Example of a Reflective Writing

Examples of reflective writing An example of good reflective writing – integration of theory with personal experience; justification and explanation of person experience using relevant theory as support; provides insight into the author’s observations of the theory; appropriate use of language; analysis of theory within the context of own experience. Organisational change and development theory suggests that models are a good way of providing change practitioners with strategies to plan, implement and move through various stages of change (Waddell, Cummings & Worley, 2007).While it is arguable that models are useful in providing guidelines for change practitioners, I feel that they are not necessarily an accurate representation of how change is actually experienced in organisations. I have worked in an organisation that has been through repeated change throughout the duration of my employment. My experience of change has been somewhat different from how it is reflected in change models.For example, as an employee I have not been involved in the initial planning stages of change, nor have I been involved in diagnosis at an individual level, therefore I am unclear as to what happens during these stages. From an individual perspective, it feels as though change is planned and implemented in my organisation at the senior levels of management without adequate input or information to and from staff. Further, from my perspective, change is not experienced in a smooth manner as suggested by change models.I have experienced change that has not appeared to move beyond the unfreezing stages (Lewin, 1947), and I have also experienced change that has regressed at different stages rather than move forward. If I were to work with employees as a change practitioner, I would highlight the realities of change so that employees are aware that there are multiple experiences in addition to ‘the prominent way of viewing this process’ (McShane & Travaglione , 2007, p. 02) within academic references. An example of poor reflective writing – colloquial/non-academic writing style; opinion-based without justification or explanation; lack of engagement with theory; links to references not made; generalisation of opinion. In my job I have been though a lot of change and there is no way that what the change models say is right. My experiences of change have all been bad and there is no way that anybody could have had a good experience of change.I don’t think change models are useful as they pretend that change is an easy process which is different from my opinion that no change is easy. I think I can speak for everyone when I say that managers don’t manage change properly as I have never seen the stages of any models within my organisation. This might be because my manager is a poor communicator which is what all the staff think. In my opinion, change models shouldn’t be taught to students as they can only teach stu dents to think about change in the wrong way which doesn’t help employees who have to go through it.

