Applying Learning Curve Theory Essay

1. Change table distribution to decrease wait time and increase clientele which entails profitability. Originally, wait time including queue was 11 to 12 minutes. By applying these changes, wait and queue reduce to 9 minutes approximately. Also, a $454 increase of profit is attained. 2. Purchase the Plax Oven instead of keeping the old unreliable manual ovens. By doing so, product availability is increase and the queue time is reduced. Using the old manual ovens, pizza took 15 minutes to cook. Utilizing the Plax Oven takes 4 minutes. 11 minutes are saved and faster service is provided to customers. Profits continue to increase. After the addition of the oven, Mario’s Pizzeria is at $1,653 in profit. Lost sales reduced to $345. 3. Purchase the Menu Point System. This system aids in reducing the queue. Wait staff does not have to walk the order over to Kitchen Staff. Thus, queue time is diminished and profits continue to increase since the utilization wait staff is reduced from a 95% to 80%. 4. Rent Cream Puffs versus opening a new counter for pick up. Renting is a better decision since no additional operating costs would be required. 5. Renting Cream Puffs allows for the capacity of tables to increase; adding 7 tables of 4 and 4 tables of 2. This aids in reducing both wait and queue time. Wait time is at 3.21 minutes and Queue is at 2.71 minutes versus the original 11 to 12 minutes of the entire process. Profits increased to $2,040 while the lost sales came to $690. Analysis of Alternative Process in Effect Mario’s Pizzeria simulation is a tool that aids in understanding how to apply the learning curve theory. The simulation begins by illustrating the current process used at Mario’s Pizzeria and describing the current issues this pizza parlor must address in order avoid a greater loss of profits and loss of customers. The simulation allows for an alternative process to be created and implemented. By creating an alternative process, one can then analyze why one process is more effective and efficient than the other. At the initial start of the simulation, the table utilization is at a 97% and the waiting time is between 11 to 12 minutes. The goal is to reduce the wait time in order to increase customer satisfaction and increase profits. To do so, the first step was to change the table distribution. By simply rearranging the table set up, customers wait time reduced significantly; wait time reduced to 5.36 and the queue to 2.57 minutes for a total of 7.93 minutes. This means that the current process of the table set up simply created an unnecessary bottleneck approach. In order to prevent this, a performance process was changed and created a more effective way of making customers stay. This is sort of change can be used to illustrate how the learning curve theory is applied. According to Chase, Jacobs, and Aquilano (2006), the Learning Curve Theory is based on three assumptions: 1) the amount of time required to complete a given task or unit of a product will be less each time the task is undertaken, 2) the unit time will decrease at a decreasing rate, 3) the reduction in time will follow a predictable pattern. By applying this theory to Mario’s Pizzeria, it is evident that a small change goes a long way. For instance, the utilization for tables decreased from 97% to 95% on tables for four, but in tables for two the utilization was 88.9%. Although customers still walked away, the number of those who left was not as high as the initial number during the first week. Mario’s Pizzeria continued to face issued when the manual oven broke. The wait time for customers was affected because the process slowed down. As a manager, one has to take immediate action to solve the problem at hand through thought process in order to avoid high additional cost to this small business. If the learning curve theory is applied correctly, Mario’s Pizzeria will not be affected dramatically especially since they have dealt with previous wait time issues. The learning curve theory states that the more a task is done several times, the less likely it will be that a similar mistake will occur. In this situation, the metric that continues to be affected is time and the dissatisfaction of a customer having to stand in line for a long time. By not using this type of performance process and to avoid reaching the upper control and upper tolerance limits, the solution was to replace the manual ovens and purchase the Plax Ovens. The Plax Ovens cook more pizzas in fewer minutes than the manual ovens. If the current manual ovens were not replaced, the cooking time will be higher and fewer pizzas would be available, which in turn the queue would not decrease for the customers. Customers will continue to wait for fifteen minutes versus four minutes. Another option that was used in the alternative process was the purchasing of Menu Point Systems. This system will allow for the process time to drop significantly. Although, the cost of the menu system seems high in price, the return of investment is of 125%. This percentage indicates that in the long run the system is worth its price for the pizza parlor. By implementing this Menu Point System, Mario’s Pizza parlor decreased it wait time to 3.76 minutes and the queue to 2.62 minutes. Additionally, the utilization of their wait staff was at 60 to 80 percent. The utilization dropped since the wait staff no longer had to walk the order over to the kitchen staff. A change was made to the queue system. A step was eliminated in the queue section, thus, saving time. By implementing, both the Plax Oven and the Menu Point System a profit of $1, 622 was earned. If this two performances process were not in place, Mario’s pizzeria would be back to step one, waiting time at its upper tolerance and upper control limit. These are two factors that should be avoided at all cost when trying to aim for total quality management in a business. Implementing the Plax Ovens and the Menu Point System, the learning theory curve is in effect. Now, when the order is placed, it goes directly to the kitchen staff, the kitchen staff then process the order through the Plax ovens which are quicker in cooking time. Finally, after all the great implementations and changes made to the pizza parlor, business continues to increase and more decisions were necessary in order to keep the timeliness and customer satisfaction. Mario’s pizzeria rented the business next to the parlor instead of opening a pick up counter. If a pick up counter was chosen as an option, operating cost increase. However, renting Cream Puffs was the best option. Renting the business next door allowed for capacity of tables to increase which in turn increased profit and lessen the overall processing time of a customer. In the end, Mario’s Pizza Parlor profited $2,040 and the grandchild earned the trust of the grandfather.

