Analysis Of British Petroleum And Its Competitive Environment Management Essay

Analysis Of British Petroleum And Its Competitive Environment Management Essay This report highlights three aspects of business development and market growth for British Petroleum considering the competitive environment of BP, the key business strategies of BP for five years and the resources and capabilities that are available to BP for the last five years. The competitive environment point towards new capabilities that BP has developed for years to maintain competitive advantage. Competitive advantage has been analyzed using Porters model and it is suggested that differentiation and focus could be a response to changing market conditions. The competitive environment is also affected by factors such as brand image and reputation as related to social responsibility and environmental awareness. BPs strategies have focused on IT outsourcing to energy efficiency, leadership building and stakeholder management, application of resources and technologies, safety as well as climate change concerns. BPs investments have led to sustained production and volume growth and this is expected beyond 2010. BPs capabilities and financial resources received a boost with the rise of oil prices and growing demands worldwide with BP main businesses being in petrochemicals, petroleum refining, and oil and gas exploration and production. 1. Competitive Environment of BP BP is a diversified energy products company engaged in oil and gas explorations and development or production and transportation of crude oil and natural gas. BP is responsible for refining, marketing, transportation, sale of gasoline, diesel fuel, jet fuel and other petroleum products; and the production, marketing and sale of petrochemicals. The global oil and gas industry being high competitive show that with expanse and success of a company, capabilities are stronger and competitors could have problems understanding or imitating these. So developing new capabilities would be essential in maintaining competitive advantage. Competitive advantage is attained when capabilities are neither simple and highly imitable nor too complex that defies internal steering and control. Capabilities that grow through use are considered critical to success and BP and other similar companies will have to develop such capabilities (Kay, 1993). A resource based view suggests that sustainable competitive advantage could help in developing existing and new resources and capabilities in response to changing market conditions. Knowledge and knowledge management are related to value creating assets and helps in competitive advantage. As far as the competitive environment is concerned, there could be sufficient competition in the main markets of BP although world energy markets are unaffected by government policies and changes. The global economy and globalization could be some of the factors that have triggered competition in the world market and more so for the oil and gas industry (Bowman and Faulkner, 1997). The oil industry has been dominated by a few major international oil companies, including BP, Shell, ExxonMobil and Chevron along with companies of the gulf states. Seven major oil companies produced, transported and refined as well as marketed two thirds of the oil supply around the world for several years. State owned oil companies as in Saudi Arabia, Gulf and OPEDC countries are the largest suppliers of crude oil even today. Aramco has produced more than four times as much oil as ExxonMobil which is the largest private sector oil company and ExxonMobil produces twice as much oil and gas. Gazprom is anot her such company which is majority-controlled by the Russian government but also privatized and is responsible for more than 20% of world production and of exports of natural gas. The oil industry and companies in the OPEC states have diversified into refining, marketing and petrochemicals, but these may be of secondary importance when considered on a global basis although the contributions of such companies are important in certain regional markets. There are also problems of environmental awareness and corporate responsibility and BPs strategies have been framed by these considerations. Sarkis and Tamarkin (2005) addressed the ways of reducing greenhouse gases and organizations involved in reducing emissions and with emergent markets. Investment in equipment could help reduce emissions and could boost sales. However there could be a faster price rise and projects may not be economically feasible leading to the need for more stringent regulations. Real options analysis is considered an important tool for the energy industry and the energy industry is still completely influenced by greenhouse gas policies drawing attention to emissions and the role of controlling greenhouse gas emissions within the industry. 2. Key business strategies of BP over the past five years. Analysis using Porters generic strategies to discuss why this strategy was pursued or changed. Some of the key directions towards strategy included energy efficiency with BP operations such as considering the price of carbon in investment decisions and promoting low cost energy pathways through gas or power generation. The company also plans to make continued investments in alternative energy with bio fuels, wind and solar or carbon sequestration and investments in research and technology. Companies focus on safe and reliable operations with continued journey in personal safety and implements operating management system with compliance. The people efforts are on building capabilities and leadership behaviors and performances help in restoring revenues or reducing complexity and costs. Apart from the culture of leadership and restructuring, building skills and capability and diversity or reward for performance are important elements of company strategy. BP already identified new regions of access for its operations including Iraq, Indonesia, Jordan, and new acreage in Gulf of Mexico and Egypt. The reserves and resource replacement are at 12%-250% and production growth was at 4% (Hayward et al, 2010). The success story of the company has been projected as governance and shareholder alignment, safer operations and volume growth as well as steady financial performance. 