Bpo Philippines Essay

INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Aileen S. Alava* Facing high expectations as the newest â€Å"sunshine industry†, the call center industry in the Philippines appears to have dimmer prospects in the coming years. Having experienced rapid growth from 2000 to 2003, the industry experienced a slowdown in growth from 2004 to 2006, raising the question of how sustainable the country’s competitive advantage is against neighboring competitors such as India and China. This paper uses Porter’s Diamond Model to analyze the factors resulting in competitive advantage between nations, and provides industry player and market information on the Philippine call center industry, as well as updates on how the industry’s participants are seeking to address the industry’s challenges. I. INTRODUCTION The call center industry is heralded as the newest sunshine industry in the country, earning around US$1.8 billion in 2005 alone, with revenues forecasted to reach US$5.3 billion by year 2010. Employment for this sector has more than doubled every year, from 2,400 agents in 2000 to 150,000 in 2006, and is expected to reach 300,000 full-time employed agents in 2010. The Philippines is among the top locations in the world for outsourced call centers. An SGV industry report states that in 2005, the Philippines’ share of the global call center market is 3% and 31% for the Asia Pacific market. By 2010, industry leaders target 6% global market share and 51% Asia Pacific market share. II. FRAMEWORK AND METHODOLOGY What will give Philippine call centers an advantage over call centers in other countries, such as those in India, China, Malaysia, Singapore? Michael Porter‘s Diamond Model defines competitive advantage between nations as the outcome of four interlinked factors: 1) firm strategy, structure and rivalry; 2) demand conditions; 3) related supporting industries; and 4) conditions affecting the key factors of production within the nations. This paper aims to discuss the competitiveness of the Philippines using this framework. Desk research was conducted to obtain secondary industry data on local and global call centers, while interviews _________________________________ with call center managers provided insight on opportunities and challenges within the industry. The role of government will also be discussed in this paper. Industry developments show government policies such as tax incentives and relaxation of property laws contributed to the industry’s growth. Strengthening of government support for primary education is crucial to the sustainability of the Philippines’ competitive position. Insufficiency in primary education is threatening the Philippine advantage as local players face difficulty meeting global demand with local supply of qualified call center agents. * Assistant Professor of Information Systems Management, College of Business Administration, University of the Philippine-Diliman. 2 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS III. CALL CENTER OUTSOURCING A call center is a business operation handling multiple types of customer-oriented functions such as marketing, selling and servicing, through multiple channels of customer interaction such as electronic mail, the World Wide Web, electronic messaging, voice messaging, fax messaging, and traditional mail. Call centers serve various stakeholders of an organization: from prospects to customers, suppliers to competitors, as well as distributors, partners, and employees. The term â€Å"call center† is used as a collective term to refer to these operations for the reason that the primary means of contact facilitated by these businesses are telephone calls. Call centers are categorized as Business Process Outsourcing companies or BPOs. BPOs also include medical transcription, IT support, animation, software development, financial accounting and payroll processing companies. Outsourcing in the Philippines arrived at the heels of successful deregulation in the telecommunications industry. Intense competition spurred massive investment in technology and skill among Philippine telecommunications companies, leading to innovation, quality improvement, and price competitiveness in services. The Philippines is no stranger to foreign arrangements of this kind. The semiconductor industry, one of the leading export sectors in the country, started in much the same way. From the early 1970’s to mid 1980’s this sector experienced dramatic expansion, growing at an annual average rate of 53%. International factors also impelled growth in the form of transnational companies from the developed economies (e.g., US, Europe, Japan) locating offshore plants in developing countries (e.g., Philippines, Vietnam, Singapore) for the most labor-intensive phases of semiconductor manufacturing. As with the call center sector, the Philippines’ main advantage in semiconductors is cheap and literate labor. Government response to further incite export activity in semiconductors is similar to regulatory mechanisms implemented in the call center industry today, such as the establishment of freeport zones, the relaxation of tariffs and duties on imported technologies, and the permission to employ foreign nationals. Agreements in the semiconductor industry during its period of rapid growth were covered by subcontracting arrangements. Today’s global trend for â€Å"off-shoring†, or offshore outsourcing, has very little difference with subcontracting. Offshoring is the arrangement by which one company contracts with service providers located outside the country for services that could also be or usually have been provided inhouse. Outsourcing business processes to remote locations is made possible by advancements in the telecommunications sector in the outsourcer countries. Low labor cost and improved connectivity resulting from technological advancement and deregulation in the telecommunications sec tor in the servicing countries (e.g., India, China, Malaysia, the Philippines) have made offshore outsourcing attractive from an economical standpoint. The costs of operating a call center in the Philippines, for example, is reportedly 40% lower than in the United States (55% cost savings from labor less 15% incremental cost from travel and telecommunications requirements). Offshore outsourcing in general brings in around 25% to 50% in cost savings. Globalization and its societal effects have made manageable the challenges of crosscultural communication: many offshore destinations have a Western heritage and almost all are exposed to Western culture – pop culture, even – through the internet, cable television, and other entertainment media, e.g., movies, books. The difference in time zones between the servicing and the served countries (e.g., the United States, the United Kingdom) are addressed through alternate six- to eight-hour shifts in the day, enabling call centers to maintain 24-hour service agent availability. While incremental costs are incurred for perfunctory risk management expenses, e.g., AILEEN S. ALAVA 3 hazard pay, etc., the total cost of operating a call center out of India or the Philippines are still lower compared to the cost of operating out of the US or the UK. IV. THE PHILIPPINE CALL CENTER INDUSTRY An IT-Enabled Services briefer from the Board of Investments in 2007 states that there are an estimated 146 call center companies in the Philippines. Call center companies should be distinguished from call center sites. A â€Å"site† is a facility housing a call center operation and a call center â€Å"company† may operate multiple sites. Sykes Asia, for example operates five sites in the Philippines while People Support operates four. There are three categories of call center companies: ï‚ · Foreign-owned call centers with Philippine subsidiaries. These are call centers owned by foreign companies, usually from the United States, that have branched out to offshore outsourcing. Insourced call centers of large multinational corporations. These are operations that are dedicated to the parent companies and whose objective is to bring competitive advantage by transforming an erstwhile internal backoffice function into one that is re venuegenerating. Filipino-owned call centers. These call centers are wholly owned by Filipino entrepreneurs or corporations (e.g. Smart, PLDT, Globe, etc.) that seek customers from the United States, Europe and Asia, particularly from Japan and Singapore. ï‚ · ï‚ · Estimates from the Board of Investments (BOI), the Commission on Information and Communications Technology (CICT) and the Business Process Association of the Philippines (BPAP) report the demand for call centers to reach anywhere from between 30,000-50,000 new agents hired in the Philippines per year from 2007-2010. Figure 1 Employment in Contact Centers 350000 301,000 300000 262,000 250000 218,000 200000 168,000 150000 112,000 100000 50000 0 2004 2005 2006 2007 2008 2009 2010 *2006-2010 from BOI/CICT/BPAP Forecast 64,000 331,000 Source: Board of Investments, BPAP 4 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS The success of call centers worldwide is attributable to the growth of outsourcing as a profitable business model. The BOI estimates that 2006 revenues in business process outsourcing (which includes other IT enabled services such as medical transcriptions, animation, and back office transactions processing) amounted to US$3.67 billion, and projects revenues to jump upwards 40% to reach US$4.79 billion this year. Joint forecasts from the BOI, BPAP and CICT predict that there will be 343,000 new outsourcing jobs this year (of which 64% or 218,000 will be in call centers), a 40% increase from the number of new outsourcing jobs in 2006 of about 244,000 (of which 69% or 168,000 were in call centers). Figure 2 Annual Employment (2004-2010) 1000000 900000 800000 668,1 26 920,764 700000 600000 479,51 9 500000 400000 244,675 343,01 3 262,000 21 8,000 1 68,000 99,300 64,000 1 2,000 1 301 ,000 331 ,000 300000 200000 100000 0 2004 1 62,250 2005 2006 2007 2008 2009 2010 BPO Industry Contact Centers Source: Board of Investments, BPAP The Philippine call center industry is estimated to have earned US$2.7 billion in revenues in 2006, a growth of 50% from 2005’s earnings of US$1.7 billion. The Department of Trade and Industry expects actual 2007 returns to be close to US$3.5 billion, a further growth of 30%. AILEEN S. ALAVA 5 Figure 3 Annual Revenues of Contact Centers (in US$M) Source: Board of Investments, BPAP It is interesting to note that service income of ten of the top call centers1 in the country (Ambergris, Convergys, Cyber City Teleservices, Sitel, E-Telecare, iContacts Corporation, InfoNXX, Parlance, PeopleSupport, and Sykes Asia) together account for more than 20% of the total revenues of the entire sector. Figure 4 Comparative Annual Revenues of 148 Call Centers vs. Ten Top Call Centers (2004-2005) 6 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Activity in the industry is apparently dependent for the most part on a small number of big players. The BOI in its IT-Enabled services briefer (2007 release) states that it expects upward momentum to continue until 2010. Sources of growth have been identified as follows: a) Expansion from established call centers such as PeopleSupport, Sykes, eTelecare, PLDT, ClientLogic, InfoNXX, Citibank, Ambergris, Accenture, IBM, Caltex and HP b) Entry and consequent expansion, i.e. addition of new sites, etc. of global players such as Dell, HSBC, JP Morgan, AIG, Convergys, TeleTech, Sutherland, Deutsche Bank, and NetSuite. c) Next wave of entrants such as Accor Reservation, MiSYS, Siemens, Ericson, Alsbridge, Virgin Atlantic, Philips, Emerson, Capital IQ, DDC and Kanbar. Growth in the sector follows expansion the operations of big players. In the last two years, both Sykes Asia and People Support have established new call center sites while still others have added new projects and accounts. These activities and the influx of new players have resulted in revenues steadily growing until 2006 and expectations for further expansion until 2010. While growth is continuous, however, a slowdown in the rate of growth is expected starting 2005. Figure 5 Annual Revenue Growth Rate of Contact Centers 220.0% 166.7% 133.3% 114.3% 75.0% 50.0% 29.8% 20.2% 14.9% 10.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 *2006-2010 forecasted by BOI/CICT/BPAP Source: Board of Investments, BPAP Slowing growth in the last two years after the steep increases of 2003 to 2004 indicates that the call center industry in the Philippines is now approaching maturity. Sales and earnings expansions of the past years resulted from the Philippines’ cost advantage over other countries. The passage of time, however, may erode this advantage as China and other Southeast Asian countries threaten to eat into the Philippines’ market share with better cost or quality AILEEN S. ALAVA 7 offerings. The challenge for the industry is to extend growth by improving the competitive dimensions where the Philippines is weak or by adjusting industry targets to create new competitive advantages. The Global Arena The Asia Pacific region outperforms other regions such as Eastern Europe, South America and Africa. Japan and South Korea are seen to increase nearshore outsourcing investments in low-cost, labor-rich neighboring China while Southeast Asian countries benefit from close-toWestern cultures, open economies, and advanced technologies for a similar cost advantage. In 2005, Frost and Sullivan forecasted that call centers in Asia will grow from 21,360 in 2004 to 39,248 call centers in 2011, at a compound annual growth rate of 9.1% Figure 6 Forecast Growth of Call Centers in Asia Pacific *at a Compound Annual Growth Rate of 9.1%, as forecasted by Frost and Sullivan. More recent studies predict faster growth rates. A 2006 Asian Contact Center Industry Benchmarking Report assessed the industry to be in a period of strong growth. The study conducted on 747 contact centers in the Philippines, India, Singapore, China, Malaysia and Thailand estimates that by 2007, the total 576,000 seats in the countries studied would increase to 704,500, a growth rate of 23%. Among the countries in the study, the Philippines has the highest forecasted growth rate. By 2007, it is expected to grow by 33%, Singapore and Malaysia by 32%, China at 22% and India by 16%. Of the Asian destinations, India is the top choice, with other nations such as the Philippines, Malaysia, Singapore, and China following closely. The Philippines, having an American-influenced culture, a proficiency in English comparable to India without the heavy accent, and a skilled labor force, was considered the greatest threat to Indian domination in this sector. However, recent years’ developments in other competitor countries such as China, Malaysia, Thailand and Indonesia coupled with a strong peso and deficiencies in the local supply of qualified call center agents have weakened the Philippines’ advantage. The A.T. Kearney Global Services Location Index in 2007, a survey conducted to measure the relative attractiveness of offshore locations with regard to financial structure (40%), people 8 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS skills and availability (30%), and business environment (30%), has ranked the Philippines the 8th most attractive country for offshoring in 2007. The top twenty-five countries are as follows: Figure 7 Source: AT Kearney 2007 Global Services Location Index AILEEN S. ALAVA 9 The 2007 study saw the Philippines decline from its 4th rank from AT Kearney’s last GLSI survey which was conducted in 2005. The top twenty five locations then were as follows: Figure 8 Source: AT Kearney 2005Global Services Location Index The Philippines’ drop in the AT Kearney rankings is attributed to the appreciation of the peso and growth in the call center industry which has driven up labor costs in terms of the US dollar, by as much as 30%, according to AT Kearney’s GSLI 2007 highlights. In other areas of performance, the country improved slightly, particularly in infrastructure, industry size and language skills. In contrast, Malaysia, Thailand, and Indonesia have either retained their rankings or moved up the index. Slower industry growth rates in these countries have tempered the effects of inflation on labor costs. 10 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Figure 9 Philippines’ Offshore Attractiveness, 2005 & 2007 A. T. Kearney Findings 6 5 4 3 2 1 0 Financial Structure Business Environment People and Skills Availability 2005 2007 3.6 3.3 2005 2007 1.2 1.0 2005 1.0 2007 1.3 Ratio of Categories – 40:30:30 Philippines’ Score 2007 2005 Financial Structure Compensation Cost (8) Infrastructure Cost (1) Tax and Regulatory Cost (1) 7.1 7.7 0.7 0.8 0.3 0.5 8.10 9.00 Philippines’ Score 2007 2005 Business Environment Country risk / Economic and Political Environment (6) Country Infrastructure (2) Cultural Adaptability (1) Security of Intellectual Property (1) 1.9 1.2 0.7 0.3 4.1 1.8 0.7 0.8 0.2 3.5 Philippines’ Score 2007 2005 People Skills and Availability Relevant experience / IT BPO Industry size/quality (4) Size and availability of labor force (2) Education (1.5) Language (1.5) Attrition risk (1) 1.2 0.7 0.9 1.2 0.2 4.2 0.9 0.7 0.9 0.7 0.6 3.8 Source: AT Kearney 2005 and 2007 Global Services Location Index AILEEN S. ALAVA 11 India Among the top contenders for offshore locations, India is the country with the most experience. The emergence of call centers as an opportunity for national growth came upon deregulation in the telecommunications industry in the mid-1990’s, much like the Philippine experience. The outsourcing sector, the first participants of which were medical transcription service companies then followed by data management and customer support providers, began to take root in the late 1990’s. As in the Philippines, the first operations consisted of support subsidiaries of multinational companies servicing the parent company. Low-cost and highly-skilled labor, significant improvements in IT infrastructure, and a positive business environment spurred by industry organizations such as the National Association of Software and Services Companies (NASSCOM) propelled exponential growth for the industry in the years to follow. The NASSCOM estimates yearly growth of 37% for the outsourci ng segment with the call center industry leading the sector. Call centers comprised 46% of the total US$4.6billion revenue the outsourcing sector earned in 2005. India is the strongest contender in the sector and is often tagged as the world’s first-choice in offshore outsourcing. In 2005, it has 8% global market share and 68% market share in AsiaPacific. The Philippines’ greatest advantage over India is in language skill. American English being the dominant lingua franca in sales and support transactions coursed through call centers, the Philippines has a culture that is closer to the West and an English tongue that is the easiest to understand in the whole of Asia, partly to exposure to American television and pop culture, as well as English being the medium of instruction in all education levels. It has been observed that India’s pool of talent has the advantage in technical, specialized occupational skills while the Philippines’ competence is in liberal arts, which provides more general knowledge as well as capabilities needed for back-office processing, e.g., communication skills, and cultural adaptability. Increased global competition in the call center sector has led to efforts to expand the portfolio of services of the Indian IT-enabled services sector. NASSCOM reports that the last three to four years in India have been a period of diversification. India’s BPO companies have expanded to higher-value processes through vertical integration towards non-voice-based services such as back-office processing and content development. In 2005, customer care services comprised 34% of total BPO revenues in India, compared to 69% in the Philippines. 12 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Figure 10.1 Figure 10.2 Sources: DTI (Philippines) , PriceWaterhouseCoopers (India) China China is the preferred choice as a call center location for companies targeting South Korea (attracted by ethnic Koreans living in China) with which it has the closest cultural ties. China is the only other country in the world that poses a threat to India as far as size and cost of labor supply is concerned. The yearly cost of operating a call center seat in China is the lowest in Asia. Table 1 Comparative Annual and Hourly Costs per Call Center Seat in China, India, Malaysia, the Philippines, Singapore and Thailand in USD ($) Annual Cost per Hourly Cost Seat per Seat 13,543.00 3.62 15,872.00 4.24 34,779.00 9.29 18,086.00 4.83 66,998.00 18.46 18,527.00 4.95 China India Malaysia The Philippines Singapore Thailand Source: callcentres.net China’s cost advantage, however, is dampened by its deficiencies in Englishspeaking manpower. In this regard, China cannot as of yet compete head-on with India and the Philippines in the global outsourcing market. University enrolments however have grown 25% in recent years which increased the country’s potential to compete. China’s entry to the World Trade Organization has spurred the inflow of capital as well as Western influence and analysts predict that in due time the labor supply in China AILEEN S. ALAVA 13 will be comparable to India in size as well as in skill. Singapore Despite high labor costs, Singapore enjoys a comparative advantage from reliable bureaucracy, excellent technical infrastructure, superior educational systems, political and economical stability, and stringent enforcement of intellectual property laws for information and data security. Singapore outsourcers provide high-value services differentiated from lowvalue, back-end processes provided by other Asian countries. To take advantage of this market niche, Singapore outsourcers market advanced offshore functions such as basic research, robotics, healthcare and medical diagnostics. Singapore companies in turn outsource lower-value operations to India and China to gain cost advantage. Malaysia What Malaysia lacks in manpower (its population is significantly smaller than India or China and thereby cannot meet the same economies of scale) it makes up for in advanced infrastructure. Malaysia is second only to Singapore in IT competitiveness rankings between countries in Southeast Asia. Strong government support is apparent in efforts such as the Multimedia Super Corridor project, which includes the development of infrastructure in what they have called â€Å"intelligent cities† such as Cyberjaya and Penang Cybercity, where major IT leaders such as IBM and Motorola have already located their regional offshore service centers. Latin American Countries Latin American countries such as Brazil, Chile and Mexico enjoy the advantage of being â€Å"near-shore† destinations, or offshore servicing countries close to the served country, this being the United States. Near-shore destinations are in the same time-zone as most customers, thereby lessening the need to arrange multiple 8-hour shifts in the day as well as the need to invest in additional expenses for hazard pay, safety insurance and the like. The A.T. Kearney study found Brazil has the best labor skills in the region, Argentina has the cost advantage, while Chile has the best business environment (e.g. it has, for instance, supplemented agreements with US and European companies with IP infringement penalty clauses). Nonetheless, perhaps the primary advantage of the region in general is the vast availability and incomparable quality of its bilingual (English and Spanish) call centers, much in demand in the United States. Eastern European Countries Eastern European countries such as the Czech Republic, Poland, Romania and Hungary are possible choices for Weste rn European countries as a near-shore destination. Eastern European call centers provide cost, language skill, and time-zone advantages. Multilingual call centers for the multilingual European market can be easily and efficiently set up in Eastern Europe more so than in Latin America or Asia. Customers from Germany and the United Kingdom moreover may prefer Eastern European call centers most particularly for its bilingual workforce: citizens in most Eastern European countries can speak both German and English. Reportedly, however, Eastern European countries, most particularly Russia, need to upgrade telecommunications infrastructure to compete with the other regions as well as to comply with European Union requirements. 