Jihad, Pakistan and India :: Politics Political Essays

Jihad, Pakistan and India Every person is entitled to his or her own opinion. Whether it is complimenting a new outfit or distrusting a society, people may think whatever they like. In the article â€Å"Jihadis† by Pankaj Mishra, different views on society are taken. From the opinions of Pakistani relationships with Indians, or the different outlooks on the Taliban takeover in Afghanistan, this article provides a detailed description of a person born in India but decided to change his life. The narrator, Mishra, is first introduced shortly after a brief setting of the Middle East before the tragic events of September 11, 2002. Described as being from India, he is now a London reporter writing various articles for English and American magazines. Through his encounters the reader receives an inside view on Middle Eastern life and history. Beginning with Pakistan’s governmental history, a foundation is set describing various ruling powers such as General Zia-ul-haq’s military takeover from Zulfikar Ali Bhutto in 1977 and the final Taliban takeover of Afghanistan in the 1990’s. The cruelty inflicted by these harsh takeovers is apparent by descriptions of â€Å"shutting down schools, smashing TVs, and VCRs, and tearing up photographs† (Mishra 103). Different reasons for supporting and joining the Taliban and other organizations are also explored. For example, a young man named Rahmat, felt he had no other choice but to join the Taliban in taking over Afghanistan after his father’s business was in ruins and his brother was in jail. After all the warnings, the Taliban offered him what he could not offer himself at that time: food and shelter. Trying to get an insider’s view on Taliban life, Mishra is escorted by Jamal, a befriended assassin.

Art Criticism of Barricade by Jose Clemente Orozco

Art Criticism of Barricade by Jose Clemente Orozco The painting Barricade by Jose Clemente Orozco is made using oil on canvas. It is 140 by 114. 3 cm and it portrays five men that are closely placed together. To the left of the portrait there is a shirtless hunched man giving his back to the viewer and has his right arm extended to the right. He is holding a red cloth in his right hand. He has two bullet straps going over his shoulders and strapped across his back. To his right there is another shirtless male figure facing the viewer with his arm extended forward and his feet closely placed together.There is a rope loosely placed around his feet. This man also has his arm slightly extended forward. He is standing in a slanted position and is leaning his back on something. To the right of this man is a fully clothed crouched man holding a knife in his hand. There are two other shirtless men on the ground behind this crouched male figure. The two bigger men on the left are balanced by the three smaller men on the right. Orozco uses a brighter value of blue on the pants of the two men on the left to show their dominance over the rest of the men. The posture of the slanted man creates implied diagonal lines.Orozco also uses a vibrant red colored cloth shift the reader’s attention from the two dominant male figures to focus on other aspects of the artwork and the other minor figures. The whole painting may evoke a gloomy and depressing mood in the viewer because the men appear to be struggling. The red cloth seems to symbolize bloodshed because of the seemingly violent scene that is taking place in the rest of the painting. The dominant figure on the right appears to be fighting for his life because of the way he is clenching his teeth. He could be extending his arm to reach for help from someone not included in the painting.The knife in the crouched man’s hand symbolizes war, and his loose grip on the knife may represent his defeat. The smoke that app ears to be polluting the sky could foreshadow that there is something worse to come and that the conflict going on may not be resolved. Also, the fact that four of the five men are shirtless could imply that they come from a lower social class. The artist succeeded in portraying a violent scene in this artwork because of the aggressive actions of the men. He limited the number of colors used in the painting, but was still able to create strong emotions in the viewer using different values of those colors.The realistic portrayal of the muscles allows the viewer to perceive the reality of the environment. However, the artist confuses the viewer because he leaves the viewer to interpret many things on their own. His whole painting focuses on the five men, so the viewers are left to interpret the setting, the reason for their conflict, and the time when the conflict occurred based on the men’s actions and the objects around them. Overall, the painter includes minor symbols such a s the cloth, gun, and knife to successfully convey the overall violent atmosphere of the painting.

Financial Derivatives - Free Essay Example

Sample details Pages: 31 Words: 9308 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? CHAPTER 1 INTRODUCTION 1.1 BACKGROUND Financial derivatives is often an efficient policy of the risk management which is been used in modern economy worldwide. The financial derivatives grow on huge scale and very significant into a well accepted definitions, measurement and the revelation of the conventional financial accounting essentials. The financial derivatives has many advantages and it is been used worldwide. Don’t waste time! Our writers will create an original "Financial Derivatives" essay for you Create order Though, some risks occur in the use of financial derivatives. The management of the financial derivatives become more essential in the modern economy. With the rapid growth of the modern economy, more financial risk exists during the development process which involves the frequent use of financial derivatives, the use of the derivatives assist against a potential risks and use of financial derivatives also reveals to the user a huge risk. Financial derivatives are also important through the progress of financial derivatives. Globally, the world economy is fast growing which is leading to so many difficulties in the financial derivatives worldwide which are creating more problems for financial derivatives. However this problem requires the introduction of regulatory body such as government to take over in order to supervise the financial derivatives. The supervision of financial derivatives plays a vital role in modern economy while lack of regulation in financial derivation will l ead the financial market into disorder, chaos and confusion. This might destroy the entires nations economy. Financial derivatives without regulation will attract a big potential economic risk. For the financial market globally, such economic crisis affects the economy worldwide. 1.2 OBJECTIVES OF THE STUDY China has a huge economy which is growing rapidly. There various types of financial derivatives in china, which are widely used in the financial market. This research will analyze the financial derivative in Chinas financial market and also discuss the classic supervision (regulations) and the analysis of the performance of the supervision procedure. China financial market, its advantage and the risks that exist in the classic financial derivative in China will also be reviewed. This research will reveal major classic in the various types of financial derivatives in china and verify the uses of all the financial derivatives in order to demonstrate its performance of those financial derivatives. The supervision of financial derivatives will also lead to reviewing the Chinas financial environs. The major purpose of this research is to establish the usage of financial derivatives against the financial derivatives. The findings of the research from both the financial derivatives and role of supervision in China will provide an overall insight in the China financial market and also conclude by making some recommendation on the usage of financial derivation and the status of the supervision of financial derivatives in China. 1.3 STRUCTURE OF THE RESEARCH This research reviews the overall literature on financial derivative in the past with a focus on the impact of the financial derivative, the benefits of the practise of financial derivative and the potential risk of the use of financial derivative. The supervision of the financial derivative analysis will be reviewed with the use of Journals and report. Subsequently, this research work will focus on the case study for the research methodology; the case study is the Chinas financial market. This research model information is gathered from both Chinas financial market and the supervision of the financial derivatives in China. Information is however collated in china using the position of a standard financial derivative in China. Using the position of a standard financial derivative in China, the analysis of financial market in China is reviewed with some journals and reports which was use as the data in support of the research and the most vital data is collected by the Chinese national statistics. The research will use both the qualitative and quantitative analysis method, this used to analyse the research data. From the research of classic financial derivative that is practise in China and the supervision of financial derivatives in China. This research will adapt the SLEPT method (Social factor, Legal factor, Economic factor, Political factor and Technological factor) to review the entire china financial markets while the SWOT (Strengthen, Weakness, Opportunities and Threats) method will be used in reviewing the financial derivative in the direction of the Chinas financial market, the functions of the supervision of the financial derivatives in China will also be reviewed. Finally, there will be a brief conclusions and provide some recommendations on both China financial for market and supervision of the financial derivatives. The limitations of the study will be highlighted and references for further reading will also be listed at the end of thi s research. CHAPTER 2 LITERATURE REVIEW 2.1 THE IMPACT OF FINANCIAL DERIVATIVE The financial derivatives have a direct influence on the organization. A financial derivative is a good policy of risk management. Froot et al (1993) observed that the peak level of investment and capital spending are selected at the same time. They recommend that financial cost risk management should have a particular dominant goal, this enable the company to have access to cash to make a price improving investments. The risk management model rely on the fundamental premises that the essentials of establishing corporate value is creating good investment and the essentials to creating good investment is generating adequate cash within, in order to use it to find those investments. Nance et al (1993) and Mian (1994) discover a statistically important clear relationship between the tax credits and the practise of risk management instruments. Dolde (1995) reported a clear and an important relation between tax loss carry forwards and the practise of risk management instrument whi ch include hedging. Dixon Bhandari (1997) found that calls for supervision through a rise in legislation are not generally accepted. Although the supervisory body main focus is that the stability of inter market could be strictly undermined without greater supervision. Guay (1999) studies financial derivative responsibilities in organizations by initiating derivatives practises. The outcomes were consistent with organization practising derivatives to hedge and not to expand, entity risk. Organization risk is measured in different ways which reduces following the use of derivatives. The study observes a decrease in risks and decisions to introduce derivatives programs vary from hedging. The outcome highlights the significance of hedge accounting laws that incorporate the influence of derivatives and hedged items at the same time. Fender (2000) discovers some basics of corporate finance of monetary economics examine the influence of corporate risk management policies on the m onetary transmission system. They employed an easy model of a financial speed up to sort the information asymmetries, they are the core of the entire models of the transmission system, it establish motivation for corporate hedging activities, that is cash flow administration, they realise that these principles, in turn, reduce the influence of monetary policy degree which is lower to the clear cost of capital effect. Billing (2002), describe the reasons behind the protection and enlightened on how auditors should review the different problems raised from the utilisation of financial instrument. Heilliar et al (2004), access the influence of financial reporting standard 13: Derivatives and different financial instruments, implementations and disclosures which focus is on the treasury department responsibilities. The researchers deliberately conduct interviews with the workers of the UK treasury department in order to review their behaviours towards and observed the impact of FR S 13. At large, the treasurer reply at an advantage to the standard and carefully reviewed the narrative disclosure to be specifically useful. The numerical disclosures were comprehensive and focused. The rapid growth in the financial derivatives also has an influence on Chinas financial market. Ba Shusong (2004) believes that financial