2010 expected performance has been projected at $4 billion investment, production growth of 1-2%, focus on cost efficiency and development of projects with an average 1-2% volume growth until 2015 with increased potential and sustained growth to 2020. Resource bases and sources of growth beyond 2015 has been marked through expanding deepwater, leveraging expertise in gas and managing the giant oil fields of the world and enabling application of technology. The focus of the company has been on cost and capital efficiency and profit growth and diversifying the portfolio with a growing resource base. A momentum on costs and strategies and operations and an average 1-2% volume growth was expected until 2015 (Hayward et al, 2010). BP is also shown as having increased potential to sustain growth to 2020 and changes in the process could drive capital and cost efficiency. Fuel value chains through quality and integration could mean right markets and right locations for logistics and refineries and quality products and brands through marketing and channel management. BP has also highlighted supply optimization and trading and common processes at the back office. Among its infrastructural changes, BP has undergone major rebuilds of CDU to process heavy crude and for the manufacture of crude oil and also new world scale sulphur removal and gas oil hydro treating units. Refinery infrastructure upgrade shows location advantage. The market share possibilities discussed showed 40% capital employed in growth markets with leading technologies and strong customer relationships with margin share growth and premium brands. The company also gives importance to safety and efficiency, quality and integration and application of resources and technology and the emphasis provided is on safe and reliable operations. In the next 2-3 years over $2billion of pre tax performance opportunity was also identified. Costs were at 2004 levels with their refinery modification in 2012 (Hayward et al, 2010). The strategy of the company was given as a focus on the growth of profits as well as cost and capital efficiency through upstream production and downstream strategies are higher turnaround and cost efficiency. Alternative energy is seen as focused and disciplined with higher corporate efficiency and strategic growth. The focus on strategy is based on profit growth and use of alternative energy, as also a focus on corporate performance and efficiency and on cost and capital efficiency. BP was among the first multinational companies that joined in the merging consensus to address climate change (Kolk and Levy, 2001). BP has focused on a strategy to reduce greenhouse gas emissions and along with solar energy, BPs other lines of business are seen as exploration, oil and chemicals. However as far as BPs position towards climate change is concerned, analysts have tried to examine Is BP reacting to inevitable environmental pressures, but conducting business as usual, or is BP seizing the moment and opportunity and using global climate change as a doorway to a new business model for the 21st century? This seems an important analysis as it marks whether BP is projecting a new business model through the climate change focus or simply responding to the global environmental pressures and challenges and whether the climate change focus within its strategy would be positive or negative for BP (Lowe et al, 1998). As far as the analysis of BPs strategies are concerned, Porter has argued that any firms strength would ultimately depend on cost advantages and differentiation. The generic strategies that should be followed by any firm for success have been given as cost leadership, differentiation and focus (Porter, 1998). Cost leadership is attained through low cost of materials and integration decisions and differentiation strategy offers unique products and attributes to clients giving a competitive edge, and focus provides a narrow market focus so that specific needs of segments are met. Porters general strategies could explain the key business strategies adopted by BP in the last five years and these were related to climate change as well as cost and capital efficiency and profits. Juris (1998) suggested that in the UK it is possible to move from a monopoly of one company dominating the market to a competitive environment with many players and this is true even in the natural oil and gas industry without significant structural reforms within the business environment, although this could be expensive. Structural reforms and innovation brings about differentiation and launch of products and services that the consumer perceives to be different, Any form of change or deregulation must be accompanied by regulatory and institutional frameworks and all entrants to the market should be given equal rights. With cooperation between the government and industry participants, there has to be mechanisms for appropriate balancing and operating. BP will also have to follow these regulations towards market balance despite being a major player. Industry participants have tried to reach a consensus on how to enhance the existing framework that could make markets more efficient. British oil and gas industry will have to effectively give more time and resources to developing a tariff structure for pipeline capacity and transportation services in tariff markets (Juris, 1998). BP has a role to play in stabilizing tariffs that could make the markets efficient. Cross (1995) highlighted outsourcing as a BP strategy and explained how the BP Exploration Operating Company, $13 billion division of British Petroleum Company explores and produces oil and gas and outsourcers all IT operations in efforts to cut costs and get more flexible higher quality IT resources to improve business. At