14 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS V. CONCLUSION The factors affecting firm strategy, structure and rivalry involve the services offered by local firms, and how competitive locally provided services are against those provided by other countries. Primarily, this involves why the Philippines is chosen by call center companies when making the call center location decision. The factors involving demand conditions involve the evolving needs of the global market for call center services, ranging from the basic service of answering inquiries based on predefined scripts to the more complex service of providing technical assistance and support. The sufficiency of related supporting industries will involve the state of local educational institutions, real estate, transportation and retail sectors and how these sectors contribute to sustain the growth of the local call center industry. Finally the conditions affecting the key factors of production, such as local skilled labor and mission-critical technology, will also be discuss ed. Firm Strategy, Structure and Rivalry Figure 11 Factors Affecting the Call Center Location Decision As earlier mentioned, the first factor affecting competitiveness is firm strategy, structure and rivalry, which primarily contributes to why the Philippines is chosen by call center companies when making the call center location decision. The offshore location decision is influenced by a number of factors and it is against these criteria that India, China, the Philippines and other countries are evaluated. It follows that it is in these attributes that the Philippines should perform for a distinct competitive advantage over the others. These factors include the following: quality and cost of labor (including technical competency and language skills), connectivity (i.e., telecommunications bandwidth) cost and reliability, mature business, regulatory and technological environments for outsourcing operations, political stability, and cultural alignment between the offshore outsourcer, the outsourcing company, and the customers to be served by the call center. Decision Criteria in Selecting an Offshore Call Center Political Stability Reliability and Cost of Connectivity Quality and Cost of Labor Cultural Alignment Mature Business Environment Among these success factors, the Philippines competes strongest in (1) quality and cost of labor, and (2) cultural alignment. It is in these two factors that exponential growth in 2003 and 2004 can be attributed. The challenge of sustaining the Philippines’ advantage in the industry can be discussed from two vantage points: first from the view of creating a distinct AILEEN S. ALAVA 15 competitive advantage and second from the view of ensuring the distinct advantage created is impervious to erosion. Threats arise from deliberate attempts by competing entities to undermine it and from developments in call center operations and technology that will shift the bases of competition. The benefit of lower cost is the Philippines’ most substantial value offering to call center investors and customers. The results of the AT Kearney survey have shown that while other factors are also significant, the global competition in the call center sector continues to be driven by cost at the present: it remains to be the most important factor in the perception of the â€Å"attractiveness† of an outsourcing location. In this regard, the country’s low infrastructure and compensation costs, as well as the provision of special tax concessions within specific zones have contributed significantly to making the country a preferred choice among investors. In addition, the results of the study also emphasized that in the Philippines, call centers were given most emphasis among the outsourcing sectors and likewise highlighted the efforts of the government to promote these services by establishing special economic zones that provide investors with freeport privileges, tax shields and holidays. Among the participants in the global call center industry, India outperforms all other countries with a combination of advantages: low-cost labor as well as a progressive educational system ensuring a continuous supply of highly-skilled employees, reliable low-cost infrastructure, supportive business government, and a wealth of management experience in the call center industry, as well as in other outsourcing services. The Philippines directly competes against India by providing labor and infrastructure at comparable rates and furthermore provides the advantage of a Westernized culture and better performance in conversational English to appeal to US-and UKbased c ustomers. Singapore has the highest compensation rates but has the advantage of good government reflected in lower costs of bureaucracy and corruption. China’s major advantage is its massive pool of available lowcost talent—only China can directly compete with India in size of available labor—however labor skills are still limited in language proficiency and management experience in the industry. What makes India a success story is the combination of multiple sources of advantage available to the call center investor. The Philippines’ current competitive advantage meanwhile is in the combination of low compensation cost and high English proficiency, and while this advantage continues to bring additional revenues and employment to the sector, growth rates have also been observed to be decreasing, apparently due to two observable trends: low acceptance rates and high attrition rates. Both low acceptance and high attrition threaten the advantages of labor availability, cost and quality of Philippine call centers. The advantage of cost over other factors, i.e., people and environment, affecting the offshore location decision is n onetheless not a perpetual one. The leveling of technical competency between the different countries through globalization and convergence of technologies as well as the homogenization of social conditions between different economies may affect the importance of cost as a success factor. The ubiquity of information available through advanced mass media and telecommunications have also brought about less cultural heterogeneity between the countries competing as call center locations. The advantage of cultural alignment is therefore not exclusive to the Philippines and, further, is one that erodes with the passage of time and the availability of communications technology. Demand Conditions Despite the low-cost labor advantage offered by offshore call centers, companies continue to look for ways to gain even more cost savings, if not from a more efficient and thereby cheaper workforce, then from automation technology. Meta Group’s technology research services group reported an increasing number of clients 16 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS choosing to implement voice-automation technology systems to handle standard, routine inquiries, e.g., account balances, product and service, payment offices, etc., instead of contracting the services of an outsourcer in a low-cost country or establishing their own call center operations offshore. The eventual outcome of this development is that, with the existence of automation technology, only customer calls requiring more complicated assistance will be routed to offshore call centers, perhaps from the Philippines or India. This direction means that customers will have higher expectations from call center agents in offshore countries. Agents will no longer be able to rely on simplified question-and-answer instructions or â€Å"scripts† to answer more complex questions that will be asked them. Industry analysts observe that, out of 100 applicants, only three to five are hired given existing skill requirements. Support services for more complex inquiries, perhaps requiring tec hnical information or instruction, will consequently require higher technical competency, as well as more than adequate communication and problem-resolution skills. Should such requirements be made necessary, it is expected that the hiring rate will be lower in the years to come, unless initiatives are implemented to enhance the skills and capabilities of existing as well as future workers in this sector. Sufficiency of Related Industries The Philippines’ weakness in information technology infrastructure threatens the ability of the country to compete where value-added services require a higher telecommunications bandwidth. Despite being one of the top offshore location choices in the world, the Philippines ranks, and has always ranked poorly in network readiness surveys, seen by most investors as measures of the competitiveness of a country in information technology. In both the 2004 and 2005 Network Readiness Index (NRI) listing compiled by the World Economic Forum (WEF), t he Philippines ranked in the lower levels: 67th in a group of 100 in 2004 and even lower in 2005 (70th place). Other outsourcing destinations fare similarly: India, the top location for offshore outsourcing is at 40th place while China, 2nd in the AT Kearney Index, is at 50th place. The WEF NRI is a measure of relative performance in the following areas: a) aspects of the environment of a given nation for development in information and communications technology (ICT) such as the regulatory regime and legal framework for ICT, and the available infrastructure; b) networked readiness of individuals, businesses and governments; and c) ICT usage by individuals, businesses and governments. The apparent inconsistency between networked readiness and other IT competency ratings for the Philippines and the remarkable growth of IT-based services, made plain by records of investment, revenue, and employment actually generated by the sector, is attributed by industry analysts to the observation that indices and rankings comparing countries with each other consider all the regio ns in the country, from the most advanced areas to the undeveloped ones. Developed countries such as the United States, Japan, and Germany have progressed to a point where the availability of telecommunications technologies and other related services in the less urbanized regions are virtually at par with that of the most industrialized areas. Developing countries are characterized by a marked difference in infrastructure and economic activity between the centers of business and the rural, residential areas. Such is the case of India, China and the Philippines where the small portion of the population living and working in the centers of business enjoy advanced technology while the rest have very limited access to even the most basic computing technology, e.g., internet access, if at all access is given them. Nonetheless, call centers in developing countries choose to locate only in the industrialized, AILEEN S. ALAVA 17 technology-enabled centers of business. Thus, they are able to employ, and at a cost advantage, the network infrastructure, hardware equipment, software and consulting services at a comparable technological level to those used by call centers in more developed countries. While it is valid that network-readiness surveys include locales in the Philippines which call centers are not considering to locate in, and that these call centers are eventually established in the industrialized, technology-enabled centers of business, it is still worthwhile considering that this shortcoming significantly limits the range of options for call center sites in the Philippines. Low infrastructure development in areas outside Metro Manila also threaten the cost advantage as call centers are constrained with only a few places to locate their operations since the location options are limited, the cost of real estate in these areas increases. While on the one hand the rise in real estate prices is seen as contributing to the trickle-effects of revenue growth in the call center sectors, on the other hand it can be seen as a threat to the country’s cost advantage as far as real estate and infrastructure costs are concerned. Factor Conditions The 2006 Asian Contact Center Industry Benchmarketing Report ranks human resource management, particularly the areas of recruitment and agent turnover, as the greatest challenge faced by Asian contact centers. In the Philippines, the consistency of supply of qualified call center personnel is threatened—as reflected in a very low 3% acceptance rate—by apparent degradation of the quality of primary and secondary education in both private and public schools. Although it has been reported that the average 10-year-and-above literacy rate in the Philippines is above 93%, literacy is not enough to ensure a position for a call center applicant. Basic English proficiency, for that matter, is considered a minimum requirement, enough for the agent to be considered for a position, but still insufficient to match the higher levels of conversational and even colloquial proficiency required for hiring. While low cost labor still works to the country’s advantage, labor on the average making up 46% of the total budget of operating call centers, such an advantage will not be sustainable if the country is not able to supply as much as is needed by steadily growing demand. While hiring is becoming more and more stringent, English proficiency in the formative levels of education remains below average. English language skills tend to diminish over time, as shown by statistics reported by the Department of Education, e.g., Grade 4 public school students show national average of 42% in English, while high school students show 30%. As English and communication subjects are required less in college, it may be expected that the level of proficiency will deteriorate more in the tertiary levels of education. Although English continues to be widely used in business, in government (at least in the high levels), and in school, programs in local mass media and entertainment are dominated by Tagalog films, making mastery of English a more difficult task for the average call center applicant. The current state is reflected in the low acceptance rate among applicants in call centers and other BPO companies. Out of every 100 new college graduates applying, only three are hired. High attrition rates and the increase in â€Å"poaching† and â€Å"piracy† of agents on the other hand threaten the low cost of labor as companies invest in benefits and compensation packages to ensure agents will not move to a competitor. In 2006, the labor attrition rate in the Philippines is reported to be 18% for full-time agents and 24% for part-time agents. India has significantly higher attrition rates, as follows: 18 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Table 2 Comparative Mean Attrition Percentage for Full-Time and Part-Time Call Center Agents in China, India, Malaysia, the Philippines, Singapore and Thailand Mean Attrition (FullTime) 17% 38% 18% 18% 16% 15% China India Malaysia The Philippines Singapore Mean Attrition (Part-Time) 29% 32% 24% 24% 21% 16% Thailand Source: callcentres.net At this rate, a job in a call center is already considered as a career in the Philippines, and not looked upon as merely a â€Å"temp† position as in the United States. Nonetheless, â€Å"poaching† or â€Å"pirating† of employees between call centers has already been observed because of the limited talent pool. Call centers are challenged to implement best practices in curbing employee attrition in the call center industry such as a flexible and conducive environment, high incentives, and training schemes, and more importantly, a career path development plan to convince college graduates that being a call center agent is not a â€Å"dead-end† type of job. The Challenge of Moving Forward The question remains as to who will bear the cost of improvements required to strengthen all factors necessary to ensure the sustainability of the Philippines’ competitive advantage in the call center industry. Some call centers have shouldered the cost themselves, o ffering free inhouse training for new hires. Still others have established joint efforts with existing universities and the Technical Education and Skills Development Authority (TESDA) to incorporate call center-oriented training requirements in their curricula and courses. Call centers have established personnel development initiatives, e.g., in-house training and evaluation, to enhance skill, and compensation and benefits initiatives, e.g., higher allowances, all-expense paid holidays and vacations, career development planning, etc., to curb attrition rates, ensure greater stability of the workforce size, and lessen the â€Å"poaching† of call center agents. More call centers are also contributing to the development of the countryside, more specifically the locations outside Metro Manila such as Laguna, Baguio, La Union, Cebu, Davao, Cagayan de Oro, Iloilo, etc. Geographical diversification, i.e., expanding call center operations to provinces, will provide more labor supply, and breathing room to answer to the intense scrambling for office space in Metro Manila. Call center operations will also encourage infrastructure development in other metro cities, with the possibility of replicating the development in the cities of Metro Manila in infrastructure and skill to the countryside areas. Another opportunity available to the sector is value diversification. India’s move towards strengthening non-voice services was not lost on Philippine ears. In its forecast towards 2010, the Department of Trade and Industry (DTI) expressed its target to increase the share of other BPO services in the total BPO revenue pie while decreasing dependence on call centers, which might now be showing signs of decline. The semiconductor industry in its peak of growth during the mid-1980’s also prompted recommendations toward diversification towards higher-value processes. At the time, the sector primarily consisted of low-level technologysupported processes, mainly automated simple assembly of semiconductor devices and product testing. Even now, industry activity in high-level AILEEN S. ALAVA 19 technology-supported activities such as wafer production and device design are still yet to reach the growth stage. The Philippines’ competitive advantage in the call center industry may be sustained through the enhancement of supply conditions, strengthening of related industries, and geographical diversification. Whether these efforts will work will be determined by two developments industry participants should take care to observe at the close of the year: first, how the market will respond to the industry’s efforts, i.e., whether the growth in demand will be sustained by continuous inflow of new contracts and whether forecasted increases in employment, facility expansion and investment will be attained or exceeded; second, how the industry will answer the demands of the market, i.e., whether the total operational capacity (as to labor supply, connectivity, technology, facility and real estate) of the call center sector will be sufficient to respond to the rise in demand. These developments will indicate whether the call center industry can reverse the tide and halt impending decline. However, the industry should be prepared should the slowdown in growth rates persist in the coming years, indicating that the country’s advantage has been weakened by the supply strength of other countries such as India or China. In this case, a prudent response that call centers should consider is to diversify into other BPO sectors such as high-value, non-voice-based services to compensate for the effects of decline in the call center industry. REFERENCES A. T. Kearney (2007 & 2005). Global services location index. Balfour, F. (2003, February 3). The way,way back office. Business Week. Bharadwaj, G., Varadarajan, P. & Fahy, J. (1993). Sustainable competitive advantage in service industries: a conceptual model and research propositions. Journal of Marketing, 57(4), p. 83. Business Process Association of the Philippines, http://bpap.com.ph Board of Investments, http://boi.gov.ph Call Center Directory, http://callcenterdirectory.net Callcentres.net. 2006 Asian contact center industry benchmarking report. Contact Center World. http://contactcenterworld.com Cruz, Dennis H. (1981, October) A review of international subcontracting arrangements in the Philippine electronics (semiconductor) industry, October 1981. Department of Trade and Industry. http://dti.gov.pg Domingo, G. (2005, April 11). BOI, BPAP, CICT: What roles they play. Computer World. Domingo, G. (2005, March 7). Why we rate poorly in technology in global competitive surveys. Com puter World. 20 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Frost & Sullivan (2005, December 20). Assessment of the Asia Pacific contact center markets. Hookway, J. (2004, October 7). The services spin-off. Far Eastern Economic Review. IBON Databank Phil, Inc. (1990). The semiconductor industry. Institute for Developmental and Econometric Analysis, Inc. Call center industry and the Philippine economy. Lecture delivered at the UP School of Economics. March 2006. International Customer Management Institute. http://www.incoming.com IT Matters. http://itmatters.com.ph McDougall, P. (2004, January 26). Automation takes toll on offshore workers. Information Week. NOTES 1 Selection of the ten top call center companies is arbitrary and not based on an objective ranking of financial performance. The subset was intended to illustrate industry concentration: how a small minority of ten call centers have contributed significantly more revenues to the sector than the other 138.