derivatives have played a vital role in the growth of Chinas market. Subsequently, El-Masry (2006) stated that big firms often used derivatives than average or smaller firms, public companies often use derivatives than the private companies. The use of derivatives is ultimate in the midst of international firms. The findings reveals that most firms that do not use derivative instrument is attributed to the fact their experiences are not important and the major reasons they avoid derivatives are, they focus on the experiences requires by FASB rules under derivatives activity, fees of creating and sustaining derivatives activities go beyond the e xpected profit, foreign exchange risk is often managed with derivatives and interest rate risk is often managed with derivatives and interest rate risk is risk that is subsequently managed risk and the study reveals that the main reason for the use of hedging with derivatives is supervising the volatility in liquidity. Bartram (2006) explores the incentive and use of non financial firms with respect to using options in managing risk activities. The study realize that an important number of 15 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 55% of the companies not within the financial sector practise the options which shows the fact that options are very flexible risk management instrument which can be useful to hedge different types of exposures both linear and non-linear, it also discover that it rely on the correlation between price and quantity risk, the optimal hedge portfolio involve different combination of both linear and non linear risk management instruments. The accounting ways and the effects of liquidity can influence the selection of derivatives. Eckstein et al (2008) study the impact of organization using derivatives which applies Statement of Financial Account Standards (SFAS) no 133; it shows the degree of cumulative effects of differences in accounting formulas from the annual income statement adopted, market response to earnings pronounced and the major effect of financial ratio. The outcome reveals that the important negative unpredicted returns were noticed around earnings pronouncement dates. Abnormal earnings correlate with the cumulative effect instead of the differences in earnings per share from operations which reveals that surprises connected to changes in accounting, it is also established that companies with resources unrealized profit and losses are connected to hedging with derivative instrument. 2.2 THE MERITS OF FINANCIAL DERIVATIVES There are several advantages of financial derivatives from 1990s McAllister and Mansfield (1998) studies the responsibilities and ability of financial derivatives investment property portfolio management and also focus on the difficulties of direct investment in commercial property. They also analyse and the major principles and all different types of derivatives, they rounded it up that the possibilities of financial derivatives to mitigate most of this difficulties which is connected with direct property investment that is studied. They also decided on Property Index Certificates (PIC) has been narrow down with shareholders and ought to produce rise in interest rate and the use of derivatives product within the assets both in the UK and global institutional shareholders. Tyler and Stanley (2002), Counter Sheedys call for further readings through the practical examination of the equity derivatives market in US and UK, quarrelling that while link in this market do, to a certain degree, showing features a typical of broader and indeed inherent, to over-the-counter derivative exchange. After that, Zivney et al (2006) discovers the possibilities of using dividend plans by individual shareholders. This plan was raised from the 2003 tax law changes which reduce tax rates on dividends received while abandoning the short term tax rate on capital losses unaffected. Freeman et al 2006, realize that the credit derivatives market is control by big banks and insurance firms who does business within themselves. The growth of credit derivatives market develops into more liquid and transparent. Freeman emphasize that thee a various easy and practical ways in which organisation can use credit derivatives to manage risk to show the empirical strengths and weakness of a particular approach. Klimczak (2008) produce a detailed assessment of the main contemporary firms hedging theories. The study focus on a sample of 150 companies listed on the Warsaw stock exchange whic h shows features shared by companies using hedge. 2.3 RISKS ATTACHED TO FINANCIAL DERIVATIVES From the above, the literature review shows various advantages of financial derivatives on the risk management of finance. However, some risk occurs in the operation of financial derivatives. Financial derivatives have been faced with so many criticisms this mostly is due to large loose because of leverage and borrowing. Laker (2008) examines that as the derivatives permit shareholders to earn huge returns from small movement in the basic assets price. Though shareholder might lose more money if the basic asset price moves against them drastically and the financial derivatives might expose shareholders to counter party risk and all types of financial derivatives have different risks at different level to this effect. Also financial derivatives will stand as an unsuitable large amount of risk for little and mostly for shareholders who lack experience as financial derivatives offers chances of huge rewards and so many attractions even to individual shareholders. However, speculati on under derivatives most presumes a great deal of risk consisting commensurate experience and good market idea which favours a small shareholders, this is the purpose why some financial advisers are opposing the use of these instruments. Derivatives are complicated instrument as forms of insurance in transferring risk among all parties involve which presume an additional risk. Laker further identified that financial derivatives often have a huge estimated value, as a result of that there is a high level of risk and shareholders might lose much without been compensated. As stated by Berhire Hathaway inc. (2002) on the annual report, that there is a possibility that this could result in a chain reaction and subsequently in an economic crisis. Also Rawles (2006), financial derivatives enormously leverage within the economy, which makes it more complex for the basic real economy to facilitate its debt requirement and restricting the real economic functions which often lead to eco nomic recession. 2.4 THE SUPERVISION OF FINANCIAL DERIVATIVES ANALYSIS The supervision of the financial derivatives should be acknowledged as both the advantage and risk are present in financial derivatives. Though, there few journals which analyse the supervision of financial derivatives, in the late 1990s, Shah (1996), identified that in the rise of huge losses from derivatives dealers and end users in modern years, many issues are being highlighted as regards the regulatory structure that is necessary to supervise and control the use of derivatives, it disagree that the principle in which the issue can be resolved by strict internal policies whereas regulators assume it is necessary for more precise oversight is misplaced though it still can be use for hedging, Derivatives involves high risk technology which often pose problems for regulations and its functions. Recently, Kern (2001), identified that the global regulation of financial markets became obvious in the 1970s with regards to post Bretton Woods liberalisation of financial markets. The removal of the fixed exchange rate equal the outcome of gold in the privatisation of finance risk, which established tension to eliminate the functions of cross border capital movements and more deregulation of the financial market. However, there is need for general regulatory body to build safe and reliable financial institutions such as bank through an efficient management as systemic risk in general market. Also it is necessary for international standards of supervision to also be acknowledged to avoid solvent in the financial institutions in one jurisdiction from the business to collapse to a less reputable institutions functioning in other jurisdictions whose rules only allowed cut rate financial services and more risky financial functions. The privatization of financial risk leads to establishment of financial institutions to blow out their risks over to many resources and functions which lead to an important rise in short term cross border portfolio asset which could reveal capital importing nation to increase system risk which was cause by volatility of such investments. Gilnen Tabak (2007) establish a new substitute for gathering information on risks that exists in financial institutions which assist in analysing the risk tools which are found in risk management. This method assists risk managers, supervisors in analysing the potential risk in financial institutions because of derivatives position. The main idea is the linear financial instrument which is also refer to the traditional method often used by management risk system it assist in decreasing roles in risk factors and defend the responsibilities of financial derivatives while the non-linear instrument have roles with different options which are represented as clear as European options. The study shows the propose method captured the risk occurrence in policies that consists of options with an accepted error margin. CHAPTER 3 DATA ANALYSIS AND METHODOLOGY 3.1 CASE STUDY The case study of this research will be the Chinas financial market; this research analysis will focus on the Chinas financial market, together with growth of the socialist market of the real economic structure. Chinas financial market is growing with the ongoing exploration. Currently, Chinas financial Market is essentially established as a pure division of the financial system. Chinas financial Market has started forming and many financial commercial have been developed, this includes Bonds, Stock and commercial bills. The capital loan and a bargain securities markets were established steadily after 1985. During the 1988, treasury bonds were established in the transfer market in major and average cities in china. In 1990 shanghai stock exchange was created and 1991 Shenzhen stock exchange was also created. Both stock exchange in 1999, release 98 A shares and 117 subsidiary shares, increasing 87.7 billion Yuan, which increase the total number of companies listed to 976; the aggreg ate increase in foreign capital is about US$610Million with the use of issuing B and H shares. China releases 1.5Billion Yuan of A shares which can be transferred into bonds. In 1994, 94.1 billion Yuan was realised from issuing and selling stocks. The level of the transaction in the stock exchange by 1999 surpass 5,000 billion Yuan and it was summed up to about 401.5billion Yuan which was the value of government bonds issued and 191.1 billion Yuan was government bonds value in cash. This fund has successfully improved the financial status of the listed companies and a rise in the sources of money for technological transformation of the public banks and financial markets. In the recent years, the financial market in China has been undergoing a rapid growth, Neftci and Yuan, Michelle (2006), stated that China financial markets shows about $2 trillion and are anticipating the market to grow to about $10trillion by 2008, the china financial market continues to expand its investment w ith a view to ensure that their operations are successful. 3.2 RESEARCH AND DATA COLLECTION They are different types of financial derivatives found in Chinas financial market which are vital for the growth of Chinas financial market. The use of the financial derivatives has led to many financial difficulties in the rapid growth of the financial system, there is need for regulators to be more effective and implement more laws on the supervision of the financial derivatives. This will help to determine and regulate the stability of both the China financial market and the supervision of financial derivatives in china. Classic materials similar to the financial market and financial derivatives in China will be use as a guide. Other source of materials will be from the internet, textbooks and journals. This research work is structure to determine the supervision of the financial derivatives in China. The China financial market is chosen as a case for the analysis. The source of the main data is from China, National Statistics of China; and few of the firms annual report wil l be used for the data analysis. This research work will focus on the nature of the Chinas financial market and the outcome of the financial derivatives in China and the supervision structure of the financial derivatives in China. The SLEPT (refer to Social factor, Legal factor, Economic factor, Political factor, Technological factor) method will be used to examine the general system of the China financial market, it will focus on the classic findings of financial derivatives and also on China financial system in order to examine the nature of the financial market in China. From the results, the research will be based on the nature of the financial derivatives in China to examine the impact, introduction, growth, transactions and practise of the financial derivatives on the Chinas financial market. This research will also examine the supervision of financial derivatives in Chinas financial market in agreement with related articles and also to make some recommendation on the supervis ion of the financial derivatives in China. 