BP exploration it was decided that the company no longer needed technologies that provided business information to employees and this could be outsourced. There were problems encountered with internal IT departments and the old and new machines as well as the need to focus on technological details rather than wider more important business issues led to the need for outsourcing these to technicians. As far as BPs technology strategy is concerned, BP diverted its IT support through outsourcing. Outsourcing helped in the reshaping of the IT department. At BP information technology was used as utility for operations to develop application and supply processing power as also to provide technology support. This is now given to outsourcing providers and the company buys generic applications or contracts the work. The IT department is expected to improve business rather than be an internal group that simply meets supply of the company. The company however has a different IT strategy and does not rely on a single supplier for all IT needs although this could make BP to escalate its fees and become more rigid in its services. At the same time selective outsourcing and division of IT operations led to strain on management resources. BPs IT strategy focused on buying IT services from multiple suppliers although these could be delivered in a way as if by single supplier. Contractors delivered services to 42 BP businesses worldwide. The subcontracts were also performed effectively and the cornerstone of the BP outsourcing strategy was to use services from multiple suppliers and yet project them as one. The IT department is kept separate from Operations so that the IT managers could independently work on the business rather than get involved in technicalities. Several IT services including large and small providers were used for outsourcing which was however a difficult task but had the benefits of reduced fixed costs, im proved service, and access to new ideas and technologies (Cross, 1995). However the downsides were the technical issues and the danger of operations and management getting loaded with IT problems. 3. Resources and capabilities of BP over the five years, and analysis of the extent to which the company has aligned its resources and capabilities to its business strategies The alignment or use of resources and capabilities to shape business strategies of the company shows that BP placed a great emphasis on infrastructure and profit growth by building its resources and through partnering and strategic alliances. BP has built its larger base by organizing around the smaller business units and the company has several smaller business units that work together and the resources are available easily and quickly. The company follows a decentralization strategy with its various units having independent operations although there are differing views on whether this has been particularly helpful or led to original thinking. New approaches to BP business showed how the BP business could successfully steer through crises although the recent focus has been on BPs strategy towards climate change (Kolk and Levy, 2001). Considering the changes in BP strategy, it has been noted that BP had a politicized bureaucracy managed matrix structure and with the complexity performance declined and the company faced financial crisis. In recent years however BP has reported highest profits $4 billion in the third quarter of 2004 alone. The high prices of crude oil added to the profits although the companys cost efficient operations were key to strong performance. The company also absorbed two oil companies Amoco and Arco and other companies and the acquisitions helped in the expanse and scope and several strategic and organizational changes added to the remarkable turnaround in the companys performance (Roberts, 2005). BPs transformation came as it divested unrelated lines of business and divided business into units with three basic businesses with upstream oil and gas exploration and production, downstream petroleum refining and marketing and petrochemicals. There were different functioning markets and the unit s were run independently adding to the strategic advantage of the company. The company presentations showed that the US refining portfolio was fully operational and US convenience retail helped in reducing marketing footprint with cash costs down by 15% in 2008. $4billion was invested by the company for alternative energy since 2006 and employee count was reduced to 7500 and cash costs were also reduced by billions in 2009, bringing down the overall expenses of the company (Hayward et al, 2010). Among other strategic directions of the company are using solar energy as alternative energy and fuel and BP has been successfully developing the solar energy potential as one of the greener sustainable sources of energy. BP corporate strategy has also been focused on issues of climate change (Kolk and Levy, 2001) and there are two directions to this strategy. One is the potential advantage in corporate reputation and image if BP is projected as green and clean company which controls its business units and functions according to global climate conditions, and the other is the possibility of a new business model within which BP could work and using of solar energy as green energy is already a step towards this motive. In the last five years BP resources and capabilities have changed drastically. Along with addition of BP solar energy, there has been increased investments and increased profits with higher oil prices. BP has also potentially expanded its reach and operations across many new regions and continued to add new resources and capabilities including material and financial to fulfil its strategic directions. The business strategies of BP have been primarily geared towards profitability and corporate responsibility so along with cost leadership, focus, innovation, differentiation and climate change, BP had diversified and categorized its business units along with mergers and acquisitions.

