tag:blogger.com,1999:blog-28835774680185380272023-11-15T10:06:25.570-08:00Amateur Management ReviewA thinking-man’s weblog in the interest of life-long learning and the free sharing of knowledge.Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-2883577468018538027.post-65207774717013605172013-03-09T21:36:00.000-08:002013-03-09T21:58:59.595-08:00Sales Masterclass 1: How well do you know your customers and what drives their buy decision?<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
The continuously increasing international trade and
globalization is causing the business environment to be much more competitive
than ever before. Companies are continuously
expected and pressured to succeed and generate profits. They need to innovate, to reduce costs, to
introduce new quality products and services, or penetrate new markets with
existing products and services, and to attract or develop, and retain talent.</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Companies need sales i.e. to generate revenue, as
revenue is the life blood of all companies, irrespective of their size, location
and nature of business. Even non-profit organizations
require some form of revenue or income, for e.g. donations, to continue to
operate. Profits from sales are used to grow
the business, for e.g. business expansion, acquiring new equipment, research
and development, and hiring and retaining talent. Companies also need to retain adequate profits
from past sales for sustaining through low-business periods caused by regional
or global economic or financial crisis.</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Needless to say, sales is very important, and since
companies make sales from customers, customers are equally important. How well do you know your customers? Do you know why they buy from you? Do you know why they buy less from you and
more from your competitor, or buy more from you and less from your
competitor? Do you know how and what
customers think of when they decide to buy or not to buy?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
The more you know about your customers, the better
positioned you are to increase your sales to them. We begin by learning more about your customer’s
business. Knowing more about your
customers’ business will reveal their needs and concerns, leading to the
factors that drive their buy decisions.</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Ask yourself:</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
1) How well do you know your customer’s profile?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
2) What is your customer’s buy process?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
3) What are your customer’s key buying factors?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
4) What business terms are most important to your
customer?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
5) Identify the key customer benefits from your
customer’s buy factors</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
6) Are there any negative market factors that can
affect your customer’s buy decision?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
7) Are there any emerging market factors that can
affect your customer’s buy decision?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
8) What buy factors are your competitors using to
leverage their products and services?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
9) Are you leveraging on technology to improve and
strengthen customer management and retention?</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<i>To
be continued</i>.</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-29544687037958073142011-10-06T21:20:00.000-07:002011-10-12T22:19:48.757-07:00iSad<a href="http://www.flickr.com/photos/29913957@N08/6222183688/" title="SteveJobs_1955-2011 by andychin62, on Flickr"><img alt="SteveJobs_1955-2011" height="292" src="http://farm7.static.flickr.com/6167/6222183688_3cb1553f32_m.jpg" width="400" /></a><br />
<div style="text-align: center;"><span style="font-size: xx-small;">Copyright (C) 2011 Apple, Inc.</span></div><br />
<div style="text-align: center;">October 5, 2011</div><div style="text-align: center;">Palo Alto, California, USA</div>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-34029575779798493442011-03-08T00:38:00.000-08:002011-10-06T04:48:22.547-07:00The Apple iPod Phenomenon: Rebooting Coolness, Culture, and Commerce (Part 3 of 3)<div style="text-align: center;"><strong><span style="font-size: large;">... Continued from Part 2</span></strong></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-indent: -0.5in;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">4.0<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Entrepreneurship Perspective</b></div><br />
<strong>4.1<span style="mso-tab-count: 1;"> </span>General</strong><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">For the third perspective of our multi-perspective approach to strategic management, the Entrepreneurship perspective is chosen simply because for each and every business venture, entrepreneurship is necessary.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In Apple’s case, there is no lack of the entrepreneurial spirit and entrepreneurship in the form of Steve P. Jobs, the co-founder of Apple Inc.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt;">Figure 4-1: Apple founders – Stephen Wozniak (left) and Steve Jobs, 1976</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><a href="http://www.flickr.com/photos/29913957@N08/5498841401/" title="Wozniak_and_Jobs by andychin62, on Flickr"><img alt="Wozniak_and_Jobs" height="267" src="http://farm6.static.flickr.com/5171/5498841401_ff6ec86f8c.jpg" width="400" /></a><br />
<br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><strong>4.2<span style="mso-tab-count: 1;"> </span>Definition of Entrepreneurship</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><i>Kuratko & Hodgetts</i> define entrepreneurship as, “a dynamic process of vision, change, and creation. It requires an application of energy and passion toward the creation and implementation of new ideas and creative solutions.<span style="mso-spacerun: yes;"> </span>Essential ingredients include the willingness to take calculated risks – in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal needed resources; the fundamental skill of building a solid business plan; and, finally, the vision to recognize opportunity where others see chaos, contradiction, and confusion” (<i>2007, p. 33</i>).</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Figure 4-2: Steve Jobs introducing the iPhone at MacWorld 2007</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><a href="http://www.flickr.com/photos/29913957@N08/5498841437/" title="Jobs_and_iPod by andychin62, on Flickr"><img alt="Jobs_and_iPod" height="356" src="http://farm6.static.flickr.com/5212/5498841437_186e6b4542.jpg" width="400" /></a><br />
<br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b>4.3<span style="mso-tab-count: 1;"> </span>Perspectives of Entrepreneurship</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The key perspectives related to the field of entrepreneurship are:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To create and increase wealth through profits from an enterprise</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To develop the enterprise by utilizing the enterprise’s resources and competencies</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To implement changes by adapting human wants, market situation and the environment</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To develop innovation through the creation of new products and/or services through self-confidence and self-determination</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To grow the enterprise through sales and income growth</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>To create jobs by developing job opportunities through entrepreneurial activities To develop positive values via corporate governance and corporate social responsibilities</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-justify: inter-ideograph;">(<i>Yusof et al, 2005, p. 4</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-justify: inter-ideograph;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><b>4.4<span style="mso-tab-count: 1;"> </span>Characteristics of Entrepreneurs</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-justify: inter-ideograph;">Every entrepreneur needs to possess four basic characteristics:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Understanding their roles</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Capability</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Motivation</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Change agent</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-justify: inter-ideograph;">(<i>Yusof et al, 2005, p. 5</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-justify: inter-ideograph;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><b>4.5<span style="mso-tab-count: 1;"> </span>Integration of Entrepreneurial and Strategic Actions</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">From the Entrepreneurship perspective, Apple had successfully integrated entrepreneurial actions with the necessary strategic actions in order to realize the Apple iPod, and related iTunes services.<span style="mso-spacerun: yes;"> </span>Figure 4-3 shows the integration concept.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Figure 4-3: Apple’s integration of Entrepreneurial and Strategic actions</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><a href="http://www.flickr.com/photos/29913957@N08/5499436326/" title="Create_Wealth by andychin62, on Flickr"><img alt="Create_Wealth" height="300" src="http://farm6.static.flickr.com/5014/5499436326_3a5fd487a3.jpg" width="400" /></a><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><i><span lang="FR" style="mso-ansi-language: FR;">Adapted from Ireland et al, 2001, p. 51</span></i></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><b>4.6<span style="mso-tab-count: 1;"> </span>Entrepreneurship Perspective and the 7C’s of Strategy</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><b>4.6.1 Context</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple has always “Think Different” from its competitors and was a pioneer in understanding the external environment, for e.g. the needs of customers such as ease-of-use, and introduced the Macintosh with a leading edge graphical user interface (GUI) operating system and mouse that was easy to use and intuitive.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.2<span style="mso-tab-count: 1;"> </span>Competence</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple, through the entrepreneurial leadership of Steve Jobs is able to continuously scan the environment for opportunities in the changing market environment and customer trends. It is this ability that enabled Apple to recognize the opportunity in the market between the traditional music industry based on analog music playback devices and digital music technology, resulting in the iPod and related iTunes services.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.3<span style="mso-tab-count: 1;"> </span>Corporate</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Corporate Entrepreneurship (CE), defined as, “the process by which members of an existing firm bring into existence products and markets which do not exist within the repertoire of the firm” (<i>Venkataraman et al, 1992, p. 488</i>).<span style="mso-spacerun: yes;"> </span><i>Kuratko & Hodgetts</i> defines CE as, “a process that can facilitate firms’ efforts to innovate constantly and cope effectively with the competitive realities that companies encounter when competing in international markets” (<i>2007, p. 54</i>). Apple Inc. began life as Apple Computer Co. in 1976. Since then Apple has ventured into the music industry with the iPod, and the telecommunications industry with the iPhone, each time introducing unprecedented innovation.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.4<span style="mso-tab-count: 1;"> </span>Competing</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Establishing strong entrepreneurial network relationships with its partners enables Apple to gain more opportunities to achieve competitive advantage, for e.g. Apple is the only company licensed by the music labels and recording companies to offer for sale <stockticker w:st="on">AAC</stockticker>-DRM encrypted digital songs as supporting services infrastructure to the iPod hardware.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.5<span style="mso-tab-count: 1;"> </span>Culture</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple’s organizational culture promotes entrepreneurial behaviour (for e.g. close association with the market to understand customer needs) and innovation as evidence by their ability to introduce products that easily win over customers in terms of “cool” designs, functionality, and innovativeness.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.6<span style="mso-tab-count: 1;"> </span>Change</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The entrepreneurial leadership of Steve Jobs has always embraced change by being the change agent, for e.g. Apple changed personal computing by enhancing it with a GUI-based operating system and use of the mouse.<span style="mso-spacerun: yes;"> </span>Apple changed the way people acquired, managed and enjoyed music with the iPod, creating a new “iPod Generation” paradigm.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b style="mso-bidi-font-weight: normal;">4.6.7<span style="mso-tab-count: 1;"> </span>Control</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Entrepreneurial behaviour always strives for higher achievements and can result in bureaucratic controls and ways of doing things.<span style="mso-spacerun: yes;"> </span>Many articles have been written about Steve Jobs autocratic management style.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">No two entrepreneurs are alike, and the unique entrepreneurial capability of Steve Jobs creates a unique competitive advantage for Apple Inc.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">5.0<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Conclusions</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The Apple iPod phenomenon was discussed using three strategic management perspectives i.e. the Industrial Organisation, Network, and Entrepreneurship perspectives.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Collectively, the perspectives explains how Apple identified and developed new opportunities or markets, and attained competitive advantages over its competitors in the market segment of digital music entertainment although it was a late entrant to the market of MP3 devices and digital music.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The key aspects of each perspective contributing to the iPod phenomenon are summarised as follows:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;">a)<span style="mso-tab-count: 1;"> </span>Industrial Organisation – The behavior of Apple in the market structure in how it developed and gained market power and performance.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;">b)<span style="mso-tab-count: 1;"> </span>Network – Apple’s ability to develop a business ecosystem for the iPod and capitalise on the ecosystem to establish competitive advantages against competitors.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;">c)<span style="mso-tab-count: 1;"> </span>Entrepreneurship – The entrepreneurship capabilities of Steve Jobs, and the successful execution of the relationships between entrepreneurship and the seven C’s of strategy.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The critical perspective for Apple to become so successful with the iPod is Entrepreneurship.<span style="mso-spacerun: yes;"> </span>It is the entrepreneurial ability of Steve Jobs that makes him the visionary, the driving force, and the master innovator of Apple Inc. (<i>Andrews, 2009; Lyons, 2009</i>) to be able to utilize and capitalize on Apple’s resources and core competencies for three critical times in the history of Apple Inc. i.e. the introduction of the Macintosh personal computer in 1984, the iPod in 2001, and the iPhone in 2007 – each a key turning point in Apple’s fortunes, business continuity, and innovation leadership.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">To most people in the ICT and related industries, Steve Jobs is not an ordinary person.<span style="mso-spacerun: yes;"> </span>His extraordinary dreams, which solicited doubts from others, have always been his driving force since his youth, for e.g., he believed that computers should be tools for everyday people at the time (pre-1975) when computers were very complicated and expensive, and huge, requiring the space of several rooms.<span style="mso-spacerun: yes;"> </span>Few ordinary people could afford or knew how to use a computer then.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">User friendly point and click using a mouse device PCs or gorgeous looking PCs with highly intuitive graphical user interface operating systems, super thin notebooks, tablets, portable digital music players, low-priced music downloads, touch screen mobile phones, and digitally animated movies may not have existed or become so popular and desired if not for the dreams of Steve Jobs.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">He is not a person that is easily understood due to his many sides.<span style="mso-spacerun: yes;"> </span>He has been described as charming, egotistical, brilliant, opinionated, charismatic, stubborn, persuasive, critical of others, and even mysterious.<span style="mso-spacerun: yes;"> </span>Although he is not the actual inventor of all those products, his bold visions, his passion for technology and design, his love for the job, and ability to motivate and inspire others made the creation of those products possible, and in turn created the market demand.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">When he and Steve Wozniak started Apple in 1976, many people did not take them seriously because they were too young and inexperienced.<span style="mso-spacerun: yes;"> </span>They had no money and no office.<span style="mso-spacerun: yes;"> </span>Four years later, at 25, Steve Jobs was worth over USD200 million.<span style="mso-spacerun: yes;"> </span>By 30, after losing his job at Apple, he started another company – Next, and later bought Pixar.<span style="mso-spacerun: yes;"> </span>In 1997, Apple, at the brink of bankruptcy, brought Steve Jobs back, and in a short time made Apple more successful than ever.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">However, Steve Jobs’ health issues have been causing concern among its shareholders and Wall Street, should he be unable to continue leading Apple Inc. (<i>Helft, 2011; Can Apple Thrive, 2011; Lohr, 2011; Kane, 2009; Wagner, 2009</i>).<span style="mso-spacerun: yes;"> </span>This is in part due to Apple’s silence on its key management succession plans (<i>Apple succession call, 2011; Apple board to, 2011; Ante and McGregor, 2009</i>).<span style="mso-spacerun: yes;"> </span>The multi-billion dollar question is, “Can Apple successfully carry-on without Steve Jobs’ extraordinary vision, passion, innovativeness, leadership and competitiveness?”</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><b><i style="mso-bidi-font-style: normal;">References</i></b></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Ampikaipakan, Umapagan. (2011, March 8). “Steve Jobs is the Apple of IT industry’s eye.” <i style="mso-bidi-font-style: normal;">New Straits Times</i>, p. 17</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Andrews, Amanda. (2009). “Steve Jobs, Apple's iGod: Profile.” <i>Telegraph.com</i>, January 14. Downloaded from <a href="http://www.telegraph.co.uk/scienceandtechnology/technology/apple/4242660/Steve-Jobs-Apples-iGod-Profile.html">http://www.telegraph.co.uk/scienceandtechnology/technology/apple/4242660/Steve-Jobs-Apples-iGod-Profile.html</a> as at <date day="27" month="2" w:st="on" year="2009">27 February 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="27" month="2" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Ante, Spencer E. & McGregor, Jenna. (2009). “Apple Succession Plan: Nobody's Business?” <i>BusinessWeek.com</i>, January 15. Downloaded from <a href="http://www.businessweek.com/print/technology/content/jan2009/tc20090115_863327.htm">http://www.businessweek.com/print/technology/content/jan2009/tc20090115_863327.htm</a> as at <date day="12" month="3" w:st="on" year="2009">12 March 2009</date></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Apple Annual Report 2008. <i>Apple.com</i>. Downloaded from <a href="http://www.apple.com/investor/">http://www.apple.com/investor/</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Apple board to face investors on Jobs succession. (2011, February 24). <i style="mso-bidi-font-style: normal;">Star</i>, p. B9</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Apple succession call nixed. (2011, February 25). <i style="mso-bidi-font-style: normal;">Star</i>, p. B10</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Apple using iPhone to play AT&T against Verizon? (2009, April 30). <i>New Straits Times</i>, p. B13</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Boffey, Daniel (2008). “Apple admit Briton DID invent iPod, but he's still not getting any money.” <i>MailOnline</i>, September 8. Downloaded from <a href="http://www.dailymail.co.uk/news/article-1053152/Apple-admit-Briton-DID-invent-iPod-hes-getting-money.html?ITO=1490">http://www.dailymail.co.uk/news/article-1053152/Apple-admit-Briton-DID-invent-iPod-hes-getting-money.html?ITO=1490</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Burrows, Peter. (2007). “Welcome to Planet Apple.” <i>BusinessWeek.com</i>, June 28. Downloaded from <a href="http://www.businessweek.com/technology/content/jun2007/tc20070627_285624.htm?chan=technology_technology+index+page_top+stories">http://www.businessweek.com/technology/content/jun2007/tc20070627_285624.htm?chan=technology_technology+index+page_top+stories</a> as at <date day="1" month="5" w:st="on" year="2009">1 May 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="1" month="5" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Burt, Ronald S. (1995). <i>Structural Holes: The Social Structure of Competition</i>. <place w:st="on"><city w:st="on">Cambridge</city>, <state w:st="on">CA</state></place>: <place w:st="on"><placename w:st="on">Harvard</placename> <placetype w:st="on">University</placetype></place> Press</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Buskirk, Eliot van. (2005). “Introducing the world's first MP3 player.” <i>CNet.com</i>, January 21. Downloaded from <a href="http://reviews.cnet.com/4520-6450_7-5622055-1.html">http://reviews.cnet.com/4520-6450_7-5622055-1.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Buskirk, Eliot van. (2007). “Creative Sells 25 Millionth MP3 Player, Focuses on Headphones Too.” <i>Wired.com</i>, November 14. Downloaded from <a href="http://www.wired.com/listening_post/2007/11/creative-sells/">http://www.wired.com/listening_post/2007/11/creative-sells/</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Can Apple Thrive Without Its Visionary CEO? (2011, January 25). <i style="mso-bidi-font-style: normal;">Star, In-Tech</i>, p. IT15</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><city w:st="on"><place w:st="on">Carlton</place></city>, Jim (1997). <i>Apple: The Inside Story of Intrigue, Egomania, and Business Blunders</i>. <place w:st="on"><city w:st="on">New York</city>, <state w:st="on">NY</state></place>: Times Business / Random House</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Cohen, Peter. (2007). “Apple: 100 million iPods sold, and counting.” <i>Macworld.com</i>, April 9. Downloaded from <a href="http://www.macworld.com/article/57233/2007/04/ipodmilestone.html">http://www.macworld.com/article/57233/2007/04/ipodmilestone.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Cross, Rob; Hargadon, Andrew & Parise, Salvatore. (2005). “Critical Connections: Driving Rapid Innovation with a Network Perspective.” The Network Roundtable at the University of Virginia. Downloaded from <a href="https://webapp.comm.virginia.edu/NetworkRoundtable/Portals/0/Networks_and_Innovation_Roundtable_final.pdf">https://webapp.comm.virginia.edu/NetworkRoundtable/Portals/0/Networks_and_Innovation_Roundtable_final.pdf</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Dalrymple, Jim; Seff, Jonathan & Michaels, Philip (2009) “Apple reports record profit for first quarter.” <i>Macworld.com</i>, 22 January. Downloaded from <a href="http://www.macworld.com/article/138362/2009/01/earnings.html">http://www.macworld.com/article/138362/2009/01/earnings.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Dimkovic, Ivan. (2001). “Improved ISO <stockticker w:st="on">AAC</stockticker> Coder.” Downloaded from <a href="http://www.mp3-tech.org/programmer/docs/di042001.pdf">http://www.mp3-tech.org/programmer/docs/di042001.pdf</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Eisenbach, <city w:st="on"><place w:st="on">Regina</place></city>; Watson, Kathleen & Pillai, Rajnandini. (1999). “Transformational leadership in the context of organizational change.” <i>Journal of Organizational Change Managemen</i>t, Vol. 12, No. 2, pp. 80 – 88</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Fortune: World’s Most Admired Companies 2009. (2009). <i>CNNMoney.com</i>. Downloaded from <a href="http://money.cnn.com/magazines/fortune/mostadmired/2009/index.html">http://money.cnn.com/magazines/fortune/mostadmired/2009/index.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Harvey, Arlene. (2001). “A dramaturgical analysis of charismatic leader discourse.” <i>Journal of Organizational Change Management</i>, Vol. 14, No. 3, pp. 253 – 265</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Hau, Louis. (2007). “Taking on the iPod.” <i>Forbes.com</i>, September 11. Downloaded from <a href="http://www.forbes.com/2007/09/11/apple-sandisk-ipod-tech-personal-cx_lh_0911sandisk.html">http://www.forbes.com/2007/09/11/apple-sandisk-ipod-tech-personal-cx_lh_0911sandisk.html</a> as at <date day="22" month="3" w:st="on" year="2009">22 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="22" month="3" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Helft, Miguel. (2011, January 31). “Filling Steve Jobs' Shoes.” <i style="mso-bidi-font-style: normal;">New Straits Times, Life and Times</i>, p. 15</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Herre, J. & Dietz, M. (2008). “MPEG-4 high-efficiency <stockticker w:st="on">AAC</stockticker> coding [Standards in a Nutshell].” <i>IEEE Signal Processing Magazine</i>. Vol. 25, No. 3, pp. 137 – 142. Downloaded from <a href="http://ieeexplore.ieee.org/Xplore/login.jsp?url=http%3A%2F%2Fieeexplore.ieee.org%2Fiel5%2F79%2F4490183%2F04490211.pdf%3Farnumber%3D4490211&authDecision=-203">http://ieeexplore.ieee.org/Xplore/login.jsp?url=http%3A%2F%2Fieeexplore.ieee.org%2Fiel5%2F79%2F4490183%2F04490211.pdf%3Farnumber%3D4490211&authDecision=-203</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Hesseldahl, Arik. (2009). “Apple's Impressive Quarterly Numbers.” <i>BusinessWeek.com</i>, January 22. Downloaded from <a href="http://www.businessweek.com/print/technology/content/jan2009/tc20090121_101972.htm">http://www.businessweek.com/print/technology/content/jan2009/tc20090121_101972.htm</a> as at <date day="12" month="3" w:st="on" year="2009">12 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="12" month="3" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Hesseldahl, Arik. (2009). “Tim Cook: A Steady Go-To Guide for Apple.” <i>BusinessWeek.com</i>, January 14. Downloaded from <a href="http://www.businessweek.com/print/technology/content/jan2009/tc20090114_965277.htm">http://www.businessweek.com/print/technology/content/jan2009/tc20090114_965277.htm</a> as at <date day="12" month="3" w:st="on" year="2009">12 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="12" month="3" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Hodgkinson, Gerard P. (2007). “The Cognitive Perspective” in Jenkins, Mark & Ambrosini, Veronique, with Collier, Nardine (Eds.),<span style="mso-spacerun: yes;"> </span><i>Advanced Strategic Management: A Multi-Perspective Approach, 2nd Edition</i>, pp. 151 – 172.<span style="mso-spacerun: yes;"> </span><place w:st="on"><city w:st="on">New York</city>, <state w:st="on">NY</state></place>: Palgrave MacMillan</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Hormby, Tom. (2007). “’Think Different’ – The ad campaign that restored Apple’s reputation.” <i>LowEndMac.com</i>, April 9. Downloaded from <a href="http://lowendmac.com/orchard/07/apple-think-different.html">http://lowendmac.com/orchard/07/apple-think-different.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">In from the cold: How Apple has blossomed. (2008). <i>Strategic Direction</i>, Vol. 24, No. 3, pp. 13 – 16</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">iPhone and iPod sales make it a fruitful quarter for Apple. (2009, April 24). <i>The Star</i>, p. B10</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><country-region w:st="on"><place w:st="on">Ireland</place></country-region>, R. Duane; Hitt, Michael A.; Camp, S. Michael & Sexton, Donald L. (2001). “Integrating entrepreneurship and strategic management actions to create firm wealth.” <place w:st="on"><placetype w:st="on"><i>Academy</i></placetype><i> of <placename w:st="on">Management</placename></i></place><i> Executive</i>, Vol. 15, No. 1, pp. 49 – 63</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Jobs, Polet & Gunn. (2008). “Leading Personalities.” <i>Strategic Direction</i>, Vol. 24, No. 11, pp. 17 – 19</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Kane, Yukari Iwatani. (2009). “Apple's Jobs Takes Medical Leave.” <i>The Wall Street Journal.com</i>, January 15. Downloaded from <a href="http://online.wsj.com/article/SB123196896984882901.html">http://online.wsj.com/article/SB123196896984882901.html</a> as at <date day="27" month="2" w:st="on" year="2009">27 February 2009</date> </div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Kuratko, Donald F. & Hodgetts, Richard M. (2007). <i>Entrepreneurship: Theory, Process, Practice</i><i style="mso-bidi-font-style: normal;">, 7th Edition</i>. <place w:st="on"><city w:st="on">Mason</city>, <state w:st="on">OH</state></place>: Thomson South-Western</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Levine, Dan. (2001). “Apple Unwraps iPod.” <i>Forbes.com</i>, October 24. Downloaded from <a href="http://www.forbes.com/2001/10/24/1024tentech.html">http://www.forbes.com/2001/10/24/1024tentech.html</a> as at <date day="27" month="2" w:st="on" year="2009">27 February 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="27" month="2" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Levy, Steven. (2006). <i>The Perfect Thing: How the iPod Shuffles Commerce, Culture, and Coolness</i>. <place w:st="on"><city w:st="on">New York</city>, <state w:st="on">NY</state></place>: Simon & Schuster</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><city w:st="on"><place w:st="on">Linden</place></city>, Greg; Kraemer, Kenneth L. & Dedrick, Jason. (2009). “Who Captures Value in a Global Innovation Network? The Case of Apple's iPod.” <i>Communications of the ACM</i>, Vol. 52, No. 3, pp. 140 – 144. Downloaded from <a href="http://pcic.merage.uci.edu/papers/2008/WhoCapturesValue.pdf">http://pcic.merage.uci.edu/papers/2008/WhoCapturesValue.pdf</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Linzmayer, Owen W. (2004). <i style="mso-bidi-font-style: normal;">Apple Confidential 2.0: The Definitive History of the World’s Most Colorful Company</i>. San Francisco, CA: No Starch Press</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Lohr, Steve. (2011, January 24). “What next for Apple? As co-founder and CEO Steve Jobs goes on medical leave, can Apple find more hits?” <i style="mso-bidi-font-style: normal;">New Straits Times, Life and Times</i>, pp. 8 and 25</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Lyons, Daniel. (2009). “Steve Jobs: The ailing creator of the iPod and iPhone is next to irreplaceable.” <i>Newsweek.com</i>, January 5. Downloaded from <a href="http://www.newsweek.com/id/176318">http://www.newsweek.com/id/176318</a> as at <date day="27" month="2" w:st="on" year="2009">27 February 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="27" month="2" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">MacMillan, Douglas. (2009). “The Music Industry's New Internet Problem.” <i>BusinessWeek.com</i>, March 6. Downloaded from <a href="http://www.businessweek.com/print/technology/content/mar2009/tc2009035_000194.htm">http://www.businessweek.com/print/technology/content/mar2009/tc2009035_000194.htm</a> as at <date day="6" month="3" w:st="on" year="2009">6 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="6" month="3" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Malone, Michael S. (1999). <i>Infinite <place w:st="on">Loop</place>: How Apple, the World’s Most Insanely Great Computer Company, Went Insane</i>. <place w:st="on"><city w:st="on">London</city>, <country-region w:st="on">England</country-region></place>: Aurum Press / Random House</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Michaels, Philip & Moren, Dan. (2006). “Live Update: Apple 4Q financial report.” <i>Macworld.com</i>, October 18. Downloaded from <a href="http://www.macworld.com/article/53456/2006/10/q4analysts.html">http://www.macworld.com/article/53456/2006/10/q4analysts.html</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">New iPod maker signed. (2004). <i>Macworld.co.uk</i>, May 12. Downloaded from <a href="http://www.macworld.co.uk/news/index.cfm?NewsID=8666">http://www.macworld.co.uk/news/index.cfm?NewsID=8666</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Porter, Michael E. (2008). “The Five Competitive Forces That Shape Strategy.” <i>Harvard Business Review</i>, Vol. 86, No. 1, pp. 78 – 93</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Rao, Venky. “Innovation Networks: Harnessing the Power of Ecosystems to Transform Organizations.” Insights White Paper. <i>Satyam.com</i>. Downloaded from <a href="http://www.satyam.com/about/documents/satyam_wp_innovNetw.pdf">http://www.satyam.com/about/documents/satyam_wp_innovNetw.pdf</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Reeves-Ellington, Richard H. (1998). “Leadership for socially responsible organizations.” <i>Leadership and Organization Development Journal</i>, Vol. 19, No. 2, pp. 97–105</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Rickard, Sean. (2007). “Industrial Organisation Economics Perspective” in Jenkins, Mark & Ambrosini, Veronique, with Collier, Nardine (Eds.),<span style="mso-spacerun: yes;"> </span><i>Advanced Strategic Management: A Multi-Perspective Approach, 2nd Edition</i>, pp. 61 – 82.<span style="mso-spacerun: yes;"> </span><place w:st="on"><city w:st="on">New York</city>, <state w:st="on">NY</state></place>: Palgrave MacMillan</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Sarkar, Soumodip. (2007). “Sustaining Leadership: <city w:st="on"><place w:st="on">Alice</place></city> in Innovation Space.” <i>EBRF 2007 Conference</i>, September 26. Downloaded from <a href="http://www.isb.edu/faculty/upload/Doc1232008027.pdf">http://www.isb.edu/faculty/upload/Doc1232008027.pdf</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Sharpe, Nicola F. & Arewa, Olufunmilayo B. (2007). “Is Apple Playing Fair? Navigating the iPod FairPlay DRM Controversy.” <i>Northwestern Journal of Technology and Intellectual Property</i>, Vol. 5, No. 2.</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Strong iPhone sales propel Apple to record best Q2. (2009, April 24). <i>New Straits Times</i>, p. B13</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Svejenova, Silvija & Alvarez, Jose Luis. (2007). “Network Perspective” in Jenkins, Mark & Ambrosini, Veronique, with Collier, Nardine (Eds.),<span style="mso-spacerun: yes;"> </span><i>Advanced Strategic Management: A Multi-Perspective Approach, 2nd Edition</i>, pp. 185 – 195.<span style="mso-spacerun: yes;"> </span><place w:st="on"><city w:st="on">New York</city>, <state w:st="on">NY</state></place>: Palgrave MacMillan</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">The Third Act. (2007). <i>Economist.com</i>, June 7. Downloaded from <a href="http://www.economist.com/opinion/displaystory.cfm?story_id=9298983">http://www.economist.com/opinion/displaystory.cfm?story_id=9298983</a> as at <date day="26" month="6" w:st="on" year="2007">26 June 2007</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="26" month="6" w:st="on" year="2007"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Venkataraman, S.; MacMillan, I. & McGrath, R. (1992). ”Progress in Research on Corporate Venturing” in Sexton, Donald L. & Kasarda, John D. (Eds.), <i>State of the Art in Entrepreneurship</i>, pp. 487 – 519. <place w:st="on"><city w:st="on">Boston</city>, <state w:st="on">MA</state></place>: PWS-Kent</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Wagner, Mitch. (2009). “Where Does Apple Go From Here?” <i>InformationWeek.com</i>, February 21. Downloaded from <a href="http://www.informationweek.com/news/hardware/mac/showArticle.jhtml?articleID=214501912">http://www.informationweek.com/news/hardware/mac/showArticle.jhtml?articleID=214501912</a> as at <date day="12" month="3" w:st="on" year="2009">12 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="12" month="3" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Wikipedia – iPod. <i>Wikipedia.org</i>. Downloaded from <a href="http://en.wikipedia.org/wiki/Ipod#Sales">http://en.wikipedia.org/wiki/Ipod#Sales</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009 and 18 February 2011</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">World’s Most Innovative Companies 2009. (2009). <i>BusinessWeek.com</i>, April 9. Downloaded from <a href="http://www.businessweek.com/magazine/toc/09_16/B4127innovative_companies.htm">http://www.businessweek.com/magazine/toc/09_16/B4127innovative_companies.htm</a><span style="mso-spacerun: yes;"> </span>as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">World’s Most Innovative Companies 2009. (2009). <i>FastCompany.com</i>. Downloaded from <a href="http://www.fastcompany.com/fast50_09">http://www.fastcompany.com/fast50_09</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">World’s Most Innovative Companies 2007. (2007). <i>BusinessWeek.com</i>, May 4. Downloaded from <a href="http://www.businessweek.com/innovate/di_special/20070503mostinnovat.htm">http://www.businessweek.com/innovate/di_special/20070503mostinnovat.htm</a> as at <date day="9" month="4" w:st="on" year="2009">9 April 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="9" month="4" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Woyke, Elizabeth. (2008). “iPod Battle Rage On.” <i>Forbes.com</i>, July 31. Downloaded from <a href="http://www.forbes.com/2008/07/31/mp3-ipod-samsung-tech-pers-cx_ew_0731mp3.html">http://www.forbes.com/2008/07/31/mp3-ipod-samsung-tech-pers-cx_ew_0731mp3.html</a> as at <date day="22" month="3" w:st="on" year="2009">22 March 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date 2009?="" day="22" month="3" w:st="on year="><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Yahoo! Finance – <stockticker w:st="on">AAPL</stockticker>. <i>Finance.Yahoo.com</i>.<span style="mso-spacerun: yes;"> </span>Downloaded from <a href="http://finance.yahoo.com/q?s=aapl">http://finance.yahoo.com/q?s=aapl</a> as at <date day="6" month="5" w:st="on" year="2009">6 May 2009</date></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><date day="6" month="5" w:st="on" year="2009"><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Young, Jeffrey S. & Simon, William L. (2005). <i>iCon Steve Jobs: The Greatest Second Act in the History of Business</i>. <place w:st="on"><city w:st="on">Hoboken</city>, <state w:st="on">NJ</state></place>: John Wiley & Sons</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;">Yusof, Abdul Aziz; Perumal, Selvan & Pangil, Faizuniah. (2005). <i>Principles of Entrepreneurship</i>. Petaling Jaya, Selangor: Pearson Prentice-Hall</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date></date>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-78452568118821923482011-02-22T00:59:00.000-08:002011-10-06T04:47:47.459-07:00The Apple iPod Phenomenon: Rebooting Coolness, Culture, and Commerce (Part 2 of 3)<div style="text-align: center;"><strong><span style="font-size: large;">. . . Continued from Part 1</span></strong></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-indent: -0.5in;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">3.0<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Network Perspective</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-indent: -0.5in;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><strong>3.1<span style="mso-tab-count: 1;"> </span>General</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Network perspective is concerned with the understanding of the complex relationships between organisations or companies over a period of time to develop and attain competitive advantage.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In the analysis of Apple’s business network, we can identify that Apple possesses three subgroups or network clusters i.e. the cluster for the Mac personal computer line of business, iPod line of business, and iPhone line of business.<span style="mso-spacerun: yes;"> </span>Each of the network clusters exhibit its own level of embeddedness.<span style="mso-spacerun: yes;"> </span>For e.g., in the iPod line of business network cluster, Apple’s first relationship tie or link is to Cheng Uei Precision, whom Apple had thoroughly evaluated and appointed to manufacture/assemble the iPod.<span style="mso-spacerun: yes;"> </span>With the increasing iPod demand over time, Apple appointed Ji-Haw Industrial as the second manufacturer/assembler (<i>New iPod Maker, 2004</i>).</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In turn, Cheng Uei Precision and Ji-Haw Industrial have their respective subgroup network relationships albeit they may also share common parts or component suppliers, for e.g. Seagate, a hard disk drive manufacturer.<span style="mso-spacerun: yes;"> </span>This network embeddedness is shown in Figure 3-1.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">However, for e.g., the network embeddedness does not stop at Seagate, as Seagate will also possess its own subgroup network; and a company known as Komag – one of several manufacturers in the world of the magnetic discs used in hard disk drive manufacturing – would likely be present in Seagate’s subgroup network.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><span style="font-family: "Times New Roman"; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "MS Mincho"; mso-fareast-language: JA;">Figure 3-1: Apple’s Network Embeddedness</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><a href="http://www.flickr.com/photos/29913957@N08/5455750388/" title="Apple_network1 by andychin62, on Flickr"><img alt="Apple_network1" height="286" src="http://farm6.static.flickr.com/5019/5455750388_9440433e86.jpg" width="400" /></a><br />