3.3 DATA ANALYSIS The qualitative and quantitative method is both used to analyze the data. Under the qualitative analysis method, the materials such as journals and all information gathered from the internet are related to Chinas financial market and the supervision of financial derivatives, the report of the classic financial organisation will all be gathered as part of the qualitative assistance to the analysis. Some major dialogue by the classic economist in China will also be the main issues for the qualitative analysis; this is due to lack of interviews by government officials and financial managers of most firms. Generally, the secondary materials used will be part of the quantitative analysis, which will certainly show the problem of this research. The quantitative method, this method of analysis is the data and information gathered from different firms. The most significant data is gathered from the China National Statistics. Other information and data are gathered from various reports f rom different firms. It is difficult to make a questionnaire with this research because the research problem is comprehensive. The major source of information and data are gathered from the internet and few reports from the government is the main structure for the quantitative analysis. The major limitations are the quantitative method in this research is the lack of an individuals observations and analysis on financial markets and the supervision of the financial derivatives. CHAPTER 4 SUMMARY OF FINDINGS 4.1 CLASSICAL FINANCIAL DERIVATIVES USED IN CHINA China has commissioned a model in financial future exchange in 1990s. Ba Shusong (2006), stated that the core financial derivatives are the foreign exchange futures, stock index futures, warrants, convertible bonds and national debt future. Few of the do not function any more, although model is not so successful, it was importance for a lot of valuable experiences. However, with the growth in China financial market, the financial derivatives perform well and will return to China financial market and a fresh product which correspond to the requirements of the growth of economy; this will be additional expansion and will certainly play a vital role in the Chinas financial market. Foreign Exchange futures; Gregory (1995) stated that inside the foreign exchange market, each price in a market is a relative price, which shows an equal rate. In the late 1980s and from the beginning of 1990s, China was completely accommodating for financial derivatives and control method of suitable opened. From 1984, the local enterprises and companies can trade the offshore foreign exchange futures via the stock broking company. This will assist in requirement for hedging of local banks corporations and swap the foreign exchange role. The first ever foreign exchange swap of China exchange market was commissioned June 1992 in shanghai. The transaction in the foreign exchange futures in local have been displayed and developed from time to time. Later on, the Shenzhen foreign exchange centre was due for approval of foreign exchange futures transactions. (Ma Qingquan 2003). Ma Qingquan (2003), later on access the inner and external foreign exchange future and realize that they all have some difficulties which enable the government of Chinese to take a bold step to resolve and restructure the foreign exchange market. From 1993 to 1995, during this era, the Chinese government has continuously ordered the closure of unlawful foreign exchange futures brokerage firms. All the loca l foreign exchange in China did not operate extensively due to absence of regulators which lead to failure of the implementation. National debt futures; the national debt future is another method of interest rate futures; it is after the most growth of financial futures in China. The national debt future was originally found December 1992 in china. The shanghai stock exchange commission was the first contact of national debt future. In the year 1993, the transaction scope of the general debt futures had been worn out mainly, the individuals and brokers was given access to the market. The Beijing commodity exchange also welcomes the transaction of national debt futures. However, the national debt future was unripe for development; this follows the 314 contract irregularities storm in Shanghai stock exchange in Sept 1994 and 327 contract irregularities storm in February 1995 also emerge. May 1995, concluded the transaction of national debt future which finally collapse. Converti ble Bonds; Convertible bonds are part of growing process of the growth of Chinas Stock market. Basically convertible bonds have a slight resemblance with stock options. (A stock option is also known as executive stock options). Little (2008) refer to a convertible bond is a kind of bond that can be switch into shares, bonds in an issuing firm. Mostly a few pre-announced proportion which is hybrid safety with same debt and equity characteristics. Ba Shusong (2006), the convertible bonds have experienced and discovered in over a decade since its first implementation in China, they have been known with many groups and they continue to progress and grow since the growth of the recent social economy of China. The convertible bonds are financial derivatives which agree with state of the growth of China economy. It will grow more and further along with the growth of the Chinas financial market. Warrant, this is a type of derivative protection that gives the owner the ability to buy s ecurity direct from the issuer at a given price within a specific period. Warrant are mostly part in a fresh issue which is refer to sweetener this is just to attract the shareholder. Between 1992 to 1996, China has commissioned a lot of warrants, which include sock warrant La Dai Fei, others are Ba oan 93 and Fuzhou East in Shanghai stock market while others warrant was also commissioned in Shenzhen stock market. This include Gui Liugong, Xia Haifa, Min minding, Xiang Zhongyi. However, because of the uncontrolled speculation of warrants, there are important speculations in the drop prices of warrants. The operations of the warrants were dismissed by the national regulatory body in June 1996. The reason for the dismissed is due to absence of regulators of the financial derivative. Hence, it is observed that the supervision and regulation on all types of Financial derivative is very important than the operation of the financial derivative. As soon as financial derivatives is in opera tion there is need for government to present a supervision in order to regulate the operations and function of financial derivatives therefore the financial derivatives will grow with health except if it will be dismissed at the closing stages due to the disorder of the financial market. In conjunction with the reform of the part construct of warrants, the issue of the warrants were present in the outline again. This is due to bearish and bullish choices with the features of the warrants. It has been an efficient way in the movement for safety of the interests of investors and simultaneously, it leads to rise in flexible payment of the price of the movement of non-investors. According to Xu Peng (2007) since 2007, 27 warrants have been registered in shanghai and Shenzhen stock market. Stock Index Futures; In March 1993, stock index futures surfaced in Chinas Hainan securities and exchange center, which showed as Shenzhen composite index and Shenzhen A share index. This is in line with the global practise, such as creation of deposit system. Unfortunately, stock market was not huge enough; the trading activities stopped functioning in the same 1993 due to speculation inside the market. Ba shusong (2006) further stated that 14years after, (April 2007), After the official commissioning of the Future Exchange Management Regulations, the stock index futures has reverted given that it has been compelled to shut down 14years earlier. This revert will certainly become an important discussion for everyone and local institutions. 4.2 STANDARD SUPERVISION OF FINANCIAL DERIVATIVES USED IN CHINA The standard supervision of financial derivatives in China can be categorise into 3, namely, the Risk management, this is the major body of the supervision of financial derivatives, the core regulator of the financial market which is a vital way to regulate the financial derivatives and the creation of rules for financial derivatives which is protection for the supervision of the financial derivatives. 4.2.1 RISK MANAGEMENT This involve the risk management of the market, the risk management of credit, risk management of liquidity, risk management of operation and legal risk management. Risk management of market; this is refer to as the loss in the rise and fall of interest rates, exchange rate and stock prices. Market risk management shows the status of a bank in a market in order to grow the number of frequency and times of the market estimation. Lu wendao (2007), refer this technique of market risk appraisal used in China financial market is to compute the potential of changes in the market price, the exposure of risk and to grow contingency policies in order to enable the right of assessment and to accept the changes in the market. Risk management of credit; The risk management of credit failure is to implement derivatives agreements or breach of contract of financial derivatives credit risk which means when the financial institutions such as banks decide to emulate a transaction which is in agreement with certain regulations. It is recommended that bank should focus more on risk diversification rather than avoiding more concentration of transactions. The risk management of liquidity; Xu and Peng (2007), management of liquidity risk is the non existence of depth of market or changes in difficulties which might lead to risk of exposing positions. It is also the absence of liquidity party which led to the termination of contract which cannot be paid or the risk of more deposit cannot be made due to the consistent fall in market. Bank in liquidity risk management should stay away from all sorts of business within a period of time to reduce the attention of more concentration of transaction which often leads the risk of the gap risk of capital flow. The risk management of operation; Zhou Yunbo (2003), operation risk is the risk of inner control and absence of information system. Operation risk management is precise partition of the trading apartment, balance apartm ent and risk management apartment. This involve the firm to focus more on welfare of their staff, improving the standard of working and when there is a default in the related information system, there should be an instant measure to ensure the normal free flow of information to make sure there is a proper supervision on the risk factors. The legal risk management; this risk is that risk that unable to execute contract or risk that occur due to absence of legal factors in contract. Most financial institution such as banks need to consult the legal adviser for a certain legal document, this is to make sure the transaction of contract is legal. Lu Veandao 2007. 4.2.2 THE CENTER CONTROL OF FINANCIAL MARKET; The principle of center control; the function of senior management; brokers and clients in the use of derivatives ought to be in line with complex approval through the risk and capital management procedure. Those procedure should be functional with different in market situations. Advanced managers ought to study and accept policies for the execution of these policies management at different stage should do the same too. The allocation of responsibility; this is the allocating responsibilities to personnel at different stages in order to avoid errors at the place of work. Risk Management; there is a huge risk in financial derivatives business, it is necessary to ascertain the exact risk management system. It is also necessary to investigate and measure the best alternative to manage the risk. Emergency response; Due to possibilities of market volatility and unpredictable human factors, it is necessary to arrange method to reduce the risk. 4.2.3 OPERATION OF INTERNAL CONTROL Accounting Supervision; the supervision of financial derivatives involves an accurate and effective accounting requirement. Background Control; this involves with creating monitor procedure in background, which deals with control, daily supervision, estimation of market value, forecasting and assessing the risk associated to the study of the counterparty. Internal Audit; financial derivatives businesses are vital to allocate base over a period to supervise the audit and report at the right time. Stop loss control; every business assume by great loss and there is need to discontinue the loss supervision of huge amount of transaction providing extreme daily loss restrictions in surplus of the ceiling. Front control; there is a trading limit control within the bank, financial derivatives businesses restrict the overall amount of self control which involves open positions and the quantity authorised. 