The Effects of Drug Abuse

The Effect of Drug Abuse Jason Russ The Effect of Drug Abuse Many people do not understand why or how other people become addicted to drugs. It can be wrongfully assumed that drug abusers lack moral principles or willpower and that they could stop using drugs simply by choosing to change their behavior. In reality, drug addiction is a complex disease, and quitting takes more than good intentions. In fact, because drugs change the brain in ways that foster compulsive drug abuse, quitting is difficult, even for those who are ready to do so.Through scientific advances, we know more about how drugs work in the brain than ever, and we also know that drug addiction can be successfully treated to help people stop abusing drugs and lead productive lives. Today, thanks to science, our views and responses to drug abuse has changed dramatically. â€Å"Groundbreaking discoveries about the brain have revolutionized our understanding of drug addiction, enabling us to respond effectively to the pr oblem,† (Volkow).Addiction is a developmental disease that begins in infancy and adolescence and is influenced by a combination of factors involving genes, environment, and an individual’s age at first drug use. The genes that people are born with in combination environmental influences of their addiction defenselessness. To addition that, gender, ethnicity, and the mental disorders may influence risk for drug abuse and addiction. â€Å"Scientists estimate that genetic factors account for between 40 and 60 percent of a person’s vulnerability to addiction, including the effects of environment on gene expression and function.Adolescents and individuals with mental disorders are at greater risk of drug abuse and addiction than the general population†, (Volkow). Few weakness genes have been found for alcohol dependence and nicotine addiction. Alcoholism is a genetically inherited disease. There are several evidences proving that â€Å"Scientists at Washington University School of Medicine conducted a genome-wide association study in 2006 and identified several novel genes involved in nicotine dependence.In 2004, researchers at the Johns Hopkins University School of Medicine found a protein, called Arc, which may be a culprit in drug addiction. The protein helps the brain retain memories for longer than an hour or two†, (Association of American Medical Colleges). â€Å"In 1994, scientists at the Oregon Health & Science University were the first to clone the mammalian gene for the D2 dopamine receptor. Dopamine is a brain neurotransmitter that is thought to be essential to the brain’s response to drugs like opiates and psycho stimulants,† (Association of American Medical Colleges). Johns Hopkins University School of Medicine researchers reported in 2006 that men’s brains show evidence of up to three times the amount of the brain chemical dopamine as women’s brains when exposed to amphetamines. This is the first clinical study that explains why more men than women abuse amphetamines and could lead to tailored treatments for drug abuse and neurological diseases†, (Association of American Medical Colleges).On the other hand, many people believe that â€Å"Addiction is a choice†, meaning anyone can stop or moderate their use of addictive drugs anytime they want to by just going to Meditation, Yoga, Exercise, Acupuncture and Counseling. However, drug addiction is a certain disease because one of the main reasons is called dopamine. â€Å"Addictive drugs trigger the release of the brain chemical dopamine, which in turn creates a reward circuit in the brain. This circuit registers that intense experience as â€Å"important† and creates lasting memories of it as a pleasurable experience.Dopamine changes the brain on a cellular level, commanding the brain to â€Å"do it again,† which heightens the possibility of relapse even long after the behavior (or drug) has s topped. Dopamine also helps to explain why intense experiences can be just as addictive as drugs,† (Smithstein). A person’s environment includes many different influences, from family and friends to quality of life in general. Factors such as peer pressure, physical and sexual abuse, stress, and quality of parenting can greatly influence the occurrence of drug abuse and the growth to addiction in a person’s life.Many people today do not understand why some become addicted to drugs or how drugs change the brain to foster obsessive drug abuse. Parents who abuse drugs or engage in criminal behavior can increase children’s risks of developing their own drug problems. Use of substances by parents and their children is strongly correlated; generally, if parents take drugs, sooner or later their children will also. Teenagers who use drugs are more likely to have one or more parents who also use drugs. Children who depend on illicit drugs usually have poor social skills or academic failures. In 2004, researchers at the David Geffen School of Medicine at UCLA used structural magnetic resonance imaging (MRI) and computational brain mapping to reveal structural abnormalities in the brains of chronic methamphetamine users†, (Association of American Medical Colleges). â€Å"A 2005 study at the University of California, San Diego, School of Medicine showed that functional MRI might be used to predict relapse in substance-dependent individuals. A simple two-choice test correctly predicted 20 of 22 subjects who did not relapse and 17 of 18 subjects who did†, (Association of American Medical Colleges). In one study, 41% of addicted parents reported that at least one of their children repeated a grade in school, 19% were involved in truancy, and 30% had been suspended from school†, (National Association for Children of Alcoholics). People, who believe that drug addiction is not a disease, claim that have nothing do with the environm ent. But the scientist says that a people were influenced by a combination factors including genes and environment increased drug abuse. â€Å"In 1995, nearly 3. 