<br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Furthermore, each tie of link in Apple’s network may exhibit a similar or variant relationship.<span style="mso-spacerun: yes;"> </span>Figure 3-2 shows Apple’s network relationships.<span style="mso-spacerun: yes;"> </span>Relationship lines drawn in thick orange colour represents strong network relationships between Apple and the partners.<span style="mso-spacerun: yes;"> </span>Thin orange relationship lines indicate an arm’s length relationship between Apple and the partners, and the dotted orange relationship lines represent the relationships between Apple’s partners, or second level relationships.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Of significance is a blue coloured thick relationship line between Apple and the music labels and recording companies, such as <stockticker>BMG</stockticker>, EMI, Sony Music, Universal Music, and Warner Music.<span style="mso-spacerun: yes;"> </span>The relationship is unique and was critical to Apple achieving a competitive advantage because Apple was the only company licensed by the music labels and recording companies to sell digital music encrypted in the Advanced Audio Coding (<stockticker>AAC</stockticker>) format with Digital Rights Management (DRM) technology to prevent or minimize music piracy.<span style="mso-spacerun: yes;"> </span>Non-iPod users i.e. Mac personal computer users will require a free iTunes application to download and playback the <stockticker>AAC</stockticker>-DRM encrypted (or protected <stockticker>AAC</stockticker>) digital music on their Macs.<span style="mso-spacerun: yes;"> </span>The DRM restrictions on digital music files were removed from January 2009 onwards after Apple reached an agreement with the major record labels.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The digital music is sold online by Apple on its iTunes music store <a href="http://www.apple.com/itunes/">http://www.apple.com/itunes/</a>.<span style="mso-spacerun: yes;"> </span>The iTunes music store began life in 2003 with an initial 200,000 music files available for download, and prices then was USD0.99 cents per song.<span style="mso-spacerun: yes;"> </span>Today, typical prices are USD0.69, 0.99 and 1.29 per song.<span style="mso-spacerun: yes;"> </span>Apple rebranded the iTunes music store to iTunes media store since it now also offers movies, audiobooks, iPod games, Podcasts, etc.<span style="mso-spacerun: yes;"> </span>Since late 2006, the iTunes media store “accounts for 85 percent of the songs downloaded in the <country-region><place>U.S.</place></country-region> according to Nielsen Sound Scan figures … and the store is open in 21 countries, which the company estimates covers nearly 90 percent of the market for where music is downloaded legally” (<i>Michaels & Moren, 2006</i>).</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><div class="MsoNormal" style="margin: 0in 0in 0pt;">Figure 3-2: Apple’s Network Relationships</div><a href="http://www.flickr.com/photos/29913957@N08/5455750426/" title="Apple_network2 by andychin62, on Flickr"><img alt="Apple_network2" height="233" src="http://farm6.static.flickr.com/5092/5455750426_7ae1fb20eb.jpg" width="400" /></a><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><br />
</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><b>3.2<span style="mso-tab-count: 1;"> </span>Key observations of Apple’s network</b></div><b></b></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><b>3.2.1<span style="mso-tab-count: 1;"> </span>Tie Modality</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Is concerned about the network from the following aspects:</div></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in 117.0pt; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">a)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Strength of the Connection</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple’s network comprises of strong network relationships and arm’s length relationships.<span style="mso-spacerun: yes;"> </span>Apple’s relationships with its manufacturers/assemblers, design houses, software developers, Apple and iTunes online stores are strong network relationships where the following interaction elements take place:</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Trust – critical to establish strong embedded ties where the connected parties will not act to each other’s self-interest at the expense of the other</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Fine-grained information transfer – is implicit and holistic in nature where important product and trade secrets are shared between the parties for critical mutual benefits</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Joint problem-solving activities – the parties work closely to resolve operational, product and technological challenges, again for their critical mutual benefits</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Risk taking and investment – with the above elements of trust, fine-grained information sharing and joint problem-solving relationship, the parties concerned are able and willing to take necessary business risks and investment needs within the network</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Complex or adaptation – with all the above interaction elements, the parties in the network are able to adapt to new market challenges and opportunities</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><b>b)<span style="mso-tab-count: 1;"> </span>Intent of the Connection</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">This is concerned with the parties of the network coming together for exploration or exploitation objectives.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In the case of Apple, the network it builds with its key partners, for e.g. the manufacturers/assemblers of its iPods, has an exploitation intention where Apple can leverage on the manufacturing and assembling expertise and infrastructure of companies like Cheng Uei Precision and Ji-Haw Industrial, without the need for high capital investments for manufacturing and assembly plants and facilities.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Similarly, Cheng Uei Precision and Ji-Haw Industrial are also exploiting Apple in the sense that by producing high demand Apple products such as the iPod, the business opportunity adds significantly to their company revenues and profitability, respectively.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In other relationships between Apple and its design house partners, the intent takes on an exploration relationship where both parties explore product, design and functionality innovations.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Outside of the <country-region><place>United States</place></country-region>, Apple adopts an arm’s length relationship with its distributor and dealer retail channels branded as Apple Centres.<span style="mso-spacerun: yes;"> </span>After a certain period, non-performing distributors or dealers are replaced with more capable and committed ones – this is clearly an exploitation approach by Apple by being able to go to market quickly without high capital investments to establish its own retail stores in every major country or markets.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><b>c)<span style="mso-tab-count: 1;"> </span>Nature of the Connection</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Nature of the connection questions the cooperation or competition aspects of the relationship.<span style="mso-spacerun: yes;"> </span>For e.g., Apple can promote competition between its iPod manufacturer/assembler to attain a higher level of production quality and cost efficiency improvements in production methodologies i.e. operational management concepts such as zero defect and Lean Six Sigma best practices.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Among its distributor and dealer channels, Apple can leverage competition to outperform each other in sales and customer support quality.<span style="mso-spacerun: yes;"> </span>However, Apple will need to exercise proper judgment in promoting competition among its network subgroups or clusters in order to continue maintaining the network equilibrium to optimize mutual benefits.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">To this aspect, most of the relationship ties or links are cooperative in nature, so that Apple and its partners leverage on each others’ strengths and balance out weaknesses.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0in; text-justify: inter-ideograph;"><b>d)<span style="mso-tab-count: 1;"> </span>Stability of the Network</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In Apple’s network, our analysis has shown that there are strong network relationships and arm’s length relationships.<span style="mso-spacerun: yes;"> </span>Both forms of relationships add to the stability and dynamism of Apple’s network.</div></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In other words, the strong network relationships between Apple and its partners creates stability in the network, while the arm’s length relationships between Apple and other categories of partners which can be changed or replaced from time-to-time, such as distributors and dealers, creates the dynamism of the network.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level3 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">3.2.2<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Network Position</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple’s position in the network can be considered from:</div><br />
<strong><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">a)<span style="font-family: "Times New Roman";"> </span></span></span>Characteristics of the Position, deals with:</strong><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>The role of the firm over other firms</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Identity of other firms (direct or indirect)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Importance of the firm</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Strength of relationship</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.25in; mso-list: l0 level4 lfo1; tab-stops: list .25in 45.0pt; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">b)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Power</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Differences in power results in different network positions</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>The ability to influence the decisions or actions of others</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Relationships are asymmetrical with respect to power </div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Power structures dictate the way the network operates and develops</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.25in; mso-list: l0 level4 lfo1; tab-stops: list .25in 45.0pt; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">c)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Positional advantage</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Particular positions in the network can serve as a source of competitive advantage</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Competitive advantage can only be achieved if a particular firm has at least 3 relationships with 3 other firms, and the position held is not too strong</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.25in; text-align: justify; text-justify: inter-ideograph;">Thus, Apple gains positional advantage from having strong network relationships from:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.25in; text-align: justify; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span>Specially selected partners that contribute different or complimentary functionalities and expertise</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span>The music labels and recording companies providing Apple with exclusive distribution rights to <stockticker>AAC</stockticker>-DRM encoded digital music titles</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span>Software developers which Apple collaborates with in developing ease-of-use and advanced technology firmware and operating systems</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span>Apple is able to hold centre-court within its network, deciding on final product and service offerings, and business terms & conditions</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span>Collaboration and inputs from its Level 2 network partners enable Apple to explore new ideas and technology via its Level 1 network partners</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level6 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level3 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">3.2.3<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Legitimacy</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple gains legitimacy through its network performance from the following key areas:</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">a)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Economic</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">This concerns the economic returns or the creation of shareholder value through revenue generation and profitability.<span style="mso-spacerun: yes;"> </span>As shown in Section 1.0 – Introduction, Apple’s financial or economic returns are very promising and profitable.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">b)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Legal</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In the area of legality and as far as the iPod and the music industry is concerned, reducing and eradicating music piracy remains a challenge.<span style="mso-spacerun: yes;"> </span>With the iPod and iTunes media store, Apple has been championing the use of original songs vis-à-vis upholding the intellectual property rights of singers and related parties.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple only promotes the sale of <stockticker>AAC</stockticker>-DRM encrypted digital songs on its online iTunes media store instead of the generic MP3 digital audio format. Only from January 2009 onwards, Apple removed the DRM restrictions after having secured the agreements of the major records labels. Thus, the initial AAC-DRM only music files gave Apple a market edge in gaining the confidence of the major record labels.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Furthermore, the <stockticker>AAC</stockticker> encoding technology has been standardized by the International Organisation for Standardization (ISO) and the International Electrotechnical Commission (IEC) as part of MPEG2 and MPEG4 standards (<i>Herre & Dietz, 2008, pp. 137 – 142; Dimkovic, 2001, pp. 1 – 7</i>).</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">c)<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Ethical</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple practices and consistently champions the:</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Use of legally obtained songs and downloads</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Use of original software among its customers</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Sales of original software by its distributor and dealer channels</div><br />
<strong>3.2.4<span style="mso-tab-count: 1;"> </span>Structural Hole</strong><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">A structural hole (Burt, 1995) exists between the traditional music industry (using analog playback equipment, audio cassettes and CDs) and digital technology.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple was able to identify this structural hole and the opportunity it presented, and bridged the chasm with innovation on the consumer-side with the introduction of a highly portable, high audio reproduction quality, and cool-looking digital device called the Apple iPod, packaged with supporting services such as the availability of original digital songs at very affordable prices, and a cyberspace platform that provided 24x7 access to buy the digital songs.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">For the traditional music industry plague with music piracy, declining sales, and changing consumer trends brought about by the Internet and digital technology, the new revenue channel opportunity presented by Apple was too good to ignore.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level3 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">3.2.5<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Network Effects</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The Apple network has resulted in the following effects (some examples):</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Created an unprecedented economic boom in the way people acquire, listen and manage their music libraries i.e. the iPod Generation</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Apple has sold over 160 million units of iPods for the period 2001 to 2008 (<i>Boffey, 2008</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>The 100 millionth iPod was shipped in April 2007 (<i>Cohen, 2007</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>In the fiscal year 2006, Apple shipped 5.3 million units of Macs, but 39 million units of iPods (<i>Michaels & Moren, 2006</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>As of late 2006, the iTunes media store accounts for 85% of the songs downloaded in the <country-region><place>United States</place></country-region>, and is open to 21 countries, which is estimated to cover nearly 90% of the market for where music is downloaded legally (<i>Michaels & Moren, 2006</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span>Apple reported a record profit for fiscal Q1 2009 (<i>Dalrymple, Seff & Michaels, 2009</i>)</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.75in; mso-list: l0 level2 lfo1; tab-stops: list .75in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">As networks are heterogeneous, thus, the difficulty of duplicating the uniqueness of Apple’s network relationships, interactions, and advantages creates a competitive advantage for Apple Inc.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: center; text-indent: 0.5in; text-justify: inter-ideograph;"><span style="font-size: large;">Continued in Part 3 . . .</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com1tag:blogger.com,1999:blog-2883577468018538027.post-85131765680675338382011-02-19T22:30:00.000-08:002011-10-06T04:47:05.455-07:00The Apple iPod Phenomenon: Rebooting Coolness, Culture, and Commerce (Part 1 of 3)<div style="text-align: center;"><span style="font-family: "Times New Roman"; font-size: large; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "MS Mincho"; mso-fareast-language: JA;"><strong>Abstract</strong></span></div><span style="font-family: "Times New Roman"; font-size: 18pt; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "MS Mincho"; mso-fareast-language: JA;"></span><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><em>The field of strategic management has been around since the 1960s when the <place><placename>Design</placename> <placetype>School</placetype></place> first presented the basic framework which focuses on strategy formation as a process of conception.<span style="mso-spacerun: yes;"> </span>Fast forward to now, the 21st century, where with the Internet and advances in information and communication technologies and infrastructure, the world has become “smaller”.<span style="mso-spacerun: yes;"> </span>The multi-national corporations’ continuous drive to create wealth from scarce resources reaches out further – an economic phenomenon known as globalisation.<span style="mso-spacerun: yes;"> </span>Global and virtual markets are created, and competition and competitiveness continues to be a major challenge to many companies and corporations.<span style="mso-spacerun: yes;"> </span>As today’s markets have become increasingly more complex and dynamic, the need to effectively evaluate, formulate and execute strategies built upon the firm’s resources and core competencies require a more sophisticated approach i.e. a multi-perspective approach to strategy.<span style="mso-spacerun: yes;"> </span>This paper attempts to explain strategic management from a multi-perspective approach using Apple’s tremendous success with the iPod as the basis of the discussion of how Apple gained competitive advantage over its competitors although it lacked the first mover advantage with the iPod.</em></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><br />
</div><div align="left" class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left; text-justify: inter-ideograph;"><a href="http://www.flickr.com/photos/29913957@N08/5455120007/" title="Apple_iPod_1stGen by andychin62, on Flickr"><img alt="Apple_iPod_1stGen" height="300" src="http://farm6.static.flickr.com/5295/5455120007_0deffa3b52.jpg" width="400" /></a></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">1.0<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Introduction</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-justify: inter-ideograph;"><span style="font-size: 16pt;"></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Since it’s founding on <date day="1" month="4" year="1976">April 1, 1976</date> as Apple Computer Co. by Steve Jobs and Stephen Wozniak, Apple Inc. had always sought to do things differently.<span style="mso-spacerun: yes;"> </span>The “Think Different” slogan and advertisement campaign from 1997 to 2002 was Apple’s immensely successful and long-lived marketing campaign (<i>Hormby, 2007</i>) because the concept personified what Apple is in the eyes of both its loyal and potential customers when compared to traditional computer giants such as <stockticker>IBM</stockticker> and Hewlett-Packard, then and even today.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple was voted by BusinessWeek as the most innovative company five years in a row – 2005 to 2009 (<i>World’s Most Innovative, 2007; World’s Most Innovative, 2009a</i>). <span style="mso-spacerun: yes;"> </span>Fortune voted Apple as the world’s most admired company for 2008 and 2009 (<i>Fortune: World’s Most, 2009</i>).<span style="mso-spacerun: yes;"> </span>Fast Company voted Apple in 2008 as the world’s second most innovative company, and for 2009, the world’s fourth most innovative company (<i>World’s Most Innovative, 2009b</i>).</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In 1984, Apple gave us the highly innovative Macintosh or Mac personal computers with its outstanding and industry leading graphical user interface (GUI)-based Mac operating systems.<span style="mso-spacerun: yes;"> </span>Apple was also the first to introduce the use of the mouse with a personal computer in 1983.<span style="mso-spacerun: yes;"> </span>(See Figures 1-1 and 1-2).</div><br />
<div style="text-align: left;">Figure 1-1: Pre-1984 Apple Personal Computers</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455732750/" title="Apple_PCs by andychin62, on Flickr"><img alt="Apple_PCs" height="299" src="http://farm6.static.flickr.com/5014/5455732750_4399f7d964.jpg" width="400" /></a></div><br />
<br />
<div style="text-align: left;">Figure 1-2: Post-1984 Apple Personal Computers</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455732760/" title="Apple_Macs by andychin62, on Flickr"><img alt="Apple_Macs" height="299" src="http://farm6.static.flickr.com/5100/5455732760_8855251bf6.jpg" width="400" /></a></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple did not limit their vision and creativity to personal computers only, and in 2001 introduced the iPod, and followed by the iPhone in 2007.<span style="mso-spacerun: yes;"> </span>Since then, both the iPod and iPhone have gained significant market share from competitors, created market niche, and continue to build loyal customers throughout the world.<span style="mso-spacerun: yes;"> </span>The introduction of the iPod also created the “iPod Generation” culture of digital music entertainment that redefined the economics of acquiring, managing, sharing and enjoying music.<span style="mso-spacerun: yes;"> </span>(See Figure 1-3).</div><br />
<div style="text-align: left;">Figure 1-3: Apple iPods and iPhones</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455732774/" title="Apple_iPods by andychin62, on Flickr"><img alt="Apple_iPods" height="299" src="http://farm6.static.flickr.com/5259/5455732774_65c3822431.jpg" width="400" /></a></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The Apple iPod – a relatively simple device to enable the storage and playback of digital music files – was not the first portable digital music player (a.k.a. MP3 player) to be introduced to the world at large.<span style="mso-spacerun: yes;"> </span>In the late spring of 1998, a Korean company known as Saehan had launch the MPMan, and it was sold in the United States in two variants by Eiger Labs under the names Eiger Labs MPMan F10 and F20 (<i>Buskirk, 2005</i>).<span style="mso-spacerun: yes;"> </span>A few months later, another <country-region><place>United States</place></country-region> company known as Diamond Multimedia launched the Diamond Rio PMP300, and was soon joined by many other companies around the world including the consumer electronic giants Sony, Samsung, and Panasonic.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Today, Apple’s nearest competitor is Creative Technology Ltd, a <country-region><place>Singapore</place></country-region> company, who had launched the world’s first hard drive-based digital music player – the Creative Nomad Jukebox in 2000 – a year earlier than Apple iPod!<span style="mso-spacerun: yes;"> </span>However, as at April 2007, Apple had sold 100 million units of iPods versus Creative Technology’s 25 million units as at November 2007 (<i>Cohen, 2007; Creative reaches, 2007</i>).<span style="mso-spacerun: yes;"> </span>The following Figures 1-4 and 1-5 shows Apple iPod sales statistics.</div><br />
<div style="text-align: left;">Figure1-4: Cumulative Sales (units) of iPods by Fiscal Quarter</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455735292/" title="Apple_sales1 by andychin62, on Flickr"><img alt="Apple_sales1" height="274" src="http://farm6.static.flickr.com/5171/5455735292_f20530f010.jpg" width="400" /></a></div><div style="text-align: left;">Source: Wikipedia - iPod</div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">From the above Figure 1-4, iPod cumulative sales reached 50 million units by the second fiscal quarter of 2006, and 100 million units by the second fiscal quarter of 2007, and over 160 million units by the third fiscal quarter of 2008.</div><br />
<div style="text-align: left;">Figure 1-5: Sales (units) of iPod per Fiscal Quarter</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455735306/" title="Apple_sales2 by andychin62, on Flickr"><img alt="Apple_sales2" height="273" src="http://farm6.static.flickr.com/5174/5455735306_db7696e240.jpg" width="400" /></a></div><div style="text-align: left;">Source: Wikipedia - iPod</div><br />
<br />
<div style="text-align: left;">Figure 1-6: Sales (units) of iPod upto Fiscal Q1 2011</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455750246/" title="Apple_sales3 by andychin62, on Flickr"><img alt="Apple_sales3" height="324" src="http://farm6.static.flickr.com/5132/5455750246_f9c3b6a471.jpg" width="400" /></a></div><div style="text-align: left;">Source: Wikipedia - iPod</div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">For Apple’s fiscal 2009 second quarter i.e. the quarter ended March 2009, amidst the global financial turmoil, Apple reported an increase in revenue by 8.7 percent to USD 8.16 billion on strong sales of iPhones and iPods, compared to USD 7.51 billion a year ago.<span style="mso-spacerun: yes;"> </span>The USD 8.16 billion revenue beat Wall Street’s average forecast of USD 7.96 billion.<span style="mso-spacerun: yes;"> </span>Gross Margin increased by 20 percent to USD 2.97 billion compared to USD 2.47 billion a year ago, and Net Profit increased to USD 1.21 billion compared to USD 1.05 billion a year ago (<i>iPhone and iPod, 2009, p. B10</i>). The following Tables 1-1 and 1-2 shows the financial performance of Apple.</div><br />
<div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5460713386/" title="Apple_financials by andychin62, on Flickr"><img alt="Apple_financials" height="300" src="http://farm6.static.flickr.com/5134/5460713386_5419fabf57.jpg" width="400" /></a></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The earnings per share for the fiscal quarter ended March 2009 was USD 1.84, well above the USD 1.09 forecasted by Wall Street.<span style="mso-spacerun: yes;"> </span>For the reported quarter, Apple shipped 2.2 million Mac personal computers – a reduction by 3 percent from a year ago; shipped 11 million iPods (launched in 2001) – an increase by 3 percent from a year ago, and an increase by 123 percent for iPhones (launched in 2007) to 3.8 million units shipped (<i>Strong iPhone sales, 2009, p.<span style="mso-spacerun: yes;"> </span>B13</i>).</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Peter Oppenheimer, CFO and Senior VP, said, “I think in a better economy our sales certainly would have been higher but … we have just reported the best non-holiday quarter in Apple’s history despite the economy that we find ourselves in” (<i>iPhone and iPod, 2009, p. B10</i>).How did Apple achieve so much success with the iPod? How did Apple outmanoeuvre the competition? This paper will attempt to explain the iPod phenomenon from three strategic management perspectives i.e. Industrial Organisation Economics, Network, and Entrepreneurship.</div><span id="goog_390653320"></span><span id="goog_390653318"></span><span id="goog_390653316"></span><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: left; text-indent: -0.5in;"><strong><span style="mso-list: Ignore;">2.0<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span>Industrial Organisation Economics Perspective</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"></div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt;"><strong>2.1 General</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Industrial Organisation Economics (IO) perspective deals with the theory and explanation of the behaviour of firms, as a legal entity and within their respective industry groups.<span style="mso-spacerun: yes;"> </span>In other words, how firms develop and grow.<span style="mso-spacerun: yes;"> </span>The key concepts of IO perspective concerns imperfect markets: market structure, market performance, and market power.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">The market structure determines the market performance, and the firm in the market with a larger market share possesses a stronger market power.<span style="mso-spacerun: yes;"> </span>In other words, the firm can control or influence price, and thus, able to shift demand.<span style="mso-spacerun: yes;"> </span>Let us now apply the key concepts of IO perspective to the Apple iPod phenomenon.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">IO perspective largely focuses on the market or industry structure, or the attractiveness of the industry in terms of industry rivalry, entry barriers, relationships with buyers and suppliers, and product and/or service substitutes – Porter’s Five Forces (See Figure 2-1) (<i>Porter, 2008, pp. 78 – 93</i>).</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">One of the major developments of IO was derived from the Structure-Conduct-Performance (<stockticker>SCP</stockticker>) paradigm or model which focuses on the market or industry and not the firm (<i>Rickard, 2007, p. 71</i>).</div><br />
<div style="text-align: left;">Figure 2-1: Porter's Five Forces</div><div style="text-align: left;"><a href="http://www.flickr.com/photos/29913957@N08/5455137799/" title="Porter's_5-Forces by andychin62, on Flickr"><img alt="Porter's_5-Forces" height="321" src="http://farm6.static.flickr.com/5216/5455137799_07a06f2f89.jpg" width="400" /></a></div><br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">2.2<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Market Structure</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In the Apple iPod case, the music industry in the period 1999 to 2000 was still in the analog technology era and oblivious to advancements in digital information and communication technologies brought about by the Internet boom.<span style="mso-spacerun: yes;"> </span>Apple recognized the “structural hole” (Burt, 1995) in the market structure and the opportunities it presented in terms of the potential market performance.</div><br />
<div class="MsoNormal" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level2 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -0.5in; text-justify: inter-ideograph;"><b><span style="mso-fareast-font-family: "Times New Roman";"><span style="mso-list: Ignore;">2.3<span style="font-family: "Times New Roman";"> </span></span></span></b><b>Market Power</b></div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">A firm with market power possesses the ability to alter or determine market prices.<span style="mso-spacerun: yes;"> </span>The larger the firm’s market share, the larger or stronger its market power.<span style="mso-spacerun: yes;"> </span>The market structure often acts as a guide to market power, for e.g. in the highly regulated oil and gas industry, the Organization of the Petroleum Exporting Countries (OPEC) – an intergovernmental organisation representing thirteen oil producing nations possess strong market power.<span style="mso-spacerun: yes;"> </span>However, there exists opposing forces to market power of firms as shown in Figure 2-2.<br />
<br />
Figure 2-2: Market Power - Firm vs. Society<br />
<a href="http://www.flickr.com/photos/29913957@N08/5455137853/" title="Market_Power by andychin62, on Flickr"><img alt="Market_Power" height="300" src="http://farm6.static.flickr.com/5292/5455137853_2e889f1062.jpg" width="400" /></a><br />
<br />
<br />
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">How is Apple able to price their range of iPods much higher than its competitors since the very beginning of the iPod launch in 2001 when they entered the market after its competitors?<span style="mso-spacerun: yes;"> </span>How did Apple managed to continue to dictate pricing and yet win so many iPod sales to become the world’s biggest supplier in the digital music player product category, ahead of its closest rival by a 400 percent lead in 2007? (<i>Cohen, 2007; Creative reaches, 2007</i>).<span style="mso-spacerun: yes;"> </span>The answers lie in how Apple acquires and maintain its market power.</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">In the iPod line of business, Apple acquires market power from:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span><strong>Legal protection and Strategic alliances</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple champions the copyright interests of the music labels and recording companies, and the singers or artists they represent.<span style="mso-spacerun: yes;"> </span>To prevent or minimize the risk of music piracy, Apple uses the Advanced Audio Coding – Digital Rights Management (<stockticker>AAC</stockticker>-DRM) encryption technology to ensure that music purchased and downloaded from its online store iTunes can only be played back on iPods (and Mac personal computers via an iTunes application).<span style="mso-spacerun: yes;"> </span>Additionally, the music labels and recording companies authorize Apple as the sole supplier of <stockticker>AAC</stockticker>-DRM encrypted songs for the iPod.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span><strong>Product differentiation</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple, well-known for its innovation, is able to design a super-cool product with ease of use, and further differentiate the product by various form factors and functionality such as the miniature iPod Shuffle and iPod Video models.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span><strong>Advertising and Marketing</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple’s advertising approach and marketing campaigns have always featured user or human lifestyles, creating psychological images of style, cool & hip, and satisfaction – never on the product and its technical specifications.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;"><br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple maintains its market power from:</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span><strong>Vertical relations</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Through the market structure, Apple configures its distributor and dealer channels with the “Apple Centre” identity and the channel partners become the sole retail source for Apple products.<span style="mso-spacerun: yes;"> </span>In this way, Apple regulates the seller – buyer interaction at the point-of-sale to ensure and enforce a high quality customer interaction associated with the “Apple Centre” identity.</div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in; text-align: justify; text-indent: -0.25in; text-justify: inter-ideograph;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font-family: "Times New Roman";"> </span></span></span><strong>Reputation</strong></div><div class="MsoNormal" style="margin: 0in 0in 0pt 1in; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Apple possesses a very positive reputation in its innovativeness and technological leadership in design, functionality and usability of its products and in the subtle creation of the “Apple lifestyle”, for e.g. with the iPod, Apple has created the iPod Generation.<br />
<br />
</div><div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: justify; text-indent: 0.5in; text-justify: inter-ideograph;">Therefore, the ability of Apple to be in sync with the market or external environment enables it to quickly identify market structure opportunities.<span style="mso-spacerun: yes;"> </span>Its ability to utilize its resources to build strategic alliances, to innovate, to differentiate and effectively position its products against its competitors in order to acquire market power gives Apple the competitive advantage to shift and manage demand.</div></div><br />
<br />
