumptions: we cant take it to consideration all parameters in to model so it is important to take it to consideration the main parameters that affect the outcome of the model. For example if we consider present situation of financial crisis the main parameter is liquidity which has been be ignored by modelers while modeling risk. 3. Data quality: data quality is the most and foremost important thing in statistics because the accuracy of these models depends up on quality of data. (Danà ­elsson J, 2002) To prove what Danà ­elsson J, said Vanessa G. Perry proved, there is always dearth of data on subprime market. The data that is available is proprietary lender data. And this data had drawbacks on analysis of market trends. To analyze data properly we need property records which contain information on mortgagee and mortgager, transaction price, property location, credit score, foreclosure rate of neighborhood state. This data was necessary for the rating agencies to analyze the market condition properly. Roughly to analyze loan performance, three sets of data was taken into consideration, that is the Borrower data, loan data, property data. Borrower data should contain income, FICO score, and demographics. The loan data should contain loan amount, LTV, loan type, interest rate/fee, terms such as FRM/ARM, payment history. Property data should contain location, prices, sales, foreclosure, and employment rate. One can predict the probability of default if and only if these data of loan is available. (Vanessa G. Perry, 2008). 2.2.4 Concerns on rating in RMBS According to (Committee on the Global Financial System, 2005), and (Mason and Rosner, 2007) there are many concerns on rating agencies which rated the RMBS, they are; 1. Transparency- Given the role that is played by rating agencies in removing Asymmetries, it is important that they be transparent on what they do. Rating agencies never disclosed completely their methodologies they use to rate RMBS and key assumptions and rating criteria. Credit rating agencies never accepted that the data provided by issuer of securities are not sufficient to rate. And rating agencies never provided historical performance data about their ratings. 2. Quality of rating process- there is a huge growth in RMBS market because of ease in lending loans. And at the same time these RMBS products started to get more complex. The rating agencies did not have enough staff to tackle increasingly complex products and huge volume of these products. Because of shortage of work force these rating agencies were not able to catch up with rating upgrades or downgrades accordingly with change in circumstances like issuers principal or interest short fall. 3. Conflict of interest- the rating agencies main role is to act as an intermediate between investors and issuers. This trust of being intermediate has been broken by rating agencies by charging issuers for rating products instead of getting paid by subscribers who subscribe for these ratings to invest in these products. Because of shift in the axis of being intermediate, these rating agencies got paid from issuer who in turn profited rating agencies by gaining millions of dollars. This process of issuer paying for his rating created conflict of interest. So considering profits they incur from this new role, rating agencies tend to rate products issued by these issuers a higher rating than they actually are. The issuer has ability to adjust deal structure to get desired rating. And issuer has influence on rating process. (Committee on the Global Financial System, 2005), (Mason and Rosner, 2007). 2.2.5 The role of rating agencies in the crisis According Tom Bulford (2008), (Ruth Rudden, 2007) â€Å"The credit rating agencies like Moodys, Standard and Poors and Fitch played a central role in growing the residential mortgage-backed securities, these credit rating agencies were titled to rate these securities on behalf of the huge investment banks to sell to the investors. The ratings of these securities were to identify the risk involved in the securities, they followed a particular three main flow in calculating the risk rating for the investors, the first as to interest the investors on the securities, they provided portfolios of RMBS which highlighted a certain level of risk involved in it, this was done through tranches which means, the different level of risks involved securities were put into different groups called tranches. This helped the investors in deciding whether to stay first in line during the event of default or down the queue. This was one point where the investors relayed on the ratings to invest on the securities. The other two things which they followed to rate the securities, one was data which was used in the financial models of the rating agencies to rate these securities, the data contained here are the information about the mortgage loans that are parceled by the investment banks. These mortgages came from the originators who provided all the information about the mortgagees like their credit history, income, etc. hence these originators provided information was historical. The information given source was not sure about as they stood by the words of the originators. Using this information on the models they used in the rating would off course end up being inaccurate. This made the investors relaying on the high rating given by these rating agencies and hence invested confidently. The rating agencies assured that the portfolios of mortgage backed securities were â€Å"stress tested† by ‘Monte Carlo simulation of macroeconomics variables to create a loss distribution. The assumptions were not wide enough because the rating agencies relied upon historical data, and till now MBS were concerned ‘the performance history that did exist occurred under very benign economic conditions. The reasons just dont stand on rating agencies following the historical data for the calculations but also the workload and the conflicts when the interest rates rose which laid the investment bank concentrate on getting the best ratings on the securities that is laid for sale. This increased the competition between the agencies; they did not want to lose deals and hence gave ratings as necessary with one initiative that was not to lose deals. One of the illustration proves the above comment, one of the member in an rating agency who did not want to lose a deal wrote a mail which said â€Å"I had a discussion with the team leaders here and we think that the only way to compete is to have a paradigm shift in thinking, especially with the interest rate risk†. Another said â€Å"We are meeting this week to discuss adjusting criteria for rating CDOs of real estate assets because of the ongoing threat of losing deals†. Tom Bulford (2008), Tom Bulford (2008) concluded that the roles of these rating agencies in financial crisis are to be studied thoroughly. Rating agencies main duty is reducing information asymmetries between issuers and investors but with the introduction of