1 million children were reported to child protective services as abused or neglected. Approximately one million of these reports were substantiated.Substance abuse was found to be a factor in a majority of these cases†, (sparkaction. org). Behavioral treatments help engage people, modifying their attitudes and behaviors related to drug abuse and increasing their life skills to handle complicated, stressful life circumstances and environmental cues that may trigger intense cravings for drugs. Additionally it can enhance the effectiveness of medications and help people remain in treatment in the longer term. The combination of genetic and environmental, factors with serious developmental stages in a person’s life to affect addiction vulnerability.Even though taking drugs at any age can lead to addiction, the ear lier that drug use begins, the more likely it will progress to more serious abuse, which teenagers will suffer more. Because their brains are still developing in the areas that choice, and self-control, young people may be especially prone to risk-taking behaviors, including trying drugs of abuse. Babies may be born premature and underweight were exposed to legal and illegal drugs in the womb. This drug exposure will damage and slow the child’s intellection and behavior later in life. Adolescents who abuse drugs often, do poorly academically, and drop out of school.They are at risk of unplanned pregnancies, violence, and infectious diseases. Adults have problems thinking clearly, remembering, and paying attention because the drugs damaging their brain cells. They often develop poor social behaviors as a result of their drug abuse, and their work performance and personal relationships suffer. Parents’ drug abuse often means chaotic, stress-filled homes and child abuse a nd neglect. â€Å"Such conditions harm the development of children in the home and may set the stage for drug abuse in the next generation. It is a proven fact that substance abuse is the leading cause for people to commit crimes.Drugs and alcohol can mess with a person’s mind and cause them to do stupid things, as in robberies, murders, become violent, etc. Drugs such as alcohol, cocaine, heroin, marijuana, narcotics and non-narcotics (prescription pills), opium, ecstasy, and mushrooms can all lead to psychological effects on a person’s mind. â€Å"Amphetamines and cocaine increase wakefulness, alertness and vigilance, improve concentration, and produce a feeling of clear thinking (Barton R&M, 2008). There is generally an elevation of mood, mild euphoria, increases sociability, and a belief that one can do just about anything. Depending on the drugs that are being used and the way they are being used, depends on how long the effects from it will last. Some can last from a few minutes to a few hours. Usually the prescription pills last for hours and cocaine effects last for only a few minutes. Any drug can lead to problems with a person’s brain; it can make one mentally disabled. It can also lead to regular nose bleeds, loss of smell, swallowing problems and inflammation of nasal septum. This can occur if one abuses drugs by snorting it through their nose.The abuse of prescription drugs are the second most abused drugs in our Nation, with Marijuana being first and Cocaine being third, heroin fourth, and methamphetamine fifth. This list will give an idea of exactly how serious this type of drug addiction is to our Nation today and how it will impact our future. According to the National Health Institute about 20% of people have used prescription drugs for non-medical issues (National Institutes of Health). When you are prescribed pain medication for an injury you may be told to take one pill every 4 hours but you feel that one is not work ing so you take two this is prescription drug abuse.You may not think that it is that big of a deal but studies say that if you abuse it once you are more at risk of abusing prescription drugs again. Although most people who abuse prescription drugs abuse pain killers there are other types that are abused also. Drug addiction is a chronic yet preventable. According to NIDA-funded research, they have shown that prevention programs relating families, schools, communities, and the media are effective in reducing drug abuse. Although many actions and cultural factors affect drug abuse trend, when people recognize drug abuse as harmful, will stop taking drugs.Thus, education is key in helping people and the public understands the risks of drug abuse. Teachers, parents, medical and public health professionals must keep sending the message that drug addiction can be prevented if one never takes drugs. References: Barton R&M 2008. , â€Å"Mexico's Drug-Related Violence,† Congressiona l Research Service â€Å"Drug Use and Abuse: Fighting the Destructive Grip of Addiction† Kirst-Ashman, K. (2011). Human behavior in the macro social environment (3rd ed. ). Brooks Cole.ISBN: 9780495813651. Kolar, A. F. , Brown, B. S. , Haertzen, C. A. , & Michaelson, B. S. , CHILDREN OF ADDICTED PARENTS: IMPORTANT FACTS. National Association for Children of Alcoholics, 1994 Nora D. Volkow, Science of Addiction. National Institutes on Drug Abuse, April 2007 Samantha Smithstein, Dopamine: why it's so hard to â€Å"just say no†. Psychology Today, 19 August 2010

Royal Ahold’s Case Write Up

Executive Summary The case discusses the Royal Ahold’s the major events that led to the demise of a great European company. The case presents some of the key issues in the areas of leadership, strategy, audit and accounting fraud that resulted in their disaster. The case identifies the problems made by the management in selecting the improper growth strategy and incentive plan that encouraged unethical behaviour from the senior management. The events presented touch and highlight management and governance issues, which are so important in managing global companies.After analysis of the cases and financial statements, I have come with questions and concerns on the management and financial statements that could have caught this earlier on. Questions to be asked and process of approving budgets, corporate strategy, risk controls would have raised concerns on the management style. Some of the other recommended actions for board and its various committees would have discouraged the improper management practices. Some of these questions might have surfaced real issues and / or encouraged the right practice.I found various accounting standards, challenges of global audit process; in this case it was led by Deliotte. The CEO’s and leadership growth strategy was the reward and recognition was improper. The number of acquisitions made during the 90s and continuous pressure was put on all subsidiaries to grow the sales by 15% were bad decisions. This alone led to many other problems within the company. The CEO’s growth strategy and desire to quickly grow the company put immense pressure on all other companies and senior management to somehow meet the CEO’s expectation.It all resulted into fraudulent activities and