Chapter 3 the Marketing Environment

GENERAL CONTENT: Multiple-Choice Questions 1. The most commercially influential demographic group in history is _____. a. Generation X b. baby boomers c. Generation Y d. seniors e. infants (Answer: b; p. 70; Easy) 1. All of the groups within a company are called the _____. a. culture b. diversity c. internal environment d. climate e. range (Answer: c; p. 66; Moderate) 2. Which of the following do suppliers not provide marketers within your firm? a. Resources to produce products and services. b. Insight into trends and competitors. c. Partners in creating and delivering customer value. . The funding for your paychecks. e. B and C (Answer: d; p. 67; Moderate)3. Which of these firms help companies to stock and move goods from their points of origin to their destination? a. Financial intermediaries. b. Physical distribution firms. c. Marketing service firms. d. Resellers. e. Modified rebuyers. (Answer: b; p. 67; Easy) 4. Banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods and services are referred to as _____. a. financial intermediaries b. physical distribution firms c. arketing service agencies d. resellers e. wholesalers (Answer: a; p. 67; Moderate) 5. Percy Original caters to a market of individuals and households that buys goods and services for personal consumption. What do we call this market? a. Business. b. Reseller. c. Government. d. Consumer. e. Marketing intermediary. (Answer: d; p. 67; Easy) 6. What is the name of the market that buys goods and services for further processing or for use in the production process? a. Business. b. Reseller. c. Wholesale. d. Consumer. e. Retail. (Answer: a; p. 67; Easy) 7. Rachel Patino works for a wholesale company called Distributors Unlimited.She is responsible for buying and selling goods at a profit to small retailers. What is her market? a. Business. b. Reseller. c. Wholesale. d. Consumer. e. Ret ail. (Answer: b; p. 67; Moderate) 8. A company’s marketing environment includes various _____ that consists of any group that has an actual or potential interest in, or impact on, an organization’s ability to achieve its objectives. a. teams b. audiences c. markets d. publics e. intermediaries (Answer: d; p. 68; Moderate) 9. This type of public is a radio station that carries news, features, and editorial opinions about your area. What is it? a. Financial. b. Media. c. Citizen-action. . Local. e. Regional. (Answer: b; p. 68; Easy)10. A consumer organization, environmental group, or minority group have challenged your firm’s stand on a local issue. This is the _____ public. a. general b. local c. government d. citizen-action e. media (Answer: d; p. 68; Challenging) 11. Your marketing environment is currently researching the size, density, location, age, and occupations of your target market. What is this environment? a. Demographic. b. Psychographic. c. VALS. d. Geographic. e. Product use. (Answer: a; p. 69; Moderate) 12. Statisticians have projected the world’s population to reach _____ billion by the year 2030. . 6. 5 b. 6. 9 c. 7. 5 d. 7. 9 e. 8. 1 (Answer: e; p. 69; Easy) 13. The three largest age groups in America are the baby boomers, Generation X, and _____. a. seniors b. Generation Y c. teens d. toddlers e. infants (Answer: b; p. 70; Moderate) 14. You distribute coupons to every person in America. Sooner or later, you will reach all _____ million people in this country. a. 267 b. 277 c. 287 d. 296 e. 297 (Answer: d; p. 70; Easy)15. Research has shown that the most important demographic trend in the United States is the _____. a. changing age structure of the population b. mobility of people c. slowing birth rates d. ncrease in professional jobs e. aging population (Answer: a; p. 70; Moderate) 16. Some baby boomers are referred to as â€Å"DINKs. † What does this stand for? a. Dependable income, no-kids couple. b. Donâ €™t work, intelligent, no-kicks. c. Dual-income, no-kids couple. d. Doing it and not knowing. e. None of the above. (Answer: c; p. 70; Easy) 17. Baby boomers were born between the years 1946 and _____. a. 1954 b. 1960 c. 1964 d. 1970 e. 1980 (Answer: c; p. 70; Easy) 18. This demographic age group is approaching life with a new stability and reasonableness in the way they live, think, eat, and spend.They are _____. a. Generation X . Generation Y c. baby busters d. baby boomers e. teenagers (Answer: d; p. 71; Easy) 19. Which group includes urban professionals that likely prefer an apartment to a house in the suburbs? a. Generation X. b. Generation Y. c. Baby boomers. d. Baby busters. e. All of the above. (Answer: a; pp. 71–72; Easy) 20. This group shares new cultural concerns, cares about the environment, and responds favorably to socially responsible companies. Who are they? a. Generation X. b. Generation Y. c. Generation Z. d. Baby boomers. e. Teenagers. (Answer: a; p. 71 ; Challenging) 21. Who are the echo boomers? a. Generation X. b. Generation Y. c.Generation Z. d. Baby boomers. e. Baby busters. (Answer: b; p. 72; Moderate) 22. This group has created large kid and teen markets. Who are they? a. Generation X. b. Generation Y. c. Generation Z. d. Baby boomers. e. The Elderly. (Answer: b; p. 72; Easy) 23. Recently you read a marketing research report that mentioned _____ has (have) utter fluency and comfort with computer, digital, and Internet technology. a. Generation X b. Generation Y c. the elderly d. preschool children e. baby boomers (Answer: b; p. 72; Moderate) 24. Defining people by their birth date may be less effective than segmenting them by their _____ or _____. a. ncome; occupation b. lifestyle; occupation c. lifestyle; life stage d. occupation; life stage e. gender; sexual preference (Answer: c; p. 74; Challenging) 25. It is interesting to note that about _____ percent of American households contain married couples with children. a. 24 b . 28 c. 32 d. 34 e. 41 (Answer: d; p. 75; Moderate) 26. The three groups of baby boomers include leading, _____, and trailing. a. core b. general c. secondary d. central e. primary (Answer: a; p. 74; Moderate) 27. _____ households are now growing faster than _____ households. a. Traditional; nontraditional b. Large; traditional c. Nontraditional; smaller d.Nontraditional; traditional e. Male-dominant; female-dominant (Answer: d; p. 74; Moderate) 28. In 1950, women made up 30 percent of the workforce; now they make up _____. a. 35 percent b. 40 percent c. 43 percent d. 46 percent e. 60 percent (Answer: e; p. 74; Moderate) 29. Americans are very mobile. Over the past two decades, the U. S. population has shifted toward the _____ states. a. Midwest b. Western c. Sunbelt d. Southeastern e. New England (Answer: c; p. 75; Easy) 30. Within given regions, the population is moving from large cities to ______. a. farming communities b. rural areas c. foreign countries d. suburbs e. coastal to wns Answer: d; p. 75; Moderate) 31. Nearly 40 million Americans are working out of their homes with electronic conveniences. They are called the _____ market. a. telecommuters b. SOHO c. mobile d. work-at-home e. lazy (Answer: b; p. 75; Challenging) 32. Population shifts interest marketers because people in different regions _____ differently. a. eat b. think c. buy d. act e. all of the above (Answer: c; p. 75; Easy) 33. The Facts For You research firm has just released a report that one of these groups of workers has declined during the last 20 years. Which one is it? a. White collar. b. Blue collar. c. Service. d. Unemployed. e.Restaurant employees. (Answer: b; p. 76; Moderate) 34. Marketers need to know that almost everyone in this country is a native. Which country is it? a. China. b. Bolivia. c. Japan. d. Korea. e. The United States. (Answer: c; p. 76; Easy) 35. Because of increased _____, Americans will demand higher quality products, books, magazines, travel, personal compute rs, and Internet services. a. income b. family size c. education d. social class awareness e. none of the above (Answer: c; p. 76; Easy) 36. It is important for marketers to know that the _____ population growth is 12 times greater than the Caucasian growth rate. a. Hispanic b. minority . Asian d. African American e. Pacific Islander (Answer: b; p. 77; Challenging)37. Most large companies know they must now target specially designed _____ and _____ to ethnic groups in the United States. a. advertising; services b. services; promotions c. products; promotions d. services; labeling e. TV commercials; newspaper ads (Answer: c; p. 77; Moderate) 38. Which members of this group are more likely than the general population to have professional jobs, own a vacation home, own a notebook computer, and own individual stocks? a. Yuppies. b. Gays and lesbians. c. Baby boomers. d. Echo boomers. e. Environmentalists. (Answer: b; p. 7; Challenging) 39. This group of Americans totals 54 million. Who are they? a. Baby boomers. b. People born in American. c. People with disabilities. d. People with foreign-born parents. e. None of the above. (Answer: c; p. 78; Moderate) 40. The _____ environment consists of factors that affect consumer purchasing power and spending patterns. a. social-cultural b. political-legal c. technological d. economic e. natural (Answer: d; p. 79; Easy)41. Marketers would do well to take heed of the fact that this group is somewhat careful about its spending but can still afford the good life some of the time. Who are they? a. Lower class. . Lower-middle class. c. Middle class. d. Upper class. e. Lower-upper class. (Answer: c; pp. 78–79; Easy) 42. The group of expenses that use up most household income are _____. a. food, housing, retirement planning b. housing, insurance, taxes c. food, housing, transportation d. housing, taxes, transportation e. food, travel, electronics (Answer: c; p. 79; Moderate) 43. Ernst Engel’s laws generally have been supported by recent studies. He discovered that as family income rises, the percentage spent on _____ declines and the percentage spent on _____ remains about constant. a. food; clothing b. clothing; recreation/entertainment c. ood; transportation d. food; housing e. recreation/entertainment; retirement planning (Answer: d; p. 80; Challenging)44. One of the major concerns for marketers about the natural environment is the _____. a. number of protestors against misuse b. shortages of raw materials c. increases in recycling d. offshore oil exploration e. none of the above (Answer: b; p. 80; Easy) 45. The natural resources that are needed as inputs by marketers or that are affected by marketing activities are referred to as the _____. a. raw material market b. natural environment c. endangered environment d. green movement e. factors of production (Answer: b; p. 0; Easy) 46. As a marketer of pesticides, you should be concerned about all of the following natural environment trends ment ioned in your text except _____. a. shortages of raw materials b. increased pollution c. increased government intervention d. government subsidies e. increased acid rain (Answer: d; p. 81; Challenging) 47. What movement has spawned the marketer’s awareness of environmentally sustainable strategies? a. EPA. b. Black market. c. Green movement. d. Deregulation. e. Green intervention. (Answer: c; p. 81; Moderate) 48. Which of the following represents the most dramatic force shaping a marketer’s destiny? a.Technological environment. b. Natural environment. c. Legal-political environment. d. Deregulation. e. Partnership marketing. (Answer: a; p. 81; Easy) 49. New technologies create new opportunities and new _____. a. products b. services c. markets d. means of financing purchases e. headaches (Answer: c; p. 82; Moderate) 50. Which country leads the world in research and development spending? a. England. b. Germany. c. Sweden. d. Japan. e. The United States. (Answer: e; p. 8 4; Moderate) 51. Marketers are aware of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society.Not only are the baby boomers wealthier, which has likely influenced trends in the lake area, but the population is better educated that has allowed people to demand more from the market. (p. 70; Moderate) 162. Among some of the older patrons of The Landing was negative talk about Casey’s converting his business into a bar. What are two examples of social responsibility that Casey could embrace in an effort to offset that negativity? Casey could sponsor local ball teams, for example, or he could contribute to or help with the Witmer Lake Enhancement Committee. p. 85; Moderate) 163. What possible shifts in cultural values may once again impact Casey’s mission at The Landing? Casey will likely continue to track preferences of the baby boomers because this population group has been the primary driver of his business. As more baby boomers retire and age and choose to spend more time with grandchildren, life at the lake may again become a focal point in the baby boomers’ lives. (p. 87; Challenging) 164. What current characteristics of Casey’s business indicate that we have moved from a â€Å"me society† to a â€Å"we society†?The Landing is now merely surviving as a bar indicates that more people want to â€Å"be with others,† as the text indicates. (p. 88; Challenging) 165. What might allow Casey Brickly to now take a more proactive stance in responding to the marketing environment? Casey has owned The Landing for more than four decades; therefore, he may have a more innate sense of how to deal with his market. In addition, he understands who his primary customers have been; therefore, he could be able to better predict their preferences. (p. 90; Moderate)