4.3 THE FORMATION OF REGULATIONS FOR FINANCIAL DERIVATIVES It is proposed to create the certain regulation organisation in order to develop the supervision of financial derivatives and to ensure that financial derivatives businesses are legal. To also initiate laws on the transaction of financial derivatives, only the creation of legal procedure and a few related laws will make financial derivatives grow. This is necessary to sustain the supervision of the financial derivatives that will prevent the financial market from being disorganised or chaotic. CHAPTER 5 DISCUSSIONS 5.1 THE ANALYSIS OF CHINA FINANCIAL INSTITUTIONS USING THE SLEPT METHOD. This research examines the SLEPT analysis method to examine the impact and effect of macroeconomic environment of Chinas financial market. The research will analyse the China financial system in the following order; the Social factor, Legal factor, Economic factor, Political factor, Technological factors. 5.1.1 SOCIAL FACTORS Proportion of the population structure; China as a nation as a huge population, the National Bureau of Statistics of China (2007) stated that the population of China is about 13.15billion in 2006. This is 0.53% increase rate than the previous year (2005) and 9.20% of the population falls within the age range of 65years and above. Fundamentally, the population of China is in a tendency of maturing. The educated Chinese up to the tertiary level and above is about 6.22% with about 8.79% of the population are uneducated. The Chinese citizens standard of living; As stated in the Chinese statistical annual book 2007, assert that the per capita disposable income of the metropolitan residents was 11759 RMB in 2006 and about 12.07% extra in the previous year (2005), the per capital yearly expenditure on the metropolitan residents consumption was 8697 RMB in 2006, about 9.49% extra than the previous year (2005), in the year 2006, the per capita savings deposit became 12293 RMB and additio nal of 13.96% from the previous year (2005), the region of house construction per citizen was 26.1 Sq meter in 2006 and became 28.62 higher than the previous year (2005), in 2006, the regular consumption expenditure per citizens of metropolitan residents in housing increase to 904.19RMB. Investment Enlightenment; Along with the growth of the China economy, the Chinese citizens will probably invest more in securities, the financial derivatives are familiar with the Chinese investment citizens, the citizens focus more on the financial derivatives because of its gain. Most of the firms and organization have also selected the financial derivatives as part of their financial risk management. The stocks in the financial market turn out to be very common in recent Chinese citizens and organizations. 5.1.2 LEGAL ISSUES The Chinese has well disciplined laws for the supervision of financial market. These laws include rules governing the citizens of china, securities rules and provisional measures of settling securities risk. There are numerous laws governing the financial market but there is no exact amount on the China financial derivatives market. 5.1.3 ECONOMIC ISSUES National economic condition; as stated by the National Bureau of Statistics of China (2007), it states that the GDP of China in 2006 was 210871.0 billion RMB. This shows an increase of 14.69% greater than the previous year (2005). In 2006, the occupants consuming expenditure was 80120.5 billion RMB showing about 12.5% rise from the previous year (2005), the occupants expenditure was 15.79% in the overall spending, about 0.16% more than the previous year. Annually, the occupants consumption rate often increases; there was 9.3% more than the previous year (2005). Price Index; as stated in the data of the National Bureau of Statistics of China (2007), in the year 2006, the consumer price index in occupants was 4.6% greater than the previous year (2005) and the house occupier consumer price index was 2.7% greater than the previous year while house owners consumer price index also increase to about 3.7% greater than the previous year (2005). However, there is often a rise in the sale s of housing price index; there was about 5.5% increase in 2006 against the previous year (2005) and in the year 2006, the housing price index was 6.4% greater than the previous year (2005) while there was an increase 4.6% in year 2006 against the previous year (2005) in industrial/office building price index. The rent payment price index was also increased annually; there was an increase of about 1.4% between year 2006 and the previous year (2005). In 2006, the land businesses price index was 5.8% greater than 2005. The consumer price index in 2008 moved up to 6.3% in July from the previous year after moving up by 7.1% in June. Inflation rate; The national bureau of statistics of China states that in early 2006, the inflation rate was 1.9% and later moved up to 2.8% by the end of the same year, it also moved up with a wide margin by end of the following year (2007) to 6.5% and it arrived at the highest level of about 8.7% in February 2008 and there was a fall in the recent times to about 6.3% in July 2008 Interest rate; In the end of the year 2007, China moved its interest rate standard up for sixth time that same year, this is one of the method to control inflation and also to prevent the China economy from collapsing which is refer to as the fourth largest economy. However, there is a reduction in demand deposits rate, this is to inspire the citizens to tie up their cash over a period of time (preferable a longer period) instead of make it available to diverting their cash into securities and property. The bank of China states that the interest rate in August 2008 rose to 2.56%. Exchange Rate; The exchange rate as stated by the Peoples bank of China in 2008, it has sustained the RMB remains fundamentally the same, from the month of June 2008 after an increase of 4.2% and 2.3% within the first quarter of the year and during the second quarter of the same year, it moved up to 0.4% in the 7th month of 2008 which shows the currency is build up to 6.818 0 alongside the US dollar for few months. 5.1.4 POLITICAL FACTORS Political system; the China state council (2007), the political system in China was created and it has been growing through the long-term existence of the Chinese revolution and reforms. The political system accept a multi-party system and the political mentor was headed and controlled by the Communist Party of China (CPC), it is not the same with all other multi-party in the western part of the countries and some countries practises one party system. Chinese political system can be attributed as a socialist political party system and the major structure of Chinas socialist democratic politics. Economic System; Sometimes ago, Chinese economy was practising socialist economy; this is a situation whereby the government own and dictate all production procedure. At the end of the reform which ended 1978, it was close to market economy just after privatization all the state controlled businesses and expose to the western part of the countries. Subsequently, china economy grows better due to the frequent Chinese government reforms. 5.1.5 TECHNOLOGICAL FACTORS The technology has come of age and the internet has a positive impact on the financial market, since the internet is very easy to accessible and resourceful, individuals and organisations might possibly trade the financial derivatives via internet. The use of internet for trading not only save time but it is very effective and efficient. The introduction of technology has reduced the problems of the financial market and all the transactions of the financial derivatives such as non existence of regulators on trading activities and lack of adequate information due to the destruction of the financial system. It is important for financial derivatives managers to have a good knowledge of the computer and the supervisory body should take more responsibility on the business of the financial derivatives. Certainly, technology has improved and develops the growth on financial derivatives in Chinas financial market and the world as a whole. 5.2. THE FINANCIAL SYSTEM ANALYSIS The China economy is transforming from the conventional planned economy to the market economy. Temporarily, it has experience similar industrialization procedure as shown in most developing nations. Its objective is to create a self regulating of fiscal oriented financial institutions and also to discover the commercial activities of the financial markets, which will accept sole functions for its excesses and loss and all the various risks involved. China accepts the opposite way to regular reform. During this reform, market-oriented foundation on the contest of the micro-business system has been essentially formed, it is not essential anymore for financial institutions to embrace the state owned businesses; it is no longer necessary that financial systems take up the responsibilities of the financial policy. The financial institutions will have to confront the world competition since China economy operates an open financial market. This brings new ideas and concept to the growth o f chinas financial institutions. The macro economy aspect of the economy shows interest rate and exchange rate have since gain freedom and there is a transformation to the integrated operation from the divided operation. Direct financing has also emerged from the structural perspective after over writing the indirect financing. According to the important changes in the financial market transformation process, in the year 1990, two (2) local stock exchange were created in China known as The Shanghai Stock Exchange and Shenzhen Stock Exchange and the two stock exchange has grown excellently since their creation. The Southern Tour led by Deng Xiaoping in 1992, experienced a rapid growth in the Foreign Direct Investment (FDI), an unlawful act of the banking sector which emerge from the few new state government controlled by commercial banks, and the re-appearance of the shanghai stock exchange which became the main financial point of China. The interbank lending and the bond markets were introduced in 1994 and 1997 respectively, in the market, the bank debit and credit card performed brilliantly; subsequently in 1997, the Asian Financial Crisis, financial sector transformation has concentrate on local-owned banks and also pays so much attention to the limitations of NPL. China was admitted into WTO in December 2001, which shows the new beginning of China financial system and this led to the creation of China capital account and adopted a fluctuating exchange rate which is required by WTO, raising context from foreign financial institutions and often and huge measure capital flows appears. In recent years, the RMB foreign exchange rate was announced by the Peoples Bank of China, the RMB rate grow rapidly, subsequently, the China economy is fast growing compare to what it used to experience in the past, the economy is likely to sustained relatively high development. The China financial institutions have the possibilities to attain a speedy development with additi onal implementation of financial institutions transformation. Franklin, Jun Qian (2003), stated that most countries stock markets are bigger than China stock market, this includes the condition of market capitalization and the over-all value traded as part of GDP. The banking system in china is very significant in terms of measurement relative to the stock markets. The banking institution in China is bigger than its financial markets and this supremacy by banks over the market solid and its stock markets are truly relatively more resourceful than the banks when measured with other countries. Thus, Chinas financial is governing by a huge but inefficient banking sector. China is been refer to as a huge developing country; China has appeal to a number of foreign investments, such as FDI, joint ventures etc Chinas FDI inflows are greater than the remaining Asian nations, most developing nations and world as a whole, but the outflows are less compare to this particular sectors. The a ttainment of WTO takes China the low price foreign assets and technology but free assets flows and foreign context and speculation shown risk, crisis in both the banking and foreign exchange/stock market crisis which resulted in a huge in 1997 for the developing economies in Asia. To avoid such crisis, the Chinese government commissioned a number of principles to develop the financial system with the use of both fiscal policy and trade policy changes. (Franklin, Jun Qian 2005). 