ultimately disaster of great company. I recommend adopting changes to incentive plans, non-financial factors be part of success criteria. In measuring financial success, working capital ratio, inventory days, receivable and payable ta rgets should be part of incentives. Above all, I recommend changes to the board committees and ensuring their work is independent was also important, i. e. audit committee, establishment of HR committee to raise issues and improve the overall organization culture. The case also highlights the issue of multiple accounting standards being practiced in very country.A standard corporate wide accounting standard in Royal Ahold must have been used. Both external and internal auditors must have report ed numbers in a consistent approach. I recommend that auditors had direct reporting to board and should have empowered and trained to look for documentation and management structures in their audit process. Had they dig deep on all areas of concerns of material significance they might have found side letters. I have also highlighted other recommendations including the controls in the accounting standards and in preparing financial papers.Incentive plans and corporate strategy be realistic to avoid unwanted behaviors. Tone of the top management including the board’s, assignment of responsibilities be clearly stated and periodically measured. Student id: 250712690 1 Management Accounting Exam Problem Identification: The case depicts another case of fail of governance and business ethics. This appears to be a fraud and not just accounting mistakes. By 2003, the time of the case, Enron, WorldCom and few others had already identified the need of business ethics and corporate governance.Royal Ahold series of events happened mainly due to greed and unethical behaviour but what really underlies is the objective setting, growth strategy and, rewards recognition criteria set by management. The case also presents issues of cost accounting, in terms of, when to apply the manufacturing rebates. Consolidation of subsidiaries and joint ventures also played a role in this fraud. It also shows bad governance, flaws in external audit, failure of internal audit functions and to som e degree their competency. Leadership strategy: Royal Ahold’s CEO’s strategy of 15% growth year-over-year was very aggressive.The reward and recognition structure around the sales number was improper as it led management of all subsidiaries and other business units to increase the revenue and meet the targets. CEO kept communicating to board and shareholders the expectation around the sales strategy and likelihood of meeting these targets. Consequently, it created a culture whereby senior management were under pressure to meet the sales objective. The senior management and head of subsidiaries must have felt that missing the sales targets is not even an option. Accounting Fraud: The case presents few big issues of accounting.Firstly, the issue is of the incorrect accounting treatment of manufacturing rebates and promotional allowances. My opinion is that rebates cannot decrease the cost of goods unless there is a certainty of getting the rebates. If the rebates are unc ertain they cannot decrease the cost of goods incorrectly. From the case, it appears that management ordered more quantity of goods then they could have sold. They booked the rebates at time of goods received and decrease the cost of goods prematurely. (Assumption: It is not very clear from the case, if these rebates were booked as income or adjusted against the cost of goods i. . decrease in cost of item. I have assumed that Royal Ahold accountants decreased the costs (prematurely as per above paragraph). If these were booked as income, then it is even a bigger fraud and not an accounting error) Second accounting fraud problem is the accountants preparation of Royal Ahold’s parent company financial statements. They consolidated the financial statements including some of the joint ventures when Royal didn’t even had control over them. Royal Ahold did not own more than 50% of these Joint Ventures and did not have the control of the decision making.They created fraudulen t paper work to show they had control on these join venture companies. This is a pure fraud as they created agreements to satisfy auditors and try to hide the real facts. Audit: Both external auditors and internal auditors (and audit committee) failed to detect any of the accounting issues. It could have been missed as accounting standards in many countries is different. External auditors, even though they may all be of Deloite, of one country only audits that country statements, so they may not be familiar what might be happening in other parts of the company.However, the Royal Ahold parent company auditors are responsible to have an oversight of companywide audit and should be held responsible for over -looking these fraudulent transactions. Internal audit and board’s audit committee failed to detect any of the misrepresentation either. On top of that in Netherlands there were two boards (Governing Board and Supervisory Board) and both boards weren’t able to detect o r raise red flag on any of these problems and misrepresentations. Management having two sets of paper work with JV (Joint Ventures) without coming under the investigation shows incompetency of audit functions.Governance / Audit Structure The way the governance and audit structure was laid out at Royal Ahold, there were five different committees and entities were responsible to review accounting and financial controls and practices that could have asked questions and raise concerns (red flags). They were: The governance board, supervisory board, the audit committee, internal audit department and the external auditors. Each should have independently reviewed management controls and financial statements and raise concerns and issues. Raising Red FlagsIn my opinion, the governance structure and audit committees and external auditors were sufficient enough to handle or uncover such fraudulent activities had they been critical, created the right controls, empowered the internal auditors a nd obviously asked the right questions while reviewing the financial statements and other management documentation. As part of board, I would have asked questions following questions, or have acted when seen abnormalities. This would have helped me in identifying issues, concerns and in raising red flags on the Royal Ahold 1999-2001 financial statements.Also some of them are related to