ITEC Essay Example | Topics and Well Written Essays - 250 words

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Body Modifications in the Modern Western Society Essay

Body Modifications in the Modern Western Society - Essay Example It is imperative that considerations with regards to the ideals and beliefs be taken in order to understand as to why not just primitive cultures but modern society in general fully accepts body piercing and modification as a part of the norm. Body piercings and modifications are components of a long history of cultures that are usually rooted in shamanic and other healing practices (Favazza 2). In the past, and even in the present, blood has been a symbol of life, and thus most cultures would be putting emphasis on the importance of life and living by holding sacrifices, blood-letting, scarifications and tattoos to tribal members, whether it is part of a rite of passage or as prayer for healing, among others. The transformation of the body can be also seen as a part of a tribe’s culture, of either as a status symbol or as the ideal picture of being presentable (â€Å"Cultural Customs†). The price of attaining beauty with regards to the perspectives of some particular t ribes is by altering the normal appearance of the body into what is considered beautiful. As compared to the modern societies today, this is not something new, since there are many people who also modify their bodies by adding piercings, tattoos, even scars to promote their own identities. However, it is not a cultural thing, but a matter of choice, as is also other modifications such as body implants, body building, and other dietary alterations (Featherstone 1). Body modification is defined as practices that aim to change the natural appearance of the body in any form or means (Featherstone 1). Among such practices would be tattooing of skin, body piercings, the addition of implants in the body as well as the other dietary and exercise regimen such as fasting and body-building. In some primitive cultures, altering the body to some extent is regarded as either a rite of passage or as a beautification ritual. The addition of tattoos and other forms of scarification gives the younger boys their passport to adulthood. In a tribe in Papua New Guinea, the cutting of skin and making it seem like a crocodile’s is not just for beautification, but as a part of the transformation of boys into adults, and by entering such a ritual is their recognition of being mature in the eyes of the whole village (â€Å"Cultural Customs†). The Suri tribe in Africa cut their lips and insert a clay pot in it, and according to their customs, the larger th e plate, the more one woman is desirable to other men, and she might even get a lot of cattle as dowry for marriage (â€Å"Cultural Customs†). In Indonesia, chiseling the teeth into fine points is considered to be another form of adornment, and women who get their teeth chiseled are seen as having a higher status than those who don normal-looking teeth (â€Å"Cultural Customs†). In a westerner’s perspective this seems to be cruel, it must also be remembered that modifications of the body such as breast implants and rhinoplasty are also done my many women in order to become much more attractive to males. Also, for some people the addition of implants is a way of hastening the process of evolution. Performance artists such as Orlan and Stelarc modify their bodies through implants such as horns, and by altering their bodies they convey the message of critiquing the notion and concept of beauty (Featherstone 9). For most

A comparison of effects of categorized and uncategorized words on Essay

A comparison of effects of categorized and uncategorized words on memory - Essay Example This model is best illustrated by a computer system where information is received and processed variably by the brain before it is stored into memory.Atkinson and Shiffrin's "multi-store model of memory" theory posits that there are three distinct memory stores - sensory, short term, and long term. The amount of attention paid and "rehearsal" of information affects likelihood of this information passing first into short term and then into long-term memory.Sensory memory has a very limited duration of about a second for visual store and two seconds for the acoustic store. Short term memory also has a limited storage capacity and a very short duration and can be lost through decay or displacement as new information is added to the store. Organizing information in short term memory through "chunking" enables it to pass into long term memory. These chunks can be acronyms, words, phrases, or anything else that links the information together into a meaningful structure. By chunking informa tion, a much greater quantity can be stored. Memory can decay over time, or there can be problems of retrieval, where the memory is there but cannot be recalled. Information in long term memory is more likely to be in the form of semantics, organized by general meaning rather than in greater detail. In a study by Tulving and Pearlstone (1966), participants' recall of word lists of 12, 24, and 48 words in categories of 1, 2, or 4 words was tested. The answer sheets were used with and without category headings to measure the effects of categorization on recall. Participants showed a significant increase in words recalled when the category headings were present on the answer sheet. This study shows that organizing information in memory increases the amount of recall. Objective of the Study Generally, the study's aim was to approximate studies [such as that of Tulving and Pearlstone (1966)] to determine whether word categorization could increase the number of words recalled from a prepared word list. In more specific point of view, the study is aimed at: 1. Identifying the factors that could help people recall more numbers of words 2. Assess which among the given factors (as stated in the first specific objective) is better be applied to specific age range of the people 3. Evaluate if there could be a difference to the number of words recall if the subjects are of different gender, social status and level of education earned. Hypotheses The null hypothesis supposes that any variation in the number of words recalled between the categorised and uncategorised word lists will be due to chance factors. The alternative hypothesis assumes that there will be a significant difference in the number of words recalled between the categorised and uncategorised word lists such that the number of words recalled from the former will be higher. Methodology Research Design The experimental method was used to try and establish a causal relationship.A repeated measures design was utilized to limit the number of participants required and to reduce participant variables. To minimize order effects, counterbalancing was used, with half the participants hearing the uncategorized list first and the remaining half hearing the categorized list followed by the uncategorized list. Participants The study was participated in by close

Rene Descartes - The Discourse on the Method Essay

Rene Descartes - The Discourse on the Method - Essay Example His work Discourse on Method offers several key perspectives on analyzing the world, and it breaks from traditions in a number of ways. The Discourse on Method is not only important as a study of how the early scientific method developed in the Western world, but also it is informative in terms of where Descartes fits within the historical context of Western thought. Based on the applications of Descartes’ new method, one can see the logical consequences of his theories to both the physical and metaphysical sciences. An overview and critical examination of those consequences, including what can be called â€Å"Descartes’ history hypothesis,† is given in this paper. Descartes published the Discourse on Method in 1637, four years before his seminal Mediations on First Philosophy in which he establishes the rationalist mode of thinking necessary to produce the cogito ergo sum argument. The arguments in the Discourse are laid out in a way that reflects this later wor k, particularly in the importance that Descartes ascribes to reasoning as such as a way toward truth. He writes, â€Å"For, in fine, whether awake or asleep, we ought never to allow ourselves to be persuaded of the truth of anything unless on the evidence of our Reason† (Descartes, IV, 9). ... However, more than a piece of thorough philosophy, Descartes’ Discourse reads more as a narrative: introducing his younger self, his eventual dissatisfaction with the old ways of thinking that were based primarily on a Jesuit or Aristotelian model of science, and his dissatisfaction with the lack of certainty that those methods provided him. In fact, these methods only produce more doubts, more uncertainty about the world as it actually exists. Therefore, he outlines the way by which he arrives at his new method, which calls into question everything except for the fact that his is a thinking thing, capable of doubting everything except for the fact that it doubts (Descartes, III, 6). In giving a justification for a rational way to approach philosophical and scientific problems, Descartes is setting up his own conclusions about both the physical and metaphysical worlds. The function of Part V of the Cartesian Discourse on Method is to address some of these physically relevant s cientific considerations given by his rational method. â€Å"In Part Five of the Discourse a few years later,† writes Ernan McMullin, â€Å"he returned to his ambitious project of a mechanistic cosmogony, describing it this time only in outline, with none of the explanatory detail of the earlier work† (McMullin 2010, 91). Cosmogony, which refers to the study of how the universe came to be, is a mechanistic—or physical—set of theories. Descartes’ method, which attempts to set forth a mechanistic view of the origins of the universe, involves looking at a number of different phenomena: stars, the sky, heavenly bodies, and human beings themselves (Descartes, IV, 4). Descartes is attempting to develop the foundations