<div></div><div style="text-align: center;"><span style="font-size: large;"><strong>Continued in Part 2 . . .</strong></span></div><div></div>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-10790387316785530082010-06-01T01:34:00.000-07:002010-06-05T00:06:48.719-07:00Malaysian banks: Debt recovery, Ethics and CSR<strong>1.0 Introduction</strong><br /><br />Risks exist in all types of businesses, and financial institutions are not excluded. An area of risk for financial institutions such as banks is outstanding loans or non-performing loans (NPL) arising from defaulters of financial instruments such as housing loans, personal loans, hire purchase and credit cards. We have already seen the adverse effects of failure to collect outstanding loans in the case of the U.S. subprime mortgage crisis that began with “California-based New Century Financial, the second largest subprime lender in 2006, filing for bankruptcy after struggling with buyback demands for defaulting mortgages” (Alfaro & Kim, 2008), followed by other financial institutions and later spiraling into a global financial crisis. The effects are still felt today as different countries have different economic recovery resources and abilities.<br /><br />Thus, does the legal right of the banks to collect outstanding loans from defaulters also give them the right to be absolved from the responsibility to ensure that the means, processes and methods used to collect outstanding loans are proper, professional and ethical?<br /><br />One can argue that if the collection of the outstanding loans is being carried out by the banks’ employees, then the banks must ensure proper, professional and ethical means, processes and methods. Another can argue that if the banks outsourced the debt recovery function to a debt-collection service provider, the banks are no longer responsible because the debt-collection service provider, as a duly registered company, is an independent legal entity by itself, and thus, have their own policies and practices.<br /><br />Is the above a loophole for the banks to absolve from the responsibility and blame should the outsourced debt-collection service provider employ high-handed techniques such as threats and other physical and mental abuses to collect outstanding loans from defaulters?<br /><br />Let us consider a recent case in Malaysia as reported in several local dailies such as the <em>Nanyang Siang Pau, Sin Chew Daily, China Press</em> and the <em>Star (of May 13, 2010),</em> that a man died after receiving 120 text messages on his mobile phone from debt collectors, reference: “Man dies after getting debt collectors’ 120 SMSes” <a href="http://thestar.com.my/news/story.asp?file=/2010/5/13/nation/6247439&sec=nation">http://thestar.com.my/news/story.asp?file=/2010/5/13/nation/6247439&sec=nation</a>. Moreover, it appears that there have been many abusive cases, so much so that several Malaysian non-governmental organisations (NGOs) has condemned the high-handed actions of the debt collectors engaged by the banks as reported in the <em>New Straits Times (of May 14, 2010),</em> Malaysian Mirror and the Bernama news agency, references: “NGOs slam threatening debt collection methods” <a href="http://www.malaysianmirror.com/nationaldetail/6-national/39926-ngos-slam-threatening-debt-collection-methods-">http://www.malaysianmirror.com/nationaldetail/6-national/39926-ngos-slam-threatening-debt-collection-methods-</a> and <a href="http://www.bernama.com/bernama/v5/newsgeneral.php?id=498227">http://www.bernama.com/bernama/v5/newsgeneral.php?id=498227</a>.<br /><br />Futhermore, in the <em>National Consumer Complaints Centre Annual Report 2009</em>, under the category of complaints made against financial institutions, the following are the key complaints: <ul><li>Assignment of non-performing loans (to debt collection companies where strong-arm tactics are used to harass and collect debts)</li><li>Unfair interest, charges and penalties</li><li>Fraudulent ATM transactions (inadequate security or safeguards)</li><li>Unfair contract terms</li><li>Misleading advertisements</li><li>Use of unprofessional or unauthorized credit tip-off service providers (providing outdated, non-updated or invalid information)</li></ul><p>(2009, pp. 25-26)</p><p></p><br /><p>Figure 1-1: Number of Complaints against Malaysian Financial Institutions, 2009</p><a href="http://www.flickr.com/photos/29913957@N08/4658627211/" title="Malaysia Complaints by andychin62, on Flickr"><img src="http://farm5.static.flickr.com/4017/4658627211_c31b25dfef.jpg" width="400" height="247" alt="Malaysia Complaints" /></a><p>(NCCC, 2009, p. 8)</p><br /><p>So, are the banks responsible for the actions and behaviour of the debt-collection companies they engage? To answer the question, let us first better understand what is ethics and corporate social responsibility [a.k.a. Corporate Responsibility (CR)].</p><br /><p><strong>2.0 Ethics and CSR</strong></p><p><strong>2.1 Company Reputation and Financial Performance</strong></p><p>A common but very important management excellence theme that Collins & Porras’ <em>Built to Last</em>, Collins’ <em>Good to Great</em>, and Brown & Turner’s <em>The Admirable Company</em> share is that a company’s reputation fuels its financial performance.</p><p>A company’s reputation vis-à-vis financial performance can be built from the following foundation components:</p><ul><li>Quality of management – Ethics (corporate governance, code of conduct)</li><li>Financial soundness</li><li>Quality of goods and services – People and process dependent</li><li>People management – Talent management (development, attraction and retention) to achieve high performance and ensure quality of goods and services</li><li>Value as a long-term investment – The value chain/value network</li><li>Capacity to innovate – Differentiation and competitive advantage</li><li>Quality of marketing – Customer engagement (attraction and retention)</li><li>Community, social and environmental responsibility (CSR) – embedded as part of corporate strategy and performance</li><li>Use of corporate assets</li></ul><p>What are the benefits of gaining high reputation vis-à-vis high financial performance? “Sir Clive Thompson, then CEO of Rentokil – Britain’s most admired company in 1994, summarised the benefits as:</p><ul><li>Customers may gain reassurance from the knowledge that they are in good hands</li><li>Employees can derive great pride from being part of the very best</li><li>Shareholders can feel reassured that their company has been judged to be the best by a group of highly credible judges</li><li>Standing within the local community, from whom we want to attract good employees, increases</li><li>Suppliers [partners] will potentially enhance their own reputations by such a prestigious award”</li></ul><p>(Brown & Turner, 2008, p. 1)</p><p>Furthermore, “research has also shown that a good reputation:</p><ul><li>Can lead to superior financial performance</li><li>Encourages shareholders to invest in the company</li><li>Attracts good staff</li><li>Helps in [attracting and] retaining customers”</li></ul><p>(Brown & Turner, 2008, pp. 3-4)</p><br /><p><strong>2.2 Ethics</strong></p><p>Ethics involves the study and practice of moral values, issues and choices. Ethics is concerned with what is right versus wrong, good versus bad and the “in-between” situations or issues generally known as the grey areas. Being ethical means complying to or upholding a set of moral principles, and this relates to discipline.</p><p>According to Jim Collins in <i>Good to Great</i>, high performing or great companies possesses a culture of discipline (Figure 2-1). “All companies have a culture, some companies have discipline, but few companies have a culture of discipline. When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance” (2008, p. 13 and pp. 120-123).</p><p></p><br /><p>Figure 2-1: The Good-to-Great Matrix of Creative Discipline</p><a href="http://www.flickr.com/photos/29913957@N08/4658627243/" title="GoodtoGreat_Discipline by andychin62, on Flickr"><img src="http://farm5.static.flickr.com/4048/4658627243_12ea9783d2.jpg" width="400" height="292" alt="GoodtoGreat_Discipline" /></a><p>(Collins, 2008, p. 122)</p><br /><p><strong>2.3 Corporate Social Responsibility (CSR)</strong></p><p>Today, CSR is gaining attention and interest among leading Malaysian companies, the government and NGOs. While some companies are totally sold out on CSR by incorporating CSR as part of their business strategies, others are less enthusiastic, wondering if such efforts are just public relations stunts or corporate image-building activities.</p><p>If companies see CSR as mere philanthropy or charity and nothing more, then they do not yet clearly understand what CSR is. CSR, when properly understood, is not what you do with your money once you have made it but how you make your money.</p><p>There is no single universally accepted definition of CSR. The vast amount of CSR literature, including corporate CSR reports, defines CSR differently, although the core elements of CSR are present in those many definitions. Some examples are listed in Table 2-1. </p><br /><p>Table 2-1: Example Definitions of CSR</p><a href="http://www.flickr.com/photos/29913957@N08/4659250738/" title="CSR definitions by andychin62, on Flickr"><img src="http://farm5.static.flickr.com/4028/4659250738_131e02851d.jpg" width="400" height="291" alt="CSR definitions" /></a><p>(Crane, Matten & Spence, 2008, pp. 6-7)</p><br /><p>From the perspective of academic research and literature, “one of the most long-standing and widely cited definitions of CSR” is Archie Carroll’s Pyramid of CSR as per Figure 2-2 (Crane et al, 2008, pp. 57-58; Carroll, 1991, pp. 39-48).</p><br /><p>Figure 2-2: Carroll’s Pyramid of CSR</p><a href="http://www.flickr.com/photos/29913957@N08/4659250794/" title="CSR pyramid by andychin62, on Flickr"><img src="http://farm5.static.flickr.com/4052/4659250794_805a4b77c3.jpg" width="400" height="398" alt="CSR pyramid" /></a><p></p><br /><p>Thus, we can argue that CSR needs to become part of the company’s DNA i.e. how it runs its business, how it manages its risks, how it strategizes for future survival and growth, and how it manages its relationships with multiple stakeholders i.e. the shareholders, customers, employees, suppliers, competitors, regulators and the community in which the company operates, and society as a whole.</p><p>Today, CSR is also important from the sustainability point of view i.e. how long can Earth or resources sustain our economic activities at the present economic rate and in the present form? Consider these simple examples – if a well-known restaurant is dependent on the sole proprietor, who is also the chef, and there are no succession plans, then that restaurant is not a sustainable business. It will only last as long as the sole proprietor/chef ‘s lifespan or ability to work. We all know that oil will run out one day in the future. Many of us will not be around to see that ‘one-day’. Thus, in the very long-term, oil companies are not sustainable.</p><p>CSR is an ethical framework that when used correctly and strategically, enables companies to develop innovative ways to create value and new ways of operations that may be more efficient in resource utilization and will benefit the company in the long-term.</p><p>There are six core characteristics that represent the essential features of CSR. They are:</p><ul><li><strong>Voluntary</strong> – in the majority of CSR literature and CSR concepts, corporate voluntarism or responsibilities beyond the minimum legal requirement is the main thrust of CSR activities. Critics of CSR argue that voluntarism is CSR’s main flaw because “legally mandated accountability” is where the importance lies. However, global competitive business pressures are now increasingly driving corporate CSR activities</li><br /><li><strong>Internalizing or Managing externalities</strong> – Externalities refer to the positive and negative side effects of a company’s economic activities that are borne by other people such as the local community where the company operates, and is not taken into account by the company in its decision making processes nor included into the market price for goods and services. However, government regulations can legally require the company to internalize the cost of the externalities</li><br /><li><strong>Multiple stakeholder orientation</strong> – In the concept of CSR, companies do not only have responsibilities to shareholders but also to a variety of stakeholders such as employees, suppliers, and consumers. This is because the operational network of the company involves more than just a company-consumer relationship</li><br /><li><strong>Alignment of social and economic responsibilities</strong> – CSR is not in conflict with the companies’ objective to seek profits, but rather when economic and social responsibilities are aligned, companies can continue to generate profitability while being socially responsible</li><br /><li><strong>Practices and Values</strong> – CSR is not only about establishing a set of “business practices and strategies that deal with social issues” but also the philosophy or values underlining those practices and strategies, which gives rise to numerous and continuous debates about why companies do it</li><br /><li><strong>Beyond philanthropy</strong> – CSR is not merely charity, but concerns or involves the entire company’s core business operations’ impact on society and the environment</li></ul><p>(Crane et al, 2008, pp. 7-9)</p><p>To adopt CSR, most companies (e.g. banks and other financial institutions) can begin by focusing their CSR efforts or activities into four business dimensions i.e. the workplace, marketplace, community, and environment, and addressing example issues and challenges as follows:</p><p><strong>i) The Marketplace</strong></p><ul><li>Company reputation</li><li>Corporate governance and Code of conduct</li><li>Business transactions code of ethics e.g. in procurement</li><li>Product and Service responsibility</li><li>Customer service level – professionalism and quality</li><li>Value Chain/Value Network and Outsourcing (e.g. partners’ performance quality and professionalism, code of conduct and quality audits)</li></ul><p><strong>ii) The Workplace</strong></p><ul><li>Health and safety issues</li><li>Culture development and sustainability</li><li>Work-life balance</li><li>Human capital development</li><li>Talent management – attraction, development and retention</li></ul><p><strong>iii) The Community</strong></p><ul><li>Company reputation</li><li>Social impact of business transactions and contribution</li><li>Alignment of core business to community investment</li><li>Employee volunteering</li></ul><p><strong>iv) The Environment</strong></p><ul><li>Reduce environmental or carbon footprint (energy, water, waste)</li><li>Environmental impact studies</li><li>Effects on biodiversity</li><li>Sustainability of resources</li></ul><br /><p><strong>3.0 Stakeholder Engagement</strong></p><p>CSR does not only concern the company and society, but involves all of the company’s stakeholders.</p><p>In <em>Integrated Strategy: Market and Non-Market Components</em>, Baron had categorized the stakeholders into two groups or components i.e. market and non-market (1995, pp. 47-48). The market component comprises the stakeholders such as customers, competitors, employees, and partners and suppliers, as shown in Figure 2-3. The non-market component comprises of NGOs, media, society or community, government, regulators, and environmental safety and standards organisations. Being concerned about or affected by social, ethical and professionalism issues, both the market and non-market components can exert differing degrees of social responsibility pressures or motivations on the company – in this case, the banks and debt-recovery service providers.</p><br /><p>Figure 2-3: Stakeholders of a company: Motivations for CSR</p><a href="http://www.flickr.com/photos/29913957@N08/4658627393/" title="Company stakeholders by andychin62, on Flickr"><img src="http://farm2.static.flickr.com/1280/4658627393_b638b8f0a4.jpg" width="400" height="285" alt="Company stakeholders" /></a><p></p><br /><p>The stakeholders, irrespective of whether they belong to the market or non-market components can be in the position of holding the company accountable for the social issues and resulting financial or economic impact. The stakeholders can also be champions for the company, slow the business progress of the company, or choose not to be involved. Should the company totally ignore the social responsibility pressures or motivations exerted by the stakeholders the consequences could prove disastrous in the long-term.</p><p>For e.g. if the debt-collectors engaged by the bank continues to use strong-arm tactics to collect debts and results in public police cases of assault and battery, serious injuries or deaths – accidental or otherwise, the negative publicity generated can cause serious reputational damage to the bank. Communities and society may easily perceive or conclude that the bank readily resorts to and condones acts of gangsterism to recover debts. Depending on the severity of the issue, NGOs, activists and even political parties can call for and orchestrate boycotts against the bank. The media and the Internet can easily be brought in to increase the negative publicity to a regional or global level creating adverse effects on the bank’s corporate image and reputation, customer confidence and support, and even shifting business to the bank’s competitors.</p><p>While the above has not yet happened in Malaysia, we can draw CSR concept similarities to some publicized real cases in other countries or industries such as:</p><ul><li>The Alison Turner vs. Halifax Bank landmark case (Mother sues bank, 2007)</li><li>The ICICI Bank (India’s second largest bank) harassment case (M. Raja, 2007)</li><li>Another ICICI Bank harassment case (Sharma, 2010)</li><li>The Nike child labour cases in Pakistan and Cambodia in the 1990s (Cushman Jr., 1998; Boggan, 2001)</li><li>The current Foxconn Technology employee suicides and labour conditions case in China (10th suicide case, 2010; Move to curb, 2010; Suicide No. 10, 2010; Taiwan activists protest, 2010; Foxconn suicides shed, 2010)</li></ul><p>In the Foxconn case, activists in Hong Kong had called for the boycott of the Apple iPhone because Foxconn, as a contract manufacturer, also manufactures the iPhone for Apple, Inc. (HK activists push, 2010).</p><p>The above cases and the earlier case of bank-appointed debt-collectors using strong-arm and harassment tactics in Malaysia are not surprising because it is a CSR myth if we think that “companies will compete in a ‘race to the top’ over ethics” (Blowfield & Murray, 2008, p. 354). In reality, “although companies may present themselves as socially responsible, there are many areas in which they deliberately pursue acts of social irresponsibility” (Blowfield & Murray, 2008, p. 354; Doane, 2005, p. 23-29).</p><br /><p><strong>4.0 Conclusions</strong></p><p>We now return to the question, “Are the banks responsible for the actions and behaviour of the debt-collection companies they engage?” The answer is ‘Yes’.<br /><br />Irrespective of CSR, banks are the key organisations in any country’s financial structure, and are expected to function with high standards of professionalism, trust and financial stability. Banks who officially or legally appoints or engage any other company as its business partner or supplier of products and services needs to ensure that the business partner or supplier is also of repute as it directly reflects upon the banks. When we include CSR, we have a stronger argument.</p><p>However, in Malaysia, CSR and corporate governance (CG) are only at the infancy stages when compared “to other Asian countries such as Singapore, Thailand and South Korea” (Haron, Ibrahim, Ismail, Quah, Kader Ali, Zainuddin & Nasruddin, 2007, p. 5). While there is awareness, the adoption, practice and reporting of CSR and CG is very slow or low.</p><p>From the research conducted by the Malaysia University of Science (Universiti Sains Malaysia) <a href="http://www.usm.my/bi">www.usm.my/bi</a>, sponsored by the Malaysian Accountancy Research and Education Foundation (MAREF) <a href="http://www.maref.org.my/">http://www.maref.org.my/</a> and the Malaysian Institute of Integrity (IIM) <a href="http://www.iim.com.my/">http://www.iim.com.my/</a> (Haron, et al, 2007), out of the 200 Malaysian public-listed companies, only 28 responses were received for the CSR questionnaire, and 30 responses for the ethical orientations questionnaire, sent to the companies’ board of directors. Is this an indication that ethics and CSR are not important? Or there is nothing much to disclose when it comes to ethics and CSR, thus, the poor response? It is also interesting to note that none of the 200 public-listed companies included a bank (Haron et al, 2007, p. 1 and pp. 146-150).</p><p>Furthermore, NGOs in Malaysia are relatively weak as champions of the consumers given the existing laws on freedom of speech and expression, freedom of information, and freedom of assembly and association (SUARAM, 2009). This is further magnified by a poor consumer rights culture, and the fact that the main dailies or press/media are owned or controlled by the major political parties.</p><p>In summary, Malaysian banks (and other companies) do possess the power and ability to behave and perform much better, and consumers in Malaysia, including loan or payment defaulters, deserve to be treated in a professional and civic manner. Collectively, we need to march forward to increase our competitiveness, innovativeness, economic wealth and welfare, and ensure sustainability as a future developed nation. Thus, debt-collection strong-arm and harassment tactics are best left to the stone-age era.</p><p></p><br /><br /><p><strong>Bibliography:</strong></p><p>10th suicide case at Chinese firm. (2010). <em>New Straits Times</em>, 26 May, p. 27<br /><br />Alfaro, Laura & Kim, Renee (2008) “U.S. Subprime Mortgage Crisis: Policy Reactions”. <em>Harvard Business School Case</em> #9-708-036, Rev: November 20, pp. 1-20<br /><br />Baron, David P. (1995). “Integrated Strategy: Market and Non-Market Components.” <em>California Management Review</em>, Vol. 37, No. 2, pp. 47-65<br /><br />Blowfield, Michael & Murray, Alan (2008) <em>Corporate Responsibility: A Critical Introduction</em>. Oxford, England: Oxford University Press<br /><br />Boatright, John R. (2007) <em>Ethics and the Conduct of Business, Fifth Edition</em>. Upper Saddle River, NJ: Pearson Prentice Hall<br /><br />Boggan, Steve (2001). “Nike admits to mistakes over child labor”, <em>Independent, UK</em>, 20 October. Accessed from <a href="http://www.independent.co.uk/news/world/americas/nike-admits-to-mistakes-over-child-labour-631975.html">http://www.independent.co.uk/news/world/americas/nike-admits-to-mistakes-over-child-labour-631975.html</a> as at 19 February 2010<br /><br />Brown, Richard & Turner, Paul (2008) <em>The Admirable Company: Why Corporate Reputation Matters So Much and What It Takes to Be Ranked Among the Best</em>. London, England: Profile Books<br /><br />Carroll, Archie B. (1991, July-August). “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.” <em>Business Horizons</em>, pp. 39-48. Accessed from <a href="http://www-rohan.sdsu.edu/faculty/dunnweb/rprnts.pyramidofcsr.pdf">http://www-rohan.sdsu.edu/faculty/dunnweb/rprnts.pyramidofcsr.pdf</a> as at 7 July 2009<br /><br />Cheah, Foo Seong & Lee, Leok Soon (2009) <em>Corporate Governance in Malaysia: Principles and Practices</em>. Petaling Jaya, Malaysia: August Publishing<br /><br />Colley, Jr., John L.; Doyle, Jacqueline L.; Logan, George W. & Stettinius, Wallace (2003) <em>Corporate Governance</em>. New York, NY: McGraw-Hill<br /><br />Collins, Jim (2001) <em>Good to Great: Why Some Companies Make the Leap … and Others Don’t</em>. New York, NY: HarperCollins<br /><br />Collins, Jim & Porras, Jerry I. (2002) <em>Built to Last: Successful Habits of Visionary Companies</em>. New York, NY: HarperBusiness<br /><br />Crane, Andrew; Matten, Dirk & Spence, Laura J. (eds.) (2008) <em>Corporate Social Responsibility: Readings and Cases in a Global Context</em>. Abingdon, England: Routledge<br /><br />CSR Asia: Corporate Social Responsibility in Asia. Accessed from <a href="http://www.csr-asia.com/index.php">http://www.csr-asia.com/index.php</a> as at 7 July 2009<br /><br />Cushman Jr., John H. (1998) “New York Times: Nike Pledges to End Child Labor And Apply U.S. Rules Abroad.” <em>CorpWatch.org</em>, 13 May. Accessed from <a href="http://www.corpwatch.org/article.php?id=12965">http://www.corpwatch.org/article.php?id=12965</a> as at 19 February 2010<br /><br />Doane, D. (2005) “The myth of CSR: The problem with assuming that companies can do well while also doing good is that markets don’t really work that way.” <em>Stanford Social Innovation Review</em>, Fall, pp. 23-29<br /><br />Foxconn suicides shed light on workers. (2010). <em>New Straits Times</em>, 29 May, p. 24<br /><br />Haron, Hasnah; Ibrahim, Daing Nasir; Ismail, Ishak; Quah, Chun Hoo; Kader Ali, Noor Nasir; Zainuddin, Yuserrie & Nasruddin, Ellisha (2007) “Governance, Ethics and Corporate Social Responsibility of Public Listed Companies in Malaysia”, in Mohd Ali, Mohd Nizam; Alias, Abdul Samad; Mohamed, Nafsiah & Mohd Ishak, Mohd Rezaidi (eds.) (2007) <em>Corporate Integrity Framework Research Monographs</em>. [The Malaysian Accountancy, Research and Education Foundation (MAREF) – Malaysian Institute of Integrity (IIM) Commission Research Report] Kuala Lumpur, Malaysia: Malaysian Institute of Integrity<br /><br />HK activists push for iPhone boycott after spate of suicides. (2010). <em>The Star</em>, 26 May, p. W38<br /><br />ICCSR – International Centre of CSR. Nottingham University Business School. The University of Nottingham. Accessed from <a href="http://www.nottingham.ac.uk/business/ICCSR/">http://www.nottingham.ac.uk/business/ICCSR/</a> as at 7 July 2009<br /><br />M. Raja (2007) “It hurts when an Indian bank loan goes bad.” <em>Asia Times Online</em>, 8 November. Accessed from <a href="http://www.atimes.com/atimes/South_Asia/IK08Df03.html">http://www.atimes.com/atimes/South_Asia/IK08Df03.html</a> as at 26 May 2010<br /><br />Mother sues bank for harassment in landmark legal action. (2007) <em>DailyMail.co.uk</em>, 18 April. Accessed from <a href="http://www.dailymail.co.uk/news/article-449293/Mother-sues-bank-harassment-landmark-legal-action.html">http://www.dailymail.co.uk/news/article-449293/Mother-sues-bank-harassment-landmark-legal-action.html</a> as at 26 May 2010<br /><br />Move to curb suicides. (2010). <em>The Star</em>, 27 May, p. W45<br /><br />NCCC – National Consumer Complaints Centre (2009) <em>Malaysia Complains: Never Underrate Consumers! (NCCC Annual Report 2009)</em>. Petaling Jaya, Malaysia: NCCC<br /><br />Sharma, Hemender (2010) “Man alleges harassment by bank, commits suicide.” <em>CNN – IBN Live</em>, 17 May. Accessed from <a href="http://ibnlive.in.com/news/man-alleges-harassment-by-bank-commits-suicide/111620-3.html">http://ibnlive.in.com/news/man-alleges-harassment-by-bank-commits-suicide/111620-3.html</a> as at 26 May 2010<br /><br />StarBiz-ICR Malaysia, The: Corporate Responsibility. Accessed from <a href="http://thestar.com.my/starbizicrm/default.asp">http://thestar.com.my/starbizicrm/default.asp</a> as at 7 July 2009<br /><br />SUARAM (2009) <em>Malaysia Human Rights Report 2008: Civil and Political Rights</em>. Petaling Jaya, Malaysia: SUARAM Kommunikasi [Suara Rakyat Malaysia (SUARAM) / The Voice of Malaysian Citizens]<br /><br />Suicide No. 10 at Foxconn. (2010). <em>New Straits Times</em>, 28 May, p. 29<br /><br />Taiwan activists protest against Foxconn. (2010). <em>The Star</em>, 29 May, p. W39<br /></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com1tag:blogger.com,1999:blog-2883577468018538027.post-82754764655401833972010-05-25T22:20:00.000-07:002010-05-28T01:29:01.789-07:00Malaysia and Corruption<strong>UPDATED</strong><br /><strong></strong><br /><strong></strong><br /><strong>1.0 Introduction</strong><br /><br />“Corruption” is an English word we often hear in conversations or read about in newspapers, in various online forums and blog sites, especially when the topics are of the sensational, political and related to people in authority.<br /><br />The <em>Oxford Advanced Learner’s Dictionary, 7th Edition</em> (OALD) offers three definitions for the word “corruption”:<br /><br />“1. dishonest or illegal behaviour, especially of people in authority;<br />2. the act or effect of making somebody change from moral to immoral standards of behaviour;<br />3. the form of a word or phrase that has become changed from its original form in some way: The word ‘holiday’ is a corruption of ‘holy day’.”<br /><br />In the context of moral and ethics, the OALD’s third definition is certainly not applicable and surely, there is nothing holy about corruption!<br /><br />So, what is corruption? We can define corruption as the abuse of one’s position for personal gain or for the benefit of an individual or group to who one owes allegiance. For e.g., a public official in charge of approving building safety plans may become corrupt by accepting monies to approve sub-standard building safety plans. A purchasing manager in an organisation may become corrupt by approving and buying stationeries at higher prices from a supplier due to commissions from the supplier.<br /><br />Corruption occurs whenever a person in authority accepts, solicits or extorts a payment, or when a private agent offers a payment to circumvent an issue, a regulation or the law for personal or competitive advantage.<br /><br />Corruption is a two-way process, usually involving members of both the public and private sectors or within the private sector, who engage in illegal, illegitimate and unethical actions or behaviour that eventually affects a country’s economic prospects and degrade its social and political institutions.<br /><br />Corruption is a symptom of weakness in the political, legal, social and business or economic systems. Corruption is not new and is not limited to certain countries of the world. Today, corruption is a global phenomenon and its severity varies from country to country – usually more prevalent in less developed or developing countries (Alatas, 1990).<br /><br />In the present era of increased international trade and globalisation, most progressive governments are advocating transparency i.e. activities should be carried out in an open, transparent and accountable manner.<br /><br /><strong>1.1 Types of Corruption</strong><br /><br />There are several types of corruption. The major or common types are bribery, patronage, nepotism, electoral fraud and manipulation, theft of state assets, diversion of revenues, and evasion of taxes.<br /><br />The most common form of bribery usually involves payments and/or family holiday packages given by individuals or companies to government officials in return for favours such as award of government contracts, licenses and permits. At one time or another, we may have been guilty of corruption ourselves when we bribe a police constable against issuing a traffic offence summons for exceeding the speed limit or running a red stop light.<br /><br />Government officials using their position, power or influence to award contracts or obtain good jobs or unfair advantages for members of their own families practices a form of corruption known as nepotism. Corruption also includes vote buying and violation or manipulation of electoral laws on campaign financing. Theft of state assets by officials charged with their stewardship is also corruption.<br /><br /><strong>1.2 Corruption in Malaysia</strong><br /><br />Malaysia is not without issues and challenges of corruption. The question is to what depth and width does corruption exists in Malaysia?<br /><br />Towards the last few years of former prime minister, Tun Dr. Mahathir Mohammad’s premiership, he had strived to address corruption, money politics and nepotism in the United Malays National Organisation (UMNO), the ruling party (Fan, 2003). Similarly, different degrees of corruption exists within the hierarchies of the other Malaysian political parties. Some of these negative activities may be regarded as “petty” corruption, while others may be regarded as “grand” corruption, but their practitioners naturally strive to keep it hidden from public view, thus, the difficulties in proving the existence of corruption.<br /><br />The Malaysian courts are also sending strong messages against corruption. In a 2006 corruption case, a former Kangar Municipal Council president was sentenced to a four-year jail term and fined Ringgit 405,000 by a Sessions Court that found him guilty on three counts of corruption committed in 1999 of soliciting bribes from a property developer, totaling Ringgit 385,000 and a charge of abusing his position as a public servant by accepting a golf set worth Ringgit 2,500. The jail sentence and fine represents one of the stiffest sentences for corruption (Former Kangar, 2006; RM405,000 fine, 2006).<br /><br />In another case, “a land settlement officer, who was acquitted of corruption by a lower court last year, saw his hopes dashed when the High Court here yesterday set aside his acquittal and sentenced him to two years’ jail.” He was also fined Ringgit 460,000 on three charges of corruption involving Ringgit 92,000 (Officer’s graft, 2006).<br /><br />A technician paid a high price for accepting a Ringgit 500 bribe from a project manager in order to speed up the approval plans for a residence and shop premises when the Sessions Court sentenced him to three months’ jail and a fine of Ringgit 10,000 (Technician pays, 2006).<br /><br />The Malaysian Anti-Corruption Commission (MACC) <a href="http://www.sprm.gov.my/">http://www.sprm.gov.my/</a>, formerly known as the Anti-Corruption Agency (ACA; established October 1967) was established in January 2009, dedicated to the task of keeping corruption in check – investigating complaints and cases, and charging those found guilty for further legal action.<br /><br />However, despite the Malaysian government’s initiatives to fight and control corruption, Malaysia continues to slip in the international corruption rankings. Back in 2006, in the Transparency International 2006 Corruption Perceptions Index report, Malaysia had fallen five places to 44th place among 163 countries and, “Among 25 countries in the Asia Pacific region, Malaysia ranks 10th where the least corrupt are Singapore, Hong Kong and Japan in that order, with Myanmar as the worst. However, Malaysia scores better than China, India, Indonesia, Thailand and Pakistan.” (Corruption ranking, 2006; Malaysia slips, 2006).<br /><br />In the latest Transparency International Corruption Perception Index 2009, Malaysia ranked #56, down by nine places from 2008’s #47 (Malaysia’s corruption, 2009; Disturbing spiral, 2009; CPI 2009 Table, 2009).<br /><br /><p>Transparency International CPI – Malaysia</p><ul><li>2009: Ranked #56</li><li>2008: Ranked #47</li><li>2007: Ranked #43</li><li>2006: Ranked #44</li><li>2005: Ranked #39</li><li>2004: Ranked #39</li><li>2003: Ranked #37</li><li>2002: Ranked #33</li><li>2001: Ranked #36</li><li>2000: Ranked #36</li></ul><p><br />While there is the Malaysia Anti-Corruption Comission Act 2009 and the MACC to combat and control corruption, much is not publicized for the benefit of the public, and the MACC itself is sometimes subject to criticism about a lack of transparency. Following the 2006 UMNO general assembly, the then prime minister, Tun Abdullah Ahmad Badawi, addressed several key criticisms against his administration and premiership style – one being that the authorities appear to only go after the “small fish”.<br /><br />Generally, the public is aware that Malaysia, similarly like many other developing countries, experiences possible corruption in the following areas:<br /></p><ul><li>Political corruption</li><li>Political finance</li><li>Vote buying</li><li>Cronyism</li><li>Awarding of government contracts</li><li>Corporate finance</li><li>General procurement, for e.g. military procurement, medical and healthcare (hospitals, pharmaceuticals), educational</li><li>Property development (planning and approvals)</li><li>Licensing and permits</li><li>Imports and exports</li><li>Intellectual property and copyright regulation and enforcement</li><li>Timber industry and illegal logging</li></ul><p>While corruption is very difficult to completely eradicate, the key objective for Malaysia is to be able to effectively regulate and keep corruption in-check. The continued and additional efforts of the government to promote and maintain transparency in government activities and also in corporate governance will certainly enhance efforts in combating corruption.</p><p>Investor trust and confidence must be maintained and further cultivated to continue to attract foreign direct investments (FDIs) in a continuously increasing competitive regional and international trade environment accelerated by globalisation (Transparency International, 2001; 2003; 2004; 2005; 2006).</p><p><strong>2.0 Causes of Corruption</strong></p><p>What causes corruption? Research have shown that generally where a country’s institutions of governance are weak, where government’s policies provide room for it, and where government institutions have become corrupt themselves, corruption tends to be more prevalent. While few countries set out to encourage or promote corruption, the causes or sources of corruption are highly contextual – rooted in a country’s political and legal development, social history, bureaucratic traditions, economic conditions and policies.</p><p>Certain characteristics of the developing, the less developed or transitional countries tend to unconsciously promote corruption. These countries may be suffering from political unrest or power struggles for the country’s institutions of governance. They may also possess a system of governance that has traditionally been dominated by the military, underdeveloped judicial system and non-existent tradition of the rule of law.</p><p>The following are some major factors that may facilitate the growth of corruption.</p><p><strong>2.1 Political Factors</strong></p><p>Levels of corruption are related to the strength of civil independence, such as the level of press freedom, the freedom of individuals to form non-governmental organisations (NGOs), and the presence of active and structured political competition.</p><p>In order to keep corruption in-check, there must be adequate transparency. Thus, the citizens of a country must have the ability or access to know about their government’s activities.</p><p>The way in which a country implements its political and electoral processes and practices can become a key source of corruption. Political parties based primarily on patron – client relationships and the distribution of patronage may become major sources of corruption. Such political structure or climate is usually accompanied by weak campaign finance legislation and a low level of disclosure required of campaign contributors and political candidates (Transparency International, 2004).</p><p><strong>2.2 Legal Factors</strong></p><p>The existence of anti-corruption legislation in a country’s legal system affects the level of corruption. However, for laws to be effective, the ability and credibility of the police and judiciary to act against corrupt practices is important.</p><p><strong>2.3 Bureaucratic Factors</strong></p><p>Several factors exist as a result of bureaucracy. In countries with high regulatory and state-bureaucracy processes, possibility of corruption tends to be higher. This means that where a government imposes many rules and regulations, public officials have a greater opportunity to exploit them, especially where public officials have unaccountable control over the provision of public services, application of the regulations and fee collections.</p><p>Also, public servants may be more tempted to engage in corrupt practices where their wages are low or there exists a large disparity between public and private sector wages. Thus, there is a need for effective auditing and monitoring systems within a government. Corruption is more likely to occur when the likelihood of its detection, and its expected detection cost, are relatively low.</p><p><strong>2.4 Economic Factors</strong></p><p>Corruption is more likely to grow rapidly in countries where governments create monopolistic economic settings. Economic factors are closely linked to bureaucratic factors because if a government’s economic policies are implemented and monitored in a non-participative, non-transparent and non-accountable manner, abuse sets in (Eberlei & Fuhrmann, 2004).</p><p><strong>2.5 Transnational Factors</strong></p><p>Corruption has strong transnational dimensions. Countries that are perceived today to be very corrupt had systemic corruption introduced during their colonial periods. For e.g. corruption emerged in the former communist states of Eastern Europe and the Soviet Union as the result of the institutions of communist rule. With the collapse of the communist regimes, the power vacuum created was filled in some cases, by old power structures practicing rampant corruption. Despite independence, many countries in transition are found to be suffering from a new colonialism of corruption, fostered by transnational forces.</p><p><strong>3.0 Consequences of Corruption</strong></p><p>Corruption has severe long-term negative consequences for the quality of governance and efforts to attain sustainable development, resulting in “crony capitalism”.</p><p>Corruption is a form of public theft. The funds are diverted from the national treasury, and usually siphoned overseas into private accounts, denying the rightful opportunity to apply them to productive public use, in progressing citizen welfare, education and living standards.</p><p><strong>3.1 Political Consequences</strong></p><p>Corruption is subtle, eroding the quality of governance and national stability by undermining the legitimacy of the political process. Ordinary citizens are marginalized because corruption is essentially a form of extortion, fostering contempt for the public service and leads to political cynicism.</p><p>Corruption distorts decision-making, resulting in the wrong projects, prices and contractors, substandard delivery, and the promotion of corruption at lower levels. It shifts the provision of services away from those who need them.</p><p>Once a pattern of successful payoffs is institutionalized, corrupt officials become more audacious raise the asking prices and search for better and more ways to obtain payments. Thus, corruption becomes entrenched, proving resistant to efforts to control it. Also, corruption feeds on itself, creating a widening sphere of illegal payoffs until state structures are completely undermined and years of development are reversed.</p><p><strong>3.2 Economic Consequences</strong></p><p>A visible consequence of corruption is the impact on a country’s economic development. Corruption compromises the achievement of sustainable development. Bribing results in additional business costs, a burden to small entrepreneurs, and the misallocation of a country’s human capital and talent. Competition becomes focused on the highest bribe, thereby denying the public the advantages of a competitive yet fair marketplace. </p><p>The manipulation of government priorities associated with corruption distorts spending on services such as healthcare and education, with serious impacts on the country’s well being, and usually the poor bear the heaviest burden.</p><p><strong>3.3 Social Consequences</strong></p><p>Corruption violates public trust and erodes social capital. It undermines laws and regulations meant to serve productive social objectives. Eventually, corruption erodes political legitimacy to the point where citizens see little point in following the rules.</p><p>This results in the demoralization of the country’s population, leading to a lack of confidence in the state and its institutions, and, in extreme situations, the collapse of the state itself. In such potentially unstable situations, the well educated and qualified people may leave for other countries i.e. the brain drain problem (Sidhu, 2010; Kok & Tee, 2010; Fong, 2010; Move to plug, 2010).</p><p><strong>4.0 Controlling Corruption</strong></p><p>The effort to control and combat corruption is a complex, long-term process. It must be continual, involving a constant maintenance of the institutions and systems of good governance nationally, regionally and internationally.