mid 90’s management attitude and strategy. Strategy and Growth Approach: The target of meeting 15% year-over-year in sales, especially in US in 2000-01 when economy was in recession should have alarmed the board and internal auditors. They should have investigated how the sales targets are being achieved. It is not easy to meet 15% sales in US food industries under this economic climate. This may have led the management behaviour in meeting the targets.As board member, I would have asked CEO to explain the strategy of rewards and recognition, mainly on top line bonus as it is a wrong choice. (I have personally worked at Compaq during 1999-2000 and have seen the issue of top line bonus and commission on sales. This led to Compaq’s continued crises and eventually it was bought by HP in 2003). I would tried to influence the board and hence the CEO to consider a more comprehensive rewards strategy. From my experience bonus strategy plays a big role in company culture. The other important factor that develops the management attitude is what CEO likes to hear.It seems Royal Ahold’s CEO, Cees van der Hooven, wanted to hear from all his subsidiaries and Joint Ventures that sales targets are being met every quarter. I would have influence the management style and company culture to be protected by changing (or diluting) this approach. CEO’s attitude and leadership style was one of the leading cause of Royal Ahold demise. His aggressive acquisition approach would have resulted in integration issues within the company. As board member, I would have asked the man agement plans on integration and how culture of the organization would not be negatively impacted.I would have created the board HR committee to influence management not to allow the negative impacts on the organization culture, integration within the organization, rewards and recognition be such that it would not have allowed the culture to deteriorate. The cultural issues, integration issues and above all greed among the management team members was uncontrolled in Royal Ahold’s accounting scandal. The growing number of acquisitions was extremely risky initiative; the corporate strategy was carrying high risks at all operational levels including controls, integration that may have led to frauds.Also, this had potential to be a reputation risk as well. In my opinion, board should not have approved such an aggressive corporate growth strategy. Consolidated Statements Although Royal Ahold ownership is less than 50% in some Join venture companies, they showed controlling interes ts in some companies. To me an agreement paper presented by the management is not sufficient. I would have asked the significance of Royal Ahold’s control and ask management which areas of Joint Venture management we have been making decisions on.If we are making decisions, even though we don’t own more than 50%, what are the risks associated with these decisions. As a board member, I would have understood how Royal Ahold has influenced the Joint Venture management. I would have also asked audit committee to understand the management structure of Joint Ventures. Taking a step further, assuming that 20% share would have given Royal Ahold right to appoint a board member on Joint Venture’s Board, I would have understood from the Joint Venture board member (through Royal Ahold appointed director) how the joint ventures decision making process really works.By asking such questions and efforts in trying to understand from the board and management of Joint ventures how the organization is actually structured and working. If Royal Ahold does not have a controlling authority on the acquired company, the company financial statements cannot be consolidated. Royal’s accounting practice o f consolidation will first bump up the revenue numbers. This was purposely done to beef up the revenue figures. This may have resulted bigger bonus for the senior management. Also, the balance sheet would be more attractive to the shareholders (and potential shareholders). To explain this here is simple illustration:Parent Current Assets Assets Total Assets Current Liabilities Liabilit ies Total Liabilities Shareholder's Equity Debt to Equity Ratio Subsidiary Consolidated 3 7 10 1 3 4 4 10 14 4 1 5 3 7 0. 5 1. 5 3. 5 8. 5 3 2. 5 5. 5 2. 3 0. 6 1. 5 As illustrated in the hypothetical example above example, by consolidat ion the debt looks more attractive then it would have looked otherwise in the parent company. The debt to equity shows debt-to-equity of ($1. 5: $1) when consolidated, and ($2. 3:$1) when not consolidated. Similarly, other financial ratios would have looked good with consolidation of financial statements.The consolidation resulted in better financial statements; hence Royal Ahold used this approach. In actual, this should not have used consolidated method. As per the accounting text, Parent when owns an investee company’s 20%-50% should use the equity method of accounting. The equity method would have mainly impacted the earnings on the Income statements. The net income, however, would result the same earnings without changing the revenue numbers. On the balance sheet side, the equity method would only show true â€Å"Assets† number, as per the investments made in the JV by Royal Ahold. The financial ratios (e. . debt to equity or quick ratio etc. ) will not be as appealing as it started to sound with consolidated statement. Risk Controls: As board member, I would have influenced the entire board not to approve the corporate strategy as a budget was too aggressive and unrealistic. As pointed out above, realistic targets are extremely important. If strategy is too aggressive and corporate culture is to share good news with the CEO the unrealistic budgets targets may lead to malpractice and improper (fraudulent) activities. In my opinion it is supervisory board obligation to approve only realistic targets.The corporate strategy in the growth years of mid ‘90s was too aggressive. This has done part of the damage in the culture and mind-set of the senior management that 15% growth is not unrealistic and has created an attitude to meet these targets in any way possible. This encouraged the wrong doings and possible frauds that started to take place in 1999-2001. Although it is not very clear from the case, were there any wrong doing (or activities) in 199798, but in the hind-sight, it appears that some of the issues must have started or existed in that time as well.The board and senior m anagement should actively work on identifying risks to the organization and work on strategies that mitigates the risks. A key here is to have a formal risk assessment process on an annual basis. The assessment is under supervision of the board and results are reviewed by the board. Inventory 2001 balance sheet shows 20% rise in inventory, I would have raises some concerns that might have uncovered the management improper decision to order such high quantity of stocks to get the manufacturing rebates. Accounts ReceivableIn 2001, accounts receivable increased by Euros 605M i. e. 21. 