Econ 1500 Assignment Example | Topics and Well Written Essays - 250 words

Econ 1500 - Assignment Example It originated from the classical economists, but later adopted by modern Marxist economics, i.e. Karl Marx. Value exists in three different concepts i.e. utility, use value, and exchange value. In classical economist’s viewpoint, labor input determines the value of a good or service. On the other hand, marginalists believe that a buyer of a good determines its utility, and this fluctuates with consumption patterns. Therefore, the major transition involves labor as the cornerstone of valuation of a product to utility as the form of valuation of a product (Hartwick and Peet 1). Which economists/philosophers derived economic information and theories on â€Å"utility†, the â€Å"equi-marginal principle†, and â€Å"opportunity cost† principles in economics that we use in today’s economic analysis? Identify the concepts and economists, and then briefly explain these three economic principles. Paul Samuelson derived the theory of utility. The concept of utility describes the tastes and preferences associated with consumer’s consumption patterns. This comes from the dual side analysis of value and price i.e. demand and supply sides. Herbert Simon invented the concept of opportunity cost. This is the cost of an activity measured against the foregone value of the next best alternative, i.e. the sacrifice in relation to the next best choice taken among mutually exclusive choices. The principle of equi-marginal utility was the brainchild of Hermann Heinrich Gossen. This concept is an extension of diminishing marginal utility law as it explains how a consumer behaves while distributing his or her limited income between various services and goods. This law dictates that a consumer will allocate his money income among several goods in order to derive maximum