5.3 THE FEATURES OF FINANCIAL DERIVATIVES The value of financial derivatives is enslaved to the basic implement; Financial derivatives arise from the conventional financial products, because they appear to derivate they can only be dependent. The worth of financial derivatives is focus to a particular extent of the conventional financial instruments. Since the products arise from the essential instruments, the worth of financial derivatives will focus on the impact of the differences of the essential instruments values, the cost of stock index futures will be focused on the influence of stock index. Warrants will move with the volatility of the share price, it is a distinct feature of financial derivatives and there is a purpose for the hedging role. Financial derivatives responsibilities include the prevention of risk; there is numerous numbers of fresh financial products that arise from financial innovation, which often promote the growth of the entire financial market. Conventional financial instruments are delayed b ehind the recent financial instruments; despite all its functions in the authentic issuance of these financial instruments of firms own financial risk. Furthermore, all financial hazards are joined together in the conventional instruments; it is very hard of decomposition. With the decomposition of financial hazards constrains, the financial derivatives with the assistance of the financial markets transactions can assist in preventing risk so as to accomplish the trade off of the income and risk. The structure of financial derivatives is complex; Assessing the structure of financial derivatives with the fundamentals of financial instruments, the main features of financial derivatives emerge to be very complex due to the fact that financial derivative have problems on the understanding and functions of the options and swaps, this is because of the combination of several technologies which makes financial derivatives more difficult in order for financial derivative to have the diff iculty of the structure. This has led to the planning of financial derivative that requires an improved mathematical procedure, a huge number of policies making by practising the modern scientific procedure and the technology age which can boost the functions of financial markets. It will involve the use on false intelligence and mechanization technology in the growth and structure of financial derivatives. Temporarily, the limitation makes the difficulty on the knowledge of the financial derivatives of the regular investors; this has resulted to incomplete use of financial derivatives by the shareholders. The design of financial derivatives is flexible; Financial derivatives is light structured in the plan and innovation of financial derivative, this is because so many portfolio of the fundamental financial instruments can establishes so many changes financial derivatives. The structure of the financial derivatives can rely on different participants needs therefore the structure of the financial derivatives are very light structure. The financial derivatives possess a leverage function; Most times during the functions of the financial derivatives, it will perform its operation of financial leverage. It can simply manage the financial market. The leverage operation can expand the use of cash and to increase the earnings while the leverage responsibilities of financial derivatives will prevent some big risks. The transaction of financial derivatives is particularly; the exact nature of the financial derivatives trading can be shown in two ways, firstly, the transaction mediators mainly focus in big level investment banks and other financial institutions. This is known as concentricity. Secondly, it is flexible, from the market allocation, it clear that few of the transaction are perform over-the-counter, that is, the user via the core investment banks as mediators to take part in derivatives transaction, the transactions of the financial derivatives are non-standardized, it reveals that financial derivatives are very light in nature. 5.4 INFLUENCES OF FINANCIAL DERIVATIVE IMPACT ON THE CHINA FUTURES MARKET The financial derivative will improve the scope of the future market in china and minimise the risks involve. Lately, the China future market consist only commodity futures while finance future does not exist. This is distantly from foreign future market and not in agreement with requirement of the growth of the future market. The presentation of the financial derivatives will occupy all the spaces in the China futures market; it will accomplish the promises of the financial market. This will leverage the present hazard and decrease the chances of risk; this will attract more shareholders to invest in financial market. Financial derivatives will improve the commodity futures market price and discovery the hedging functions; there are 2 fundamental features of price discovery and hedging in the china commodity future market. The presence of distortions in the bear of the financial and exchange hazards by the traders, in contrast with the prices of the foreign market. The Chinas f utures market price consists of capital and the exchange rate risk superior. From the introduction of financial derivatives market, the capital and exchange risk can be undermined without any effect. This will only bring down the price of trading of the futures market, in order to boost the effectiveness of the commodity future markets. It also assists the chinas commodity futures market to meet up with the global standards and this will reveal the real commodity costs. Financial derivatives will raise the growth of market volume for futures market and widening the design of the investors; In addition to the introduction of financial derivation, the Chinas future markets will turn out to be more ideal and very effective. Currently, despite the high in demand of financial derivatives, this will bring together the sum of the futures market and more shareholders will invest so much in the futures market via the advancement of the risk management of the entire financial market. This will expand the size of the market for futures trading. Financial derivative will increase the level of futures employed; As a result of the distinct features of the financial assets, the businesses that exist in financial derivatives are very complex. Consequently, the beginning of financial derivatives will boost the conditions for the futures industry workers, it develops a huge good standard of the professional and this will boost the growth of the futures industry in the nearest future. CHAPTER 6 CONCLUSION AND RECOMMENDATIONS 6.1 CONCLUSION Finally, the financial derivatives are growing rapidly in world financial market and it is necessary to supervise the financial derivatives. There are various factors that influence financial derivatives, regardless of so many benefits from the use of financial derivatives. It often present many risk from the use of the financial derivatives. They are several supervision of the financial derivative which often creates separate results on the financial market. The level of the supervision will automatically control the safety and legal of the financial market. For effective growth of the financial derivatives in the financial market, there is need for more supervision method on the financial derivatives in order to maintain the growth of financial market in the global market. China is fast growing country, the financial derivatives is fresh section in the financial market which has benefitted both the shareholders and the people of China. There are various types of financial derivat ive in the chinas financial market they include; stock index futures, foreign exchange futures, the national debt future, warrant and convertible bonds. However, some of these financial derivatives are barred due to the untidiness they bring to the financial market excluding the stock index futures which is refer to as a proper growth tendency. Generally, the supervision of financial derivatives in China include many functions which include; the risk management which is often refer to as the core section of the financial derivatives which manage all the financial derivatives risk such as legal risk management, liquidity risk management, operation risk management, market risk management, credit risk management. Another function of the financial derivatives is the internal control, this deal with the internal activities of the financial market which also plays a major role in the supervision of the financial derivatives. The introduction of the guidelines for financial derivativ es operations is another function of the financial derivatives which is introduce to provide safety measure for financial derivatives. Subsequently, the SLEPT analysis (Social factors, Legal factors, Economic factors, Political factors and Technological analysis) of the China financial market and environs, which expose the exact level of the China financial market and the fast growth of the China financial market and the economy as a whole. The features of financial derivatives in China are that the worth of financial derivatives is subjected to the fundamental implement; the financial derivatives have the responsibility to shun risk. Financial derivatives are structured to be difficult, the design is also very light and accommodating, the financial derivatives also have the leverage operations and certain trade activities of financial derivatives. With the nature of the financial market and the supervision of financial derivatives, this research analyzed the effect of the financial derivatives impact on the China futures market. It also presents the introduction of financial derivatives which will play a vital role in the organization of Chinese futures market and this will decrease the total risk, the growth of the financial derivatives will develop the functions of the commodity futures market which will directly boost the market price and invent the hedging functions, with the use of financial derivatives this will widening the volume of the futures market and improve the structure of the shareholders, and the trading activities of financial derivatives will increase the level futures employed. 6.2 RECOMMENDATIONS According to the rapid growth of the economic worldwide and financial internalization, the financial derivatives businesses have been very popular in the financial market. There are various methods of supervision of financial derivatives from different countries this attributed to the difficult features of the financial derivatives, although the financial derivatives is in the early stage in china and the financial derivatives cannot be shun. It is proposed that Chinese government could create a combine supervision method. The equal/combination supervision of the financial derivatives is necessary for internal growth; the search for combined supervision system to the regulation is to combine supervision system of organising between the internal structure and co-ordination; an equal supervision system has a defined comparative advantage. It is however recommended that the Chinese financial derivative market should have a standard and homogenous supervision system to protect any poss ibility of risk that may occur in the financial derivatives. 6.3 LIMITATIONS OF THE STUDY In the course of the research work with relationship with a case study, there are some certain research limitations which include; Lack of data; the research focuses on theoretical analysis and there are no relevant data to back it up such as a presentation on market survey. The research work study the Chinas financial market views, reports and journals and also study the views, reports and journals of financial derivatives used in China. The China supervisory method is basically theoretical and they lack data to support the analysis. There are no recent data to back up all the analysis of Chinas economy. 6.4 SUGGESTION FOR FURTHER STUDY For further study, it is however recommended to rely on certain Examples of limitations; this research work focuses on the findings on the Chinas financial market; some materials were examined about the chinas future market and Chinas financial market. This research work registered most of the financial derivatives used in China but they are no any exact examples this because the collection of the examples are complicated. The research paper examines a number of supervision of the financial derivatives in Chinas financial institutions but there are no samples to analyse the operations of the supervision of the derivatives, all these are the limitations of the research study. Examples on the Chinas financial market, China financial derivatives and the relevant supervision that is been used in China financial derivative. The shareholders and the financial market itself will play a vital role in getting the examples of the financial market and financial derivatives. The research al so recommends that the researcher needs to get recent data that can back up the analysis in order to explain the China economic system perfectly.

The Impact Of Internet And Social Media On Copyright Laws

What is the impact of the internet and social media on copyright laws? What is the impact of the internet and social media on copyright laws? Haley Leshko CGS-1000 March 10, 2017 Mr. Newfield WHAT IS THE IMPACT OF THE INTERNET AND SOCIAL MEDIA ON COPYRIGHT LAWS? Introduction Copyright laws were established to protect the original work of individuals since 1709. At present only two acts are in effect today, the copyright Act of 1909 and 1976. (United States Copyright Laws) These works protect the individuals work but not the idea. With the digital age copyright laws are not adapt to protect these rights. With the vast amount of information that is available digital copyright infringement takes place almost on an hourly†¦show more content†¦Congress should however â€Å"specify users† digital rights by mapping out an expansive , affirmative set of rights delineating the scope of public’s rights to sample, reuse, build upon, and share the digital works one legally acquires.† (JD Lasica, Should Copyright Laws Change in Digital Age?) Individuals who create an original work have a right to protect their work under copyright laws. These laws protect the work from being reproduced in anyway shape or form. According to the (C ongress ion Budget Office, Copyright Issues in Digital Media) â€Å"The rights that copyright owners can claim over creative work are not always well defined, however some areas of copyright law remain unsettled.† If a person intentional downloads copyrighted material with the sole intent to profit that person should be prosecuted under the copyright law. 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Corporal Punishment What Are We Teaching Our Kids Essay