structured finance products rating agencies deviated from their main role of reducing information asymmetries. In fact they started to favour security issuer as they are paid for rating. Committee on the Global Financial System, (2005) concluded that role of rating agencies in capital market is to rate bonds or securities on specific scale. (Ruth Rudden, 2007), (Mason and Rosner, 2007) concluded that the importance of credit rating agencies in the capital market became prominent and the investors relayed on these ratings to invest on the bonds and the rating doesnt give information on whether particular bonds must be bought or sold. They give their opinion on relative safety of the bonds. The rating agencies got paid by issuer of securities for rating structured finance products on same scale as normal bonds. Tom Bulford (2008) concluded that change of role by rating agencies as information intermediation between issuer and investor got strained with the introduction of structured finance products. (Danà ­elsson J, 2002) concluded that to rate structured finance products rating agencies need more complex models. (Vanessa G. Perry, 2008) concluded that there is no enough historical data on subprime market and in turn this dearth of data affects accuracy of the rating process. Committee on the Global Financial System, (2005) concluded that there are some concerns relating rating process of RMBS. Tom Bulford (2008) concluded rating agencies had played their role in financial crisis and need to be blamed for their irresponsible behavior. 1.3 Subprime Crisis The roots of financial crisis are complex and obscure. The main culprits are mortgage banks brokers, rating agencies, to some extent federal reserve and government. Financial crisis started with Federal Reserve slashing interest rates to encourage spending and reduced 30-year bond issues to increase the prices. This along with American dream of home ownership triggered housing boom. This housing boom has been used by many mortgage lending banks. The introduction of FICO scores instead of traditional point based system and the off-balance sheet vehicle made lending loans easy. Loans were given to people with low credit history (sub-prime loans) Souphala, C and Anthony, P.C, (2006) 1.3.1 Evolution of the crisis According to Souphala, C and Anthony, P.C , (2006), the introduction of FICO scores instead of more traditional â€Å"point based system† credit scoring. And the off balance sheet vehicle (OBSV) made banks to lend loans to people with low credit score. This type of lending is called subprime where these borrowers are who fail credit history requirements in the standard (prime) mortgage market. The subprime lending is known as high cost lending and primarily driven by credit history and down payment where as prime lending is driven by down payment only. People thought prime lending is complicated but have great promise and great peril. The subprime lending provided opportunity for homeownership to those who havent passed credit history in the past. Lower credit history of subprime lending which could have resulted in more delinquent payments and defaulted loans. US mortgage market, which for decades was dominated by fixed rate mortgages, included nontraditional mortgages, simultaneous second-lien mortgage, and no documentation or low documentation loans. Nontraditional mortgages allow borrowers to defer payment of principal and sometimes interest and include interest only mortgages (IOs) and adjustable rate mortgages (ARMs) with flexibility payment options. Interest rates are much higher than that of prime loans, is the main reason of risk for borrowers. Strong home price appreciation and declining affordability have helped drive growing demand for nontraditional mortgage products that can be used to stretch home buying power. Souphala, C and Anthony, P.C , (2006). 1.3.2 Role of US federal government National partners in home ownership in the largest private public partnership program whose solo aim is increasing home ownership rate to all time high by the end of decade by increasing creative financing methods for mortgage loans. In this program, retailer, home builders, Fannie Mac, Freddie Mac, mortgage bankers are the partners who came up with innovative ideas such as using FICO score instead of point based system is introduced to ease the requirements to lend loans to people whose credit history is not good to get mortgage loan. Another innovation is off balance sheet vehicle which made lending loans easy. (Mason and Rosner, 2007) According to Souphala, C and Anthony, P.C , (2006),The government and the quasi-government agencies were main reason who influenced the US mortgage credit cycle by their legislative reforms and the mandates, the alternative mortgage transaction parity act in 1982 eliminated regulatory disparities between state and federal chartered mortgage by granting state chartered institutions the authority to issue alternative mortgage(sub-prime), including the use of variable interest rates and balloon payments, regardless of state mortgage lending law. The tax reform act 1986. Then stimulated demand for mortgage debt by retaining the deduction for home mortgage interest. To lessen the effects of a mild recession in 2000, the Federal Reserve cut interest rates. Although the Fed has raised interest rates past year, mortgage rates have largely been unaffected. This interest rate cut along with increasing housing price made people to invest in housing. Home ownership is best way of making wealth in fact most households find it difficult to invest in anything but their homes. These factors helped to drive growing demand for nontraditional mortgages products that can be used to stretch buying power. Souphala, C and Anthony, P.C , (2006). 1.3.3 Financial Market Turmoil Due to poor standard of lending there has been raise in subprime loans, the delinquency rate increased in the year 2006-2007 because of subprime loans issued in previous years. The overall rise in delinquency rate is sudden and overwhelming. The market started to response to these high delinquency rates in the second half of 2006 and first half of 2007. In spite of high delinquency rate, market had confidence on highly rated tranches of subprime RMBS (senior tranches). In the second half of 2007 this confidence came to its low when credit rating agencies lowered their rating on highly rated tranches. These downgrades created uncertainty and doubt on quality of rating these rating agencies assigned. With more exposure to risk related to subprime debts, restricted liquidity of banks, the inter market for term loans was effected so there was a sharp increase in risk premium. These authors concluded that banks lost confidence and have less liquidity. This resulted in present financial cr isis. The result of this is freezing all structured finance products and cut down in non confirming mortgages. This is because of those agencies giving non confirming mortgages had lots of loans and RMBS which were