Procurement and supply chain management Essay Example for Free

Procurement and supply chain management Essay This Publication is concerned with the vital subject of business logistics and supply chain management, an area that can be essential to a firm’s competitive strategy and revenue generation. This management area has been described by many names, including physical distribution, materials management, transportation management, logistics, and supply chain management. Relevant business activities may include one or more of the following areas: transportation, inventory, order processing, purchasing, warehousing, materials handling, packaging, customer service standards, and production. The focus of this Publication is on the planning, organizing, and controlling of these activities key elements for successful management in any organization. Special emphasis is given to strategic planning and decision making as an important part of the management process. Managerial efforts are directed towards setting the level of the logistics activities so as to make products and services available to customers at the time and place required, and in the condition and form desired, in the most profitable and cost-effective way. Logistical activities have always been vital to organizations, and so business logistics and supply chain management represents a synthesis of many concepts, principles, and methods from the more traditional areas of marketing, production, accounting, purchasing, and transportation, as well as from the disciplines of applied mathematics, organizational behaviour, and economics. This Publication attempts to unify these elements to assist in the effective management of the supply chain. The Publication aims to present ideas, principles and techniques that are fundamental to good business logistics practice. It concentrates on important activities of management such as planning, organizing, and controlling, and also on a triangle of interrelated transportation, inventory, and location strategies, which are at the heart of good logistics planning and decision making. Contemporary trends that affect the scope and practice of business logistics and supply chain management have been integrated into the body of the text. Firstly, emphasis is placed on logistics and supply chain management in a worldwide setting to reflect the growing internationalization and globalization of business in general. Secondly, the shift towards service-oriented economies by industrialized nations is emphasized by showing how logistics concepts and principles are applicable to both service-producing tirms and product-producing ones. Thirdly, attention is given to the integrated management of supply chain activities. 1 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk The Publication contains many practical and contemporary examples that show the applicability of the textual material and assist in the understanding and learning of the key points and concepts. Each Chapter in this Cambridge International College Publication on Logistics, Chain Supply Transport Management includes: †¢ An introduction section †¢ Examples and/or figures and diagrams to explain the concepts being covered †¢ A summary of concluding comments †¢ Review Questions designed to reinforce learning and contemplation of what is covered in the Chapter Advice on How to Study this Program Every individual CIC Member approaches his/her study in a different manner, and different people may have a particular study method that they find most effective for them. However, the following is a tested and proven Study Method, suggested to you as a CIC Member in order to assist in making your study and learning easier and enjoyable and to assist you to quickly master the contents of this CIC Publication on Logistics, Chain Supply Transport Management: Step 1: Set yourself a flexible study schedule, depending on the time you have available and what is best for you. For example, the target set could be to study for 1 or 2 hours a night, or for 8 or 9 hours a week, or to complete one Chapter every 2 weeks. There is no set or compulsory schedule, but simply setting a schedule or goal is often an important action in ensuring that study is undertaken successfully and within the specified timeframe. Step 2: Read the whole of the first Chapter at your normal reading pace, without trying to memorise every topic covered or fact stated, but trying to get â€Å"the feel† of what is dealt with in the Chapter as a whole. Step 3: Start reading the Chapter again from the beginning, this time reading more slowly, paragraph by paragraph and section by section. Make brief notes of any points, sentences, paragraphs or sections which you feel need your further study, consideration or thought. You may wish to keep any notes in a separate file or notebook. Try to absorb and memorise all the important topics covered. Step 4: Start reading the Chapter again from its start, this time paying particular attention to and if necessary studying more thoroughly those parts on which you earlier wrote notes for further study. It is best that you do not pass on to other parts or topics until you are certain you fully understand and remember those parts you earlier noted as requiring your special attention. Try to fix everything taught firmly in your mind. 2 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk Step 5: There are self-assessment review questions at the end of the Chapter, and you are strongly advised to try to answer or think about them as best you can but do not send your answers to the College. If these questions/exercises highlight any areas that you feel you need to revise or re-read in the Chapter, then go ahead and do that before moving on to Step 6. Step 6: Once you have completed steps 1 to 5 above, move on to the next Chapter and repeat steps 1 to 5 for each subsequent Chapter. 3 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk LOGISTICS, SUPPLY CHAIN TRANSPORT MANAGEMENT PROGRAM MODULE ONE BUSINESS LOGISTICS/SUPPLY CHAIN A VITAL SUBJECT (based on Chapter 1 of ‘Logistics, Supply Chain and Transport Management’ by Ronald H Ballou) Contents Introduction Business Logistics Defined The Supply Chain The Activity Mix Importance of Logistics/Supply Chain (SC) Costs Are Significant Logistics Customer Service Expectations Are Increasing Supply and Distribution Lines Are Lengthening with Greater Complexity Logistics/SC Is Important to Strategy Logistics/SC Adds Significant Customer Value Customers Increasingly Want Quick, Customized Response Logistics/SC in Non-Manufacturing Areas Service Industry Military Environment Business Logistics/SC in the Firm Objectives of Business Logistics/SC Questions and Problems Introduction As far back as history records, the goods that people wanted were not always produced where they wanted to consume them, or these goods were not accessible when people wanted to consume them. Food and other commodities were widely dispersed and were only available in abundance at certain times of the year. Early peoples had the choice of consuming goods at their immediate location or moving the goods to a preferred site and storing them for later use. However, because no well developed transportation and storage systems yet existed, the movement of goods was limited to what an individual could personally move, and storage of perishable commodities was possible for only a short time. This limited movement-storage system generally constrained people to live close to the sources of production and to consume a rather narrow range of goods. Even today, in some areas of the world consumption and production take place only within a very limited geographic region. Striking examples can still be observed in the developing nations of Asia, South America, Australia, and Africa, where some of the population live in small, self-sufficient villages, and most of the goods needed by the residents are produced or acquired in the immediate vicinity. Few goods are imported from other areas. Therefore, production efficiency and the economic standard of living are generally low. In this type of economy, a well-developed and inexpensive logistics system would encourage an exchange of goods with other producing areas of the country, or even the world. 4 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk As logistics systems improved, consumption and production began to separate geographically. Regions would specialize in those commodities that could be produced most efficiently. Excess production could be shipped economically to other producing (or consuming) areas, and needed goods not produced locally were imported. This exchange process follows the principle of comparative advantage. This same principle, when applied to world markets, helps to explain the high level of international trade that takes place today. Efficient logistics systems allow world businesses to take advantage of the fact that lands, and the people who occupy them, are not equally productive. Logistics is the very essence of trade. It contributes to a higher economic standard of living for us all. To the individual firm operating in a high-level economy, good management of logistics activities is vital. Markets are often national or international in scope, whereas production may be concentrated at relatively few points. Logistics activities provide the bridge between production and market locations that are separated by time and distance. Effective management of these activities is the major concern of this Program. Business Logistic Defined Business logistics is a relatively new field of integrated management study in comparison with the traditional fields of finance, marketing, and production. As previously noted, logistics activities have been carried out by individuals for many years. Businesses also have continually engaged in movestore (transportation-inventory) activities. The newness of the field results from the concept of coordinated management of the related activities, rather than the historical practice of managing them separately, and the concept that logistics adds value to products or services that are essential to customer satisfaction and sales. Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one cost for another (transportation costs for inventory costs) was evident in the selection between road and water transport: â€Å"The fact is that carriage by road being quicker, more reliable and less subject to loss or damage, it possesses advantage to which businessmen often attach a considerable value. However, it may well be that a saving induces the merchant to use a canal; he can buy warehouses and increase his floating capital in order to have a sufficient supply of goods on hand to protect himself against slowness and irregularity of the canal, and if all told the saving in transport gives him a cost advantage, he will decide in favour of the new route. † The first textbook to suggest the benefits of co-ordinated logistics management appeared around 1961, in part explaining why a generally accepted definition of business logistics is still emerging. Therefore, it is worthwhile to explore several definitions for the scope and content of the subject. A dictionary definition of the term logistics is: â€Å"The branch of military science having to do with procuring, maintaining, and transporting material, personnel, and facilities. † This definition puts logistics into a military context. To the extent that business objectives and activities differ from those of the military, this definition does not capture the essence of business logistics management. A better representation of the field may be reflected in the definition promulgated by the Council of Logistics Management (CLM), a professional organization of logistics 5 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk managers, educators, and practitioners formed in 1962 for the purposes of continuing education and fostering the interchange of ideas. Its definition: â€Å"Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements. † This is an excellent definition, conveying the idea that product flows are to be managed from the point where they exist as raw materials to the point where they are finally discarded. Logistics is also concerned with the flow of services as well as physical goods, an area of growing opportunity for improvement. It also suggests that logistics is a process, meaning that it includes all the activities that have an impact on making goods and services available to customers when and where they wish to acquire them. However, the definition implies that logistics is part of the supply chain process, not the entire process. So, what is the supply chain process or, more popularly, supply chain management? Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it. Supply chain management emphasizes the logistics interactions that take place among the functions of marketing, logistics, and production within a firm and those interactions that take place between the legally separate firms within the product-flow channel. Opportunities for cost or customer service improvement are achieved through co-ordination and collaboration among the channel members where some essential supply chain activities may not be under the direct control of the logistician. Although early definitions such as physical distribution, materials management, industrial logistics and channel management all terms used to describe logistics have promoted this broad scope for logistics, there was little attempt to implement logistics beyond a company’s own enterprise boundaries, or even beyond its own internal logistics function. Now, retail firms are showing success in sharing information with suppliers, who in turn agree to maintain and manage inventories on retailers’ shelves. Channel inventories and product stockouts are lower. Manufacturing firms operating under just-in-time production scheduling build relationships with suppliers for the benefit of both companies by reducing inventories. Definitions of the supply chain and supply chain management reflecting this broader scope are: â€Å"The supply chain (SC) encompasses all activities associated with the flow and transformation of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Materials and information flow both up and down the supply chain. † â€Å"Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to achieve a sustainable competitive advantage. † After careful study of the various definitions being offered, Mentzer and other writers propose the broad and rather general definition as follows: â€Å"Supply chain management is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. † 6 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] The supply chain management model in Figure 1-1 viewed as a pipeline shows the scope of this definition. It is important to note that supply chain management is about the co-ordination of product flows across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and the supply chain members collectively. It is difficult, in a practical way, to separate business logistics management from supply chain management. In so many respects, they promote the same mission: â€Å"To get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest contribution to the firm. † Some claim that supply chain management is just another name for integrated business logistics management (IBLM) and that the broad scope of supply chain management has been promoted over the years. Conversely, others say that logistics is a subset of SCM, where SCM considers additional issues beyond those of product flow. For example, SCM may be concerned with product pricing and manufacturing quality. Although SCM promotes viewing the supply channel with the broadest scope, the reality is that firms do not practise this ideal. Fawcett and Magan found that companies that do practise supply chain integration limit their scope to one tier upstream and one tier downstream. The focus seems to be concerned with creating seamless processes within their own companies and applying new information technologies to improve the quality of information and speed of its exchange among channel members. The boundary between the logistics and supply chain management terms is fuzzy. Even then, logistics activities are repeated once again as used products are recycled upstream in the logistics channel. A single firm generally is not able to control its entire product flow channel from raw material source to points of the final consumption, although this is an emerging opportunity. For practical purposes, the business logistics for the individual firm has a narrower scope. Usually, the maximum managerial control that can be expected is over the immediate physical supply and physical distribution channels, as shown in Figure 1-2. The physical supply channel refers to the time and space gap between a firm’s immediate material sources and its processing points. Similarly, the physical distribution channel refers to the time and space gap between the firm’s processing points and its customers. Due to the similarities in the activities between the two channels, physical supply (more commonly referred to as materials management) 8 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk and physical distribution comprise those activities that are integrated into business logistics. Business logistics management is now popularly referred to as supply chain management. Others have used terms such as value nets, value stream, and lean logistics to describe a similar scope and purpose. The evolution of the management of product flows toward SCM is captured in Figure 1-3. Although it is easy to think of logistics as managing the flow of products from the points of raw material acquisition to end customers, for many firms there is a reverse logistics channel that must be managed as well. The life of a product, from a logistics viewpoint, does not end with delivery to the customer. Products become obsolete, damaged, or nonfunctioning and are returned to their source points for repair or disposition. Packaging materials may be returned to the shipper due to environmental regulations or because it makes good economic sense to reuse them. The reverse logistics channel may utilize all or a portion of the forward logistics channel or it may require a separate design. The supply chain terminates with the final disposition of a product. The reverse channel must be considered to be within the scope of logistics planning and control. The Activity Mix The activities to be managed that make up business logistics (supply chain process) vary from firm to firm, depending on a firm’s particular organizational structure, management’s honest differences of opinion about what constitutes the supply chain for its business, and the importance of individual activities to its operations. Follow along the supply chain as shown in Figure 1-2 and note the important activities that take place. Again, according to the CLM: 9 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk â€Å"The components of a typical logistics system are: customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage. † Figure 1-4 organizes these components, or activities, according to where they are most likely to take place in the supply channel. The list is further divided into key and support activities, along with some of the decisions associated with each activity. Customer service standards co-operate with marketing to: a. Determine customer needs and wants for logistics customer service b. Determine customer response to service c. Set customer service levels 2. Transportation a. Mode and transport service selection b. Freight consolidation c. Carrier routing d. Vehicle scheduling e. Equipment selection f. Claims processing g. Rate auditing 3. Inventory management a. Raw materials and finished goods stocking policies b. Short-term sales forecasting c. Product mix at stocking points 10 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk d. Number, size, and location of stocking points e. Just-in-time, push, and pull strategies 4. Information flows and order processing a. Sales order-inventory interface procedures b. Order information transmittal methods c. Ordering rules Support Activities 1. Warehousing a. Space determination b. Stock layout and dock design c. Warehouse configuration d. Stock placement 2. Materials handling a. Equipment selection b. Equipment replacement policies c. Order-picking procedures d. Stock storage and retrieval 3. Purchasing a. Supply source selection b. Purchase timing c. Purchase quantities 4. Protective packaging designed for: a. Handling b. Storage c. Protection from loss and damage 5. Co-operate with production/operations to: a. Specify aggregate quantities b. Sequence and time production output c. Schedule supplies for production/operations 6. Information maintenance a. Information collection, storage, and manipulation b. Data analysis Control procedures Key and support activities are separated because certain activities will generally take place in every logistics channel, whereas others will take place, depending on the circumstances, within a particular firm. The key activities are on the â€Å"critical† loop within a firm’s immediate physical distribution channel, as shown in Figure 1 to 5. They contribute most to the total cost of logistics or they are essential to the effective co-ordination and completion of the logistics task. 11 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk Customer service standards set the level of output and degree of readiness to which the logistics system must respond. Logistics costs increase in proportion to the level of customer service provided, such that setting the standards for service also affects the logistics costs to support that level of service. Setting very high service requirements can force logistics costs to exceedingly high levels. Transportation and inventories maintenance are the primary cost-absorbing logistics activities. Experience has shown that each will represent one-half to two-thirds of total logistics costs. Transportation adds place value to products and services, whereas inventories maintenance adds time value. Transportation is essential because no modern firm can operate without providing for the movement of its raw materials or its finished products. This importance is underscored by the financial strains placed on many firms by such disasters as a national railroad strike or independent truckers’ refusal to move goods because of rate disputes. In these circumstances, markets cannot be served, and products back up in the logistics pipeline to deteriorate or become obsolete. Inventories are also essential to logistics management because it is usually not possible or practical to provide instant production or ensure delivery times to customers. They serve as buffers between supply and demand so that needed product availability may be maintained for customers while providing flexibility for production and logistics in seeking efficient methods for manufacture and distribution of the product. Order processing is the final key activity. Its costs usually are minor compared to transportation or inventory maintenance costs. Nevertheless, order processing is an important element in the total time that it takes for a customer to receive goods or services. It is the activity triggering product movement and service delivery. Although support activities may be as critical as the key activities in any particular circumstance, they are considered here as contributing to the logistics mission. In addition, one or more of the support activities may not be a part of the logistics activity mix for every firm. For example, products such as finished automobiles or commodities such as coal, iron ore, or gravel not needing the weather and security protection of warehousing will not require the warehousing activity, even though inventories are maintained. However, warehousing and materials handling are typically conducted wherever products are temporarily halted in their movement to the marketplace. 