</p><p><strong>4.1 An Integrated Approach</strong></p><p>Such an approach that considers the above view may include:</p><ul><li>Undertaking a comprehensive analysis of the incidences, causes and consequences of corruption at the national level</li><li>Instituting reforms in the country’s political, legal, administrative and economic systems. The opportunities for corruption may be reduced through efforts to improve the country’s system of governance and strengthen the institutions of good governance</li><li>Engaging civil society, including non-governmental organisations (NGOs) and the media, in raising public awareness about corruption and monitoring progress in controlling corruption</li></ul><p>The primary emphasis is on changing and enhancing existing systems of governance, rather than on blaming individuals. This approach recognizes that without building institutional capacity, even well intended and well-designed policies can lead to poor outcomes.</p><p>Since each country faces its own historical, political and social context, thus the specific strategies employed by countries will vary. However, in general, policy responses to corruption typically involves one or more of the following areas:</p><ul><li>Political will and reforms – political will involves the recognition that a healthy system of governance is essential to national welfare. The concept also implies that key leaders recognize the need to work together constructively. Political reform refers to establishing a system of checks and balances to prevent the arbitrary exercise of power</li><li>Administrative reforms – corruption in the public service must be faced from the onset and dealt with as an integral part of the reform process</li><li>Watchdog agencies and other measures of deterrence, e.g. anti-corruption commissions, ombudsman, watchdog units, whistleblower statutes</li><li>The Judiciary – essential to any country hoping to achieve long-term, sustainable success in controlling corruption is an effective, independent, and accountable judicial and law enforcement system</li><li>Media – effective anti-corruption efforts require a genuinely free press able to play its role as a public watchdog</li><li>Civil Society – citizen groups are an essential check on the arbitrary use of government power</li><li>Private sector and international business – the private sector has a crucial role to play in controlling corruption given that corruption commonly occurs at the intersection of the state and marketplace</li></ul><p><strong>4.2 The Global Dimension</strong></p><p>Just as an integrated effort at the national level of the country are essential to combating corruption, a coordinated approach at the regional or international level must also be used to combat globalised corruption, such as:</p><ul><li>Developing an international code of conduct for political officials, financial institutions, the private sector and others</li><li>Creating and strengthening inter-parliamentary unions</li><li>Improving coordination between policy makers and investigators, particularly in establishing systems or conventions that provide information on offshore accounts held by elected officials under investigation</li><li>Ensuring conformity of anti-corruption laws and regulations to other countries in the region</li><li>Drafting regional cooperative conventions on anti-corruption</li></ul><p><strong>5.0 Conclusions</strong></p><p>From the discussions in the previous sections, we can summarise the nature and consequences of corruption as follows:</p><ul><li>Corruption is the abuse of public position for personal gain or for the gain of an individual or group to whom one owes allegiance</li><li>Corruption is a two-way process, usually involving the public and private sectors</li><li>Corruption tends to flourish particularly where the quality of governance is weak, and where the institutions of accountability are marginalized</li><li>Corruption undermines good governance, distorting policy, leading to poorer public services and infrastructure, reduced spending on healthcare and education, and serious budgetary problems</li><li>Corruption furthers the social and economic marginalization of the poor. Thus, poverty eradication remains but a dream</li></ul><p>And in controlling corruption:</p><ul><li>Controlling corruption is a long-term labour that requires a comprehensive approach at a national level. Reforms should strengthen the institutions and mechanisms of governance to reduce the opportunities for corruption and implement measures to reduce the attraction to engage in corruption</li><li>Political will is essential to the success of anti-corruption initiatives</li><li>Political reforms should include measures to strengthen the rule of law, the role of civil society, build the capacity of parliament, and establish an open, transparent, competitive electoral process</li><li>Administrative reforms should reduce the opportunities and incentives for corrupt behaviour within the public service. There is a need to balance between strengthening rules and regulations, and improving the quality of public service</li><li>Economic reforms to reduce the opportunities for corruption must be carried out in a way that takes into account the political and social context</li><li>Deterrence and enforcement measures are valuable tools to fight corruption. The existence of anti-corruption legislation and the ability to enforce and execute such legislation is necessary for success</li></ul><p></p><br /><br /><p><strong>References:</strong></p><p>Alatas, Syed H. (1990) <em>Corruption: Its Nature, Causes and Functions</em>. Aldershot, England: Avebury<br /><br />Alatas, Syed H. (1999) <em>Corruption and the Destiny of Asia</em>. Petaling Jaya, Malaysia: Prentice-Hall Malaysia<br /><br />Aziz, Tunku Abdul (2005) <em>Fighting Corruption: My Mission</em>. Kuala Lumpur, Malaysia: Konrad Adenauer Foundation<br /><br />Boatright, John R. (2007) <em>Ethics and the Conduct of Business, 5th Edition</em>. Upper Saddle River, NJ: Pearson Prentice Hall<br /><br />Corruption ranking slips. (2006, November 6). <em>The Star</em>, p. N12<br /><br />CPI 2009 Table (2009) <em>Transparency International</em>. Accessed from <a href="http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table">http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table</a> as at 20 May 2010<br /><br />Disturbing spiral downward in corruption index. (2009, November 20). <em>The Star Online</em>. Accessed from <a href="http://thestar.com.my/news/story.asp?file=/2009/11/20/focus/5145439&sec=focus">http://thestar.com.my/news/story.asp?file=/2009/11/20/focus/5145439&sec=focus</a> as at 20 May 2010<br /><br />Eberlei, Dr. Walter & Fuhrmann, Bettina, et al. (2004) “Fighting Poverty and Corruption.”<br />Accessed from <a href="http://www.gtz.de/de/dokumente/en-corruption-and-poverty.pdf">http://www.gtz.de/de/dokumente/en-corruption-and-poverty.pdf</a> as at 14 November 2006<br /><br />Fan, Yew Teng (2003) “Can UMNO wipe out corruption?” <em>Aliran.com</em>. Accessed from <a href="http://www.aliran.com/oldsite/monthly/2003a/10d.html">http://www.aliran.com/oldsite/monthly/2003a/10d.html</a> as at 20 May 2010<br /><br />Fong, Chan Onn (2010, May 16) “Tracing the brain drain trend.” <em>The Star Online</em>. Accessed from <a href="http://thestar.com.my/news/story.asp?file=/2010/5/16/nation/6273783&sec=nation">http://thestar.com.my/news/story.asp?file=/2010/5/16/nation/6273783&sec=nation</a> as at 20 May 2010<br /><br />Former Kangar council chief gets stiff sentence. (2006, November 30). <em>New Straits Times</em>, p. 2<br /><br />Kok, Cecilia & Tee, Lin Say (2010, February 6) “Stemming the tide and keeping our talent.” <em>The Star Online</em>. Accessed from <a href="http://biz.thestar.com.my/news/story.asp?file=/2010/2/6/business/5614304&sec=business">http://biz.thestar.com.my/news/story.asp?file=/2010/2/6/business/5614304&sec=business</a> as at 20 May 2010<br /><br />Malaysia's corruption ranking dips, again. (2009, November 19). <em>MySinChew.com</em>. Accessed from <a href="http://www.mysinchew.com/node/31709">http://www.mysinchew.com/node/31709</a> as at 20 May 2010<br /><br />Malaysia slips to 44th place on graft index. (2006, November 7). <em>New Straits Times</em>, p. 4<br /><br />Move to plug brain drain. (2010, May 23). <em>The Star Online</em>. Accessed from <a href="http://thestar.com.my/news/story.asp?file=/2010/5/23/nation/6322584&sec=nation">http://thestar.com.my/news/story.asp?file=/2010/5/23/nation/6322584&sec=nation</a> as at 26 May 2010<br /><br />Officer’s graft acquittal set aside, gets 2 years’ jail. (2006, December 1). <em>New Straits Times</em>, p. 12<br /><br />RM405,000 fine for graft. (2006, November 7). <em>The Star</em>, p. N10<br /><br />Sidhu, B. K. (2010, January 15) “Give incentives to reverse brain drain from Malaysia.” <em>The Star Online</em>. Accessed from <a href="http://biz.thestar.com.my/news/story.asp?file=/2010/1/15/business/5477398&sec=business">http://biz.thestar.com.my/news/story.asp?file=/2010/1/15/business/5477398&sec=business</a> as at 20 May 2010<br /><br />Technician pays high price for taking small bribe. (2006, December 1). <em>New Straits Times</em>, p. 12<br /><br />Transparency International (2006) “Global Corruption Report 2006 – Special Focus: Corruption and Health.”<br />Accessed from <a href="http://www.transparency.org/publications/gcr/gcr_2006">http://www.transparency.org/publications/gcr/gcr_2006</a> as at 20 May 2010<br /><br />Transparency International (2005) “Global Corruption Report 2005 – Special Focus: Corruption in Construction and Post-conflict Reconstruction.”<br />Accessed from <a href="http://www.transparency.org/publications/gcr/gcr_2005">http://www.transparency.org/publications/gcr/gcr_2005</a> as at 20 May 2010<br /><br />Transparency International (2004) “Global Corruption Report 2004 – Special Focus: Political Corruption.”<br />Accessed from <a href="http://www.transparency.org/publications/gcr/gcr_2004">http://www.transparency.org/publications/gcr/gcr_2004</a> as at 20 May 2010<br /><br />Transparency International (2003) “Global Corruption Report 2003 – Special Focus: Access to Information.”<br />Accessed from <a href="http://www.transparency.org/publications/gcr/gcr_2003">http://www.transparency.org/publications/gcr/gcr_2003</a> as at 20 May 2010<br /><br />Transparency International (2001) “Global Corruption Report 2001.”<br />Accessed from <a href="http://www.transparency.org/publications/gcr/gcr_2001">http://www.transparency.org/publications/gcr/gcr_2001</a> as at 20 May 2010<br /><br />U.S. Agency for International Development (1999) “A Handbook on Fighting Corruption.”<br />Accessed from <a href="http://www.usaid.gov/our_work/democracy_and_governance/publications/pdfs/pnace070.pdf">http://www.usaid.gov/our_work/democracy_and_governance/publications/pdfs/pnace070.pdf</a> as at 20 May 2010</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-70771060052100372662010-05-06T07:50:00.000-07:002010-05-06T19:13:43.178-07:00Powering Malaysia into the next century or into disaster?<div style="TEXT-ALIGN: center"><b><span class="Apple-style-span" style="font-size:small;">Abstract</span></b></div><p class="MsoNormal"><span style="font-size:+0;"><i><span class="Apple-style-span" style="font-size:small;">On May 5, 2010, the Malaysian government announced that we are to have our own nuclear power plant by 2021.</span></i><span style="font-size:+0;"><i><span class="Apple-style-span" style="font-size:small;"> </span></i></span><i><span class="Apple-style-span" style="font-size:small;">References:</span></i><span class="Apple-style-span" style="font-size:small;"><?xml:namespace prefix = o /><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal" style="TEXT-ALIGN: center"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">Our first nuke plant by 2021</span></b></span></p><p class="MsoNormal" style="TEXT-ALIGN: center"><span style="font-size:+0;"><a href="http://thestar.com.my/news/story.asp?file=/2010/5/5/nation/6194127&sec=nation"><span class="Apple-style-span" style="font-size:small;">http://thestar.com.my/news/story.asp?file=/2010/5/5/nation/6194127&sec=nation</span></a></span></p><p class="MsoNormal"></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal" style="TEXT-ALIGN: center"><span style="font-size:+0;"><a href="http://thestar.com.my/news/story.asp?file=/2010/5/4/nation/20100504145101&sec=nation"><span class="Apple-style-span" style="font-size:small;">http://thestar.com.my/news/story.asp?file=/2010/5/4/nation/20100504145101&sec=nation</span></a><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal" style="TEXT-ALIGN: center"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">First nuclear power plant expected in 2021, says Chin</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal" style="TEXT-ALIGN: center"><span style="font-size:+0;"><a href="http://www.bernama.com/bernama/v5/newsbusiness.php?id=495465"><span class="Apple-style-span" style="font-size:small;">http://www.bernama.com/bernama/v5/newsbusiness.php?id=495465</span></a><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><i><span class="Apple-style-span" style="font-size:small;">While it cannot be denied that a developing Malaysia needs more power for industrial growth and sustainability, the questions are: “Are we ready for nuclear power?” and “Will we be able to manage nuclear power with high operational and safety standards that meets or exceeds international standards?”</span></i><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;"><br /></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">1. Nuclear Energy</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">Nuclear energy is energy released during the splitting or fusing of the atomic nuclei.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">The two key characteristics of a nuclear fission are – the energy per fission is very large, for e.g. the fission of 1 kilogram of Uranium-235 releases 18.7 million kilowatt-hours as heat (a Malaysian family of three persons typically uses less than 250 kilowatt-hours per month), and secondly, the fission process initiates a self-sustaining series of nuclear fissions or chain reaction which results in a continuous release of nuclear energy.</span><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">Thus, it is very important to be able to efficiently and safely contain and regulate the nuclear fission process in order to harness the nuclear energy for use.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">2. Nuclear Power Reactors</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">The first large-scale nuclear reactors were built in 1944 in the state of Washington, United States for the manufacture of nuclear weapons material i.e. plutonium, while the power or energy produced was not used.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Today, several types or categories of nuclear power reactors exist.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">There are light-water and heavy-water reactors, propulsion reactors, research reactors, and breeder reactors.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Malaysia’s nuclear reactor at the Malaysia Nuclear Agency facility (formerly known as MINT – Malaysian Institute of Nuclear Technology Research) is a research reactor (typically of 1-megawatt or less) used for research purposes and the production of radioactive isotopes for medical and industrial use.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">A large, for e.g. a 1,000-megawatt nuclear power reactor contains billions of curies (1 Curie = a unit measure of activity of radioactive substances; named in honour of French physicists Pierre and Marie Curie) of radioactivity during operation and even after shutdown, requiring mandatory safety reactor designs and processes to manage and eliminate the radioactivity from causing harm.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">In the early 1980s, more than a hundred nuclear power plants were operating or being built in the United States (USA).</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Since 1978, no orders for new or additional nuclear plants were made, and some completed plants have not been allowed to operate partly due to the ongoing USA and former Soviet Union (USSR) nuclear arms disarmament talks and treaties.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">3. Nuclear Fuels and Wastes</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Another major issue or challenge is the management of nuclear fuels and wastes.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">The hazardous fuels used in nuclear reactors present major management problems. The hazardous fuels must be stored or disposed off.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">A typical 1,000-megawatt nuclear power reactor has about 200 fuel elements, one-third of which are replaced each year because of the depletion of the uranium-235 and the buildup of fission products.</span><span class="Apple-style-span" style="font-size:small;"> At the end of its life in the reactor, the fuel is highly radioactive because of the fission products it contains and therefore is still producing a considerable amount of energy. The discharged fuel needs to be placed in water storage pools at the reactor site for a year or more.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">At the end of the cooling period the spent fuel elements needs to be shipped in heavily shielded casks either to permanent storage facilities or to a chemical reprocessing plant. At a reprocessing plant, the unused uranium and the plutonium-239 produced in the reactor will be recovered and the radioactive wastes concentrated.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">By 2000, reprocessing of spent fuel was prohibited in the United States because of environmental, health, and safety concerns, not to mention that plutonium-239 can be illegally used for weapons manufacture.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">The long-term storage of the highly radioactive wastes, which remain biologically hazardous for thousands of years will always be the subject of public controversy, especially in the geographic regions in which the repository is to be located or being proposed to be built to store nuclear wastes.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">4a. Nuclear Safety</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">The two major areas of public concern about nuclear power plants are: (a) the high level of radioactivity, including storage and disposal, and (b) the use of nuclear fuels uranium-235 and plutonium-239 are the materials from which nuclear weapons are made.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">High safety needs and know-how:</span><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">(i)</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Radioactive hazards</span></span></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">Radioactive materials emit penetrating, ionizing radiation that can injure and permanently damage living tissues.</span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">(ii)</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Reactor safety systems</span></span></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">The safety of the nuclear power reactor itself has received the greatest attention. In an operating reactor, the fuel elements contain the largest fraction of the total radioactive inventory.</span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">4b. The Three Mile Island and Chernobyl incidents</span></b></span></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">Despite the very high safety design and operating standards required to run a nuclear power plant, accidents still do occur.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">History records the nuclear disasters at Three Mile Island, Pennsylvania, United States in 1979 and at Chernobyl, Ukraine in 1986.</span></span></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">The former was due to operational errors while the later incident was due to unauthorized testing of the reactor that caused two explosions.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">In the Chernobyl incident, radioactive material spread over Scandinavia and northern Europe.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">More than 30 people died and about 135,000 people were evacuated.</span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Can we guarantee Malaysians and our neighbouring countries that a nuclear accident will never occur in Malaysia when we have a nuclear power plant?</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">Should a nuclear accident occur, what evacuation plans can be implemented within a small country like Malaysia or even within the South East Asia region?</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">How and from whom will we secure the expertise to manage our nuclear power plant up to or exceeding international standards?</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">5. Other Major Issues and Challenges</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Needless to say that any large-scale nuclear power project in Malaysia will not only generate major environmental, health and safety issues and concerns but also serious political and ethical issues within and without Malaysia, which is beyond the scope of this article to discuss in detail but worth highlighting.</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><b><span class="Apple-style-span" style="font-size:small;">6. Conclusion</span></b><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></span></p><p class="MsoNormal"><!--StartFragment--></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">While there are schools of thoughts supporting and rejecting the use of nuclear energy, it is without doubt that nuclear energy can be very dangerous.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">The future energy needs of a developing Malaysia, is indeed a challenging issue.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">At the end of the day, it is the ability to balance the amount of benefits against risks that will win the argument.</span><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;"> </span></span><span class="Apple-style-span" style="font-size:small;">It is very clear that if we are to have our own nuclear power plant, we certainly cannot and must not manage it like how we currently manage our public toilets … which has seen some significant improvements.</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;"><br /></span></p><p class="MsoBodyText3"><b><i><span class="Apple-style-span" style="font-size:small;">Bibliography:</span></i></b></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Abdul Razak, Tan Sri Professor Dato' Dr. Dzulkifli (2006) "Going nuclear? Think again". </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 30 April, p. 34</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Ahmad, Arman (2009) "Is nuclear energy the answer?". </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 27 June, p. 18 - 19</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Cheaper and very much less polluting. (2009) </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 28 June, p. 18</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Concerns of radiation are overblown, says agency. (2009) </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 2 June, p. B5</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Cooperation needed for peaceful uses of nuclear energy. (2006) </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 28 November</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Hamsawi, Roziana (2008) "Nuclear energy the best option". </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 13 November, p. 38</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Husni Nuruddin, Nor Azaruddin (2007) "Nuke energy can spur Iran's growth". </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 13 March, p. N42</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Iran going ahead with atomic plans. (2007). </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 16 January</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Iran vows to go nuclear faster. (2006) </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 25 December, p. 12</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Ishak, Nurris & Mei Ling, Chai (2008) "Can Malaysia go nuclear?". </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 29 June, p. 29 & 31</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Ishak, Nurris & Mei Ling, Chai (2008) "The lost years". </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 29 June, p. 30</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Ishak, Nurris & Mei Ling, Chai (2008) "Three Mile Island, Chernobyl". </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 29 June, p. 30</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Ishak, Nurris & Mei Ling, Chai (2008) "15 years to our first nuclear power plant". </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 29 June, p. 31</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Johari, Shahriman (2009) "The future looks nuclear". </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 2 June, p. B5</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Jong: New reactors are safe. (2008) N</span><i><span class="Apple-style-span" style="font-size:small;">ew Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 28 June, p. 18</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Khoo, Simon (2006) "Are we ready for nuclear energy?". T</span><i><span class="Apple-style-span" style="font-size:small;">he Sunday Star</span></i><span class="Apple-style-span" style="font-size:small;">, 24 December, p. 34</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Kok, Cecilia (2009) "Nuclear power - are we ready?". </span><i><span class="Apple-style-span" style="font-size:small;">The Star - BizWeek</span></i><span class="Apple-style-span" style="font-size:small;">, 30 May, p. SBW19</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Mohamad, Suzalie (2007) "Asean nuclear power poser". </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 5 June, p. N47</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Nuclear Energy. (2007) </span><i><span class="Apple-style-span" style="font-size:small;">Encyclopedia Britannica</span></i></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Nuclear the way to go. (2007) </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 29 June</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Nuclear Waste Management. (2007) </span><i><span class="Apple-style-span" style="font-size:small;">Encyclopedia Britannica</span></i></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Nuke power plant possible: Singapore has to look ahead. (2008) </span><i><span class="Apple-style-span" style="font-size:small;">The Sunday Star</span></i><span class="Apple-style-span" style="font-size:small;">, 7 December, p. W50</span></p><p class="MsoBodyText3"><span class="Apple-style-span" style="font-size:small;">Pooi Koon, Chong (2009) "Nuclear energy a viable option: Alstom". </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 10 January, p. 34</span></p><p class="MsoBodyText3"><!--StartFragment--></p><p class="MsoNormal"><span style="font-size:+0;"><span class="Apple-style-span" style="font-size:small;">Raj, Hari (2006) “Power source of the future”. </span><i><span class="Apple-style-span" style="font-size:small;">The Star – BizWeek</span></i><span class="Apple-style-span" style="font-size:small;">, 29 July, p. 8</span><u><span class="Apple-style-span" style="font-size:small;"><o:p></o:p></span></u></span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">Singh, Sabaran (2008) "Malaysia to use nuclear energy by 2023". </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 20 September, p. N29</span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">Sovacool, Benjamin K. (2009) "Is the nuclear option the right one for Malaysia?". </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 12 August, p. 17</span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">Tay, Simon S.C. & Chua, Gavin H. Y. (2007) "Nuclear options seductive, but dangerous". </span><i><span class="Apple-style-span" style="font-size:small;">Today</span></i><span class="Apple-style-span" style="font-size:small;">, 10 January, p. 8</span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">Thailand to build nuclear power plants. (2007) </span><i><span class="Apple-style-span" style="font-size:small;">The Star</span></i><span class="Apple-style-span" style="font-size:small;">, 12 June</span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">Thailand to build nuclear power plants for US$6b. (2007) </span><i><span class="Apple-style-span" style="font-size:small;">New Straits Times</span></i><span class="Apple-style-span" style="font-size:small;">, 12 June</span></p><p class="MsoNormal"><span class="Apple-style-span" style="font-size:small;">We have expertise to go nuclear. (2009) </span><i><span class="Apple-style-span" style="font-size:small;">New Sunday Times</span></i><span class="Apple-style-span" style="font-size:small;">, 28 June, p. 18</span></p><p class="MsoNormal"><br /></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-24487255330098275172010-04-23T06:14:00.000-07:002010-04-23T06:46:35.669-07:00International Management Mini-Case 1As an <i><b>International Manager</b></i>, what do you think?<div><br /><div>CATEGORY:</div><div>International Management: Understanding and Managing Differences in Culture</div><div><br /></div><div>MINI-CASE:</div><div>"Batam workers riot over slur"<br /><a href="http://www.straitstimes.com/BreakingNews/SEAsia/Story/STIStory_517794.html">http://www.straitstimes.com/BreakingNews/SEAsia/Story/STIStory_517794.html</a><br /><br />"Indonesia accuses Indian exec over 'stupid' slur"<br /><a href="http://news.malaysia.msn.com/regional/article.aspx?cp-documentid=4047962">http://news.malaysia.msn.com/regional/article.aspx?cp-documentid=4047962</a><br /></div><div><br /></div><div><br /></div></div>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-8270811979000102302010-04-20T00:42:00.000-07:002010-04-23T06:14:25.217-07:00R.I.P. Professor C. K. Prahalad<strong>UPDATED:</strong><br /><br />The recent passing (on April 16, 2010) of brilliant management and strategy guru Professor C. K. Prahalad is a great loss to both academia and industry<br /><br />He was the Paul and Ruth McCracken Distinguished University Professor of Strategy at the Ross School of Business, The University of Michigan. He is a globally recognised management thinker. In 2007, the <em>Times of London</em> and <em>Suntop Media</em> elected him as the most influential management thinker, while <em>BusinessWeek</em> named him the most influential thinker on business strategy.<br /><br />Among his published works are <em>The Fortune at the Bottom of the Pyramid</em>, coauthor of <em>Competing for the Future</em>, <em>The Future of Competition</em>, and <em>The New Age of Innovation</em>.<br /><br />He had won the McKinsey Prize for the best article four times, and had received several honorary doctorates. He had worked and consulted with many of the world's leading companies. He was a board member of NCR Corporation, Pearson PLC, Hindustan Unilever Ltd., The World Resources Institute, and The Indus Entrepreneurs.<br /><br />Read more:<br /><br />Leading management thinker C.K. Prahalad passes away at 68<br /><a href="http://www.marketwatch.com/story/leading-management-thinker-ck-prahalad-passes-away-at-68-2010-04-19?reflink=MW_news_stmp">http://www.marketwatch.com/story/leading-management-thinker-ck-prahalad-passes-away-at-68-2010-04-19?reflink=MW_news_stmp</a><br /><br />Global CIO: C.K. Prahalad, Management Genius and Humanitarian, RIP<br /><a href="http://www.informationweek.com/news/global-cio/interviews/showArticle.jhtml?articleID=224400624">http://www.informationweek.com/news/global-cio/interviews/showArticle.jhtml?articleID=224400624</a><br /><br />RIP Prof C.K. Prahalad (includes a few video presentations)<br /><a href="http://www.pluggd.in/c-k-prahalad-death-few-bop-lessons-297/">http://www.pluggd.in/c-k-prahalad-death-few-bop-lessons-297/</a>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-78330491969745449522009-10-15T22:18:00.000-07:002009-10-30T22:30:20.064-07:00Managing Change: Lessons from Corporate Culture Change, Part 3 of 3<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT<br /></strong><br />This article was published in the July-Sept 2009 (Vol. 44, No. 3) issue of<br />Management – the quarterly magazine of The Malaysian Institute of Management<br /><br />Reproduced here with permission from the author Dr. Victor S. L. Tan<br />and from<br />The Malaysian Institute of Management<br />****************************************************************************************</span></div><br /><br />Too many organisations go about the wrong way in creating corporate culture change. That probably explains why many corporate culture change initiatives fail or that they cannot be sustained. And it is not too surprising that many leaders and managers are beginning to doubt whether it is possible to change corporate culture in the first place.<br /><br />Corporate cultures are created by humans. Those rules whether overt or covert in terms, beliefs, thinking, feeling and behaviour are man-made and can be changed. Perhaps, the main aim of this concluding part of a series on change management is to offer change agents some valuable lessons from some of the corporate culture change efforts undertaken by various organisations. While there are many aspects and lessons that one can learn from corporate culture change work, I am taking the liberty to share here ten powerful lessons that I believe will help change agents get on the right footing.<br /><br /><strong>Lesson 1: Effective corporate culture change must begin with changing mindsets</strong><br /><br />No change can be implemented without, first of all, a change in mindset. By changing mindsets, I am referring to the 5 components of mindsets: Blindspots, Assumptions, Complacency, Habits and Attitudes, more easily remembered from the acronym; B.A.C.H.A. (Source: Changing Mindsets, Victor S. L. Tan, publisher: Times International). Changing mindsets is about uncovering blindspots with regard to areas for improvement. It is about questioning assumptions of thinking, behaviour and practices that are no longer relevant or useful. It is about reducing complacency in the workplace to increase innovation, productivity and performance. Changing mindsets is about eliminating unproductive habits or work practices that do not add value to the individual or the organisation. It is about inculcating a positive attitude towards oneself, work, people, the management and the organisation as a whole.<br /><br />With mindset change, one is then aware of the need to change the policies, procedures and practices accordingly. In one of our client engagements with a conglomerate in Indonesia, the culture change began with a mindset change from the top management and then cascaded down to the lower level staff. This has proved to be an effective approach to pave the way for a start of the change process as the whole organisation had been engaged in old thinking and outdated ways of managing for the last 20 years in operation. The uncovering of the blindspots and the constant questioning of assumptions helped reduce the level of complacency of the leaders and executives. This resulted in the abandoning of unproductive work practices in the workplace and overall, a more positive attitude of people towards one another, towards their respective departments, their work and the organisation as a whole.<br /><br /><strong>Lesson 2: Successful organisations have corporate culture aligned to their vision, mission, strategies, goals and their environment</strong><br /><br />It is generally agreed that the purpose of corporate culture is to develop an internal environment that is conducive for people to perform effectively.<br /><br />However, a corporate culture will only be relevant and useful if it is aligned to the organisation's vision, mission, strategies, goals and the external environment it operates in. What this implies is that an organisation must first get its vision and mission right before deciding on the desired corporate culture. Of course, having determined the right vision and mission, it can then formulate the relevant goals and strategies. In the case of Jaguar Cars, a luxury car manufacturer, in the 80s, the culture change led by Chairman and Managing Director, John Egan focused on aligning the culture towards the new mission for Jaguar "to become the finest car company in the world". A new set of beliefs and core values on growth, quality, market sensitivity, learning and human development, and professionalism was developed, encouraged and practised in the workplace to enable Jaguar to produce world-class luxury cars. With the new culture, what followed was an impressive turnaround of Jaguar, with a huge jump in turnover, profitability and productivity.<br /><br />The reason why determining the corporate culture needs to take into consideration the environment is because the nature of the industry or the type of business often dictates certain ways of doing things to enable it to compete or stay successful. For example, in the IT industry, the speed of response is a critical factor in doing business. In financial services, integrity is an important value to win the trust of customers.<br /><br /><strong>Lesson 3: To achieve credibility and win the commitment of people, policies, procedures and practices must be consistent with the new culture</strong><br /><br />Consistency is an important factor in gaining the credibility for any change programme. Saying one thing and doing another thing is the surest way of losing credibility. Once a new culture is identified and the desired core values and behaviour communicated to employees, it is important to simultaneously change the existing policies, procedures and practices in the workplace to align to the new culture. Thus, for example if a new culture promotes openness, it is important to share information and disseminate relevant information freely and openly based on needs rather than hierarchy.<br /><br />In the case of the culture change initiated by Ciba-Geigy where it strived to reduce its impact on the environment and pay more attention to employee concerns, the leaders started to change their policies and practices to align to the new culture. The company disposed of its photographic film business and reorganised itself to make decentralisation and autonomy a reality. It also conducted massive training to develop leadership and entrepreneurial qualities among its employees.<br /><br /><strong>Lesson 4: To get a buy-in of corporate culture change requires a strong rationale</strong><br /><br />It is true that most cases of culture change take a lot of effort and time to overcome resistance. An effective way to overcome resistance is to provide a strong, compelling and sound rationale for the culture change. From our experience, such a rationale must often incorporate not just what is good for the organisation but also for individuals. Thus for example, an organisation which is promoting a performance-oriented culture should not just stress on the benefits of increasing productivity and performance to enable the company to compete and survive. It should also stress that by developing such a culture, it would also enhance the competency of individuals, help them develop a performance track record and increase their market value in terms of knowledge, skills and experience. It should also communicate to the staff that such a culture would also add meaning to their work and bring about personal satisfaction in the process.<br /><br /><strong>Lesson 5: To ensure company-wide culture assimilation, culture change programmes should utilise the various culture transmission mechanisms available</strong><br /><br />To succeed in culture change, there must be prevalent practices of behaviour that reflect the new culture. Thus to ensure company-wide internalisation of the new culture, an organisation should utilise every channel of communication and every opportune occasion to promote and communicate the new belief system, core values and desired patterns of behaviour to every level of staff from the top right down to the lowest level of organisational hierarchy. Companies should use formal and informal channels of communication to influence and educate others on the new culture. Just like in advertisement, the publicity blitz should be frequent, focused and impactful to achieve maximum results.<br /><br /><strong>Lesson 6: Achieving deep and sustainable culture change requires the participative approach</strong><br /><br />Culture change is by nature a deep and fundamental change. Such a change requires not just opening up minds but also touching hearts. People must really not just think it but they must really feel it before they behave in accordance to the desired culture. The way to achieve sustainable culture change is to first have people want to practise the new culture rather than being forced to do things in a certain way. A good way to do this is by highlighting the aspect of the culture that shows care for people. Thus showing how the practice of the new culture will enhance respect between one another, create a more enjoyable workplace and increase the competency and value of individuals speaks well of the care the organisation has for its people. As the saying goes, "People do not care how much you know until they know how much you care". Showing care certainly goes beyond opening one's mind; it certainly touches the heart.