Research done by leading pediatricians, the American Psychological Association, and countless other sources since the 1960’s have completely revolutionized parenting and fundamentally changed how parents raise their kids. From a child’s nutrition to what your kids should watch on TV have been extensively studied, but none other more than corporal punishment as a means of discipline. Arguably one of the most difficult things any parent has to face when raising a child is discipline. Many parents, whether having their first child or already raising a family, often ask themselves: is corporal punishment an acceptable form of discipline and what effect could it have on my child? Like Dr. Spock wrote in his parenting guide, â€Å"The best test of a†¦show more content†¦Although sometimes a slap on the hand or a firm open palm slap on the behind is necessary, it’s more important that the child understand why they are being disciplined. Corporal punishment can sometimes be a part of discipline, but it is not the cure to all situations and definitely not the only part of the solution. Just like the scripture reads, â€Å"A rebuke works deeper in one having understanding than striking a stupid one a hundred times† Prov 17:10 (New World Translation). While physically punishing a misbehaving child brings instant results by making the child complacent, the overall effect on the child is actually more negative. The child understands their actions caused them to get punished but this doesn’t actually teach the child a reason for behaving correctly, only that they did something wrong. Furthermore, it encourages aggression and violence because it models aggression and violence. â€Å"Spanking or slapping a child is an act of violence, just as slapping a wife is an act of violence† (Straus Donnelly, 2001, p. XiX). 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The United States has outlawed corporal punishment from our prisons as cruel and inhumane treatment, as well as wife-beating, once thought to be the right

Cafe de Coral Free Essays

string(38) " to build over the last thirty years\." As Mr. Michael Chan, Chairman and CEO of the Cafe de Coral group, thought about the directions his company should take, he felt a bit uncertain. The company, clearly the most popular Chinese Quick Serve Restaurant (QSR) in Hong Kong and a local success, had just celebrated twenty years as a public company. We will write a custom essay sample on Cafe de Coral or any similar topic only for you Order Now This success and longevity in the cut-throat world of fast food was remarkable, but Mr. Chan did not want the company to rest on its laurels. At his meeting this afternoon with senior management, Mr.Chan planned to suggest that the company needed to move outside of Hong Kong and follow a much more aggressive plan than it had followed when it had moved slowly into China (with both Cafe de Coral outlets in neighboring Guangdong Province and recently New Asia Dabao in Shanghai) and also into North America (by buying into and then purchasing outright the Manchu Wok chain) over the last several years. He knew that the company needed a very clear globalization strategy in order to move to the next level of growth and to find sustainable growth opportunities away from Hong Kong.Mr. Chan had no clear plan at this point and he needed input from his managers and the Board. Mr. Chan reflected on how Cafe de Coral was a household name in Hong Kong and was the most popular QSR in its home market. The company dominated the market in Hong Kong and continuously improved its brand image through innovations in food preparation at its centralized food processing and distribution centers in Hong Kong and across the border in Guangdong.It also had perfected methods of offering large menus (up to 150 items) that changed four times over the course of every day with different items added and other items taken off the menu two to three times a week to provide variety as well as fresh and delicious food in a quick-serve environment to its huge and discerning customer base. 1 Mr. Chan wanted to build on the company’s expertise in high volume and cost efficient food preparation and distribution and in offering great variety because he believed that these were the companyâ⠂¬â„¢s unique capabilities that dded value to the company’s success. But where should he do this building and how could he be sure that what worked in Hong Kong would work in markets around the world? Of course, North America, where fast food started and was still thriving, was a logical answer, but would Cafe de Coral be able to compete in a market that did not value menu variety, as far as fast food was concerned? As Mr. Chan thought about the big names in fast food in America, he concluded that the smaller the menu in North America, the more successful the place.Should he gamble on taking Cafe de Coral’s huge and ever-changing menus to a place where a few variations on a hamburger, on fried chicken or on a taco were what sold? In addition, the company had experience in North America with the limited menu format of Manchu Wok, which it now owned completely. What about Europe where there were some American fast food outlets and some interest in fast food but also where the market was not very accepting of the idea of fast food? There was no q uestion that varieties of cuisines were welcome in Europe but the food had to be done with a certain flair.Could Cafe de Coral sell its big menu, as good as he knew it was, where the market distrusted the very concept of fast food? And what about greater expansion into China and the rest of Australasia? The company’s cautious expansion into Southern China, where tastes were very similar to those in Hong Kong, had proceeded very well over the last ten years or so and the careful strategy through joint venturing in Shanghai with the New Asia Dabao brand had been successful in the last three years. But how should the company move across China and Australasia?It was good to be in the coastal and more affluent areas of China, but to succeed there and elsewhere in China and across Asia meant having a broader customer base. He also did not want to forget that there were real possibilities of expansion into Australia and New Zealand where there were many Chinese immigrants and where the market might be ready for a Hong Kong-style fast food chain and not just interested in American fast food. 2 3 These were the questions that Mr. Chan planned to raise when he met with his managers that afternoon.He knew that the thorniest issue for the company was franchising. The company had succeeded in Hong Kong through owning 100% of all the outlets while at the same time using a districting management strategy that awarded bonuses to district managers and chief chefs for meeting and surpassing performance goals in their districts. But even though the company gave some autonomy to the district managers and chief chefs, there was still central control at the head office. The idea of relinquishing some of this control was a bit troubling, even to Mr. Chan. A franchising model would certainly require relinquishing control over food quality, food safety and service standards, but franchising seemed the only way to succeed in the huge (in terms of geographic expanse and in the number of customers) markets of North America, Europe, China and Australasia. Would shareholders and the Board of Directors be able to accept franchising of the brand? It was true that the company had some experience with expanding far away from Hong Kong with the Manchu Wok chain in North America. Franchising was working for Manchu Wok, but was franchising the only model for expansion?Mr. Chan himself was struggling with this idea because he wasn’t sure he liked the idea of losing control over the brand that the company had worked so hard to build over the last thirty years. You read "Cafe de Coral" in category "Papers" Related to the franchising issue was food production and distribution. Part of Cafe de Coral’s success in Hong Kong was the centraliz ed production and distribution system that the company had developed. Something like 80% to 90% of all food preparation occurred away from the actual outlets, which meant that the staff at the outlets could concentrate on customer service. Cafe de Coral was known for its huge menus and for having something for everyone at all times. This was possible through off-site preparation and through the carefully developed two-stage ordering process at the stores. Could this expertise in production and delivery be transferred to other markets? Expansion into vast markets across the global meant huge investments in food production and distribution centers and backend IT support systems. shareholders at home? Could the company make these investments without compromising its commitments to its Franchising and investments in food preparation centers were the basic problems that the company faced in determining its expansion strategies, but there were other problems to think about as well. Which place first? Who were the target customers in these markets? Should the company insist on selling variety in these markets or should it tailor its menu to local tastes? What Mr. Chan was looking for was information about the markets across t he globe that he couldn’t get just from reading reports and statistics.He needed North Americans, Europeans, Mainland Chinese, Southeast Asians, Australians and New Zealanders and, yes, even Hong Kongers (he could never forget about the company’s home market because the company needed to stay ahead of the game there) to tell him what they liked and what they wanted to eat, what they knew about fast food and the fast food business in their home markets, and what they saw as the strengths, weaknesses, opportunities, and threats in their markets. He needed time to gather more information, but time was something he didn’t have a lot of since his meeting was that afternoon. There was never enough time, he thought, as he sat back for a moment and thought back to the days when Cafe de Coral was a very local restaurant in Hong Kong†¦ 5 6 2. Company Background – The Cafe De Coral Group In 1968, a new company with a French-sounding name, Cafe de Coral, was incorporated in Hong Kong. Owner of the new company chose this name to capture the meaning of three Chinese characters, to encompass the company’s vision of having all its stakeholders (including shareholders, customers and employees â€Å"all happy together† in this new enterprise. The company started small, with one restaurant in Causeway Bay. The company spent the next ten years creating a market for the new concept of a quick-serve Chinese food restaurant and building through innovation. By 1976, the company was advertising on television and s preading the word about Chinese fast food. In 1979, the company built its first centralized food processing plant to meet growing demands.And then in 1981, the company made the unique move of opening restaurants in several public housing estates across Hong Kong to take its food to a broad base of his customers. By 1986, the company had grown to 32 restaurants across Hong Kong and Cafe de Coral was a well-known place to buy a quick but flavorful bite to eat. With this success under its belt, it was time for the company to be listed. In its first report as a public company after listing in 1986, Cafe de Coral reported profits of approximately HK$37. 2 million.In the twenty years since its listing, Cafe de Coral grew from a local company with 32 restaurants to a global diversified business group with some 562 operating units extending beyond fast-food outlets to institutional catering, specialty restaurants and a food processing and distribution business in Asia and North America. In 2006, the company, under the direction of Michael Chan, its CEO and Executive Chairman, reported profits of HK$320 million. With its motto, â€Å"A Hundred Points of Excellence,† Cafe De Coral sees profit as only one mark of its success, however.As the world’s largest publicly listed Chinese Quick Service Restaurant (QSR), Cafe De Coral prides itself on leading in product innovation and marketing excellence, with uncompromised standards of quality, unconditional service to its customers, staff and shareholders, and undivided commitment to excellence. 