12 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk Protective packaging is a support activity of transportation and inventory maintenance as well as of warehousing and materials handling because it contributes to the efficiency with which these other activities are carried out. Purchasing and product scheduling often may be considered more a concern of production than of logistics. However, they also affect the overall logistics effort, and specifically they affect the efficiency of transportation and inventory management. Finally, information maintenance supports all other logistics activities in that it provides the needed information for planning and control. The extended supply chain refers to those members of the supply channel beyond the firm’s immediate suppliers or customers. They may be suppliers to the immediate suppliers or customers of the immediate customers and so on until raw material source points or end customers are reached. It is important to plan and control the previously noted activities and information flows if they affect the logistics customer service that can be provided and the costs of supplying this service. Management of the extended supply chain has the potential of improving logistics performance beyond that of just managing the activities within the immediate supply chain. Importance of Logistics/Supply Chain Logistics is about creating value value for customers and suppliers of the firm, and value for the firm’s stakeholders. Value in logistics is primarily expressed in terms of time and place. Products and services have no value unless they are in the possession of the customers when (time) and where (place) they wish to consume them. For example, concessions at a sports event have no value to consumers if they are not available at the time and place that the event is occurring, or if inadequate inventories don’t meet the demands of the sports fans. Good logistics management views each activity in the supply chain as contributing to the process of adding value. If little value can be added, it is questionable whether the activity should exist. However, value is added when customers are willing to pay more for a product or service than the cost to place it in their hands. To many firms throughout the world, logistics has become an increasingly important value-adding process for a number of reasons. Costs Are Significant Over the years, several studies have been conducted to determine the costs of logistics for the whole economy and for the individual firm. There are widely varying estimates of the cost levels. According to the International Monetary Fund (IMF), logistics costs average about 12 percent of the 13 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk world’s gross domestic product. Robert Delaney, who has tracked logistics costs for more than two decades, estimates that logistics costs for the U. S. economy are 9. 9 percent of the U. S. gross domestic product (GDP), or $921 billion. For the firm, logistics costs have ranged from 4 percent to over 30 percent of sales. The results from a cost survey of individual firms are shown in Table 1-3. Although the results show physical distribution costs at about 8 percent of sales, this survey does not include physical supply costs. Probably another one-third may be added to this total to represent average logistics costs for the firm at about 11 percent of sales. Over the last decade, physical distribution costs have ranged between 7 percent and 9 percent of sales. There may be a trend of increasing costs for individual firms, although Wilson and Delaney show over the same period that logistics costs as a percent of U. S. GDP have declined by about 10 percent. Logistics costs, substantial for most firms, rank second only to the cost of goods sold (purchase costs) that are about 50 percent to 60 percent of sales for the average manufacturing firm. Value is added by minimizing these costs and by passing the benefits on to customers and to the firm’s shareholders. Logistics Customer Service Expectations Are Increasing The Internet, just-in-time operating procedures, and continuous replenishment of inventories have all contributed to customers expecting rapid processing of their requests, quick delivery, and a high degree of product availability. According to the Davis Survey of hundreds of companies over the last decade, world-class competitors have average order cycle times (the time between when an order is placed and when it is received) of seven to eight days and line item fill rates of 90 percent to 94 percent. LogFac summarizes world-class logistics performance for domestic companies as: Error rates of less than one per 1,000 orders shipped Logistics costs of well under 5 percent of sales Finished goods inventory turnover of 20 or more times per year Total order cycle time of five working days Transportation cost of one percent of sales revenue or less, if products sold are over $5 per 500 gms As might be expected, the average company performs below these cost and customer service benchmarks, when compared with the statistics in Tables 1-3 and 1-4. Supply and Distribution Lines Are Lengthening with Greater Complexity The trend is toward an integrated world economy. Firms are seeking, or have developed, global strategies by designing their products for a world market and producing them wherever the low-cost 14 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk raw materials, components, and labor can be found (e. g. , Ford’s Focus automobile), or they simply produce locally and sell internationally. In either case, supply and distribution lines are stretched, as compared with the producer who wishes to manufacture and sell only locally. Not only has the trend occurred naturally by firms seeking to cut costs or expand markets, but it is also being encouraged by political arrangements that promote trade. Examples of the latter are the European Union, the North America Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico, and the economic trade agreement among several countries of South America (MERCOSUR). Globalization and internationalization of industries everywhere will depend heavily on logistics performance and costs, as companies take more of a world view of their operations. As this happens, logistics takes on increased importance within the firm since its costs, especially transportation, become a larger part of the total cost structure. For example, if a firm seeks foreign suppliers for the raw materials that make up its final product or foreign locations to build its product, the motivation is to increase profit. Material and labor costs may be reduced, but logistics costs are likely to increase due to increased transportation and inventory costs. The â€Å"tradeoff†, as shown in Figure 1-6, may lead to higher profit by reducing materials, labour, and overhead costs at the expense of logistics costs and tariffs. â€Å"Outsourcing† adds value, but it requires careful management of logistics costs and product-flow times in the supply channel. Logistics/SC Is Important To Strategy Firms spend a great deal of time finding ways to differentiate their product offerings from those of their competitors. When management recognizes that logistics/SC affects a significant portion of a firm’s costs and that the result of decisions made about the supply chain processes yields different levels of customer service, it is in a position to use this effectively to penetrate new markets, to increase market share, and to increase profits. When a firm incurs the cost of moving the product toward the customer or making an inventory available in a timely manner, for the customer â€Å"value† has been created that was not there previously. It is value as surely as that created through the production of a quality product or through a low price. It is generally recognized that business creates four types of value in products or services. These are: form, time, place, and possession. Logistics creates two out of these four values. Manufacturing creates form value as inputs are converted to outputs, that is raw materials are transformed into finished goods. Logistics controls the time and place values in products, mainly through transportation, information flows, and inventories. Possession value is often considered the responsibility of marketing, engineering, and finance, where the value is created by helping customers acquire the product through such mechanisms as advertising (information), technical support, and terms of sale (pricing and credit availability). To the extent that SCM includes production, three out of the four values may be the responsibility of the logistics/supply chain manager. Customers Increasingly Want Quick, Customized Response Fast food retailers, automatic teller machines, overnight package delivery, and electronic mail on the Internet have led us as consumers to expect that products and services can be made available in increasingly shorter times. In addition, improved information systems and flexible manufacturing processes have led the marketplace toward mass customization. Rather than consumers having to accept the â€Å"one size fits all† philosophy in their purchases, suppliers are increasingly offering products that meet individual customer needs. Companies too have been applying the concept of quick response to their internal operations in order to meet the service requirements of their own marketing efforts. The quick response philosophy has been used to create a marketing advantage. Saks Fifth Avenue applied it, even though big profits are made through big margins and not on cost reductions that might be achieved from good logistics management. Supply chain costs may even rise, although the advantage is to more than cover these costs through increased profits. Logistics/SC in Non-manufacturing Areas It is perhaps easiest to think of logistics/SC in terms of moving and storing a physical product in a manufacturing setting. This is too narrow a view and can lead to many missed business opportunities. The logistics/SC principles and concepts learned over the years can be applied to such areas as service industries, the military, and even environment management. Service Industry The service sector of industrialized countries is large and growing. In the United States, over 70 percent of all jobs are in what the federal government classifies as the service sector. The size of this sector alone forces us to ask if logistics concepts are not equally applicable here as they are to the manufacturing sector. If they are, there is a tremendous untapped opportunity yet to be fulfilled. Many companies designated as service firms in fact produce a product. Examples include: McDonald’s Corporation (fast foods); Dow Jones Co. , Inc. (newspaper publishing); and Sears, Roebuck and Co. (merchandise retailing). These companies carry out all the typical supply chain activities of any manufacturing firm. However, for service companies such as Bank One (retail banking), Marriott Corporation (lodging) and Consolidated Edison (electric power), supply chain activities, 16 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: Britain. International Headquarters: College House, Leoville, Jersey JE3 2DB, Britain Telefax: +44 (0)1534 485485 Email: [emailprotected] com Website: www. cambridgecollege. co. uk especially those associated with physical distribution, are not as obvious. Even though many service-oriented companies may be distributing an intangible, nonphysical product, they do engage in many physical distribution activities and decisions. A hospital may want to extend emergency medical care throughout the community and must make decisions as to the locations of the centers. United Parcel Service and Federal Express must locate terminals and route pickup and delivery trucks. The East Ohio Gas Company inventories natural gas in underground wells during the off-season in the region where demand will occur. Bank One must locate and have cash inventory on hand for its ATMs. The Federal Reserve Bank must select the methods of transportation to move cancelled cheques among member banks. The Catholic Church must decide the number, location, and size of the churches needed to meet shifts in size and location of congregations, as well as to plan the inventory of its pastoral staff. Xerox’s repair service for copying equipment is also a good example of the logistics decisions encountered in a service operation. The techniques, concepts, and methods discussed throughout this Program should be as applicable to the service sector as they are to the manufacturing sector. The key, according to Theodore Levitt, may be in transforming an intangible service into a tangible product. Problems will remain in carefully identifying the costs associated with the distribution of an intangible product. Perhaps because of this, few service firms or organizations have a physical distribution manager on their staff, although they frequently do have a materials manager to handle supply matters. However, managing logistics in service industries does represent a new direction for the future development of logistics practice. Military Before businesses showed much interest in co-ordinating supply chain processes, the military was well organized to carry out logistics activities. More than a decade before business logistics’ developmental period, the military carried out what was called the most complex, best-planned logistics operation of that time-the invasion of Europe during World War II. Although the problems of the military, with its extremely high customer service requirements, were not identical with those of business, the similarities were great enough to provide a valuable experience base during the developmental years of logistics. For example, the military alone maintained inventories valued at about one-third of those held by all U. s. manufacturers. In addition to the management experience that such large-scale operations provide, the military sponsored, and continues to sponsor, research in the logistics area through such organizations as the RAND Corporation and the Office of Naval Research. With this background, the field of business logistics began to grow. Even the term logistics seems to have had its origins in the military. A recent example of military logistics on a large scale was the conflict between the United States and Iraq over Iraq’s invasion of the small country of Kuwait. This invasion has been described as the largest military logistics operation in history. The logistics support in that war is yet another illustration of what worldclass companies have always known: Good logistics can be a source of competitive advantage. Lt General William Pagonis, in charge of logistics support for Desert Storm, observed: â€Å"When the Middle East started heating up, it seemed like a good time to pull out some history books on desert warfare in this region . But there was nothing on logistics. Logistics is not a best seller. In a couple of his diaries, Rommel talked about logistics. He thought the Germans lost the battle not because they didn’t have great soldiers or equipment in fact, the German tanks outfought ours almost throughout World War II but because the British had better logistics. † 17 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website: The first wave of 200,000 troops and their equipment was deployed in a month and a half, whereas troop deployment took nine months in the Vietnam conflict. In addition, the application of many good logistics concepts was evident. Take customer service, for example: â€Å"We believed that if we took care of our troops, the objectives would be accomplished no matter whatever else happened. The soldiers are our customers. It is no different than a determined, single focus on customers that many successful businesses have. Now, you take care of your soldiers not only by providing them cold sodas, and burgers, and good food: you make sure they have the ammunition on the front line, so that when they go fight the war they know they have what they need. † This meant that when 120 mm guns rather than 105 mm guns were desired on tanks, they were changed. When brown vehicles were preferred over the traditional camouflage green, they were repainted at the rate of 7,000 per month. Environment Population growth and resultant economic development have heightened our awareness of environmental issues. Whether it is recycling, packaging materials, transporting hazardous materials or refurbishing products for resale, logisticians are involved in a major way. After all, the United States alone produces more than 160 million tons of waste each year, enough for a convoy of 10-ton garbage trucks reaching halfway to the moon. In many cases, planning for logistics in an environmental setting is no different from that in manufacturing or service sectors. However, in a few cases additional complications arise, such as governmental regulations that make the logistics for a product more costly by extending the distribution channel. Business Logistics in the Firm It has been the tradition in many firms to organize around marketing and production functions. Typically, marketing means selling something and production means making something. Although few business people would agree that their organization is so simple, the fact remains that many businesses emphasize these functions while treating other activities, such as traffic, purchasing, accounting, and engineering, as support areas. Such an attitude is justified to a degree, because if a firm’s products cannot be produced and sold, little else matters. However, such a pattern is dangerously simple for many firms to follow in that it fails to recognize the importance of the activities that must take place between points and times of production or purchase and the points and times of demand. These are the logistics activities, and they affect the efficiency and effectiveness of both marketing and production. Scholars and practitioners of both marketing and production have not neglected the importance of logistics. In fact, each area considers logistics within its scope of action. For example, the following definition of marketing management includes physical distribution: â€Å"Marketing (management) is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges with target groups that satisfy individual and organizational objectives. † Marketing’s concern is to place its products or services in convenient distribution channels to facilitate the exchange process. The concept of production/ operations management often includes logistics activities. Now, viewing product flow activities as a process to be coordinated, product flow aspects within marketing, production, and logistics are collectively managed to achieve customer service objectives. The difference in operating objectives (maximize revenue versus minimize cost) for marketing and production/operations may lead to a fragmentation of interest in, and responsibility for, logistics activities, as well as a lack of co-ordination among logistics activities as a whole. This, in turn, may lead to lower customer service levels or higher total logistics costs than are necessary. Business logistics represents a regrouping, either by formal organizational structure or conceptually in the minds of management, of the move-store activities that historically may have been partially under the control of marketing and production/ operations. If logistics activities are looked upon as a separate area of managerial action, the relationship of logistics activities to those of marketing and production/ operations would be as is shown in Figure 1-7. Marketing would be primarily responsible for market research, promotion, sales-force management, and the product mix, which create possession value in the product. Production/ operations would be concerned with the creation of the product or service, which creates form value in the product. Key responsibilities would be quality control, production planning and scheduling, job design, capacity planning, maintenance, and work measurement and standards. Logistics would be concerned with those activities (previously defined) that give a product or service time and place value. This separation of the activities of the firm into three groupings rather than two is not always necessary or advisable to achieve the coordination of logistics activities that is sought. Marketing and production/operations, when broadly conceived and co-ordinated, can do an effective job of managing logistics activities without creating an additional organizational entity. Even if a separate functional area is created for logistics within the firm so as to achieve effective control of the firm’s immediate logistics activities, logisticians will need to view their responsibility as one of coordinating the entire supply chain process rather than being just a local logistics activity administrator. To do otherwise may miss substantial opportunities for cost reduction and logistics customer service improvement. The interface is created by the arbitrary separation of a firm’s activities into a limited number of functional areas. Managing the interface activities by one function alone can lead to sub-optimal performance for the firm by subordinating broader company goals to individual functional goals-a potential danger resulting from the departmental form of organizational structure so common in companies today. To achieve interfunctional coordination, some measurement system and incentives for cooperation among the functions involved need to be established. This is equally true of the inter-organizational co-ordination required to manage product flows across company boundaries. It is important to note, however, that establishing a third functional group is not without its disadvantages. Two functional interfaces now exist where only one between marketing and production/ operations previously existed. Some of the most difficult administrative problems arise from the interfunctional conflicts that occur when one is attempting to manage interface activities. Some of this potential conflict may be dissipated if a new organizational arrangement is created whereby production/ operations and logistics are merged into one group called supply chain. Just as managers are beginning to understand the benefits of interfunctional logistics management, inter-organizational management is being encouraged. Supply chain management proponents who view the area more broadly than some logisticians have been strongly promoting the need for collaboration among supply channel members that are outside the immediate control of a company’s  logistician, that is, members who are legally separate companies. Collaboration among the channel members that are linked through buyer-seller relationships is essential to achieving cost-service benefits unable to be realized by managers with strictly an internal view of their responsibilities. Supply chain managers consider themselves to have responsibility for the entire supply channel of the scope as illustrated in Figure 1-8. Managing in this broader environment is the new challenge for the contemporary logistician. Objectives of Business Logistics/SC Within the broader objectives of the firm, the business logistician seeks to achieve supply channel process goals that will move the firm toward its overall objectives. Specifically, the desire is to develop a logistics activity mix that will result in the highest possible return on investment over time. There are two dimensions to this goal: (1) the impact of the logistics system design on the revenue contribution, and (2) the operating cost and capital requirements of the design. Ideally, the logistician should know how much additional revenue would be generated through incremental improvements.