2%. I would have asked questions around the assumptions and likelihood receiving the Account Receivable. More importantly, who owes this receivable to Royal Ahold. This may have been due to the manufacturing rebates included in the accounts receivable. If so, it would have led to the whole issue of management aggressive behaviour on ordering stocks to get rebates. It might have opened up the entire incorr ect accounting treatment of manufacturing allowances and rebates. General ReserveRoyal Ahold is showing consistently on their balance sheet a general reserve item that is over 5 to 6 Billion euros (approx). This appears to be high, I would have asked on what assumptions these provisions are made. It might have uncovered some of the assumptions that are being made by management. This general reserve is in addition to the 1. 5B euros in other provisions. This is should have been a red flag. Other Recommended Preventive Measures Besides the concerns and red flags mentioned above, I would have raised based on what I would have seen.I would have also taken following measures to prevent this from happening. Incentive (Bonus) Structure: The bonus structure cannot solely be based on financial goals. The bonus structure has to base on non-financial goals as well. Within financial goals all aspects to kept in mind when designing the appropriate incentive program. The increase in working capit al (inventory, receivables, payables etc. ) is kept at minimum or in line with the net income. The increase or decrease in working capital beyond the realistic proportion to earnings should be discouraged through the incentive program as well.Audit Committee Structure: The case presents the audit committee and internal audit department weaknesses and signs of some of their inefficient processes and competency issues. Besides reviewing the audit committee performance, monitoring and control issues were also been found. I would have influence the audit committee to have a metrics of internal audit department. This may have encouraged more objectivity of audit functions and may have aligned management controls to the overall governance issues. It is the responsibility of audit committee that internal and external auditors have an open communication.Besides audit of the current financial statements, and review of controls and structures, the auditors must identify areas of improvement i n controls and work on action plan in improving the organization controls and monitoring process. HR Committee As mentioned above, I would have asked board to create HR committee that takes an active role in setting the controls in the organization. The committee should take an active role in reviewing the annual compensation and objective setting. Committee should have taken an independent review of key hiring decisions and management capability on integration and organization culture.Some key decisions in this area should only made by committee after consulting with the management, audit and board’s general direction. IT System: I would have asked internal audit committee to ensure all IT systems are audited to ensure proper controls are in place. Usually, in fraud IT systems controls could have loop holes or management may have the ability to bypass some of the checks and balances and/ or segregation of duties. Consistency in financial Statements Royal Ahold had companies in four different continents and in many countries.Financial statements presentation and laws across the globe are not consistent. US GAPP, Netherlands GAAP, IFSA and others are not standard across all countries where the Royal Aholds companies are in operation. While the fact makes a challenge for the board, it doesn’t give them an excuse of letting things slip. The board should have worked out with internal and external auditors in creating a minimum corporate standard across the group of companies. It is the flaw in governance and leadership to over-look this fundamental point.

The Controversial Matter Of Abortion - 2005 Words

The highly controversial matter of abortion has been lurking in and out of many governmental discussions and debates. It has lasted for many decades and was highly practiced until the 1880s when laws and regulations were put into effect. Recently, this topic has been brought up once again and is focused on areas mainly the Southern and Western parts of the United States. Abortion is one of those topics where it can go either way; it’s either pro-life or pro-choice. Both are two very different sides that are so sensitive it can reach out to many people on multiple levels of their emotional and mental state of mind, due to their many religious beliefs. Along with that, it is blown up and mixed in with the negativity of social media and that is a clear the problem and decisions become biased. It comes to these questions that makes me wonder about who should be involved? And why does there have to be only one right choice for abortion and not a neutral side? Or that why canâ€℠¢t abortion simply be accepted by society after many decades of voting and reforming the same laws? The only thing that separates one side from the other side is the argument of the â€Å"right to life†, which is pro-life. It is when a girl or a woman has an unplanned pregnancy and must under any circumstances keep the baby from when it is conceived until when the child is born unless the mother has a life-threatening situation that involves the baby. However, a pro-choicer has somewhat of a different out look onShow MoreRelatedIs Abortion A Moral And Constitutional Issue?999 Words   |  4 PagesThese brave women have fought for changes in government, employment, education, and religion. The subject of abortion is no different than the battle for equality in wages. The topic of abortion as been a heated debate for generations. The right to abortion, as controversial as it may be, is still a fight for a woman’s right to choose. 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