7 With its base in Hong Kong, the company has expanded into Asia and North American over the past five years through mergers and acquisitions (Manchu Wok in North America and New Asia Dabao in Shanghai).It has also expanded its Hong Kong brands and has focused on its specialty restaurants, The Spaghetti House and Oliver’s Super Sandwiches. The restaurants owned by Cafe de Coral are as follows: Brand Cafe de Coral Manchu Wok New Asia Daobao Oliver’s Super Sandwiches Fan Ting Bravo le cafe The Spaghetti House Ah Yee Leng Tong Super Super Congee Noodles Dai Bai Dang Asia Pacfic Catering Luncheon Star Segment Country/ Region Hong Kong, China Chinese Quick Service Restaurant (QSR) North America ShanghaiWestern QSR Chinese QSR Premium Chinese QSR Italian specialty restaurant Chinese restaurant, specialized in serving Chinese soup Chinese restaurant, specialized in Cantonese congee noodles Chinese restaurant Institutional Catering Lunch box catering Hong Kong USA Hong Kong Hong Kong, China, SE Asia Hong Kong Hong Kong USA Hong Kong Hong Kong Restaurants Owned by Cafe de Coral 8 To build its business in China, the group has also focused on building food processing capabilities in Guangdong, across the border from Hong Kong.The company’s current businesses are divided as follows: Organization Chart of Cafe de Coral’s Strategic Business Units 9 Currently Cafe de Coral is the to p Chinese fast food chain in Hong Kong. It serves over 300,000 customers a day in Hong Kong, with 129 outlets located throughout the territory in residential, commercial, leisure and tourist locations. In 2005, the proportion of sales by from each business division was: 80% (HK$2735M) from QSR worldwide; 10% (HK$338M) from institutional catering in Hong Kong; 10% (HK$345M) from all others for a total of $3419M. 10While the QSR units generate the largest revenue, institutional catering in Hong Kong was the fastest growing in terms of unit numbers of the group’s business divisions in 2005. The company signed 16 new contracts, which was a 25% increase over the previous year, and operated 79 outlets. The second fastest growing business was China and Overseas QSR. Thirteen new outlets were opened in these markets, a 14% increase over the previous year, from 91 to 104 outlets. In the ten years from 1996 to 2006, the company’s turnover (revenue) increased 1. 7 fold and the net profit increased 2. 58 fold.However, the company was not immune to the business downturns in 1998 and 2003. There were significant drops in net profits in both years in comparison with 1997 and 2002. One issue that concerned the board was how to protect the company against these sorts of market-wide downturns in Hong Kong that could not be anticipated. 11 From 1996 to 2006, the group’s turnover and profits were: 12 3. The Hong Kong Restaurant Industry As a densely populated city built on several islands and across a swath of land on the coast of the Chinese mainland, Hong Kong does not have the space to make living in stand-alone houses possible for most people. Most everyone in Hong Kong lives in apartments. In 2005, the government’s statistics (Housing Department) showed almost 50% of the population (about 7 million) lived in public rental housing supplied by the government or in subsidized sale flats that were built by the government and sold to qualified (by income level) buyers. The other 50% lived in private permanent housing, most of that in high-rise apartment buildings. With nearly everyone living in apartments and most of those apartments quite small (the average living space in a government flat was 7 square meters per person), there is not enough space to entertain guests at home.Eating out away from these cramped quarters is a very common way to for Hong Kongers to spend time with extended family members and friends. In Q2 of 2005, the total number of restaurants in Hong Kong reached 10,962. Because local people eat out often and also because Hong Kong is a popular tourist stop for Westerners traveling to China and, more recently, for Mainland Chinese who have a growing number of tourism dollars and want to spend them outside of China, the catering industry is huge in Hong Kong. Hong Kong is famous for being a food paradise where tourists and locals alike can find a huge variety of authentic cuisines in one small place. There are many types of Chinese (Beijing, Shanghainese, Szechwan, Cantonese, etc. ), Japanese, Korean, South Asian, Western burgers and pizzas, Western steak houses, Middle Eastern, and Continental cuisines available in the central business districts on both sides of the harbor. All this food is available in various store and catering formats, namely full-service restaurants, fast food, cafes/bars, takeaway, street stalls, kiosks and self-service canteens. 3 Annual per capita spending on various restaurants and bars was HK$9725. 7 in 2002. Number of Restaurants in Hong Kong, 2004 No. Establishment Chinese restaurants Non-Chinese restaurants Fast food shops Bars Misc. eating drinking places 5,491 3,590 1,026 485 502 Percentage (by number) 50 32 9 4 5 Percentage (by receipts) 48 26 19 4 3 Total 11,094 100 100 Source: Census and Statistics Department, Hong Kong Government Although the SARS (Severe Acute Respiratory Syndrome) epidemic greatly affected the local economy in 2003, the Hong Kong economy recovered in 2004 mainly from an influx of tourists.In 2004, the total income from tourism jumped 26% from HK$57,137 million to HK$72,181 million due to a dramatic increase in Mainland Chinese tourists visiting the territory. The spending on food by tourists surged from HK$6,762 million to HK$ 8,239 million in 2004. 14 Spending on Tourism 1999-2004 HK$ million, current prices 1999 Accommodation Entertainment Excursions Food Shopping Travel within country Total Source: Notes: 2000 19,058. 4 730. 0 924. 0 5,287. 0 19,516. 0 3,215. 6 48,731. 0 2001 20,029. 9 935. 0 923. 0 5,729. 0 19,778. 0 3,554. 50,949. 0 2002 20,133. 0 1,612. 0 1,384. 0 8,047. 0 25,321. 0 3,667. 0 60,164. 0 2003 13,866. 0 1,287. 0 437. 0 6,762. 0 31,543. 0 3,242. 0 57,137. 0 2004 18,139. 0 1,593. 0 1,172. 0 8,239. 0 38,756. 0 4,282. 0 72,181. 0 16,892. 4 698. 0 1,239. 0 5,396. 0 18,320. 0 3,536. 6 46,082. 0 1999-2003 Euromonitor International from Hong Kong Tourism Board; 2004 Euromonitor International estimates tourists Entertainment includes attractions and evening entertainment Food includes restaurants Includes spending by incoming tourists as well as domesticAlthough tourist spending rose 22% in 2004, the overall catering industry grew a mere 1% in sales in 2004 to reach HK$53 billion. The overcrowded catering market is characterized by fierce competition. Restaurants of all types compete through continuous product innovations, marketing campaigns, renovation of stores, and price wars. While the focus on product innovations, marketing campaigns, and renovation of stores built strong brand image and sales across the market, price wars eroded the profit margin and decreased overall sales.According to Euromonitor, the catering industry will continue to grow in Hong Kong at a compounded annual growth rate (CAGR) of 2% in sales value and nearly 3% in both store numbers and transactions between 2005 and 2009. On this saturated and competitive turf, fast food chains, especially Chinese fast food chains, have outperformed the industry average and are expected to lead the growth. 15 4. Fast Food in Hong Kong The fast food industry in Hong Kong is successful because it offers cheap and fast food, which is a perfect match for the busy and hectic lifestyles of the Hong Kong people.Fast food restaurants account for 19% of the overall restaurant sales in Hong Kong: According to AC Nielson’s consumer consumption habit report, Hong Kongers were the most frequent fast food eaters in the world. In 2004, 61% of Hong Kong adults ate at a take-away restaurant at least once a week. 19% 16 While Western fast food giants, such as McDonald’s, Burger King, KFC, and Wendy’s, are very successful in the worldwide market, the Hong Kong market is dominated by Chinese fast food chains. Local fast food chains control over 50% share of the Hong Kong QSR market, with Cafe de Coral leading with 24% share. McDonald’s is the only Western fast food giant to gain a stronghold in Hong Kong in second place with 20% share, whereas KFC enjoys less than 10% of market share in Hong Kong. Cafe de Coral is one of the only two brands in the world that can out-complete McDonald’s on its local turf. Jollibee in the Philippines is the other. Despite years of trying to penetrate into the Hong Kong market, many international players, such as Burger King, Wendy’s, Subway and Jack in the Box, have not been successful. Most of them backed away from their investments in Hong Kong. Burger King returned recently with a single outlet inside the Hong Kong International Airport. 17 5. What Makes Cafe De Coral Successful? A Look at the Company’s Drivers of Success The failure of many foreign chains in the Hong Kong market is attributed to their inability to adapt to local tastes and to local pricing needs. A quick comparison of local and international fast food operators yields the following observations: Local 1. 2. corporate ownership wide product range, about 150 products a day, with 4 menus International 1. 2. franchise limited products, about 40 items, 2 menus a day. ffers many give-aways: e. g. Snoopy figures, Hello Kitty soft toys dolls in Asia 3. takes a long time for product development in individual markets, to calibrate with the headquarters product development team. 3. response to local needs much faster Comparison of Hong Kong and International Fast Food Operators But how does Cafe de Coral stay on the top of its market? What drives its success? The company has worked very hard to focus on product innovation, carefully designed in-store operations to deal with the high volume of customers, centralized global sourcing, centralized food processing centers, p-to-date marketing and branding strategies, performance-based compensation packages for key managers and chefs, and a custom-designed back-end IT support system to stay ahead of the game. 6. Product Innovation at Cafe De Coral Cafe de Coral responds to the local market through its new product innovation capabilities. Product innovation comes from perfecting the recipes of commonly available and favorite dishes, standardizing the recipes so that the portion size for an individual customer is correct, and then determining what it takes to move to mass production. 18A case in point is the traditional wintertime favorite for Chinese called clay pot rice. This dish is sold during the winter months at Chinese restaurants and in large portion sizes so that a group of diners can enjoy the hot and fragrant dish together. Rice and toppings, usually preserved meat or Chinese sausages, are cooked in a clay pot and served at the table in the pot. To add this dish to Cafe de Coral’s seasonal menu during the winter months meant that the company had develop the recipe so that the portion size would meet the demand of a single person ordering and eating the dish. In addition, it had to figure out how to produce and sell the dish on a mass scale of, say, 30,000 sets per day. In restaurants, clay pot rice takes 20 minutes to prepare. While they wait for the dish, diners eat other dishes and normally do not notice how long it takes before the clay pot is brought to the table. At Cafe de Coral, this model of serving dishes as they are prepared (which is very typical of all Chinese sitdown restaurants) does not work. The company had learned through long experience that their customers are seeking efficiency and they will not wait for more than 10 minutes for their food to be prepared and presented to them.To add clay pot rice to its menu, the company needed to determine how to centralize much of the preparation of the dish at the group’s central food processing plant so that only the very last steps in the preparation would be done on site. The development chefs at the central processing plant found ways to shorten the cooking time at the b ranch level and to turn a well-loved family dish into a seasonal best seller for the group. Customers need to wait for 5 to 10 minutes before enjoying clay pot rice, but this is within the acceptable waiting time. 19 20 7. In-Store Operations to Support High Transaction VolumeWith its success in understanding and adapting to local flavors and the local desire for menu diversity, Cafe de Coral serves 300,000 customers daily in its 129 outlets, which is equivalent to serving 10 million meals a month. To cope with the this high volume of traffic and still provide a clean dining environment to their customers, the typical shop area is 300 square meters in size, quite a large space for Hong Kong retailers. In addition to renting (and recently buying) large shop areas, Cafe de Coral streams its customers into different queues to control the traffic volume.This is very different from a Western fast food shop’s typical all-in-one counter service, where the customer waits in front of one of many cashiers, orders the food from the cashier who rings up the order and then goes to get the food that has been prepared routinely throughout the day. The cashier returns with the food, collects the money and then presents the customer with the food, either in a bag for take away or on a tray for on-site dining. At a Cafe de Coral outlet, the customer first encounters the menu board at the doorway and decides on what to order. The customer then proceeds to the cashier who is always next to the menu.The customer places the order and pays the cashier. The cashier gives the customer an order slip. Next, the customer takes the order slip to a food-catering bar, which has received the order through the point-of-sale transaction system. The food preparers prepare the food promptly as it is ordered so that it is always fresh for the customer. The food is then presented to the customer on the spot or it is collected when the customer’s order number appears on a digital display. 