<br /><br />Another good way of developing sustainable culture change is to get people's involvement. Involvement can come in many ways. It could be involvement through their input and suggestions on how they would translate certain core values into practice in their daily tasks. Or it could be soliciting their suggestions on how they could promote the practice of respecting one another in the workplace. Other ways of involvement could be through culture promotion activities such as a slogan competition to come up with a theme for launching the core values of the new culture. One of the organisations we worked with had come up with an essay writing competition on topics such as "How I Can Help Promote the New Corporate Culture in My Organisation" for individuals as well as for group categories. In the process of discussing amongst themselves and writing the essays, employees began to understand a little bit more of the new culture and began to see the value of the new culture, and subsequently began to want to assimilate the desired patterns of behaviour in the workplace.<br /><br /><strong>Lesson 7: Top management commitment is essential to the success of culture change</strong><br /><br />The success of culture change requires company-wide acceptance. A limited change in the way of thinking and working within a small unit or department does not constitute a culture change in organisation. To have company-wide practice of a new corporate culture requires the commitment of top management. Commitment here refers to not only the initial launching but the continued support and follow-through. Support is needed to change policies and systems to align to the new culture.<br /><br />In the case of British Airways (BA), a major culture change was instituted with full top management support, when the then Thatcher government decided to convert BA from government ownership to private ownership. The Chairman, Lord King and CEO, Colin Marshall provided the support to the change in organisation structures, systems and policies. In fact, the company's top management approved the change to a new performance appraisal system and compensation system which put greater emphasis on improving customer service and being market-driven. Colin Marshall's unwavering commitment was demonstrated by his personal presence in question-and-answer sessions at a series of training programmes on "Managing People First" and "Leading The Service Business" for senior and middle managers.<br /><br /><strong>Lesson 8: To speed up culture change, leverage on “Opinion Leaders”</strong><br /><br />Every resource is needed to help speed up the culture change process. A good way to tap into the organisation's resources is to seek out "opinion leaders" to assist in promoting the new culture. Opinion leaders can be formal or informal leaders whose opinions matter to others. Often these leaders have people who look up to them and listen to what they say and do what they say. Thus, it will make sense to first convince these opinion leaders and then involve them as change agents and as role models to help spread the new culture within the organisation.<br /><br /><strong>Lesson 9: Create a powerful dream of the new culture</strong><br /><br />Every great achievement starts with a powerful dream. There is a compelling force of change in creating a powerful dream. And great changes come from powerful dreams. Martin Luther King had a powerful dream in the 60s when he said, "I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood". Christopher Columbus had a powerful dream of sailing across a shorter East-West trade route. Mahatma Gandhi had a powerful dream to lead his country to independence from the British. John F. Kennedy had a powerful dream of landing man on moon. Likewise, it is important to create a powerful dream of the new culture an organisation wants to develop. It should come across as exciting, inspiring and worthwhile for everybody in the organisation.<br /><br /><strong>Lesson 10: Recognise and reinforce change success early and frequently</strong><br /><br />A culture change is on ongoing process and may take a long time to see tangible results. Too often leaders wait too long before they start to recognise, reward or reinforce the motivation of people in the process of implementing culture change. If the wait is too long, people will run out of stamina, their interest will simmer down and the assimilation process will come to a halt. It is thus important to look out for "early wins" and "small wins" along the way of culture change implementation, and recognise and reward people to ensure they stay motivated. In one of our culture change engagements, for example, a celebration was held when the organisation came to a consensus on the defined core values. There was further recognition of the roles of the people involved when the new culture was launched. And every success, no matter how small was highlighted early in the process and was recognised, celebrated and rewarded.<br /><br />Rewards need not be merely monetary. It can come in the form of a commendation letter recognising a particular team in recruiting the most number of change agents, or a public announcement during a family day outing where individuals are singled out for being effective role models in leading their team effectively. It is the culmination of all these small positive gestures and steps taken on a continuous and relentless fashion that ultimately lead to a culture transformation for the organisation.<br /><br /><br /><em>Written by Dr. Victor S. L. Tan. Dr. Tan is an international authority on change management and the CEO of KL Strategic Change Consulting Group (</em><a href="http://www.klscc.com/"><em>www.klscc.com</em></a><em>) specialising in strategic change and corporate culture. He is the author of six management books including his latest book,</em> The Secret of Change<em>. The author may be contacted at +603 – 9074 1129 or </em><a href="mailto:victorsltan@klscc.com"><em>victorsltan@klscc.com</em></a>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-41883823000614990422009-09-11T09:00:00.000-07:002009-10-16T19:25:33.938-07:00Securing your PC or laptop against cyber-criminalsWe constantly hear about computer viruses, trojans, spyware, malware, etc that has made most of us indifferent about the need to apply the latest updates against operating system vulnerabilities, and to keep our firewall, anti-virus and anti-spyware solutions up-to-date. Most of us may feel that no matter what we do to secure our desktop PCs or laptops, viruses, trojans, spyware, malware, etc will still penetrate our computer systems. So, why bother? Thus, most PC and laptop users think that defensive efforts are futile. This basically stems from a lack of understanding or misinformation. When an unethical hacker or cyber-criminal gains access to your computer system, the potential for executing malicious acts is very high.<br /><br />I will use the Microsoft Windows file system for this discussion simply because Windows is the most commonly used operating system in the world today, making it an attractive target for unethical hackers and cyber-criminals.<br /><br /><strong>The Windows NT File System (NTFS)</strong><br /><br />Microsoft's NTFS file system was introduced with the launch of Windows NT, and is still the file system used by Windows 2000, XP, Vista and the new Windows 7 operating system. The NTFS file system is a major improvement over the previous File Allocation Table (FAT) file system.<br /><br />The NTFS file system “was designed to include many features, including data recovery, security, fault tolerance, large files and file systems, multiple data streams, UNICODE names, sparse files, encryption, journaling, volume shadow copies, and file compression” (Silberschatz, Galvin & Gagne, 2006, p. 790).<br /><br />Once a computer system is compromised, unethical hackers and cyber-criminals usually hide their malicious files, instructions or data in the hard disk, using either of two popular methods: (a) low-level formatting, and (b) partitioning.<br /><br />If the low-level formatting method is chosen, unethical hackers and cyber-criminals typically target the redundant sectors and bad sectors to hide their damaging codes. In the partitioning method, the typical target locations are the partition tables, inner-partition gaps, hidden partitions, deleted partitions, unallocated spaces, and boot records. However, a competent and up-to-date anti-virus and anti-spyware application can identify and act to remove such threats.<br /><br />A more subtle technique makes use of the multiple data streams (MDS) feature of NTFS. The MDS feature enables multiple independent streams of data to exist in a file. Each stream contains the complete data of the file, for e.g. .doc, .xls, .txt, .zip, etc. Furthermore, the MDS includes a data stream known as Alternate Data Stream (ADS), originally created for compatibility with the Apple Macintosh Hierarchical File System (HFS) but is also used by most application programs and native Windows operating system to store file attributes and for temporary storage of other file related information.<br /><br /><strong>Alternate Data Streams (ADS)</strong><br /><br />ADS provides the ability to fork file data into other files without affecting their functionality and size or display of file information to file browsing utilities such as the DOS “dir” command and Windows Explorer.<br /><br />The following steps demonstrate how an unethical hacker or cyber-criminal can make use of ADS to plant malicious codes and launch it later.<br /><br /><strong>Step 1: Using Microsoft Windows XP</strong><br /><ol><li>Create the folder 'ADS_Demo' in your hard disk root directory C:\</li><li>Copy and paste the applications Notepad.exe and Mspaint.exe into C:\ADS_Demo</li><li>Your result should be similar to that shown in Figure 1</li><li><span style="color:#3333ff;"><strong>For this demonstration, let us assume that the application Notepad.exe is the file created and planted by an unethical hacker or cyber-criminal into your PC or laptop, and contains malicious codes. In other words, assume Notepad.exe is the malicious file</strong></span></li><li>Take note of the file sizes and date stamps as follows: Notepad.exe = 68KB, 4/14/2008 and Mspaint.exe = 335KB, 4/14/2008</li></ol><br /><p align="center"><strong>Figure 1: Windows Explorer</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2597/4000773929_0fb7243d50.jpg" border="0" /> </p><br /><br /><p><strong>Step 2: Create an ADS for the malicious file</strong></p><ol><li>Launch 'Command Prompt' from Start All Programs Accessories</li><li>Change directory to C:\ADS_Demo</li><li>Enter the DOS command 'dir' to list the contents of your ADS_Demo sub-directory</li><li>Your results should be similar to Figure 2</li><li>Again, take note of the file sizes and date stamps as follows: Notepad.exe = 69,120 bytes and Mspaint.exe = 343,040 bytes. No change in the date stamps</li><li>Now, to create an ADS, enter the command 'type notepad.exe > mspaint.exe:notepad.exe'</li><li>Your result at this stage should be similar to Figure 3</li><li>Notice that the file size of Mspaint.exe remains unchanged at 343,040 bytes although we have already embedded 69,120 bytes of the malicious file to it, but the date stamp has changed from 4/14/2008 to 10/11/2009</li><li>A check under Windows Explorer (Figure 4) also shows that the file sizes have not changed at all, but the date stamp of Mspaint.exe is now 10/11/2009</li></ol><br /><p align="center"><strong>Figure 2: Run Command Prompt & List folder contents</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2494/4000774045_9b7f0c431a.jpg" border="0" /> </p><br /><p align="center"><strong>Figure 3: Create an ADS for Notepad.exe (the malicious file)</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2590/4000774179_d2c54ef3a5.jpg" border="0" /> </p><br /><p align="center"><strong>Figure 4: Windows Explorer</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3419/4000774225_3229487a78.jpg" border="0" /> </p><br /><br /><p><strong>Step 3: Launching the malicious file</strong></p><ol><li>In the Command Prompt window, execute the malicious file using the standard DOS command ‘start’ as follows 'start c:\ads_demo\mspaint.exe:notepad.exe' (Figure 5). On your Windows desktop, the Notepad program (the malicious file) will launch (Figure 6)</li><li>Then launch Task Manager to check which program is running. If your computer system is NOT protected by the latest updates against Windows vulnerabilities, then Task Manager will wrongly report that Mspaint.exe is running instead of Notepad.exe (the malicious file) as shown in Figure 7</li></ol><br /><p align="center"><strong>Figure 5: Launch Notepad.exe (the malicious file)</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2640/4001546706_6024fef46b.jpg" border="0" /> </p><br /><br /><div align="center"><strong>Figure 6: Notepad.exe runs in your Windows desktop</strong></div><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2661/4002737453_845a7644a2.jpg" border="0" /> </p><br /><br /><div align="center"><strong>Figure 7: Task Manager wrongly reports Mspaint.exe is running</strong></div><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3440/4003501674_99ce63fa02.jpg" border="0" /> </p><br /><br /><p><strong>Step 4: Delete Notepad.exe (the malicious file)</strong></p><ol><li>Since Notepad.exe is the (assumed) malicious file, we must remove or delete it from our computer system</li><li>In the Command Prompt window, enter 'del notepad.exe' (Figure 8)</li><li>Then enter 'dir' to check whether it has been deleted. The 'dir' command shows only the Mspaint.exe file in the sub-directory (Figure 8). Thus, Notepad.exe was deleted or is it?</li><li>Enter the command 'more <. mspaint.exe:notepad.exe > notepad.exe' and the Notepad.exe (the malicious file) is regenerated as shown in Figure 9, and likewise in Windows Explorer (Figure 10)</li><li>Note that prior to deletion, the date stamp of Notepad.exe (the malicious file) was 4/14/2008 and the date stamp of the regenerated Notepad.exe (the malicious file) has changed to 10/11/2009</li><li>Thus, malicious programs embedded using ADS are difficult to be removed or deleted permanently. The use of appropriate anti-intrusion security solutions is usually required</li></ol><br /><p align="center"><strong>Figure 8: Delete Notepad.exe (the malicious file)</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3536/4000782197_551f193439.jpg" border="0" /> </p><br /><p align="center"><strong>Figure 9: Easily regenerate Notepad.exe (the malicious file)</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2489/4000782275_916e2257d1.jpg" border="0" /> </p><br /><p align="center"><strong>Figure 10: Windows Explorer</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2657/4001547156_2cec918a31.jpg" border="0" /> </p><br /><br /><p><strong>Conclusion</strong></p><p>From the above demonstration, we can conclude that when unethical hackers or cyber-criminals gain access to a computer system, they can easily hide malicious programs to existing files, and the file size shows no increase in size even after malicious codes have been added. Later, the malicious programs are launched to cause havoc to the computer system or take control of the computer system to further spread malicious programs to other computers via the Internet.</p><p>Therefore, it is important that as a computer user, you ensure that your computer system is:</p><ul><li>updated with the latest updates or patches against operating system vulnerabilities</li><li>protected by a firewall application from a reputable security software company to prevent malicious access or intrusion</li><li>using a firewall program that is regularly updated with any new patches released by the manufacturer (use the auto-update feature)</li><li>protected by an anti-virus and anti-spyware program from a reputable security software company and that the program scans in real-time for viruses, trojans, spyware, malware, etc</li><li>using the latest anti-virus and anti-spyware definition files (use the auto-update feature)</li></ul><p>While there are good firewall, anti-virus and anti-spyware programs which are downloadable free-of-charge for use, these typically have some missing or disabled features. For e.g. in most free versions of anti-virus and anti-spyware programs, these solutions do not run in live mode i.e. they allow the computer systems to be infiltrated by the virus or spyware, and then during scheduled scans, take action to clean or remove the virus or spyware. It is highly recommended that you use anti-virus and anti-spyware programs that run live and thus, is able to intercept the incoming virus or spyware in real-time, in addition to scheduled scans.</p><p></p><br /><p><em><strong>References:</strong></em></p><p>Gralla, Preston. (2005). <em>Windows XP Hacks, Second Edition</em>. New York: NY, O'Reilly<br /><br />Silberschatz, Abraham; Galvin, Peter B. & Gagne, Greg. (2006). <em>Operating System Principles, Seventh Edition (Wiley Student Edition)</em>. Singapore, John Wiley & Sons Asia<br /><br />Sinchak, Steve. (2004). <em>Hacking Windows XP</em>. New York: NY, John Wiley<br /><br />Solomon, David. A. & Russinovich Mark. E. (2000). <em>Inside Microsoft Windows 2000, Third Edition</em>. Redmond: WA, Microsoft Press<br /><br />Tanenbaum, Andrew S. & Woodhull, Albert S. (1997). <em>Operating Systems: Design and Implementation, Second Edition</em>. Upper Saddle River: NJ, Prentice Hall<br /><br />Tanenbaum, Andrew S. (2001). <em>Modern Operating Systems, Second Edition (Eastern Economy Edition)</em>. New Delhi: India, Prentice Hall India</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-52437302552502745332009-09-09T04:02:00.000-07:002009-10-12T07:59:10.479-07:00Value-based Marketing: A Quantitative Approach to Creating Shareholder Value (Part 1 of 2)The dot.com crash of the late 1990’s, gross errors in business strategies, and corporate mismanagement scandals such as Enron, Tyco International, WorldCom, Parmalat, Marconi, and Daewoo had generated renewed interest in corporate governance and in the creation and sustenance of shareholder value.<br /><br />Thus, it has become increasingly necessary to ensure that companies and corporations are effectively and efficiently managed for shareholder value. One approach is known as value-based management.<br /><br />The Chartered Institute of Management Accountants’ official terminology defines value-based management as “a managerial process which effectively links strategy, measurement and operational processes to the end of creating shareholder value” (Starovic, Cooper & Davies, 2004, p. 2).<br /><br />Value-based management attempts to identify the basics of value creation by focusing on issues that matters to shareholders, resulting in an acceptable annual return on their capital investments.<br /><br />Among the key activities and resources being focused around value creation is marketing, and the ability to identify the contribution of marketing and evaluate or measure its effectiveness is necessary in value-based management.<br /><br />An approach to creating the ability is via value-based marketing. Value-based marketing defines the central objective of marketing as contributing to the maximization of shareholder value by aligning customer focus marketing to the interests of shareholders (Doyle, 2000a, p. 4).<br /><br />Many companies realize that the key to sustainability and profitability lies with customers. Thus, we see an increasing shift of companies to become more customer-focused in order to increase customer value, and managing customer loyalty to create higher shareholder value (Best, 2009, p. 36).<br /><br /><strong>What is Shareholder Value?</strong><br /><br />What is shareholder value? How do we measure it? Shareholder value is a financial concept under the ownership of the financial management discipline. Shareholder value is determined by four factors:<br /><ul><li>The level of cash flows</li><li>The time value of money or cash</li><li>The durability of cash generating assets i.e. the concept of net present value</li><li>The risks of future cash flows i.e. the opportunity cost of capital (Doyle, 2000b, p. 300)</li></ul><p>In non-financial terms, shareholder value can be created when corporate actions result in the:</p><ul><li>Introduction and sales of new products or services, or variations of existing products or services, clearly differentiated from competitors’ offerings</li><li>Adoption of new technologies that will create or enhance its core competencies</li><li>Developing and implementing entry barriers against potential rivals</li><li>Reduction of operating costs or the increase in efficiency of resource utilization (Subbrayan, 2008, pp. 13 – 14)</li></ul><p>Consistent successes in creating shareholder value are typically reflected in a company’s share price. In Value-Based Marketing, Doyle says, “The basic principle of shareholder value is that a company’s share price is determined by the sum of all its anticipated future cash flows, adjusted by an interest rate known as the cost of capital” (2000a, p. 33).</p><p>Thus, companies that adopt the shareholder value approach will need to maximize returns for shareholders by developing and executing marketing strategies that maximize the value of cash flows over time.</p><p><strong>Quantifying Shareholder Value: Basic valuation methods</strong></p><p><strong>a) Shares and Shareholder Returns</strong></p><p>Shareholder return is derived from the capital appreciation on the value of the stock, and the dividend distribution by the company.</p><p>Let us consider a simple example at the personal shareholder level – assuming that the stock of Malaysian Airline System Bhd (MAS) is trading at Malaysia Ringgit 10 per share, and you decide to buy 1,000 shares. Your investment amounts to RM10,000. Five months later, the share is trading at RM10.95 per share, and the company declares a RM2 per share dividend.</p><p>What is the current market value of your shares?<br />Current market value = RM10.95 x 1,000 = RM10,950</p><p>How much is the capital gain?<br />Capital gain = (RM10.95 – RM10) x 1,000 = RM950</p><p>How much did you benefit from the RM2 per share dividend?<br />Dividend income = RM2 x 1,000 = RM2,000</p><p>Thus, the total shareholder return = RM950 + RM2,000 = RM2,950. In other words, the original RM10,000 investment has grown into RM12,950 through capital gain and dividend income.</p><p>What is the total percentage of shareholder return?<br />Total percentage return = RM2,950 / RM10,000 = 29.5%</p><p>How much of 29.5% is due to capital gain and how much is due to dividend income?<br />Capital gains yield = (10.95 – 10) / 10 = 9.5% i.e. each Ringgit invested has returned 9.5 sen in capital gains.</p><p>Dividend yield = (RM2 / RM10) x 100% = 20% i.e. each Ringgit invested has produced 20 sen in dividends.</p><p>In total, each Ringgit invested in MAS’ stock has returned 29.5 sen.</p><p><strong>b) Discounted Cash Flow (DCF) and Net Present Value (NPV)</strong></p><p>Using a simple example, let us assume that investment analysts have projected that MAS is to produce annual cash flows of RM100,000 for the next five years due to its business transformation plan of implementing a value-based marketing strategy. Will it be worthwhile to invest in MAS now?</p><p>We will need to compute the Net Present Value (NPV) of the projected cash flows over the five year period. For this purpose, let us assume the required rate of return is 10 percent.</p><p>Referring to a Present Value Table <a href="http://www.studyfinance.com/common/table3.pdf">http://www.studyfinance.com/common/table3.pdf</a> for the Present Value Factor, we can create the following Table 1.</p><br /><p align="center"><strong>Table 1</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2637/3952251893_e099a52869.jpg" border="0" /> </p><br /><p>Since the sum of all present values of cash flows is RM379,070, thus, an investment amount today that is lesser than RM379,070 would constitute a prudent investment.</p><p><strong>c) Economic Value Added (EVA)</strong></p><p>A measure of shareholder value that has gained popularity is the Economic Value Added (EVA) model, established by Joel M. Stern and G. Bennett Steward III.</p><p>The proponents of EVA claim that it is a measure of a company’s true economic value creation, but presently, there is wider acceptance of cash flow as indicator of shareholder value and wealth creation. The fundamental percept of EVA is that true shareholder value is only created if a surplus is created over the total capital invested in the business.</p><p>Using data from the 2006 and 2007 Annual Reports of MAS, the EVA is computed as follows:</p><p align="center">EVA = EBIT(1-t) – (Capital x WACC)</p><p align="left"></p><br /><p align="center"><strong>Table 2: Economic Value Added (EVA) of MAS</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3433/3952251923_41a78331a6.jpg" border="0" /> </p><p align="center"><span style="font-size:78%;">* To simply the discussion, we assume that WACC = 15%</span></p><p>Since MAS was loss making in the financial years 2005 and 2006, the EVA reflects that negative shareholder value was created (i.e. the destruction of shareholder value) during those financial years. For the financial year 2007, MAS was profit making again, and positive shareholder value was generated.</p><p>We have identified that shareholder return is derived from capital appreciation on the value of the stock, and dividend distribution by the company. The capital appreciation of the value of the stock i.e. creation of shareholder value is determined by the sum of all its anticipated future cash flows, adjusted by an interest rate known as the cost of capital.</p><br /><p align="center"><strong>Figure 1: Relationship between Marketing and Shareholder Value</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2491/3955214933_1576ddfce8.jpg" border="0" /> </p><br /><p></p><p>Then, how is future cash flows generated? Obviously, the primary source is from sales revenues (Figure 1). Activities such as operational costs reduction and the efficient use of cost resources are indirect means of enhancing cash flows. The higher the sales revenues, the higher the potential for the company to generate more cash flows. In turn, higher sales revenues can be achieved through the successful execution of strategic marketing plans and marketing activities that create higher customer values. Thus, marketing is related to and central to the creation of shareholder value.</p><p></p><br /><p><strong><em>References:</em></strong></p><p>Best, Roger J. (2009). <em>Market-Based Management: Strategies for Growing Customer Value and Profitability (5th Edition).</em> Upper Saddle River, New Jersey: Pearson Education Inc.<br /><br />Creating the Lexus Customer Experience. (2009). <em>The Executive Issue</em>, No: 34, January. Management Centre Europe. Downloaded from <a href="http://www.mce-ama.com/downloads/cases/MCE_cat09_CCS-Lexus.pdf">http://www.mce-ama.com/downloads/cases/MCE_cat09_CCS-Lexus.pdf</a><br /><br />Doyle, Peter. (2000). <em>Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value</em>. Chichester, England: John Wiley & Sons Ltd<br /><br />Doyle, Peter. (2000). “Value-Based Marketing.” <em>Journal of Strategic Marketing</em>, Vol. 8 (4), pp. 299 – 311<br /><br />Hodge, Richard & Schachter, Lou. (2006). “Accelerate Your Customers' Success: The Lexus Sales Story.” <em>CustomerThink.com</em>, September 5. Downloaded from <a href="http://www.customerthink.com/article/accelerate_your_customers_success_the_lexus_sales_st">http://www.customerthink.com/article/accelerate_your_customers_success_the_lexus_sales_st</a><br /><br />Lexus Earns Best-Selling Luxury Brand Title for Sixth Consecutive Year – Surpasses 300,000 Sales in Record-Breaking Year. (2006). <em>Lexus.com</em>, January 4. Downloaded from <a href="http://www.lexus.com/about/news/articles/2006/1/20060104_1.html">http://www.lexus.com/about/news/articles/2006/1/20060104_1.html</a><br /><br />Malaysian Airline System Bhd (MAS) 2006 and 2007 Annual Reports. Downloaded from <a href="http://www.malaysiaairlines.com/hq/en/corp/corp/relations/info/reports/annual-reports.aspx">http://www.malaysiaairlines.com/hq/en/corp/corp/relations/info/reports/annual-reports.aspx</a><br /><br />Starovic, Danka; Cooper, Stuart & Davis, Matt. (2004). “Maximising Shareholder Value: Achieving clarity in decision-making.” <em>The Chartered Institute of Management Accountants</em>. Downloaded from <a href="http://www2.cimaglobal.com/cps/rde/xbcr/SID-0A82C289-AA3CDFE4/live/tech_techrep_maximising_shareholder_value_0105.pdf">http://www2.cimaglobal.com/cps/rde/xbcr/SID-0A82C289-AA3CDFE4/live/tech_techrep_maximising_shareholder_value_0105.pdf</a><br /><br />Subbrayan, Radhakrishnan. (2008). <em>How a Company Creates Shareholder Value</em>. Petaling Jaya, Malaysia: Leeds Publications<br /><br />The Chartered Institute of Management Accountants. (2005). “CIMA Business Talk: Creating Shareholder Value.” <em>New Straits Times</em> - Appointments, July 2, p. 12<br /><br />Wilson, Richard M. S. & Gilligan, Colin. (2005). <em>Strategic Marketing Management: Planning, Implementation and Control (3rd Edition).</em> Oxford, England: Butterworth-Heinemann / Elsevier</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-50977952575266778322009-08-23T00:27:00.000-07:002009-09-27T01:00:10.518-07:00Cloud Computing – an introduction<strong>1.0 The evolution and concept of cloud computing</strong><br /><br />“Cloud” is a metaphor for the Internet. Thus, cloud computing is Internet computing or in other words, the usage of the Internet as a computing infrastructure and resource. In cloud computing, the Internet is used to provide services such as data storage, software applications, and email and file exchanges.<br /><br /><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3502/3842861702_680ded19b5.jpg" border="0" /> </p><br /><br />The key aspect of cloud computing is that the users do not have or need the knowledge, control or ownership of the computer and network infrastructure. Users just simply access the software or service they require to use and pay for what they use. Therefore, “in cloud-service engagements, buyers [users] just need to care about the service [level or quality] without worrying about its implementation” (Khan, 2009).<br /><br />A simple example – if your organization is a user of Microsoft Excel®, typically, your organization would have a client-server networked computing environment with Excel running off an application server and/or off numerous Microsoft Windows®-based desktop PCs and laptops – collectively known as fat clients. In a cloud computing environment, your organization invests in thin clients (low cost scaled-down desktop PC and laptops) networked to the server to access a spreadsheet application from the “cloud”. In the case of an individual, if you have a broadband connection to the Internet, you can use an inexpensive laptop, for e.g. a netbook (from your home or neighbourhood Starbucks) to access a spreadsheet application from the “cloud”. Furthermore, most cloud computing services for the individual are free.<br /><br />Obviously, organizations have greater computing needs and the cloud computing service providers have more to offer than just spreadsheets.<br /><br />Stroh, Acker & Kumar ideally define cloud computing as, “Cloud computing is nothing more than the collection of computing software and services that can be accessed via the Internet rather than residing on a desktop or internal servers. Such services include applications as simple as e-mail – Yahoo! Mail, Google’s Gmail, for example – or as complex as Salesforce.com, which helps manage customer relations and sales leads” (2009).<br /><br />Cloud computing evolved from Software as a Service (SaaS), and will lead to increased:<br /><ul><li>Virtualisation</li><li>Usability</li><li>Collaboration</li><li>Scalability</li><li>Standardisation</li></ul><br /><br /><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm3.static.flickr.com/2642/3846510593_8ebf9203d6.jpg" border="0" /> </p><br /><br /><p>Cloud computing collectively propagates:</p><ul><li><strong>Infrastructure as a Service</strong> – defined as the fully outsourced delivery of computer or computing infrastructure as a service. In the business model’s upstream, the cloud-infrastructure providers can dynamically allocate the required resources to cloud-service providers. Downstream, this means that end-user businesses do not need to purchase or own computer hardware, software and related equipment.</li><li><strong>Platform as a Service</strong> – defined as the ability to provide all the necessary facilities to support the complete process of developing and delivering Web applications and services to cloud-service providers and end-users.</li><li><strong>Software as a Service</strong> – defined as service-on-demand where cloud-service providers will license customized software for end-user use for the duration of the service agreement.</li></ul><p><strong>2.0 Major cloud computing vendors and popular cloud-services available today</strong></p><p><strong>2.1 The major vendors are:</strong></p><ul><li>Amazon <a href="http://aws.amazon.com/ec2/">http://aws.amazon.com/ec2/</a></li><li>Google <a href="http://www.google.com/apps/intl/en/business/index.html">http://www.google.com/apps/intl/en/business/index.html</a></li><li>Hewlett Packard <a href="http://www.hpl.hp.com/research/cloud.html">http://www.hpl.hp.com/research/cloud.html</a></li><li>IBM <a href="http://www.ibm.com/grid/">http://www.ibm.com/grid/</a></li><li>Microsoft <a href="http://www.microsoft.com/azure/default.mspx">http://www.microsoft.com/azure/default.mspx</a></li><li>Salesforce.com / Force.com <a href="http://www.salesforce.com/cloudcomputing/">http://www.salesforce.com/cloudcomputing/</a></li></ul><p><strong>2.2 Popular cloud-service offerings are:</strong></p><ul><li>E-Mail</li><li>Human resource management (HRM) applications</li><li>Office applications</li><li>Customer relationship management (CRM) applications</li><li>E-Procurement applications</li><li>Remote backup and storage</li><li>Project management applications</li></ul><p><strong>3.0 Why is cloud computing gaining interests?</strong></p><p>So, why is cloud computing gaining interests? While the critics and supporters of cloud computing continue to debate on the virtues of cloud computing, “… more and more companies are quietly making the transition, and they are finding that Web-based computing services can provide the power, low costs, functionality, flexibility, and mobility that has long eluded traditional enterprise computing” (Stroh et al, 2009).</p><p>Business sustainability issues and challenges in the following areas have also driven companies to explore alternative solutions and acted as a catalyst for high technology solution providers to innovate.</p><p><strong>i) Increasing total costs of ownership – upgrades, maintenance, and obsolescence</strong></p><p>Traditional enterprise computing systems require regular hardware and software upgrades and maintenance. The introduction of new technologies has shortened product lifespan thus accelerating obsolescence, and increases the need for hardware and software refresh.</p><p><strong>ii) Cost savings</strong></p><p>The overall need of firms to drive down costs in operations, production and wastes to maintain competitiveness can only go as far as not compromising on product and service quality and efficiency in order to continue to meet customer expectations and satisfaction. Other areas of cost savings can come from a reduction on capital expenditure and maintenance costs of enterprise computing systems.</p><p><strong>iii) Risk of new computer system project failure</strong></p><p>Growing firms, for e.g. SMEs, new to adopting enterprise computing solutions may reconsider the high acquisition cost and unproven usage and maintenance capability in favour of alternative computing solutions with lower risks.</p><p><strong>iv) Human capital</strong></p><p>Failure to hire and retain skilled computer human resources is becoming more prevalent today. In some less-developed countries, there is a shortage of skilled computer systems and technology manpower, and the issue can be further aggravated when universities produce graduates equipped with the wrong skills and knowledge compared to industry needs, probably due to the fast pace of change in the industry.</p><p><strong>3.1 The key advantages of cloud computing</strong></p><ul><li>Reduced hardware and software acquisitions i.e. reduced capital expenditure</li><li>Lower hardware and software maintenance costs</li><li>Up-to-date software functionality from regular software updates</li><li>Greater accessibility and mobility (a basic laptop, broadband Internet connection, a free operating system and Web browser such as open source Linux® (e.g. Fedora®, Ubuntu®, etc) and Firefox®</li><li>Pay-for-what-you-use</li><li>Flexibility and agility – companies can easily increase or decrease their computing needs</li><li>Increased collaboration with suppliers and customers at a lower transaction cost</li><li>Companies can focus more on business challenges such as markets and competition, marketing and demand generation, product development and innovation, profitability and sustainability without worrying about the implementation and maintenance of enterprise computing infrastructure</li></ul><p><strong>4.0 Major concerns, issues and challenges</strong></p><p>While the benefits of cloud computing are clear, corporate buy-in is slower than expected chiefly due to the following areas:</p><p><strong>i) Security and Reliability</strong></p><p>Security and reliability concerns about storing corporate data with a third party continue to be debated. “For some corporate users, keeping the cloud in-house alleviates the security and privacy concerns that can come with running key applications and data outside the company. However, cloud providers insist that data is safer and less vulnerable with them” (No Man is, 2009). This is generally true because cloud-service providers offer and maintain state-of-the-art facilities and implement security updates immediately as the nature of their business pose a higher risk.</p><p>Also, there is on-going debate among technology gurus on the issue of data residency – the time delay between data being requested and delivered i.e. a question on performance in a real business environment.</p><p><strong>ii) Privacy and Confidentiality</strong></p><p>This issue is closely related to security and reliability. While cloud-service providers may implement high system security measures to ensure and enhance reliability, the human element of potential greed and corruption among the cloud-service providers’ employees of lesser ethics still appear as a point for concern.</p><p><strong>iii) Responsibility and Accountability</strong></p><p>The level of responsibility and accountability expected by end-users versus what the cloud-service providers are liable to in their service level agreements (SLA) differs. Cloud-service providers cannot afford to extend too much in terms of responsibility and accountability should security or data privacy become breeched as doing so would severely increase their business risks. Thus, it is the norm that cloud-service providers limit themselves to ensuring that the latest security measures are in place and every precaution is checked and double-checked. However, should breeches or failure occur, to what extend are cloud-service providers answerable? Are the answers in long drawn-out legal suits?</p><p><strong>iv) Cost savings doubts</strong></p><p>In a study conducted by McKinsey & Co., and published in March 2009, McKinsey based their research on Amazon.com’s Web service offering and concluded that it would cost more than double! (Clearing the Air, 2009).</p><p>“Forbes, The Wall Street Journal, The New York Times and others have all written pieces quote the report saying ‘clouds are NOT very cost-effective’” (Cohen, 2009).</p><p><strong>v) Too many cloud computing platforms?</strong></p><p>As cloud computing represents one of the next growth areas in information and communication technology for the IT industry, several cloud computing players exist today championing their flavour of the cloud computing platform, creating some confusion, and leading to concerns and questions about standards and interoperability.</p><p><strong>5.0 The future of cloud computing</strong></p><p>As companies continue to be driven to reduce costs or better manage costs in the increasingly competitive regional, international or global market, cloud computing is a fast emerging technology that is revolutionizing information and communication infrastructures, providing flexibility and potential cost reductions.</p><p>Hardware, software or applications are becoming increasingly costly to maintain as business volumes grow. Thus, with cloud computing, the pricing model of pay-for-what-you-use or rent-what-you-need removes the need for costly capital expenditure in acquiring, implementing and maintaining an enterprise computing system infrastructure. In this aspect, cloud computing can replace corporate private datacentres and multi-dedicated server infrastructures.</p><p>Cloud computing enables companies to utilize standard applications or develop and deploy customized applications, and monitor and scale those applications using resources accessed over the Internet.</p><p>Presently, cloud computing is still in the infancy stage, where companies and individuals use it for small projects or simple needs, for e.g. office applications. For a greater rate of adoption to take place, a higher level of trust or business buy-in must be achieved in the critical areas of security, privacy and reliability.</p><br /><br /><p><strong><em>References:</em></strong></p><p>Clearing the Air on Cloud Computing. (2009). <em>McKinsey & Co</em>., March 1. Downloaded from <a href="http://uptimeinstitute.org/content/view/353/319/">http://uptimeinstitute.org/content/view/353/319/</a><br /><br />Cloud Backup Tutorial: How to Leverage Cloud Backup Services, Part 1. (2009). <em>SearchDataBackup.com</em>, July 1. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Cloud Backup Tutorial: How to Leverage Cloud Backup Services, Part 2. (2009). <em>SearchDataBackup.com</em>, July 1. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Cloud Computing: Latest Buzzword or a Glimpse of the Future? (2009). <em>CBS Interactive, Inc</em>., February 1. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Cloud Computing: What is its Potential Value for Your Company? (2009). <em>CBS Interactive Inc</em>., February 1. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Cohen, Reuven. (2009). “McKinsey & Co: Clearing the Air on Cloud Computing”. <em>ElasticVapor.com</em>, April 16. Downloaded from <a href="http://www.elasticvapor.com/2009/04/mckinsey-co-clearing-air-on-cloud.html">http://www.elasticvapor.com/2009/04/mckinsey-co-clearing-air-on-cloud.html</a><br /><br />Hosted Enterprise Cloud: The Cloud of Efficiency. (2009). <em>NaviSite Inc</em>., May 22. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Khan, Imrana. (2009). “Cloud Computing set to go Mainstream.” <em>Outsourcing</em>, Issue #13: July – August, pp. 30-31<br /><br />Nellutla, Thirumal & Teoh, John. (2008). “Cloud Computing”. <em>IBM Corporation</em>, Illinois Digital Government Summit, September 15.<br /><br />No Man is an Island: The Promise of Cloud Computing. (2009). <em>Knowledge @ Wharton</em>, April 1. Downloaded from <a href="http://knowledge.wharton.upenn.edu/article.cfm?articleid=2190">http://knowledge.wharton.upenn.edu/article.cfm?articleid=2190</a><br /><br />Ortiz, Joseph. (2009). “Slash Storage Costs, Archive to the Cloud.” <em>Storage Switzerland LLC</em>, August 1. Downloaded from <a href="http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A">http://whitepapers.businessweek.com/data/search?site=bw&qp=site_abbrev%3Abw&qg=VENDOR&cp=bpres&cr=bpres&st=1&qt=Cloud+backup+tutorial%3A</a><br /><br />Stroh, Stefan; Acker, Olaf & Kumar, Aneesh. (2009). “Why Cloud Computing is Gaining Strength in the IT Marketplace.” <em>Strategy & Business</em>: Leading Ideas, June 30. Downloaded from <a href="http://www.strategy-business.com/li/leadingideas/li00131">http://www.strategy-business.com/li/leadingideas/li00131</a><br /><br />Timbuong, Jo. (2009). “Cloud Computing set to Shine”. <em>The Star, InTech</em>, August 18, p. IT15<br /><br />Timbuong, Jo. (2009). “Red Hat Takes to the Cloud”. <em>The Star, InTech</em>, August 18, p. IT15<br /></p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com1tag:blogger.com,1999:blog-2883577468018538027.post-2686337281636654762009-08-06T11:26:00.000-07:002009-08-13T00:01:14.527-07:00Getting Started in Cloud Computing<p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3491/3817202818_eb4792c112.jpg" border="0" /> </p><p align="center"><span style="font-size:78%;">(Image source: </span><a href="http://infreemation.net/cloud-computing-linear-utility-or-complex-ecosystem/"><span style="font-size:78%;">http://infreemation.net/cloud-computing-linear-utility-or-complex-ecosystem/</span></a><span style="font-size:78%;">)</span></p><br /><p>“In 2009, worldwide cloud-services revenue is expected to cross USD56.3 billion, a 21.3% increase from 2008 … likely to reach USD150.1 billion in 2013 … Business processes delivered as cloud services are the largest segment of the overall cloud-services market, accounting for 83% of the overall market in 2008” (Khan, 2009).</p><p>If you are still trying to find out what cloud computing is about or how it works, the best way is to try it out yourself …</p><p>Get yourself started here <a href="http://www.google.com/apps/">http://www.google.com/apps/</a></p><p>For businesses, you can try out the Standard or Premier Edition here <a href="http://www.google.com/apps/intl/en/business/index.html">http://www.google.com/apps/intl/en/business/index.html</a></p><p></p><br /><br /><p><strong><em>For techies or programmers:</em></strong></p><p>Run your web apps on Google's infrastructure<br /><a href="http://code.google.com/appengine/">http://code.google.com/appengine/</a><br /><br />Connecting Apple's iPhone to Google's cloud computing offerings<br /><a href="http://www.ibm.com/developerworks/web/library/wa-aj-iphone/">http://www.ibm.com/developerworks/web/library/wa-aj-iphone/</a><br /></p><br /><br /><p><strong><em>References:</em></strong></p><p>Google and the Wisdom of Clouds<br /><a href="http://www.businessweek.com/magazine/content/07_52/b4064048925836.htm">http://www.businessweek.com/magazine/content/07_52/b4064048925836.htm</a><br /><br />Google's Cloud Looms Large<br /><a href="http://www.technologyreview.com/biztech/19785/">http://www.technologyreview.com/biztech/19785/</a><br /><br />Google Groups: Cloud Computing<br /><a href="http://groups.google.com/group/cloud-computing">http://groups.google.com/group/cloud-computing</a><br /><br />How the Google-Apple Cloud Computer Will Work<br /><a href="http://computer.howstuffworks.com/google-apple-cloud-computer.htm">http://computer.howstuffworks.com/google-apple-cloud-computer.htm</a><br /><br />Khan, Imrana. (2009). “Cloud Computing set to go Mainstream.” <em>Outsourcing</em>, Issue #13: July – August, pp. 30-31</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-53022050953730130142009-07-21T22:35:00.000-07:002009-08-08T18:11:12.820-07:00The Impact of Globalization on Malaysia's Private Higher Education Sector<strong>Introduction</strong><br /><br />Much as been said about globalization, which is synonymous with the opening of national borders to the international flow of goods, services, raw materials and resources, information and technology, and human resources.<br /><br />In the area of higher education, universities have become factors of the competitive advantage of nations (Porter, 1998). They are the locus of scientific discoveries that move economies forward, and the primary means of educating and generating the talent or human capital required in order to obtain and sustain competitive advantage in various industries.<br /><br />In response to the same forces that have propelled world economies, universities have become more self-consciously global, especially universities of the advanced nations – seeking students from around the world who represent the entire spectrum of cultures and values, sending their own students abroad in educational exchange programmes to prepare them for global careers, offering courses of study that address the challenges of an interconnected world and collaborative research programs to advance science for the benefit of all mankind.<br /><br />Of the forces shaping higher education none is more sweeping than the people movement across borders. Prospective students travel from one developed nation to another, and from developing or less-developed to the developed countries to seek good education.<br /><br />However, cross border movements in higher education is not limited to students. Universities have also undertaken the setting up of branch campuses in suitable foreign countries, such as:<br /><ul><li>University of Nottingham Malaysia Campus <a href="http://www.nottingham.edu.my/Pages/default.aspx">http://www.nottingham.edu.my/Pages/default.aspx</a></li><li>University of Nottingham, Ninbo, China <a href="http://www.nottingham.edu.cn/">http://www.nottingham.edu.cn/</a></li><li>Monash University Malaysia <a href="http://www.monash.edu.my/">http://www.monash.edu.my/</a></li><li>Monash University South Africa <a href="http://www.monash.ac.za/">http://www.monash.ac.za/</a></li><li>Curtin University of Technology, Sarawak, Malaysia <a href="http://www.curtin.edu.my/">http://www.curtin.edu.my/</a></li><li>Swinburne University of Technology Sarawak Campus, Malaysia <a href="http://www.swinburne.edu.my/">http://www.swinburne.edu.my/</a></li><li>University of Chicago Booth School of Business, London, England <a href="http://www.chicagobooth.edu/visit/london/index.aspx">http://www.chicagobooth.edu/visit/london/index.aspx</a></li><li>University of Chicago Booth School of Business, Singapore <a href="http://www.chicagobooth.edu/visit/singapore/index.aspx">http://www.chicagobooth.edu/visit/singapore/index.aspx</a></li><li>INSEAD Asia Campus, Singapore <a href="http://www.insead.edu/singapore_campus/getting/index.cfm">http://www.insead.edu/singapore_campus/getting/index.cfm</a></li></ul><p>The British Open University <a href="http://www.open.ac.uk/">http://www.open.ac.uk/</a> alone has 43 branch campuses outside the UK. In Malaysia, the Open University Malaysia <a href="http://www.oum.edu.my/portal/">http://www.oum.edu.my/portal/</a> has an enrollment of over 79,000 local and foreign students. It operates in Yemen, Bahrain, and Maldives via partnerships with the local higher educational institutions. By September 2009, it will operate in Vietnam and Ghana (OUM to spread, 2009). INTI University College <a href="http://www.newinti.edu.my/">http://www.newinti.edu.my/</a> has a branch campus in China focusing on teaching English language to Chinese students to equip them with the global communication language (Ramli, 2006). Limkokwing University of Creative Technology <a href="http://www.limkokwing.net/malaysia/">http://www.limkokwing.net/malaysia/</a> has campuses in Indonesia (Bali), Botswana, Cambodia, Lesotho, and the UK (London).</p><p>Where branch campuses are not possible, twinning and transfer programmes with local private institutions of higher education have become another avenue brought about by globalization, for e.g. in Malaysia, the University of Northumbria, UK and KDU College; University of East London, UK and UCSI University College; University of Southern Queensland, Australia and SEGI University College, and the University of London, UK, external degree programmes with several local private colleges (Uda Nagu, 2006a).</p><p>Rapid advancements in digital and Internet technology, and e-learning courseware have also significantly contributed to cross border delivery of higher education, for e.g., University of Phoenix, USA <a href="http://www.phoenix.edu/">http://www.phoenix.edu/</a> is recognized as the leading accredited online degree course provider. Universitas 21 Global <a href="http://www.u21global.edu.sg/Education/home">http://www.u21global.edu.sg/Education/home</a> formed by 19 world-class universities, is the leading accredited online MBA course provider. Technology has made access to quality education easier irrespective of nationality and location. While the impact of globalization appears to deliver overall positive effects to higher education, what are the issues and challenges?</p><p><strong>Literature Review</strong></p><p>Today’s era is characterized by globalization that is changing, among others, the economic environment that in turn affects institutions of higher education irrespective of their physical locations, traditions, and current practices and aspirations. Continuous growth in economic relationships among nations, a global shift towards free-market dynamics, and increasing consumerism are some factors affecting institutions of higher education i.e. universities. The changes in the economic environment are also causing significant changes to national and international organizations, and to governmental systems such as moving from a centrally controlled economy towards a free-market economy. The explosive growth in digital and Internet technology, and telecommunications represented another catalyst of environmental change (Magrath, 2000). Thus, universities, traditionally operating on a highly individualized basis will experience increased competition, a need for increased national and international collaboration in research, and introduce new educational delivery and support methodologies.</p><p>As higher educational institutions everywhere begin to face similar challenges, and with increased competition in the higher education industry, the institutions i.e. universities respond by becoming more market driven and adopt a more global perspective by focusing to increase foreign student enrollment especially from less-developed countries. A global shift to knowledge economies is also increasing the importance of higher education. Further competition is in the form of new entrants to the higher education industry in response to increasing global demand for higher education (The Futures Project, 2000). Globalization is also affecting methods of educational delivery and support. Traditional classroom delivery is now enhanced with electronic learning support. Online courses, virtual classrooms and Web-based tutorials are some delivery methodologies for distance education across borders as a result of globalization.</p><p>However, the effects of globalization in the higher education industry cannot be left completely to free market mechanisms as issues such as quality and quality control, accreditation, educational relevance, the effective use of new technology, and ethics needs to be in place and regulated. Higher educational institutions cannot be allowed to only focus on profitability but must develop a strong sense of responsibility to educate and assist less-developed nations establish or acquire sound educational systems for future generations (The Futures Project, 2000; AUT and DEA, 1999).</p><p><strong>The Impact of Globalization</strong></p><p>Globalization is rapidly reshaping the landscape of higher education. Driven by global shifts to free market mechanisms that cause continuously increasing international trade, foreign direct investments and other economic relationships among nations, multinational or transnational corporations constantly need to obtain and maintain their core competencies and competitive advantages to generate economic wealth with scarce resources. An increasing awareness of the need to focus on the consumer, and growth of new consumer experience and consumer satisfaction business thinking has also contributed to changes in customer relationship models. A continuous flow of human capital talent and skills is required. Institutions of higher education, both public and private institutions are the source for current and future human capital.</p><p>So, how has globalization affected Malaysia’s higher education sector, especially the private institutions of higher education or Institusi Pengajaran Tinggi Swasta (IPTS)? We can group the impact of globalization in the Malaysian private higher education sector into four major categories:</p><ol><li>Creation of world-class education – Curriculum, Research, Technology and Collaboration</li><li>Quality assurance and accreditation – Ethics, Branding and Ranking</li><li>Academia and Industry collaboration</li><li>Malaysian Government as catalyst</li></ol><p><strong>Creation of world-class education – Curriculum, Research, Technology and Collaboration</strong></p><p>Globalization and the transition to a knowledge-driven society or economy have created a greater demand for higher education. This demand will constitute a good market for cross border or transnational education providers. Transnational education can take the form of franchising, twinning programmes, offshore courses, distance learning and the setting up of branch campuses and other forms of collaboration. In other words, there is a need to create world-class institutions of higher education or world-class universities. What is meant by “world-class”?</p><p>According to professor Dr. Stephanie Fahey, the common yardsticks that make a university world-class are staff and student performance, which includes research output and impact, students’ academic results, graduation rates and employability (Aiming for world-class, 2006). Phang argues that, “we need to produce world-class graduates who possesses the ability to bring in a range of relevant variables into our thoughts and decision-making processes. It means being international in outlook and possessing a keenness to expose ourselves to issues and happenings around us” (Phang, 2005).</p><p>Therefore, it becomes very important for the Malaysian private higher educational institutions to possess the ability to design, develop and deliver the correct curriculum to meet industrial changes and development brought about by globalization, for e.g. globalization has created the need for international management or know-how to manage across borders with different cultures and practices. Thus, the curricula needs to educate our students in international management and cultures, and problem identification and solving.</p><p>To create and provide world-class education, Malaysia’s private universities need to also conduct relevant international-level research, for e.g. we should conduct research into understanding and learning global competitive advantages so that our small and medium enterprises (SMEs) and industries can grow and compete at the international or regional economic level instead of continuing to depend on government incentives and protection, and foreign tariff exemptions. In 2007, Malaysian SMEs make up 99 percent of the total number of registered businesses, 56 percent of total employment, but accounts for 32 percent of the GDP and 19 percent of total exports (Government to ensure, 2008).</p><p>The education and exposure to high technology and information and communication systems in the areas of enterprise systems, business intelligence systems, supply chain management and customer relationship management systems are necessary.</p><p>Where our private universities lack in ability and know-how, they need to collaborate with more advanced higher educational institutions and also with industry. We can benefit from such collaborations with the transfer of knowledge and technology and maintain abreast of industry needs and changes. We cannot continue to produce human capital graduating with irrelevant and obsolete knowledge, technology and skills.</p><p><strong>Quality assurance and accreditation – Ethics, Branding and Ranking</strong></p><p>Prospective students of higher education are consumers, and consumers have rights. Students have rights to quality education. The Malaysian government is responsible to ensure that our private higher educational institutions provide quality education by providing official accreditation and annual evaluations (Azizan, 2006; Uda Nagu, 2006b).</p><p>Quality education can only be assured when the private higher educational institutions meet the necessary criteria in terms of relevance of curricula, qualifications of academia, graduation results and performance, quality and employability of graduates, research and collaborations, and policies and practice of ethics and corporate governance.</p><p>Ethics and corporate governance of some private higher educational institutions are questionable as some act as a front for illegal immigration activities, declaring foreign workers as students (Karim, 2006; Sujata, 2006).</p><p>With these criteria and quality accreditation in place, private higher educational institutions can build their respective branding and establish respectable ranking positions in the educational field they pursue, for e.g., excelling in providing management education, information technology or engineering education. With these credentials, we can attract more foreign students to study in Malaysia and more international collaborations with other institutions of higher education (All out to, 2006; Martin, 2006).</p><p><strong>Academia and Industry collaborations</strong></p><p>Another important aspect for our private higher educational institutions is to establish academia and industry collaborations. Why is this important? As Malaysia transitions to a knowledge economy or society, a strong collaboration between academia and industry will “create the impetus for the creation of a new workforce that will strengthen the Malaysian economy. On the other hand, a weak link between academia and industry will create unemployable graduates who do not fit the requirements of the new economy and will cause Malaysia to lose its competitiveness” (Phang, 2003; Help shape varsity, 2006).</p><p>Academia and industry collaborations will benefit both parties. Academia gets more aligned to the needs of the industry and will be able to produce graduates relevant to the industry. Companies in the industry will benefit from the research capabilities of the universities and may even be able to commercialize some of the research findings of the universities. A close collaboration will establish the academia as a knowledge providing resource to the industry value chain and will help improve the competitiveness of Malaysia. A higher educational institution that establishes cooperative ties with industries can rise in recognition surpassing its more established peers (Gomez, 2009; Ramachandran, 2007; Ismail, 2007; Indramalar, 2003).</p><p><strong>Malaysian Government as catalyst</strong></p><p>The Malaysian government, through the ministry of higher education, in addition to being the guardian to ensure quality education and ethical practices in the private higher education sector, needs to also play an active role in promoting private higher education and enabling academia and industry collaborations.</p><p>The government needs to develop a vision and sustainable roadmap for the growth of the private higher education sector. This is important as the private educational institutions are managed like commercial corporations and hence, lesser administrative barriers exist in order to respond quickly to market and industrial changes and developments.</p><p>Development and research funding, and tax incentives should be made available to the private higher educational institutions to enable them to grow and produce industry relevant graduates thereby helping Malaysia build and maintain competitiveness and build human capital so vital for our country’s future and economic well-being (IPTS, 2006; Private colleges want, 2006).</p><p><strong>Conclusion</strong></p><p>While globalization is changing the landscape of the private higher education sector, Malaysia has already embarked on transitioning to a knowledge economy (Malaysia on course, 2009). Higher education represents the nucleus of the knowledge economy. In order to continue our economic growth, maintain and generate new competitive advantages in the global market place, we need to invest in and build our human capital. This can be achieved through creating and delivering world-class education.</p><p>To create world-class education, we need to be nimble, flexible and global in outlook – basic characteristics expected from the private higher education sector, but possessing these characteristics are insufficient, as we also need to develop core competencies in:</p><ul><li>Designing, developing and delivering industry relevant curricula</li><li>Achieving and maintaining the gold standard in educational and ethical excellence</li><li>Establishing a high technology focus and usage</li><li>Establishing international collaborations in educational technology and research</li><li>Establishing academia and industry collaborations</li><li>Establishing infrastructure and support programmes by the government to nurture and grow the private higher education sector</li></ul><p></p><br /><p><em><strong>References:</strong></em></p><p>Aiming for world-class. (2006). <em>The Star: Education</em>, July 30, p. 8<br /><br />All out to attract foreign students. (2006). <em>The Star: Education</em>, September 3, pp. 2-3<br /><br />AUT and DEA (1999). <em>Globalisation and Higher Education: Guidance on Ethical Issues Arising from International Academic Activities</em>. London, England: Association of University Teachers <a href="http://www.aut.org.uk/">http://www.aut.org.uk/</a>, and Development Education Association <a href="http://www.dea.org.uk/">http://www.dea.org.uk/</a><br /><br />Azizan, Hariati. (2006). "Setting a new standard". <em>The Star: Education</em>, July 16, p. 7</p><p>Gomez, Terence. (2009). "Strengthening linkages: Effective partnerships between industry and universities will help cultivate entrepreneurial skills". <span style="font-style: italic;">The Star</span>, March 28, p. SBW8</p><p>Government to ensure economy continues to prosper. (2008). <em>Daily Express</em>, December 5. Downloaded from <a href="http://www.dailyexpress.com.my/news.cfm?NewsID=61445">http://www.dailyexpress.com.my/news.cfm?NewsID=61445</a> as at 6 July 2009<br /><br />Help shape varsity education, industry urged. (2006). <em>The Star</em>, August 23, p. N3</p><p>Indramalar, S. (2003). "Intel's strong links with academia". <span style="font-style: italic;">The Star: Education</span>, August 3, p. 19</p><p>IPTS: Goodies still elusive. (2006). <em>The Star</em>, September 10, p.</p><p>Ismail, Izwan. (2007). "Collaboration to drive innovation". <span style="font-style: italic;">New Straits Times: Tech & U</span>, July 2, p.<br /></p><p>Karim, Farah N. (2006). "1,200 foreign students missing from classes". <em>New Straits Times</em>, September 9, p. 8<br /><br />Magrath, C. Peter (2000). <em>Globalization and its effect on higher education beyond the Nation State</em>. Salzburg Seminar / Universities Project 12th Symposium: The Impact of Globalization on Higher Education.</p><p>Malaysia on course towards full-fledged k-economy. (2009). <span style="font-style: italic;">New Straits Times</span>, August 7, p. B4</p><p>Martin, Sumitha. (2006). "Quality first". <em>New Sunday Times: Learning Curve</em>, August 20, p. H2<br /><br />OUM to spread wings to Vietnam, Ghana. (2009). <em>New Straits Times</em>, July 25. Downloaded from <a href="http://www.nst.com.my/articles/23thir/Article/index_html">http://www.nst.com.my/articles/23thir/Article/index_html</a> as at 26 July 2009<br /><br />Phang, J. (2003). "Academia and industry: The Stanford experience". <em>The Star: InTech</em>, July 29, p. 39<br /><br />Phang, J. (2005). "Creating world-class education". <em>The Star: InTech</em>, April 26, p. 29<br /><br />Porter, Michael. (1998). <em>The Competitive Advantage of Nations</em>. New York, NY: Free Press<br /><br />Private colleges want more government backing. (2006). <em>New Straits Times</em>, February 28, p.</p><p>Ramachandran, Sonia. (2007). "When industry and university forge ties". <span style="font-style: italic;">New Sunday Times: Learning Curve</span>, July 22, p. H2</p><p>Ramli, June. (2006). "More foreign universities eager to set up campuses in Malaysia". <em>New Straits Times</em>, August 9, p. 14<br /><br />Sujata, V.P. (2006). "Kedah college under probe". <em>The Star</em>, September 9, p. N8<br /><br />The Futures Project (2000). <em>The Universal Impact of Competition and Globalization in Higher Education</em>. The Futures Project: Policy for Higher Education in a Changing World, Brown University, Rhode Island <a href="http://www.futuresproject.org/">http://www.futuresproject.org/</a><br /><br />Uda nagu, Suzieana. (2006). "Fruitful tie-ups". <em>New Sunday Times: Learning Curve</em>, July 9, p. H2<br /><br />Uda Nagu, Suzieana. (2006). "A gold standard for education". <em>New Straits Times</em>, August 20, p. 24</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-17253613525886126442009-07-18T06:48:00.000-07:002009-08-04T19:25:01.060-07:00Managing Change: How to Change Your Corporate Culture (Part 2 of 3)<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT<br /></strong><br />This article was published in the April-June 2009 (Vol. 44, No. 2) issue of<br />Management – the quarterly magazine of The Malaysian Institute of Management<br /><br />Reproduced here with permission from the author Dr. Victor S. L. Tan</span></div><div align="center"><span style="font-size:85%;">and from<br />The Malaysian Institute of Management<br />****************************************************************************************</span></div><br />Changing corporate culture is unlike a heart transplant operation which can be done overnight. Instead, it is an ongoing process that takes time and requires constant monitoring. It is certainly not about transplanting alien cultural elements into an organisation. Changing corporate culture is about transforming the organisation through continuous influence and the shaping of beliefs, assumptions, values and patterns of behaviour of people towards creating a desired work environment. It is about changing the mindsets of people to a new way of thinking and working, which will enable the organisation to be effective, efficient and competitive. Thus, changing corporate culture is about opening minds and winning hearts of people to a new way of working, which is not just about increasing the bottom line but also about improving relationships amongst people and seeking meaning in work through a sense of belonging, shared values and satisfaction.<br /><br />How does an organisation go about influencing and shaping its corporate culture? KL Strategic Change Consulting (KLSCC) Group has worked with over 200 Asian organisations, and in many of them the work has involved, to a great extent, changing their corporate culture to align to their respective visions, missions, goals and the environment.<br /><br />The following diagram shows the KLSCC's Corporate Culture Change Model, which is comprised of four phases.<br /><br /><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3577/3788090725_f50221f24d.jpg" border="0" /> </p><p><br /><strong>Phase 1: Culture Assessment</strong><br /><br />The Culture Assessment phase comprises two tasks. One is the assessment of the existing culture of the organisation, and the other is to determine the desired corporate culture. To get a more reflective picture of the real culture of an organisation, one should use a combination of tools. One way is to conduct personal interviews with a representative sample of participants in the organisation. One-to-one interviews as well as focused interviews with groups can be conducted to assess the existing culture as well as determine the desired culture of the organisation.<br /><br />Besides interviews and discussions, Corporate Culture surveys can also be conducted on a representative sample of participants. To encourage accurate input, these surveys must be conducted in an anonymous fashion with the assurance of strict confidentiality. In this respect, KL Strategic Change Consulting Group has developed various corporate culture assessment questionnaires, tools and instruments to help organisations gauge their existing culture as well as determine their desired culture. A desired culture encompasses not just personal and organisational aspirations, but also the demand of the external environment (which includes competition, customers, shareholders and other stakeholders) that will enable the organisation to compete and succeed.</p><p><strong>Phase 2: Culture Gap Analysis</strong></p><p>This phase involves analysing the gaps that arise from the existing corporate culture and the desired one. This analysis looks into the people, policies, process, technology, strategy and structure of the organisation. One way this can be done is by analysing what currently impedes an organisation from achieving its desired vision, mission and goals. Another way is to define the missing links, be they resources, the appropriate leadership style or the behaviour of people that is required to enable an organisation to achieve the desired future state. The results from the gap analysis will provide sound input to the development of change programmes that influence and shape the culture of the organisation.</p><p><strong>Phase 3: Changing Mindsets: Influencing Culture Change</strong></p><p>The core of cultural change is the change in mindsets. This involves learning new ways of thinking, new ways of working and interacting with one another. It enables the acquiring of new attitudes and new skills in the workplace. To do this, there is a need to influence and shape the beliefs, assumptions and values of people in the workplace. There are many ways to do this. For a start, the change agents who lead the culture change should become role models. Their attitudes and daily behaviour in the workplace must reflect those defined as desired culture. Their consistent behaviour with the desired culture will encourage others to emulate them. Albert Schweitzer said it best, when he remarked, “Setting an example is not the main thing in influencing others. It is the only thing.”</p><p>The next change should be to revamp company policies, procedures and the systems of the company to be aligned with the new culture. Thus any inconsistent practices that are not aligned to the desired patterns of behaviour should be abandoned. To ensure wide influence of the new culture, the organisation should undertake company-wide training to communicate the new belief systems, core values and desired patterns of behaviour.</p><p>Orientation programmes can be conducted for new recruits as well as existing staff to help them modify their beliefs, attitudes, values and behaviour to the desired patterns of behaviour in the workplace. The company must capitalise on every communication channel possible to widely publicise and communicate the new corporate culture. Newsletters, e-mails, department meetings, branch managers' meetings, management meetings, family day gatherings, sports club activities and company anniversary events can be useful channels and opportunities for promoting and reinforcing the new culture within organisations.</p><p>Another very effective way to start the culture change process in an organisation is through the recruitment process. Potential candidates are screened for the right values and behaviour patterns that will fit the desired culture. Candidates are then interviewed thoroughly and selected on the basis of possessing the relevant values, thinking and behaviour patterns. Some organisations we worked with, have also undertaken a thorough workforce reorganisation, whereby people with the beliefs, values and behaviour that are consistent with culture of the organisation are put in charge whereas those who are not, are being sidelined.</p><blockquote><p>“<strong>The crux of effective change will come from how organisations implement a performance reward system to recognise, encourage and reinforce the practice of the desired culture</strong>.”</p></blockquote><p>Thus the new leaders who are in charge will develop their people and inculcate the practices of the new culture in the organisation. This type of workforce restructuring, while it “rocks the boat” often is what is needed to change the culture of very old, bureaucratic and archaic organisations in crisis situations. Often the demands of competition and the fast changing environment dictate this type of approach to change quickly and effectively to enable the organisation to survive. Culture change requires constant monitoring and fine-tuning of approaches to achieve effective results. And ultimately, the crux of effective change will come from how organisations implement a performance reward system to recognise, encourage and reinforce the practice of the desired culture.</p><p><strong>Phase 4: Sustaining the New Culture</strong></p><p>Sustaining a new culture requires continuous improvement efforts in moulding, shaping, influencing and reinforcing actual behaviour in the workplace on a daily basis. The reality of whether a new culture is sustainable lies in what value and importance leaders place in maintaining the consistency of the desired practices and patterns of behaviour in the daily activities and tasks in the workplace.</p><p>Thus a constant flow of new ideas and suggestions to promote and reinforce the new culture is needed to get people to really internalise those beliefs, values and behaviour. And the constant linking of positive performance and results to the new culture will also add credibility towards the new corporate culture. And once people truly see the benefits of the new culture not just for the organisation but also for themselves as individuals, they will want to continue those practices.</p><p>To serve as a useful guide for change agents to implement culture change in their organisations, 1 would like to share our experience of the change efforts we made in working with over 200 Asian organisations. Overall, there is a common, desired work environment which employers and employees strive for.</p><p>While there are many issues and a lot of dissatisfaction raised by various levels of staff in the organisations we worked with, we feel that a lot of these are symptoms of some of their yet unfulfilled intrinsic needs. These needs could be the feeling of recognition and appreciation, a sense of importance, a sense of belonging, the joy of achievement, the pride of involvement or the fun of sharing.</p><p>In summary, there is a common thread running through the organisations which we have worked with. Overall, their staff members want the following:</p><ul><li>Good relationships between divisions, departments and individuals</li><li>A conducive work environment</li><li>Appreciation of good work done</li><li>A sense of fairness</li><li>Encouraging support and guide when needed</li><li>Competitive salaries and staff benefits</li><li>Relevant and timely information on what's going on</li><li>More open communication without fear</li><li>Promotion and growth opportunities in the company</li><li>Tactful discipline</li></ul><p>Overall, to create this environment and a conducive and productive corporate culture, top management, leaders, managers and staff must work in concert to achieve a win-win partnership to ensure the following are practised in the workplace:</p><ul><li>People are clear of the direction of the organisation</li><li>People are involved and their views or input sought in the decision making process</li><li>The workplace is friendly and meaningful, and people enjoy coming to work</li><li>Communications are clear, timely and relevant</li><li>People get the resources and support they need to do their jobs</li><li>People are respected, recognised and appreciated for doing a good job</li><li>People are kept informed about what is going on in the company</li><li>People are held accountable for their jobs and own up to the problems</li><li>Individual and team efforts are rewarded or recognised</li><li>There are opportunities for learning and career advancement</li><li>There is a spirit of enthusiasm, sense of belonging and teamwork</li><li>Nurturing people is a practice of the organisation</li></ul><p></p><br /><p><em>Written by Dr. Victor S. L. Tan. Dr. Tan is the Chief Executive Officer of KL Strategic Change Consulting Group. He is an author of five management books. His latest book is The Secret of Change. For more information, visit </em><a href="http://www.klscc.com/"><em>www.klscc.com</em></a><em> or contact the author at </em><a href="mailto:victorsltan@klscc.com"><em>victorsltan@klscc.com</em></a></p><p><br /></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-41829964951514704952009-07-15T01:39:00.000-07:002009-07-18T17:46:24.722-07:00The Global Financial Crisis and the Optimal Period to Refresh Your PCsWith the current global financial crisis, many countries’ economies are depressed, and international trade and business volumes have reduced significantly in most industries.<br /><br />The effect on desktop and laptop computer ownership and usage by companies and corporations is immediately to adopt an approach to prolong the equipment’s lifespan. While this is the normal course to take, owners need to be aware that prolonging the lifespan beyond ‘x’ number of years actually increases the total cost of ownership (TCO) of maintaining those desktop and laptop computers -- yes, the Law of Diminishing Returns also applies to extended ownership -- the longer you maintain old systems, its TCO increases.<br /><br />So, this question, “When is the best time to refresh or replace the computers?” would probably be on your mind now.<br /><br />This link <a href="http://communities.intel.com/docs/DOC-3144?dfaid=1&crtvid=0">http://communities.intel.com/docs/DOC-3144?dfaid=1&crtvid=0</a> will take you to an interesting article and whitepaper arguing that, “…for most firms, the optimal PC refresh lifecycle for both laptop and desktop PCs is three years.”<br /><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-37748194241988720462009-06-27T09:40:00.000-07:002009-06-28T09:57:59.559-07:00Managing Change: Understanding Corporate Culture (Part 1 of 3)<div align="center"><span style="font-size:85%;">**************************************************************************************** <strong>ACKNOWLEDGEMENT<br /></strong><br />This article was published in the Jan-Mar 2009 (Vol. 44, No. 1) issue of<br />Management – the quarterly magazine of The Malaysian Institute of Management<br /><br />Reproduced here with permission from the author Dr. Victor S. L. Tan</span></div><div align="center"><span style="font-size:85%;">and from<br />The Malaysian Institute of Management<br />****************************************************************************************</span></div><br />Many organisations today are hard pressed to change as they are driven by a strong need to change through this digital and the K-economy era. There is no alternative. They have to change to enable their organisations to compete and survive. However, many CE0s are unhappy because many of the changes implemented are not sustainable.<br /><br />The scenario sounds too familiar. An organisation suddenly realises the need to change due to external pressure of competition. It decides to take a quick and simple way, i.e. undertake training for staff to improve their competency and motivation. Their staff members are sent off to a nice resort for a couple of days where they brainstorm issues, develop strategies to resolve problems, build team spirit and nurture a sense of camaraderie. When the staff members come back, they are all charged up for two weeks and then the enthusiasm subsides and everyone goes about doing things the old beaten way. The issues are still there. The result is that there is no iota of change happening. It is likewise with the implementation of change initiatives, be they TQM or business process reengineering or the GRID management approach – all started well but have not ended up well.<br /><br />As a consultant, I have been posed the most common question from CEOS: How do you sustain a change initiative and the enthusiasm for continuous improvement?<br /><br />There is one great strategic flaw in the way most organisations go about implementing change. They go about managing change in a superficial manner through merely changing the structure, process, strategy and technology without addressing the fundamentals that drive the organisation. And these fundamentals are the components that influence and guide the behaviour of people in organisations. It is these very basic components that make up the corporate culture of an organisation. Unless an organisation takes time to shape its corporate culture to the desired change, the effort and results will not be sustainable.