21 22 8. Centralized Global Sourcing of Materials The group has centralized its global sourcing of food and materials for all its Hong Kong and China operations.In fact, 80% of the raw materials are procured from nonChina based sources to meet the company’s food standards and to take advantage of the global economies of scale. A typical purchase contract runs for three to six months. Within the contract duration, most fluctuations in pricing are absorbed by the global supplier. At the same time, the global supplier needs to guarantee stable supplies. Under global sourcing, the group imports beef from Brazil, fish fillets from New Zealand, spring chickens from France, and eggs and poultry from the US. Indeed, 10% of the eggs imported into Hong Kong from the US are sold to Cafe de Coral. The benefits of Cafe de Coral’s centralized sourcing are stable supplies and costs along with reduced margin pressure and reduced management in the buying process. 9. Central Food Processing Centers The preparation of Chinese food involves a great deal of chopping and seasoning, along with a variety of cooking methods. Because of its large and complex Chinese menu, Cafe de Coral has found ways to deal with the huge effort required for food preparation.To deal with the difficulties of preparing Chinese food in a fast and efficient manner and on a large scale, Cafe de Coral built its own central food processing centers to do 80% to 90% of the food preparation. The company can save on the high costs of using skilled labor at each of its outlets this way. Only the last-minute cooking and heating of the dishes is left for the individual outlets to do. Executive chefs hand down detailed instructions to branch workers on how to complete the last 10% to 20% of the preparation process. Currently, the company has two central kitchens: one at the Headquarters in Shatin and another one in Guangzhou.These centers support Cafe de Coral and the group’s other restaurants in Hong Kong and Southern China. 23 24 Outlets order materials every afternoon. The food processing centers process the orders overnight and deliver the needed semi-finished food and materials to branches the next morning. Food Materials Order Cycle of Cafe de Coral This backend support system and a fleet of self-owned trucks make this 24-hour orderto-delivery cycle possible, reliable and efficient. The benefits of the central food processing centers are two fold. They reduce labor costs by cutting the number of chefs in the outlets.Currently there is only one Chief Chef in each district (18 districts in total). In addition, the consistency and quality across all outlets are ensured. 25 10. Marketing and Branding Strategy Since Cafe de Coral offers products that are available in full-service restaurants and from competitors across Hong Kong, it always faces the dilemma of how to lure fastfood eaters into its stores to pay a premium price over what they could find on the street in food stalls and how to differentiate itself from other Chinese fast food shops. Just recently, the company also grew concerned with its image. It wondered if Cafe de Coral, though a household name in Hong Kong, had become an old-fashioned brand. As with any brand, Cafe de Coral needs to rejuvenate its image constantly. To keep the brand young, the company is seeking to attract teenagers and young adults to become its new and frequent customers. This is the customer segment that is most willing to spend money on social gatherings in a fast food setting. With its new slogan, â€Å"What a Beautiful Day, see you at Cafe de Coral†, the company seeks to bring in the rendezvousing crowd.It also started an aggressive program of renovating the in-store environments within two years to create a chic, post-modern ambience. The overall design is meant to project hotel-like surrounding that are beyond the customers’ expectation for what they are paying for their food, with a spacious reception area, postmodern art decor, plasma TVs and relaxing music. In addition, the development chefs have developed special products, such as fondue for two and hot pot for two, to support of the ‘rendezvous’ marketing strategy. 26 11. Performance-Based RemunerationTo encourage store managers, district managers, and chief chefs to perform at their very best, the company has adopted a performance-based remuneration scheme. Apart from their base salary, a significant portion (up to 50%) of the salaries of these employees is based on the shop’s and district’s profitability. Each shop is a profit center on its own. Cafe de Coral divided its Hong Kong business into 18 districts, with one district manager and one chief chef in each district. These two top-level managers manage around six or seven stores in their districts. The company gives autonomy to the district manager and chief chef. They are responsible for profits and losses of the stores in their district; they have individual business targets, in-store measures and in-process measures to meet. Mystery shoppers are hired to monitor the food and service quality of each restaurant. Their reports have a bearing on the performance bonuses to be awarded to all members of the management team of each branch. The chief chef and district manager need to work together on compiling the best menus for their district.While the headquarters produces core menus that must be included in every store, the chief chef decides on the rotation of other regular products on a weekly basis after learning what kinds of fresh ingredients are available through central sourcing and how much they cost. The district manager decides on the production volume for each product based on the cost per product that the chief chef and the central processing plant provide. Store managers further balance the appropriate amount of materials and food to achieve the sales targets at the stores set by the district managers and headquarters.This autonomy gives flexibility to each store and district to react to the different demographics in each district and to maximize turnover. For example, a store surrounded by schools sells more snacks; a store located in the central business district sells more up-scale meal sets. At the same time, the bottom-up sales targeting gives the food processing plant and the company’s purchasing team accurate and detailed forecasting information to minimize food costs and materials wastage. Food and materials wastage at the branch level is currently less than 1%. 27 12.IT Support – Operation and Management Decision Making Cafe de Coral works on a high degree of collaboration and depends on a detailed feedback loop across different levels to deliver the high profit margin. The IT department plays a crucial role in facilitating a transparent information flow across all levels and departments. At the heart of this information flow is the Business Management System (BMS), a hub that links individual systems running in different departments. Another core system is the Point-Of-Sales (POS) system, which was fully implemented in 2003 in all stores.Daily and weekly menus are available in the POS terminals so that in-store employees do not need to memorize any product codes. Any sales order at the cashier is instantly displayed in the kitchen to shorten the communication time, and, in the end, to shorten the customer’s waiting time. Sales, food and materials inventory, costing, and forecasting information are fed seamlessly into the BMS located in the headquarters for centralized sourcing, food processing, and business tracking, and for formulating sales opportunities and other management needs. 28 Information and Physical Material Flow in Cafe de Cora lThis high level of information integration also facilitates the delivery of timely management reports. Executive management reports and monthly profit and loss reports from the branches are available two weeks after the end of the month. The BMS system also helps the company to manage ad hoc situations. For example, when a very strong typhoon came through Hong Kong in August 2006, all flights in and out of Hong Kong had to be cancelled or rerouted. As they waited for the typhoon to pass, many passengers were forced to stay in the airport and they flocked to the two Cafe de Coral outlets there.The two outlets enjoyed abnormally high sales that day, but they also sold out all of their stock within the day. Through the BMS and POS, the 29 management team was able to locate products and resources from nearby branches to satisfy demand over the next few days. Such flexibility not would have been possible without the BMS, which provides near real-time information at the headquarters to make prompt decisions. 13. Cafe De Coral Going Global? The fast food culture is reaching far into the Asia Pacific region.According to ACNielsen’s Online Consumer Survey in 2004, â€Å"nearly all Filipino (99%), Taiwanese and Malaysian (98%) and Hong Kong people (97%) were fast food patrons†. In a comparison with the rest of the global market on weekly fast food consumption, the East Asian markets scored big among the top ten in terms of patronage. Percentage of Population that eats at Take-Away restaurants at least once a week 61% 59% 54% 50% 44% 41% 37% 35% 30% 29% Top 10 Global Markets Hong Kong Malaysia Philippines Singapore Thailand China India U. S. Australia New Zealand Source: AC Nielson, Oct 2004 Top 10 Global markets for weekly fast food consumption 0 In terms of overall sales, Euromonitor’s statistics for 2003 indicate that the U. S. is by far the top fast food nation. Top fast-food markets worldwide, 2003 US$ Bn United States Japan Canada United Kingdom China South Korea Germany Australasia Brazil India Total Global Market Source: Euromonitor, Nov 2004 % 53% 5% 5% 5% 3% 3% 3% 2% 2% 2% 148. 61 13. 87 12. 7 12. 1 9. 76 9. 24 7. 37 5. 68 5. 0 4. 9 282 Top fast food markets worldwide, 2003 ACNielsen found that the global drivers of take-away restaurant choice were the type of cuisine, the price of the food and the convenience of the location of the restaurant.The global fast food market generated total revenues of USD 282 billion in 2003, which was an increase of 20% over the previous five years. More than 96 billion meals were served worldwide in 2003. Longer worker hours, changing lifestyles and the continuing disintegration of the tradition of family meals have helped fast food chains to sustain growth worldwide. The US is still the largest market where over 50% of the global revenues were generated. In emerging markets such as Eastern Europe, Africa/Middle East and AsiaPacific, there was continued demand for Western-styled food in spite of the higher than average local price tag.By the same token, Americans’ annual per capita spending on fast food topped the world at $515 in 2003, and increased to $566 in 2005. This was followed by Canada, the UK and Australia with $456, $393 and $363 annual per capita spending on fast food, respectively. Euromonitor’s statistics indicate that Asian fast food is catching up fast on a yearly growth rate of 6. 9% compared to a 1. 3% yearly growth of burger chains. 31 The largest three players in the worldwide fast food game are still McDonald’s (26%), Yum! (10%), and Wendy’s (7%). McDonald’s is the world’s largest foodservice retailing chain.The burger giant has 31,886 outlets in 119 countries. The company recorded $20. 5 billion revenue and a net profit of $2. 6 billion in 2005, an increase of 7. 3% and 13% over the previous year, respectively. Headquartered in Kentucky, Yum! Brands, Inc owns the world’s largest restaurant fleet with about 34,000 restaurants operating in over 100 markets. KFC, Pizza Hut, Long John Silver’s and Taco Bell are the company’s global leading brands. The company made US$ 9. 349 billion revenue and US$ 762 million net income in 2005, a jump of 4% and 3%, respectively, over the previous year.The increase was primarily attributable to the continuous development of franchisee restaurants. In 2005 alone, the multi-brand catering giant opened 4,000 more outlets worldwide. Wendy’s is the third largest fast food company in the United States. There are 6746 worldwide outlets, of which 80% are franchised. Apart from traditional (but square) burgers, Wendy’s offers a wide range of alternatives such as baked potatoes and chili. The group also owns Tim Hortons, the Canadian-based doughnut and coffee shop. In 2005, the Group reported sales of $3. 772 billion, up from $3. billion in 2004. Twothirds of the sales came from Wendy’s brand itself. 32 33 14. Conclusion The very idea of competing with the likes of McDonald’s, the huge Yum! group and Wendy’s was intriguing to Mr. Chan. But what would be the best strategy to go global? How would the company deal with franchising if it chose that model? Could it invest in the food preparation and distribution centers that would be necessary to make expansion work? Does it need to maintain the same operational logistics and mode of customer flow that it used in Hong Kong to handle high traffic volumes?Would markets outside of Hong Kong and China take to the huge and varied menu that characterized Cafe de Coral and made it popular among local customers? Which areas in the world should they go to first? Who were the target customers in these markets? How could the company be certain that the drivers of success in Hong Kong would work in outside markets? Would the expansion strategy take away energy and interest in the Hong Kong market? How should the company protect its market share there? There were just so many questions. Mr. Chan needed some answers and soon. 34 How to cite Cafe de Coral, Papers