<br /><br /><strong>What is Corporate Culture?</strong><br /><br />Corporate culture is the way people do things in an organisation. It is a set of norms comprising of beliefs, attitudes, core values and behavioural patterns shared by people in an organisation.<br /><br />It is these shared beliefs, core values and patterns of behaviour which influence the performance of an organisation. Beliefs are the assumptions or perceptions about things, which people and the organisation as a whole take as true or valid. For example, an organisation may have a shared belief about the great potential of its people. Core values are the primary or dominant values that are accepted throughout the organisation, e.g. the core value of respect. A pattern of behaviour is the way people act towards one another. For instance, an organisation that has the belief in the potential of its people and has the core value of respect will have the desired pattern of behaviour of treating people well.<br /><br />KL Strategic Change Consulting Group, in its consulting work with over 250 Asian organisations, has found that the corporate cultures of Asian organisations play a significant role in determining the capability and speed of leading change within the organisations as well as in the industry. Thus corporate culture is important as it will determine whether or not an organisation survives in the face of changes, turbulence and challenges in the environment. The model developed by KL Strategic Change Consulting shows a direct correlation in how an organisation's beliefs and assumptions influence the core values, which in turn shape the behaviour of people. And it is this behaviour pattern that ultimately affects the performance of an organisation.<br /><br /><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3302/3668620024_43677bf244.jpg?v=0" border="0" /> </p><br /><strong>Characteristics of Corporate Culture</strong><br /><br />How does one go about specifically to describe the corporate culture of an organisation? There arc certain characteristics that an organisation values, which distinguish it from other organisations. It is this set of characteristics that provide a start for describing the corporate culture of an organisation. Overall, organisation behaviour experts can agree that there arc about 10 characteristics which collectively provide insights into the essence of the culture of an organisation. The following are the 10 differential characteristics:<br /><ol><li><strong>Individual initiative</strong>: the degree of responsibility, freedom and independence that individuals have</li><li><strong>Risk tolerance</strong>: the degree to which employees are encouraged to be aggressive, innovative and risk-taking</li><li><strong>Direction</strong>: the degree to which the organisation creates clear objectives and performance expectations</li><li><strong>Integration</strong>: the degree to which the units within the organisation are encouraged to operate in a coordinated manner</li><li><strong>Management support</strong>: the degree to which managers provide clear communication, assistance and support to their subordinates</li><li><strong>Control</strong>: the number of rules and regulations, and the amount of direct supervision that is used to oversee and control employee behaviour</li><li><strong>Identity</strong>: the degree to which members identify with the organisation as a whole rather than with their particular work group or field of professional expertise</li><li><strong>Reward system</strong>: the degree to which reward allocations (i.e. salary increase and promotions) are based on employee performance in contrast to seniority, favouritism and so on</li><li><strong>Conflict tolerance</strong>: the degree to which employees are encouraged to air conflicts and criticisms openly</li><li><strong>Communication patterns</strong>: the degree to which organisational communications are restricted to the formal hierarchy of authority</li></ol><p>To understand the corporate culture of an organisation, employees are invited to participate in rating these characteristics on a continuum from low to high that corresponds with a scale from 1 to 10. By collating the input from a representative sample of employees, a composite picture of the organisation culture can then be determined. This description will provide a good starting point for employees to develop a common understanding about the organisation, the way things are done and how people are supposed to behave.</p><p><strong>The Benefits of Corporate Culture</strong></p><p>How does corporate culture help an organisation? What benefits can an organisation derive from developing a strong and conducive corporate culture? In our corporate culture work, we have found that our clients benefited in the following ways:</p><ul><li>It helps align the company towards achieving its vision, mission and goals.</li><li>It increases the team cohesiveness of various departments, divisions or units within an organisation as its corporate culture serves as the 'glue' that bonds people together.</li><li>It shapes the behaviour of staff at work by encouraging the assimilation of core values and the desired behaviour, thereby enabling the organisation to be more effective and efficient.</li><li>A common culture promotes consistency, resolves conflict and facilitates coordination and control.</li><li>It increases staff motivation through a sense of belonging, loyalty and common beliefs and values, which encourage them to think positively of themselves and their organisations.</li><li>A strong culture enables an organisation to pull all its people together and maximise their potential; this certainly provides a competitive edge.</li></ul><p>A study of 200 companies by Harvard Business School researchers John Kotter and James Heskett found that corporate culture has a strong impact on the performance of organisations. This landmark study provides four significant conclusions as follows:</p><ul><li>Corporate culture can have a significant impact on a firm's long-term economic performance.</li><li>Corporate culture will probably be an even more critical factor in determining the success or failure of firms in this new millennium.</li><li>Corporate cultures that inhibit strong long-term financial performance are not rare; they develop easily, even in firms that are full of reasonable and intelligent people.</li><li>Although difficult to change, corporate cultures can be made more performance enhancing.</li></ul><p>A company with a strong positive culture will motivate people to continue growing, learning and improving. Research has shown that employees have higher motivation and satisfaction working in organisations which are well managed with managers and employees who practise sound principles, common beliefs and shared values.</p><p>Thus it can be seen that to enable change initiatives and the enthusiasm for continuous improvement to be sustained, organisations need to develop a conducive corporate culture to support such efforts. They need to inculcate beliefs, assumptions and core values that shape behaviour towards the desired results. To do this requires more than just simply instituting a performance management system. It requires a mindset change of the way people create their own identities, make sense of their working lives and find meaning from their work. And that is going to the core of fundamental change – the change in corporate culture.</p><br /><p></p><p><em>Written by Dr. Victor S. L. Tan. Dr. Tan is the Chief Executive Officer of KL Strategic Change Consulting Group. He is an author of five management books. His latest book is</em> The Secret of Change<em>. For more information, visit </em><a href="http://www.klscc.com/"><em>www.klscc.com</em></a><em> or contact the author at </em><a href="mailto:victorsltan@klscc.com"><em>victorsltan@klscc.com</em></a></p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com1tag:blogger.com,1999:blog-2883577468018538027.post-78867290553577130882009-06-14T08:27:00.000-07:002009-06-14T18:52:14.192-07:00Initiatives for Organisation’s Business Continuity Plan (BCP)<div align="center"><span style="font-size:85%;">**************************************************************************************** <strong>ACKNOWLEDGEMENT<br /></strong><br />This article was published in the New Straits Times on September 27, 2003<br /><br />Reproduced here with permission from the author (Dr.) Josef Eby Ruin<br />****************************************************************************************</span></div><br /><strong>1.0 Business Continuity Plan (BCP) deliverables</strong><br /><br />Typically, a BCP is prepared to document the following deliverables:<br /><ul><li>Identifying tasks to be undertaken, and the responsibilities of various personnel in the disaster management team or committee (DMT)</li><li>Stating the job of a BCP coordinator</li><li>Identifying the contact numbers and addresses for DMT members and support resources required; and</li><li>The communication matrix or template required to notify stakeholders, the public, and the media</li></ul><p>The plan in the BCP defines the business resumption procedures that encompass the critical business processes of an organisation. It details the key resources to be used and the various action plans to be initiated so as to recover these resources for the business continuity. Key areas to be documented in the BCP would be:</p><ul><li>Formalising the recovery team's set-up, and availing them the mandates and power</li><li>The recovery team's roles</li><li>Minimum and necessary support staff needed</li><li>Location of the organisation's control command centre (CCC) and mission-ciitical facilities required</li><li>Protection and location of critical information</li><li>Identification and testing of the business recovery site for the critical functions to continue</li><li>Telecommunication requirements of the business operations of the organisation</li><li>Personnel requirements (the "red-label" staff) to deliver the agreed level of minimum services; and</li><li>The location and stand-by roles of "green" and "yellow-labelled" staff</li></ul><p><strong>2.0 What determines a BCP's success?</strong></p><p>As BCP is the heart/brain of any organisation's continuity management strategy, its success depends on the following:</p><ul><li>Effective implementation and testing of the documented BCP procedures, and getting them understood across the entire organisation</li><li>The hands-on application exercise for staff who are directly involved in the execution of the plan</li><li>Awareness programme to ensure enterprise-wide adoption of the plan</li></ul><p><strong>3.0 The continuity culture and awareness</strong></p><p>All proposals identified in the BCP should be implemented as a matter of commitment, otherwise the effort, time and investment made in its preparation will be wasted, redundant or at best become superfluous. The same goes for awareness that have to be embarked upon so as to provide the assurance that the entire organisation is competent and confident with the plan’s success and effectiveness.</p><p>All parties must appreciate the importance of BCP to the organisation's survival and their roles in the process. This awareness should extend to external stakeholders and third parties whom the organisation depends on in both normal and crisis operations.</p><p>By implementing the BCP in this manner, all those involved in the invocation of the BCP can have full confidence in the organisation's ability to manage a crisis. With such commitment, the BCP-involved staff will have that “continuity culture” in their work habits. This kind of value shall put an organisation head-and-shoulder above the rest as far as organisational resilience is concerned.</p><p><strong>4.0 Appointing an organisation’s BCP coordinator</strong></p><p>A BCP coordinator is to be appointed. He is to report directly to the board member responsible for the BCP programme. A coordinator has to understand the organisation's business structures, corporate objectives and the various people who make the organisation ticks. Ideally, he is seen as a good programme manager with superior communication and interpersonal skills. He is a good leader and has a good understanding of the cost and budget dynamics as the setting up of business recovery sites (hot, warm, cold sites) are not cheap to initiate and maintain.</p><p><strong>5.0 The relevance of awareness, dryruns and training</strong></p><p>A BCP has to be practical and implementable. BCP is a live strategy, hence it needs periodical updates with revisions for applicability, suitability, and efficacy for maximum value-impact. If the BCP document is merely printed, then distributed and turned into a “showcase or decorative file”, then that organisation’s BCP initiatives have failed and the whole exercise is futile.</p><p>If an emergency is declared and the organisation is obliged to invoke its BCP, it would fail since no one (or not all the critical staff) have any idea as to its contents and without knowing the moves to initiate. Thus, there is the dire need to underscore the importance of getting the BCP awareness and testing for the staff, especially the red-labelled staff who will become the main initiators when a crisis attacks.</p><p>An organisation's BCP cannot be considered “fool-proof” until it is tested and proven workable. Testing or BCP-exercising can take various forms – from communications plan test to partial systems test to partial system and business simulated test to full-system and business live test. The frequency of exercise may be at a minimum of once a year.</p><p><strong>6.0 Knowing the organisation’s stakeholders’ expectations</strong></p><p>When a crisis occurs, there is the need to recognise the various stakeholders. The list may vary, depending on the nature of the crisis. Typically, an organisation's stakeholders whose expectations need to be served would include one or many of the following:</p><ul><li>Adversarial groups, brokers, distributors, dealers</li><li>Vendors, suppliers, business groups</li><li>Community leaders, competitors, customers/clients</li><li>Employees, investors, law enforcement officials</li><li>Regulatory authorities/officials</li><li>News media organisations, plaintiff attorneys, politicians</li><li>Security analysts, ratings agencies, insurance companies</li><li>Stockholders, union officials, shareholders; and</li><li>Any entities, individuals, groups that have interest in the beleaguered organisation that is facing the crisis</li></ul><p><strong>7.0 Inherent features of a credible BCP</strong></p><p>A credible BCP needs to have a mechanism set up to establish easy maintenance and update an organisation's BCP. A roadmap for the unexpected can be one such mechanism. Such roadmap must define responsibfiities to:</p><ul><li>Differentiate between business recovery and disaster relief-rescue teams</li><li>Identify tasks to be undertaken by various teams</li><li>Identify and list key contacts, suppliers and resources</li><li>Provide the framework for crisis communication and how to inform stakeholders and handle the media</li></ul><p>A credible BCP should define the business continuity procedures clearly. The procedures are to cover mission critical processes and must highlight what are the key resources to be used, and what processes are to be followed, to recover these resources that are affected by the crisis. A credible BCP should also integrate itself with other key strategies in the organisations like perhaps the policy for:</p><ul><li>Crisis communication and public relations</li><li>Safety and emergency guide</li><li>IT and communications recovery procedures</li><li>Security framework</li><li>Departmental operating outlines</li><li>Supply chain logistics policy; and</li><li>Operational risk management manual</li></ul><p><strong>8.0 Contents of a BCP document</strong></p><p>There is no hard and fast rule as to what constitutes a complete BCP document. However, six fundamentals should be present.</p><p><strong>I. General introduction<br /></strong>a. Objectives<br />b. Responsibihties<br />c. Exercising<br />d. Maintenance</p><p><strong>II. Plan invocation<br /></strong>a. Disaster declaration<br />b. Damage assessment<br />c. Continuity actions<br />d. Team organisation and responsibilities<br />d. Red-label, yellow-label, and green-label staff<br />e. Emergency operations centre</p><p><strong>III. Communications<br /></strong>a. Parties that need to be informed<br />b. Contacts<br />c. Key messages and common templates to use</p><p><strong>IV. Suppliers<br /></strong>a. List of recovery suppliers<br />b. Details of contract provisions</p><p><strong>V. Awareness and training<br /></strong>a. Approach and concept to cascade or disperse the BCP among staff<br />b. Mock runs and testing for credibility and practicality</p><p><strong>VI. Custodian, evolvement and Changes<br /></strong>a. List of all BCP holders<br />b. Distribution and change process</p><p><strong>9.0 FAQs regarding BCP initiatives</strong></p><p>Whatever, and despite all sorts of BCP materials that can be read to gain insights into what it is all about, there will still be lots of unanswered questions for management practitioners. Knowing some simple answers that an organisation should answer for some of the frequently asked questions (FAQS) on BCP issues (like those stated below) would make an organisation’s management understand BCP better as well as facilitate the organisation’s team to develop credible and elective BCP.</p><p><strong>FAQ 1: System for management notification<br /></strong>i) What kind of management notification system does your organisation have in place if a crisis occurs during non-business hours?<br />ii) How long will it take to reach everyone (from board to senior management decision- making body)?<br />iii) What needs to be done if a disaster happens at 4.45pm?</p><p><strong>FAQ 2: Organisational emergency response<br /></strong>i) When was your organisation's BCP documents last reviewed?<br />ii) Has it ever been tested to see if it worked?<br />iii) How well does this BCP gel with the response plans of other subsidiaries within your organisation?</p><p><strong>FAQ 3: Vulnerabilities and internal problems</strong><br />i) What are other identified internal problems that your organisation has which could damage its business if the “bad” or negative news leaked out to the public?<br />ii) What will the public’s reaction be, if say, one of such "bad" news is disclosed by a disgruntled staff<br />iii) How will your management explain and justify the situation so that such news will have insignificant financial impact on your organisation?<br />iv) What is being done by your management to reduce the chances of such whammy from occuring now or in the future?</p><p><strong>FAQ 4: Official spokesperson<br /></strong>i) Who is your organisations spokesperson in a crisis environment?<br />ii) Who is the alternate spokesperson if the principal spokesperson is not available, or not appropriate/relevant for that kind of crisis event?<br />iii) How good are they in handling tough questions from reporters?<br />iv) How much confidence does your organisation has that the spokesperson is convincing and credible?<br />v) How are disclosures handled in your organisation when a crisis occurred in a branch, region or isolated location outside your head office? Who is the designated spokesperson in such a situation?</p><p><strong>FAQ 5: Accuracy of information<br /></strong>i) How much information your organisation would divulge if there is a crisis in your organisation?<br />ii) Who is to ascertain what to say?<br />iii) What are your organisation's approval process?<br />iv) How long will such approval process take?</p><p><strong>FAQ 6: Disseminating news to stakeholders and employees<br /></strong>i) How does your organisation contact the board, management, and employees so they would hear first before learning about the crisis from the news media?<br />ii) How about your customers, suppliers, other key audiences and stakeholders? How long would that take?</p><p><strong>FAQ 7: Similar crisis in other organisations<br /></strong>i) What similar crisis situations have other organisations experienced in the past year that went “public”?<br />ii) How well would your own organisation have handled those similar crises?<br />iii) How much of their management time have those other organisations taken?<br />iv) How much have those crises cost them in expenses, ill-publicity?<br />v) Would there be lawsuits, and regulatory or government investigations?<br />vi) How long might they be, before those organisations get the problem behind them?<br />vii) What would your organisation have initiated if it happened to your organisation?<br />viii) What are the “lessons learnt” from their experiences?<br />ix) Have you made any changes in the way your organisation do business as a result of what happened to those organisations?</p><p></p><br /><p><em>Written by (Dr.) Joseph Eby Ruin, FCCA (UK), CA (Malaysia), Hon. DBA - Management Philosophy (Kursk State Technical University). (Dr.) Joseph completed his ACCA (UK) in 1976. He became Fellow in 1984. He has also been a member of the Malaysian Institute of Accountants since 1983. For his many management books, articles, and conference, seminar and workshop papers, he was conferred the honorary degree of Doctor of Business Administration (Management Philosophy) by the Kursk State Technical University, Russia in 2006. He was elected Regional Director of The Professional Risk Managers' International Association (PRMIA) Malaysia Chapter in November 2007. He can be reached at RiskFirst Consultancy & Training Services, Tel: +603 - 22735506.</em></p><p></p><br /><p><strong>Chen Ming-fa’s note:<br /></strong><br />Also see <em>Managing Business After Disaster</em> <a href="http://biz.thestar.com.my/news/story.asp?file=/2009/1/12/business/2955533&sec=business">http://biz.thestar.com.my/news/story.asp?file=/2009/1/12/business/2955533&sec=business</a><br /><br />The field of Business Continuity Management (BCM) is gaining prominence. In Malaysia, the Malaysian central bank i.e. Bank Negara, has issued business continuity guidelines as part of the corporate governance for all financial and insurance institutions. To become a professionally certified BCM guru, visit the <strong>Business Continuity Institute</strong> <a href="http://www.thebci.org/">http://www.thebci.org/</a> to find out more.</p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-86472088209329001012009-05-30T04:31:00.000-07:002009-06-07T19:03:37.030-07:00Sustainability as Core Business Strategy<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT </strong><br /><br />This article was published in the New Straits Times on August 23, 2008<br />as a CIMA Business Talk article.<br /><br />Reproduced here with permission from<br />The Chartered Institute of Management Accountants (CIMA Malaysia).<br />****************************************************************************************</span></div><br />Business leaders now recognise that sustainability has moved beyond the corporate social responsibility agenda to become an integral part of core business strategy and success. Companies are moving from asking what our sustainability strategy should be, to asking what our business strategy should be in light of sustainability.<br /><br />Companies have used three key approaches to integrate sustainability into their strategy – planning their strategy to include sustainability trends, managing how opportunities are defined and selected, and experimenting with approaches to learn which yield the best results.<br /><br /><strong>High Demand, low supply</strong><br /><br />Business depends on a host of often unnoticed ecosystem services, from a stable climate to assimilation of waste, from providing food to controlling diseases and pests. It's not just rainforests and tigers under threat, climatic systems, water resources, agriculture and fisheries are all degraded or unsustainable ecosystem services, which we still rely on for business success.<br /><br />We are depleting our natural capital at the very time when our needs are growing. The planet will be home to 9 billion people by 2050, with the addition of just under 1 billion people in the next 10 years alone.<br /><br /><strong>Profit from sustainability</strong><br /><br />The surge in population and consumption over the next 20 years looks impossible for damaged ecosystems to sustain. But smart businesses will profit from these challenges by finding ways to give us what we need and want while maintaining the ecosystem services which we rely on.<br /><br />People increasingly expect business to play a key role in finding solutions to these global problems. Taking the opportunities also brings reputation and brand benefits as well as give employees a larger cause to be motivated by. However, if companies fall short of expectations, then they will experience consumer distrust (or even boycotts), greater regulation from governments, and investors questioning the quality of management.<br /><br />There is an opportunity now for businesses to explore how to combine profit with creating a sustainable future. Business strategies that address this challenge at a profit will define the successful business of the next 10 years.<br /><br /><strong>Integrate Sustainability into Strategy</strong><br /><br />We have found that businesses bring sustainability into their strategy process using a combination of three approaches. Firstly, they must plan to include future trends. Most companies have a strategic planning cycle, perhaps five-yearly with annual revisions. Companies can incorporate sustainability into that cycle by introducing material sustainability trends to the external assessment of the structure and dynamics of the business context.<br /><br />Secondly, companies should manage how opportunities are defined and selected. In most organisations, there is the plan and then there is what happens. Putting any strategic plan into action means changing how opportunities are defined at the “coalface” and selected by managers and then reallocating resources appropriately.<br /><br />Leading businesses are enabling people to define sustainability as an opportunity through giving clear signals of intent, including announcements and high profile actions. They are also setting a structural context where opportunifies that are on-strategy are favoured. These can be formal, regular reporting to board-level committees, performance targets or internal carbon currency. Or they can be informal such as promoting people who have pushed commercial sustainability-related activities.<br /><br />Thirdly, organisations need to experiment to learn and create options. The world changes fast, so do the commercial opportunities of sustainability. Speed of change limits how well a company can plan or manage for success. Instead, leading businesses keep their options open and identify the best approach through a range of deliberate and contained experiments.<br /><br />The experiments could be a new product message, a new product, or a whole new business. Such experiments give them the chance to test different approaches without committing the entire business. Learning is the success factor – even if they lose money, they know how to do it differently next time.<br /><br />Some companies focus on one strategy, but most companies have a combination of strategies that use core competencies.<br /><br />Business strategies for sustainability must be built on the specifics of how that company creates and maintains its competitive edge. Any business case is going to be weak for generic initiatives, philanthropic add-ons or being responsible for the sake of it. Instead, business strategies must anticipate emerging issues, build on the company’s strengths, and focus on resolving the challenge of reducing supply and increasing demand.<br /><br /><br /><em>Written by David Bent. For more information, please contact The Chartered Institute of Management Accountants (CIMA) Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com. Website: </em><a href="http://www.cimaglobal.com/"><em>http://www.cimaglobal.com</em></a>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-71937929499468366902009-05-29T08:14:00.000-07:002009-06-07T19:03:06.559-07:00Ways to Retain Talent<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT</strong><br /><br />This article was published in the New Straits Times on July 26, 2008<br />as a CIMA Business Talk article.<br /><br />Reproduced here with permission from<br />The Chartered Institute of Management Accountants (CIMA Malaysia).<br />****************************************************************************************</span></div><br />From technical skills in disciplines such as finance and accounting to the budding leadership qualities of tomorrow's chief executive officers, employers are facing an uphill battle to get the best people with the right competencies into their organisations. And even those that manage to recruit good staff are finding that they face a new challenge – keeping them on board.<br /><br />As the business environment becomes more global and demanding, the skills gap means it is a seller’s market for candidates with the right experience and training. The pressure is on employers to understand how to target the right people and offer them the right rewards to stay and grow with the company.<br /><br /><strong>The staff challenge</strong><br /><br />Many companies have taken the first step by raising the importance of talent management to the highest levels, realising the strategic importance of finding and keeping the best people. Companies taking a proactive stance towards human resources (HR) are realising that creative thinking and concrete investment in long-term staffing continuity go hand-in-hand. The benefits may not make an immediate impact on the bottomline and do not fit the paradigm of short-termism in which the evaluation of key staff, especially senior executives, takes place these days. For the long-term health of the business, however, they are invaluable.<br /><br />Changing demographics and increasingly global markets mean that companies must be selective about the talent pool they target to fill key posts, whether at junior or senior levels.<br /><br /><strong>More than money</strong><br /><br />Having targeted on specific talent pool, companies must ensure that the individuals on which they come to rely on are sufficiently rewarded and challenged to want to stay for the long term.<br /><br />There was a time when this could be ensured by offering greater financial rewards, but those days are gone. Furthermore, the need to retain key staff has never been greater, so firms that find the right formula could create significant competitive advantage.<br /><br />Kath Roberts, managing director at Michael Page International, a global specialist in mid-market and executive recruitment, says, “In a buoyant economy, employees take more risks in the knowledge that they can get another job. That is why retention is a massive issue in HR now. Research suggests that a 5 per cent increase in staff retention can result in a 40 per cent increase in productivity.”<br /><br />Employees’ newfound power in the marketplace means employers must understand their workers’ changing values and provide the right environment for staff to develop and achieve their goals.<br /><br />Roberts explains, “The 1990s was a decade of cost-cutting and corporate scandals. Employees felt disenfranchised from their workplace. Generation-Y people place greater importance on trust, ethics and pride. They do not believe in blind corporate loyalty. More often, they want to join smaller companies or start their own businesses. So employees prioritise work-life balance and the community values of their employer, not just job security.”<br /><br />Kelvin Stagg, group financial controller and company secretary at Michael Page International, agrees, “Such is the demand for what is an increasingly sparse population of'skilled, competent and motivated people that simply improved remuneration packages just do not make the difference anymore. It takes an in-depth consideration of what the role and the company has to offer, married with a highly professional approach to career management, to secure the very best.”<br /><br />Those companies that fail to develop such a professional approach will find that they incur not only the immediate costs of recruiting to fill vacant positions, but also a number of less tangible costs that, while less obvious, are just as harmful to the business.<br /><br /><strong>Strategic staffing</strong><br /><br />If there is a single key to successfully overcoming the staffing challenge that will face every large company in the coming decade, it is to align staffing strategy with the overall goals of the business. This not only forces companies to identify the skills they need in line with long-term business plans, but also provides the right environment for developing leaders of tomorrow to ensure that succession problems do not weigh down a company.<br /><br />To develop their top talent and prepare those who will take over the reins, companies need to move individuals around the organisation so they can build a diverse set of skills and offer key people new challenges. This will help companies groom successors from within by providing clear personal and career development plans. Most organisations, however, are lagging in this area.<br /><br />Roberts says, “Many companies are poor at training their staff. The better companies are good at assessing potential and bringing it out through experience. They measure leadership potential, not just performance.”<br /><br />Organisations that recognise the need to address the strategic risk associated with skills gap understand that the best practice is to focus on a more holistic, long-term view of staffing needs. They judge talent more on their potential than on quarterly results, and regularly review staff satisfaction to ensure they are providing the necessary framework for personal development.<br /><br />This can create a virtuous cycle, where organisations that work hard to retain talent also develop as part of their brand the concept that they are good employers. This, in turn, comes to play an important part in attracting new people.<br /><br />The skills gap will not disappear overnight, so the onus is on employers to develop talent for the future.<br /><br /><br /><em>Written by Jim Banks. For more information, please contact The Chartered Institute of Management Accountants (CIMA) Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com. Website: </em><a href="http://www.cimaglobal.com/"><em>http://www.cimaglobal.com</em></a>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-88751836372210644142009-05-28T06:05:00.000-07:002009-06-07T19:02:43.500-07:00Corporate Social Responsibility (CSR) Gaining Ground<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT</strong><br /><br />This article was published in the New Straits Times on December 18, 2004<br />as a CIMA Business Talk article.<br /><br />Reproduced here with permission from<br />The Chartered Institute of Management Accountants (CIMA Malaysia).<br />****************************************************************************************</span></div><p>As the driving force behind UK's Associate Parliamentary Sustainable Waste Group, Mark Dempsey's background as an environmental management specialist has made him acutely aware of the series of directives, laws and regulations that are threatening to overwhelm businesses with green tape. With careful waste management alone, he argues, companies can make savings equivalent to one per cent of their annual turnover.<br /><br />One of the most persuasive ways of encouraging companies to become greener is to show them that it makes financial sense. On a wider scale, this formula of being green, being seen to be green and increasing profits at the same time is now being used to urge firms of all sizes to bite the ethical bullet and accept the more daunting challenges of corporate social responsibility (CSR) reporting.<br /><br />The business case for CSR is looking increasingly persuasive. According to CSR Europe, one of the leading authorities on the subject, successive studies have shown that a committed CSR strategy improves a company's overall performance in the long term, as well as its attractiveness in the marketplace. For instance, research last year by the Institute of Business Ethics found that firms with a public commitment to ethics made 18 per cent more profits on average than those without one.<br /><br />Along with the notable growth in socially responsible investment funds in recent years – there are now almost 300 in Europe – investors and consumers are really starting to flex their ethical muscles. Research by McKinsey & Co has found that institutional investors.are prepared to pay a premium of more than 20 per cent for shares of companies that demonstrate good corporate governance.<br /><br />And CSR Europe's research has shown that 20 per cent of European consumers are willing to pay more for products that they believe to be socially and environmentally responsible.<br /><br />According to Geoff Lane, head of the CSR advisory team at PricewaterhouseCoopers, interest in CSR from big business has now reached boiling point. The problem lies not in converting companies to the merits of CSR, but in getting them to put into practice. “A lot of it is about changing the culture of the ways companies are run, and that can be quite a daunting prospect,” he says.<br /><br />The main barrier, Lane feels, is the fear factor linked to transparent reporting. “There is a feeling that companies don't want to rush into it and make mistakes that could put them in the firing line.”<br /><br />But experience has shown Lane and his team that, once a company appreciates the fundamentals of CSR, these fears diminish.<br /><br />Whether companies choose to adopt a full CSR strategy or not, they cannot ignore the growing pressure for greater accountability from institutional shareholders, insurance companies, pressure groups, the Government and the media. One of the consequences of this pressure is that risk has become one of the key facets of modern reporting.<br /><br />“Risk management now extends a long way beyond the financial because so much hinges on reputation,” Lane says. “There's an acceptance that risk has to be approached in a much broader way, using a much more subtle process to capture possible liabilities. It's rather like a radar screen where you can see what's coming at you.”<br /><br />The effect of enhanced risk management and the greater emphasis on ethical profit-making has led to a situation where, whether they like the idea of becoming eco-warriors or not, financial managers are finding themselves playing a central role in developing CSR strategies.<br /><br />Lane believes that in the future one of the key roles of the finance director will be to ensure that CSR is part of a company's core strategy. “To get investors and analysts to understand why CSR issues are important, finance directors need to communicate how these issues generate both risk and opportunity for their business in the short and long term,” he says. “This means positioning CSR in the context of the company's core strategy for creating value.”<br /><br />At the other end of the spectrum, Deborah Doane, chair of the Corporate Responsibility Coalition, urges financial managers to ensure that their CSR strategy documents are supported by measurable indicators.<br /><br />Doane also believes it's important for those driving CSR to ensure that there is an open and balanced dialogue with all stakeholders and, in particular, those involved in the company supply chain.<br /><br /><br /><em>Written by Camilla Berens. This article first appeared in</em> <strong>Financial Management</strong><em>, a monthly magazine published by the Chartered Institute of Management Accountants (CIMA), United Kingdom, for its members. For more information, please contact The Chartered Institute of Management Accountants (CIMA) Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com Website: </em><a href="http://www.cimaglobal.com/"><em>http://www.cimaglobal.com</em></a> </p><p></p><br /><p><strong>Chen Ming-fa's note: Some actual examples of CSR in action in Malaysia.</strong></p><p><strong>1. New use for old batteries</strong></p><p><a href="http://thestar.com.my/metro/story.asp?file=/2009/5/25/central/3966450&sec=central">http://thestar.com.my/metro/story.asp?file=/2009/5/25/central/3966450&sec=central</a></p><p><strong>2. Disabled buddies find their niche at hypermart</strong></p><p><a href="http://www.nst.com.my/Saturday/National/2563860/Article/index_html">http://www.nst.com.my/Saturday/National/2563860/Article/index_html</a></p><p><strong>3. The disabled get a break at GCH Retail</strong></p><p><a href="http://biz.thestar.com.my/news/story.asp?file=/2009/3/21/business/3398175&sec=business">http://biz.thestar.com.my/news/story.asp?file=/2009/3/21/business/3398175&sec=business</a></p><p><strong>4. Clearwater focusing on green projects</strong></p><p><a href="http://www.star-space.com/news/story.asp?file=/2009/5/23/pnews/3949044&sec=pnews">http://www.star-space.com/news/story.asp?file=/2009/5/23/pnews/3949044&sec=pnews</a></p><p><strong>5. Foundation of tyres</strong></p><p><a href="http://thestar.com.my/lifestyle/story.asp?file=/2009/4/7/lifefocus/3626139&sec=lifefocus">http://thestar.com.my/lifestyle/story.asp?file=/2009/4/7/lifefocus/3626139&sec=lifefocus</a></p><p><strong>6. Panasonic: Go Green, Live Green</strong></p><p><a href="http://thestar.com.my/gogreenlivegreen/story.asp?file=/2009/4/7/gogreenlivegreen/3591347&sec=gogreenlivegreen">http://thestar.com.my/gogreenlivegreen/story.asp?file=/2009/4/7/gogreenlivegreen/3591347&sec=gogreenlivegreen</a></p><p><strong>7. Shell: Gas to Liquids (GTL)</strong></p><p><a href="http://www.shell.com/home/content/shellgasandpower-en/products_and_services/what_is_gtl/dir_what_is_gtl_1205.html">http://www.shell.com/home/content/shellgasandpower-en/products_and_services/what_is_gtl/dir_what_is_gtl_1205.html</a></p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-28795459804578683702009-05-26T19:28:00.000-07:002009-06-07T19:02:13.534-07:00Building High-Performance Organisations<div align="center"><span style="font-size:85%;">****************************************************************************************<br /><strong>ACKNOWLEDGEMENT </strong><br /><br />This article was published in the New Straits Times on October 23, 2004<br />as a CIMA Business Talk article.<br /><br />Reproduced here with permission from<br />The Chartered Institute of Management Accountants (CIMA Malaysia).<br />****************************************************************************************</span></div><br />Jean-Francois Manzoni from international business school INSEAD has developed a refreshing set of theories on how to drive performance. After working with many leading organisations on the MBA programme at business school INSEAD, Manzoni has defined his own set of drivers for improving performance. They make a refreshing change from the usual empirical view taken by researchers about what drives better performing organisations.<br /><br />Manzoni, who heads the INSEAD-PricewaterhouseCoopers research initiative on high-performance organisations, makes it clear that the most important catalyst for change is people and their attitude and behaviour. Many of the key issues raised will strike a chord but most would agree that identifying problem areas is always easier than putting them right.<br /><br />In judging the performance of an organisation, Manzoni first considers.whether the “whole” (the management team) is as great as the sum of its parts. He cites companies where individual executives are competent, often extremely so, but where as a team they do not spark, or pull in the same direction. He then looks at how much effort it takes to get things done. Are processes and systems helping or does running the company feel like pulling a heavy load uphill?<br /><br />Next he considers the boundary of the firm. Many managers feel it is easier to control and coordinate resources when they are within the firm. The common assumption is that, if an activity is undertaken within an organisation, it must be easier than outsourcing – this is often ill-founded.<br /><br />Finally, he looks at what he terms the “ideas cost”. How well does an organisation exploit its capabilities and resources, particularly the knowledge and experience of its staff? Building on these observations, the following are key aspects of a framework for organisational excellence:<br /><br /><ul><li>A healthy dissatisfaction with the status quo (DSQ). In high-performing organisations, people want to improve, learn and do things better. There is an aggressive culture towards competitors and this drives the DSQ.</li></ul><ul><li>“We can and we will do it” – strong employee self-confidence is important, but must be backed up by a top management team pulling in the same direction and sharing a common understanding of the business model. To give people enough time to focus on important activities, companies must be disciplined in removing work that doesn't add value and that focuses neither on the customer nor on the employees. Many organisations are too lenient over this: there needs to be a constant drive to maximise return on time invested in initiatives. Companies should also consider and influence all the drivers of behaviour – performance measures / rewards, technology, structure, people skills, culture and process, to facilitate work that adds value.</li></ul><ul><li>Change should lead to opportunities. So many organisations recruit good people, train and support them and then offer jobs to external candidates. This makes many employees feel helpless and that they cannot make an impact on problems and issues. A programme aimed at addressing problems with performance can help people to feel empowered and capable of tackling issues.</li></ul><ul><li>A strong sense of “us” in improving performance. Clarity on mission, vision, strategy and values is vital so that all employees understand the basics of an organisation's strategy. Again, this is not possible unless there is a coherent view of strategy at the top. Top management needs to be both distinctive and realistic: distinctive in their strategic choices and realistic in terms of delivery and the culture of the organisation. The business and cultural model has to be enforced. Microsoft, for example, have directors of culture and people who are focused on achieving this.</li></ul><ul><li>A desire to succeed and avoid failure – for many, confronting under-performance feels uncomfortable. Addressing these high-level issues requires multi-disciplinary skills. Management accounting and the advanced management accounting tools that include techniques such as shareholder value management, activity-based management and the balanced scorecard, can help deal with some of the issues raised. But management accounting techniques cannot work alone: it is leadership and the right human resource strategies that will support learning, encourage autonomy and create an environment for success.</li></ul><br /><em>Written by Stathis Gould. The writer is head of technical issues at the Chartered Institute of Management Accountants (CIMA), United Kingdom. This article first appeared in </em><strong>Insight</strong><em> – CIMA's online newsletter for accountants in business. </em><strong>Insight</strong><em> is accessible at </em><a href="http://www.cimaglobal.com/newsletters"><em>www.cimaglobal.com/newsletters</em></a><em>. For more information, please contact The Chartered Institute of Management Accountants (CIMA), Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com Website: </em><a href="http://www.cimaglobal.com/"><em>http://www.cimaglobal.com</em></a>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com0tag:blogger.com,1999:blog-2883577468018538027.post-80886697775205247732009-03-09T00:39:00.000-07:002009-04-20T08:03:07.981-07:00The Rise of Store Brands among Hypermarkets in Malaysia<div align="center"><strong><em>Abstract</em></strong></div><a name="OLE_LINK1"><em><span style="color:#000000;">The increasing cost of living in </span></em></a><em><span style="color:#000000;">Malaysia, the onset of the global financial crisis, increasing unemployment and uncertainty of economic recovery are driving most Malaysians and other people living in Malaysia to become more budget-conscious. The need to “stretch the Ringgit” becomes a norm. In the economic chaos, a business opportunity has presented itself, and the major hypermarkets operating in Malaysia – Carrefour, Giant and Tesco, are already exploiting the opportunity by introducing their respective store brands (a.k.a. house brands, retailer brands or private labels) of consumer goods. This article identifies and discusses the market forces driving the opportunity, the strategies the hypermarkets can consider to further develop the opportunity, and the strategies the manufacturer brands can adopt to defend their turf.</span></em><br /><br /><br /><br /><strong>1.0 Introduction</strong><br /><br />In the Fourth Quarter 2008 Peninsular Malaysia Voter Opinion Survey, respondents had ranked the top two concerns as:<br /><ul><li>Unfavourable economic conditions; and</li><li>Inflation and rising cost of living;</li></ul><p>as shown in Figure 1-1 (Economy, 2009, p. 12). In another newspaper report, it said that, “basic food items like a 400g loaf of bread cost RM1.60 in 1993 and the price has risen 30 percent to RM2.10” (Chin <em>et al</em>, 2008, p. F20). Ex-farm live chicken per kg has risen by 52.3 percent from RM2.43 in 1988 to RM3.70. Rice – the 15 percent broken variety type, has risen by 34.6 percent from RM13.00 in 1998 to RM17.50, as shown in Figure 1-2. (Note: USD 1 = MYR 3.64 or RM 3.64 as at February 25, 2009).</p><p></p><br /><p><strong>Figure 1-1:</strong> What is the Most Important Issue or Problem in the Country Today?<br /><em><strong>Source:<br /></strong>“Economy, race main worries”<br />New Straits Times, 3 February 2009, p. 12</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3635/3411124114_9bde91baa4.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 1-2:</strong> The Rising Cost of Living<br /><em><strong>Source:<br /></strong>“Spiralling out of reach” by Joseph Chin, Joseph Loh & Rashvinjeet S. Bedi<br />The Star, 22 June 2008, p. F20</em></p><p><em></em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3377/3411129648_c58bba87d8.jpg?v=0" border="0" /> </p><br /><br /><p>From the income perspective, “while the economy has grown in the last 50 years – at 6 to 8 percent annually, salaries have not matched these types of growth. As such, most of the private sector companies still pay Third World salaries” (Gnanalingam, 2008). Furthermore, with the current global financial crisis that has drastically affected global economies, pay rises, if any, in 2009 will remain small (Paul Raj, 2008; Malaysian workers, 2008).</p><p>Managing salary and wage increases to a minimum may also be inline with Malaysia’s positioning as being resource rich, offering excellent infrastructure and availability of skilled yet low-cost labour to continue attracting FDI (Malaysia 14th preferred, 2008).</p><p><strong>1.1 The Government’s call to buy more local products</strong></p><p>The global financial crisis has caused the governments of several countries, for e.g. Vietnam, Indonesia, Malaysia, United States and Peru, to encourage their citizens to buy more local products in order to save money (i.e. lower expenditure), stimulate the local economy and maintain some level of production capacities (In global, 2009; Indonesia mulls, 2009, p. B13; Ritikos & Ling, 2009, p. N4; Give local, 2009, p. 2; Gomez, 2009, p. 12; Bedi, 2009, p. F19; Liow: Use Malaysian, 2009; Millmow, 2009; President Garcia, 2009).</p><p>The “Buy Malaysian” call is especially important for Malaysia as 99.2 percent of the total numbers of businesses are SMEs, and they contribute 32 percent of the GDP with a workforce of 56.4 percent (Giving managers, 2009, p. 11). Furthermore, Malaysia’s exports had plunged by 28 percent in January 2009 (RM 38 billion) when compared to January 2008’s RM 53 billion – the worst decline in more than two decades (Damodaran, 2009, p. B2; Sarif, 2009, p. SBW10).</p><p>However, the WTO director-general has warned that such “measures by governments will jeopardise export sector jobs and risk setting the world on a damaging downward spiral of beggar-thy-neighbour protectionism” (Williams, 2009; Brazil may, 2009, p. B13; Trade Wars, 2009; Idris, 2009, p. SBW15).</p><p align="center">===========================================================</p><p align="center"><span style="font-size:130%;">Smart supermarket shopping just a click away<br /></span><span style="font-size:85%;">by Kristina George<br />(New Straits Times, March 14, 2009)<br /></span><a href="http://www.nst.com.my/Saturday/National/2504723/Article/index_html"><span style="font-size:85%;">http://www.nst.com.my/Saturday/National/2504723/Article/index_html</span></a></p><p align="center"><span style="font-size:85%;">This Web portal </span><a href="http://smartpengguna.my/default.aspx"><span style="font-size:85%;">http://smartpengguna.my/default.aspx</span></a><span style="font-size:85%;"> enables consumers to compare groceries and related products among the popular Malaysian supermarkets or hypermarkets. Currently, the comparative product / price information is only available for Klang Valley, Malaysia.</span></p><p align="center">===========================================================</p><p><strong>2.0 Market drivers</strong></p><p>The escalating cost of living and the need to stretch the dollar has increased the opportunity and demand for lower priced consumer goods i.e. the market pull effect.</p><p>Retailers which are able to offer consumer goods at lower prices i.e. the market push effect, wins higher sales from consumers who are now increasingly prudent in their expenditure.</p><p>This market situation provides marketers the business opportunity to identify and develop alternative consumer goods to continue attracting consumers to their stores.</p><p>Other micro- and macro-economic factors that are fueling the demand for store brands (also known as private labels, retailer brands or house brands) as alternatives to manufacturer brands are:</p><ul><li>Global economic slowdown, escalating costs and rising inflation</li><li>Global or regional expansion of large retailers e.g. Tesco, Carrefour</li><li>Smaller manufacturers turning to contract manufacturing when their own, but weaker brands fail</li><li>Increasing market competition</li><li>Low cost as a differentiation strategy to achieve competitive advantage</li><li>Retailers’ need to increase margins as operating cost increases</li><li>Store brand products becoming more sophisticated as variety increases, and the quality and packaging improves</li><li>Increasing willingness of consumers to consider lower price alternatives to stretch the household budget</li></ul><p><strong>3.0 Differentiation strategy – introduction of Store Brands</strong></p><p>From a strategic approach, the large retailers e.g. hypermarkets are faced with:</p><ul><li>A segment of consumers demanding for alternative lower cost consumer goods</li><li>The same segment of consumers expecting a minimal sacrifice in quality in lieu of the lower price</li><li>The hypermarket’s need to increase margin with the reduced selling price</li></ul><p>In essence, for the consumer, this can be translated to mean “low priced, respectably-branded consumer goods.” In other words, while consumers are increasingly attracted to lower priced consumer goods, they still require an acceptable assurance on the quality of those lower priced consumer goods.</p><p>Based on Porter’s Generic Strategies, as shown in Figure 3-1 below, Carrefour, Giant or Tesco can decide to challenge each other to become the lowest cost player in the Malaysian hypermarket segment. Who succeeds in becoming the lowest cost leader will depend on its value chain being the most efficient and lowest cost.</p><p></p><br /><p><strong>Figure 3-1:</strong></p><p></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3312/3410313081_5e41094cb8.jpg?v=0" border="0" /> </p><br /><br /><p>Striving to be the low cost leader can be effective when:</p><ul><li>The market comprises of many price-sensitive buyers</li><li>Buyers do not care for differences between brands</li><li>Many buyers with significant bargaining power exists</li><li>There are few ways to achieve differentiation</li></ul><p>Alternatively, Carrefour, Giant or Tesco can adopt a differentiation strategy instead of purely striving to become the lowest cost leader, because a strategy solely aiming to be the lowest cost leader is subject to the following risks:</p><ul><li>Competitors may imitate, thus driving overall industry profits down</li><li>Buyer interest may swing to other differentiating features beside price</li><li>Technological breakthroughs in the industry causing the strategy to become ineffective</li></ul><p>Moreover, most, if not all cost leadership strategies involve some degree of differentiation. Since the product subject here is the respective hypermarkets’ store brands, thus, the brand name of the hypermarket can serve as a strategic form of differentiation, for e.g. Hypermarket X’s store brand is perceived to be of higher quality among all the hypermarkets.</p><p>With their respective well-known hypermarket name that they already enjoy – which typically is synonymous with offering manufacturer brand products at everyday low prices – being able to further lower the prices of everyday goods while maintaining the perception that quality is not compromised, creates a competitive advantage to retaining existing customers and acquiring new customers.</p><p>Consumer perception do place a value on the store brand product based on the hypermarket’s name. In other words, Consumer A perceives that Store Brand X from Hypermarket X may be of better or higher quality than Store Brand Y of Hypermarket Y.</p><p>To date, all three foreign-owned hypermarkets have introduced their respective store brands in Malaysia – Carrefour <a href="http://www.carrefour.com.my/carrefour_brands.php">http://www.carrefour.com.my/carrefour_brands.php</a>, Giant <a href="http://www.giant.com.my/store_brand.html">http://www.giant.com.my/store_brand.html</a>, and Tesco <a href="http://www.tesco.com.my/article.cfm?id=43">http://www.tesco.com.my/article.cfm?id=43</a> (Hypermarket brands, 2008, p. 8).</p><p>The following advertisements (Figures 3-2, 3-3, 3-4, 3-5, 3-6, 3-7 and 3-8) by the aforementioned hypermarkets appeared in popular dailies to promote their respective store brands and to message the savings.</p><p></p><br /><p><strong>Figure 3-2:</strong> “Carrefour Products. Up to 30 percent cheaper compared to well known brands.”<br /><em><strong>Source:</strong> The Star, 11 June 2008, p. N7</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3633/3410318697_4ae811500a.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-3:</strong> “Cost Increase? Save more. Go Carrefour.”<br /><em><strong>Source:</strong> The Star, 4 July 2008, p. N21</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3620/3410319005_065f6a5c04.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-4:</strong> Carrefour’s “Life’s Full of Choices.”<br /><em><strong>Source:</strong> Sunday Star, 29 March 2009, p. M5</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3601/3411129938_c10d0af13a.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-5:</strong> “Giant Brand. Only RM1.99 each.”<br /><em><strong>Source:</strong> Sunday Star, 24 August 2008, p. N17</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3547/3410318941_30eed70f85.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-6:</strong> “Stretch your Ringgit. Spend less with Tesco.”<br /><em><strong>Source:</strong> The Star, 14 June 2008, p. N23</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3251/3410321915_38b92b7672.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-7:</strong> “New! Tesco Brand Electrical Range.”<br /><em><strong>Source:</strong> The Star, 28 June 2008, p. N26</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3645/3410321823_3a324b7041.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 3-8:</strong> “New! Tesco Brand Choices.”<br /><em><strong>Source:</strong> The Sun, 21 November 2008, p. 38</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3297/3411132814_d59aec0d12.jpg?v=0" border="0" /> </p><br /><br /><p>Furthermore, market reports by the Malaysia Ministry of Domestic Trade and Consumer Affairs are showing “that consumers are wising up on spending, and many are switching to alternative brands with comparable quality to branded goods. This is supported by the higher sales of house brands offered by the hypermarkets” (Loong, 2008, p. F27).</p><p>Datuk Shahrir Abdul Samad, minister of domestic trade and consumer affairs said, “Consumers are saying, let me look at quality and pay appropriate prices rather than going for the best brands all the time” (Loong, 2008, p. F27)</p><p><strong>4.0 Market audit – the market size of Store Brands</strong></p><p>According to a survey conducted last year by the Nielsen Company, “The demand for private-label products of local hypermarkets and supermarkets is increasing as more shoppers attempt to stretch their ringgit” (Kam, 2008, p. B7; More consumers, 2008, p. 50; Rising costs, 2008).</p><p>The Malaysian private label market from February to September 2008 was worth RM240 million as shown in Figure 4-1 (Kam, 2008, p. B7). This represents a 32 percent increase over the February to September 2007 period. As a comparison, branded goods or manufacturer brands grew only 15 percent for the comparative periods.</p><p>However, for the February to September 2008 period, manufacturer brands accounted for RM5.3 billion in sales. Thus, there is much room for store brands to grow from its 2008 sales of RM240 million.</p><p>It is also worthwhile to note that the survey revealed or confirmed that, “on average, house brands are 30 percent cheaper than their branded counterparts” (More consumers, 2008, p. 50) as shown in Figure 4-2.</p><p></p><br /><p><strong>Figure 4-1:</strong> Sales of Private Label Products vs. Branded Goods<br /><em><strong>Source:<br /></strong>“Consumers switching to private-label products” by Rachael Kam<br />The Star, 11 December 2008. p. B7</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3662/3410318509_4fba9d0cb0.jpg?v=0" border="0" /> </p><br /><br /><p><strong>Figure 4-2:</strong> Private Label Price vs. Branded Goods Price<br /><em><strong>Source:<br /></strong>“More consumers opt for in-house brands” New Straits Times, 11 December 2008, p. 50</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3640/3411124226_14120705c5.jpg?v=0" border="0" /> </p><br /><br /><p><strong>5.0 Strategies for hypermarkets to promote and grow their Store Brands</strong></p><p>As discussed earlier, hypermarkets are facing:</p><ul><li>A segment of consumers demanding for alternative lower cost consumer goods</li><li>The same segment of consumers expecting a minimal sacrifice in quality in lieu of the lower price</li><li>The hypermarket’s need to increase margin with the reduced selling price</li></ul><p>The key strategies hypermarkets can adopt are:</p><ul><li>Competing on price</li><li>Competing on quality at lower prices</li><li>Competing using portfolio segmentation</li></ul><p><strong><em>Competing on price</em></strong></p><p>The key initial attraction of store brands to consumers is the lower price of the alternative product to the market leading manufacturer brands. The alternative product can be defined as, “the consumer perceived almost equivalent product” to the manufacturer brand.</p><p>In other words, for a lower price, consumers can accept alternative products or products which they perceive as almost the same as the manufacturer brand products.</p><p>Furthermore, with store brands, the hypermarkets are not only able to offer alternative products at a lower price but also earn a higher margin compared to the manufacturer brands which they sell side-by-side.</p><p>Figure 5-1 shows the store brand and manufacturer brand pricing model comparison. While the contract manufacturers of the store brands may charge the hypermarket higher costs, the contract manufacturers also earn lower margins themselves as they have no cost adders such as advertising and promotional expenditures to cover compared to the brand manufacturers.</p><p></p><br /><p><strong>Figure 5-1:</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3370/3411124162_55d7b75434.jpg?v=0" border="0" /> </p><br /><br /><p>With the lower cost they obtain from contract manufacturers for their store brands, the hypermarkets can also earn a higher margin when they price the store brands close to manufacturer brands. The industry practice in Malaysia seems to be an average 30 percent price gap between store brands and manufacturer brands. This is further supported by the Nielsen Company audit of the private label market in Malaysia mentioned earlier.</p><p><strong><em>Competing on quality at lower prices</em></strong></p><p>In the previous paragraphs, I used the phrase “… almost equivalent product”. Why is almost equivalent important? </p><p>Although consumers may be shopping for lower price alternative products, but if the perceived quality of the store brand is in doubt, even the lower price may not significantly attract the consumers.</p><p>Thus, the store brand must be perceived as almost equivalent to the manufacturer brand which consumers have been using since trust or quality, and positive emotional bonding with the manufacturer brand have already been established.</p><p>In this aspect, hypermarkets such as Tesco and Carrefour offer different categories for their store brands. Tesco offers Tesco Value and Tesco Choice as shown in Figure 5-2, and also the Tesco UK Imported range, while Carrefour offers Carrefour Big Saver and Carrefour Quality Line (NOTE: Carrefour Top Life are sports and fitness equipments, and Carrefour Harmonie are fabric products, i.e. non-grocery categories).</p><p></p><br /><p><strong>Figure 5-2:</strong> Store Brand Categories - Tesco example</p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3624/3410541451_cfaabbf073.jpg?v=0" border="0" /> </p><br /><br /><p>Figure 5-3 shows how the hypermarkets position their store brand categories against manufacturer brands.</p><p></p><br /><p><strong>Figure 5-3:</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3598/3411352894_505c8ba571.jpg?v=0" border="0" /> </p><br /><br /><p><strong><em>Competing using portfolio segmentation</em></strong></p><p>Hypermarkets can also use their store brands to compete against manufacturer brands by adopting a combination of portfolio segmentation strategy.</p><p>Portfolio segmentation is broadly based on price, category, and benefit:</p><ul><li>Price-based segmentation</li></ul><p>Typically, this strategy uses two or three store brands to appeal to different price segments. Tesco uses this strategy with their Tesco Value offering basic need products at cheapest prices, Tesco Choice offering leading brand quality products at lower prices, and Tesco UK Imported range offering imported quality products for more discerning consumers.</p><ul><li>Category-based segmentation</li></ul><p>Carrefour uses this type of portfolio segmentation by offering Carrefour store brands across product categories such as Carrefour Big Saver offering everyday basic products at cheapest prices, Carrefour Quality Line that emphasizes on product quality such as freshness, flavour, aroma, etc, Carrefour Top Life offering a range of sports and fitness equipments, and Carrefour Harmonie offering quality fabrics and textiles.</p><ul><li>Benefit-based segmentation</li></ul><p>This form of segmentation strategy builds around consumers’ specific needs instead of appealing to consumers’ price sensitivity. For e.g., today, we find consumers being increasingly concerned about the type of fertilizers and chemicals used and long-term effects on health, thus, a market segment for natural and organic products is growing. Among the mentioned hypermarkets, Tesco UK Imported range also fits into this strategy by offering a higher quality benefit to consumers shopping for UK imported products.</p><p><strong>6.0 Effects on Branded Goods and their manufacturers</strong></p><p>How can brand manufacturers address the growing demand for store brands which competes for the same customer pool? How can brand manufacturers continue to supply and rely on large retailers e.g. the hypermarkets to promote the manufacturer brands when the hypermarkets are becoming more committed to promote their own store brands?</p><p>Manufacturer brands can consider and adopt the following strategies:</p><ul><li>Dual strategy – brand manufacturer continues producing its own brand and also the hypermarkets’ store brands</li><li>Increase partnership effectiveness</li><li>Increase the manufacturer brands’ value proposition</li><li>Become more innovative</li><li>Selectively fight store brands</li></ul><p><strong><em>Dual strategy</em></strong></p><p>In markets where store brands have gained market leadership or controls the lion’s share of the market, it may make viable business sense for the brand manufacturers with idle production capacity to produce store brands for the hypermarkets.</p><p>By eliminating stagnant brands and extensions, and focusing on a smaller range of successful manufacturer brands, and additionally, producing store brands for the hypermarkets, the brand manufacturers can defend and increase market share and vis-à-vis their overall revenues and profitability.</p><p>A complete switchover may also be viable in the long-term, especially for the Tier 2 brand manufacturers that are not as successful as the Tier 1 brand manufacturers – they can become a dedicated store brand producer to the hypermarkets.</p><p><strong><em>Increase the effectiveness of the partnership</em></strong></p><p>Brand manufacturers should realize that a hypermarket also competes against other hypermarkets and large retailers. Thus, a hypermarket will need brand manufacturers to help them differentiate against another hypermarket or large retailer. With the large volume commitment that a hypermarket chain can provide, brand manufacturers should be able to customize certain products for the hypermarket to create product exclusivity via exclusive SKUs (e.g. a lower priced 4kg bottle of cooking oil instead of the standard 5kg bottle, or a tube of Colgate toothpaste with extra 20 percent content with a minimal price increase), and exclusive one-time offerings or limited editions on a mutually benefiting basis.</p><p>Another area where brand manufacturers can continue to value-add to the hypermarkets is in product assortment or product range. For hypermarkets to have their own store brands, volume commitment is the name of the game. Thus, the hypermarket will need to focus into specific categories of products where there is substantial volume or economies of scale created within its chain of hypermarkets. However, a brand manufacturer such as Proctor & Gamble (P&G) can easily offer the hypermarket an assortment of brands without the need of the hypermarket to build its own economies of scale simply because P&G already has the economies of scale.</p><p><strong><em>Increase the value proposition of manufacturer brands</em></strong></p><p>Brand manufacturers can increase the value proposition of their brands against store brands by:</p><ul><li>Creating greater product affinity to consumers’ perception (image and emotions)</li><li>Managing the price gap between manufacturer brands and store brands of the same category</li><li>Delivering customer satisfaction and expectation via a quality edge</li></ul><p></p><br /><p><strong>Figure 6-1:</strong> Consumer Decision Making Process<br /><em><strong>Source:</strong> Deschamps and Nayak, 1995, p. 87</em></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3570/3411124006_9eed67c5b6.jpg?v=0" border="0" /> </p><br /><br /><p>The above Figure 6-1 shows the consumer decision making relationship between image and emotional bonds, the price gap, and quality.</p><p>Consumers utilize information about the product or brand image, price and quality to assist and reinforce their purchase decisions. If the manufacturer brand lacks the right fit to the consumer’s desired product image and emotional bonding, the prospect is lost.</p><p>If it fits, then the consumer will consider the price gap between the manufacturer brand and the store brand. If the price gap is acceptable, the consumer purchases the manufacturer brand.</p><p>By using or consuming the manufacturer’s product, the consumer determines whether the product delivers the desired or expected performance i.e. delivering the desired level of customer satisfaction for the consumer to begin establishing a positive relationship with the manufacturer brand, for e.g. repeat the purchase and recommending the manufacturer brand to others (Kumar & Steenkamp, 2007, pp. 195 – 196).</p><p><strong><em>Increase product innovativeness</em></strong></p><p>To continue maintaining their market leadership or defending their market share, brand manufacturers need to increase R&D expenditures to improve products and identify new product innovations.</p><p>From marketing management studies and research, the findings support the fact that, “as the number of new product launches in an industry increase, the share of private labels in the category declines” (Kumar & Steenkamp, 2007, p. 168).</p><p>Kumar & Steenkamp further says that, “Industries with a consistent history of new technology and brilliant innovation by brand manufacturers have powerful brands and relatively weak retailers” (2007, p. 168). New product technology and innovations are the corner stones of product differentiation strategies, and can create or attract profitable market segments. Differentiated products can act as an entry barrier for a market segment to the store brands.</p><p><strong><em>Selectively fight Store Brands</em></strong></p><p>The brand manufacturers, especially the market leading Tier 1 manufacturer brands can selectively fight the store brands in specific product categories i.e. track the store brand’s growth by product segment and compete against it market-by-market.</p><p>In fighting the store brands, the brand manufacturers will need to:</p><ul><li>Increase advertising and promotional budgets</li><li>Reduce prices via sales promotional activities and loyalty programmes</li><li>Introduce discount “fighter” brands</li></ul><p>In the long-term, brand manufacturers must regularly re-examine their business and operational efficiency to maintain their core competencies such as:</p><ul><li>Decrease production costs by increasing production efficiency with the use of new technology</li><li>Decrease operational costs by increasing operational and supply chain efficiency</li><li>Reduce waste and idle time within the whole value chain beginning from the raw material suppliers to internal operations to logistics service providers to wholesalers/retailers</li></ul><p><strong>7.0 Conclusion</strong></p><p>The economic and government influence, and the market drivers that helped to create the opportunity for the demand of store brands in Malaysia have been identified.</p><p>From the market audit conducted by the Nielsen Company, we can agree that there is a viable market for store brands in Malaysia, and ample opportunity for growth.</p><p>To develop the market for store brands, I have discussed the key issues and strategies the hypermarkets can undertake to promote their store brands and yet maintain strong business relationships with their suppliers i.e. the brand manufacturers.</p><p>For the brand manufacturers, the store brands are a threat to their business as more shelf space is being allocated to store brands since its demand is rapidly increasing. In this aspect, I have also discussed the key strategies brand manufacturers can consider in order to defend and continue growing their business.</p><p>However, the brand manufacturers which are most likely to suffer eroding sales or market share as the demand for store brands continue to accelerate are the Tier 2 brand manufacturers that presently have not been as successful to market their manufacturer brands compared to the market leading Tier 1 manufacturer brands.</p><p>A continuously improving knowledge-base and understanding of consumer needs and wants with respect to the changing economic conditions in the business environment will help ensure the survival and growth of both manufacturer brands and store brands, as in the end, consumers make the final decision to purchase what, where and when.</p><p>Thus, it is no surprise to find that manufacturer brand loyalty is still strong in Malaysia, based on a survey conducted by Synovate in November 2008. The survey spanned 18 countries and included 1,000 Malaysians aged 15 to 64 across all income levels (Chong, 2009, p. 53).</p><p>The brand loyalty survey results are tabulated as follows:</p><p></p><br /><p><strong>Figure 7-1:</strong></p><p><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://farm4.static.flickr.com/3565/3410312961_6ff014f9a5.jpg?v=0" border="0" /> </p><br /><br /><p>While this may be good news for brand manufacturers, the fact that the demand for store brands is growing at more than double the rate of manufacturer brands (i.e. 32 percent vs. 15 percent) serves as a strong reminder that brand manufacturers must continue to innovate, maintain customer loyalty, and generate new customer demand.</p><p></p><br /><br /><p><strong><em>References:</em></strong></p><p>Aaker, David A. (1996). <em>Building Strong Brands</em>. New York, NY: The Free Press<br /><br />Bedi, Rashvinjeet S. (February 1, 2009). “Save money, buy Malaysian.” <em>The Star</em>, p. F19<br /><br />Blackwell, Roger D., Miniard, Paul W. and Engel, James F. (2006). <em>Consumer Behavior, 19th Edition (International Student Edition).</em> Mason, OH: Thomson South-Western<br /><br />Brazil may take ‘Buy American’ to WTO. (February 18, 2009). <em>New Straits Times</em>, p. B13<br /><br />Chin, Joseph; Loh, Joseph and Bedi, Rashvinjeet S. (June 22, 2008). “Spiralling out of reach.” <em>The Star</em>, p. F20<br /><br />Chong, Yvonne. (February 16 – 28, 2009). “Standing by their Brands.” <em>Malaysian Business</em>, pp. 53 – 54<br /><br />Damodaran, Rupa. (March 7, 2009). “January exports plunge 27.8pc: Decline in value to RM 38.3 billion worse than market expectations.” <em>New Straits Times</em>, p. B2<br /><br />Deschamps, Jean-Philip and Nayak, P. Ranganath. (1995). <em>Product Juggernauts: How Companies Mobilize to Generate a Stream of Market Winners</em>. Boston, MA: Harvard Business School Press<br /><br />Economy, race main worries. (February 3, 2009). <em>New Straits Times</em>, p. 12<br /><br />Give local producers a chance, consumers urged. (January 17, 2009). <em>New Straits Times</em>, p. 2<br /><br />Giving managers the right skills. (February 17, 2009). <em>New Straits Times</em>, p. 11<br /><br />Gnanalingam, G. (September 12, 2008). “Analysis: Malaysia Has First Class Infrastructure But Third World Salaries.” <em>Bernama.com</em> <a href="http://www.bernama.com/bernama/v5/newsbusiness.php?id=358773">http://www.bernama.com/bernama/v5/newsbusiness.php?id=358773</a><br /><br />Gomez, Jennifer. (January 29, 2009). “When buying local goes a long way.” <em>New Straits Times</em>, p. 12<br /><br />Hypermarket brands a hit with the thrifty. (June 13, 2008). <em>New Straits Times</em>, p. 8<br /><br />Idris, Izwan. (February 21, 2009). “In protectionism we do not trust.” <em>The Star</em>, p. SBW15<br /><br />In global crisis, exporters turn to local market. (February 16, 2009). <em>VietnamNet Bridge</em> <a href="http://english.vietnamnet.vn/biz/2009/02/829230/">http://english.vietnamnet.vn/biz/2009/02/829230/</a><br /><br />Indonesia mulls ‘use local’ decree. (February 17, 2009). <em>New Straits Times</em>, p. B13<br /><br />Kam, Rachael. (December 11, 2008). “Consumers switching to private-label products: Cost-conscious buyers going for cheaper alternatives.” <em>The Star</em>, p. B7<br /><br />Kapferer, Jean-Noel. (2008). <em>The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term, 4th Edition</em>. London, England: Kogan Page Ltd<br /><br />Kotler, Philip and Keller, Kevin Lane. (2006). <em>Marketing Management, 12th Edition</em>. Upper Saddle River, NJ: Pearson Prentice Hall<br /><br />Kumar, Nirmalya and Steenkamp, Jan-Benedict E.M. (2007). <em>Private Label Strategy: How to Meet the Store Brand Challenge</em>. Boston, MA: Harvard Business School Press<br /><br />Lincoln, Keith and Thomassen, Lars. (2008). <em>Private Label: Turning the Retail Brand Threat into your Biggest Opportunity</em>. London, England: Kogan Page Ltd<br /><br />Liow: Use Malaysian goods. (March 18, 2009). <em>The Star</em>, p. N10<br /><br />Loong, Meng Yee. (May 18, 2008). “Learn to stretch the Ringgit.” <em>The Star</em>, p. F27<br /><br />Malaysia 14th preferred destination for FDI. (February 4, 2008). <em>Malaysian Industrial Development Authority (MIDA)</em> <a href="http://oldweb.mida.gov.my/beta/view.php?cat=53&scat=1991">http://oldweb.mida.gov.my/beta/view.php?cat=53&scat=1991</a><br /><br />Malaysian workers rally for better pay amid rising costs. (May 8, 2008). <em>The China Post</em> <a href="http://www.chinapost.com.tw/asia/malaysia/2008/05/08/155443/Malaysian-workers.htm">http://www.chinapost.com.tw/asia/malaysia/2008/05/08/155443/Malaysian-workers.htm</a><br /><br />Millmow, Alex. (February 3, 2009). “Global crisis about to strangle us.” <em>The Canberra Times</em> <a href="http://www.canberratimes.com.au/news/local/news/opinion/global-crisis-about-to-strangle-us/1422891.aspx">http://www.canberratimes.com.au/news/local/news/opinion/global-crisis-about-to-strangle-us/1422891.aspx</a><br /><br />More consumers opt for in-house brands. (December 11, 2008). <em>New Straits Times</em>, p. 50<br /><br />Ng, Fintan. (February 28, 2009). “Soaring cost of living: Living alone in the Klang Valley can be expensive in troubled times.” <em>The Star</em>, p. SBW15<br /><br />Paul Raj, Adeline. (December 10, 2008). “Smaller pay jumps ahead.” <em>New Straits Times</em> <a href="http://www.nst.com.my/Current_News/NST/Wednesday/National/2424246/Article/pppull_index_html">http://www.nst.com.my/Current_News/NST/Wednesday/National/2424246/Article/pppull_index_html</a><br /><br />President García asks Peruvians to buy local products. (February 4, 2009). <em>Andina</em> <a href="http://www.andina.com.pe/Ingles/Noticia.aspx?id=MI377gFsSI4">http://www.andina.com.pe/Ingles/Noticia.aspx?id=MI377gFsSI4</a>=<br /><br />Rising costs pave way for private label sales in Malaysia. (December 5, 2008). <em>The Nielsen Company</em> <a href="http://my.nielsen.com/news/20081205.shtml">http://my.nielsen.com/news/20081205.shtml</a><br /><br />Ritikos, Jane and Ling, Sharon. (January 17, 2009). “Buy Malaysian goods, urges PM.” <em>The Star</em>, p. N4<br /><br />Sarif, Edy. (March 7, 2009). “Exports down 28% in January.” <em>The Star</em>, p. SBW10<br /><br />Trade Wars: Will Protectionism Win out over Recovery? (February 18, 2009). <em>Knowledge@Wharton</em> <a href="http://knowledge.wharton.upenn.edu/article.cfm?articleid=2165">http://knowledge.wharton.upenn.edu/article.cfm?articleid=2165</a><br /><br />Upshaw, Lynn B. (1995). <em>Building Brand Identity: A Strategy for Success in a Hostile Marketplace</em>. New York, NY: John Wiley & Sons<br /><br />Williams, Frances. (February 3, 2009). “Lamy warns on ‘buy local’ measures.” <em>Financial Times</em> <a href="http://www.ft.com/cms/s/0/a013e78e-f20e-11dd-9678-0000779fd2ac.html?nclick_check=1">http://www.ft.com/cms/s/0/a013e78e-f20e-11dd-9678-0000779fd2ac.html?nclick_check=1</a></p><p></p>Andrew Chinhttp://www.blogger.com/profile/11801682094693497893noreply@blogger.com3