Evaluation of Iraq war through group think Essay

The War on Iraq was decided by a small group of people that was headed by the President and comprised of the Vice-President, Defense Secretary, CIA Director and other senior administrative officials. The decision to go to war was a decision of a small think-tank rather than of an individual or a larger group of people. The decision of the think-tank pushing the case for the Iraq War seems to be an apt example of confirmation bias. This confirmation bias during the events leading to the Iraq War has led to a widening rift between policy makers and the intelligence community. It is widely believed that the war think-tank defied the pointers presented by the official intelligence. Instead, the intelligence available in a raw form was misused to publicly justify the war on Iraq and build a positive public perception that would endorse the war. As the Washington Post reports the discussion on the war; â€Å"The case was thin,† summarized the notes taken by a British national security aide at the meeting. â€Å"Saddam was not threatening his neighbours and his WMD capability was less than that of Libya, North Korea or Iran. However, the think-tank was convinced about going for a war with Iraq and it used the available intelligence to confirm its beliefs. Cognitive diversity was missing in the think-tank that drew up the plan for the Iraq War. All members involved in the decision process had same political leanings, were to a large extent a culturally homogenous group and formed a small team that worked closely with each other on various policy making issues. The team did not comprise of various political voices even though the decision to go to war impacted the entire country. It did also not take advice and heed to objections of World bodies like the United Nations when some of the member countries objected to the unilateral action of the United States and its ally Britain to go to war. The team did not invite any new members to its coterie of decision makers to infuse fresh or alternative thinking in its decision making process. As Senator Barbara Boxer said, â€Å"Iraq was a war of choice, not necessity†. The intelligence community was roped in only to substantiate claims made by the think-tank on the reason to go to war. The group behaved with a preset agenda ignoring the alternatives at hand and made biased decisions. The Iraq War is also an example of group comparison where the decisions of the individual members could have been different from the decisions of the group that they were part of. The study of group polarization began with an unpublished 1961 Master’s thesis by MIT student James Stoner, who observed the so-called â€Å"risky shift†, meaning that a group’s decisions are riskier than the average of the individual decisions of members before the group met. After the wide public criticism of the U. S. handling of the war, two prominent members of the Iraq think-tank put in their papers. Secretary of State Colin L. Powell resigned after almost 4 years of at the helm of affairs. He was seen as less supportive of the war even though he was the public face on international forums to drum up support amongst its traditional allies. Whereas Defense Secretary Donald H. Rumsfeld who took over the course of foreign policy after Powell’s exit was seen as a hardliner. It seems that the hardliners would have grown even more resolute in their decision to go to war after several rounds of deliberations that the think-tank might have had. They would have presented intelligence information and other reasons to hard sell their belief thereby subduing the reluctant supporters of the war.

No Place to Hide

‘No place to hide’? The realities of leadership in UK supermarkets SKOPE Research Paper No. 91 May 2010 * Irena Grugulis, **Odul Bozkurt and ***Jeremy Clegg * Bradford University School of Management, **Lancaster University Management School, ***Leeds University Business School Editor’s Foreword SKOPE Publications This series publishes the work of the members and associates of SKOPE.A formal editorial process ensures that standards of quality and objectivity are maintained. Orders for publications should be addressed to the SKOPE Secretary, School of Social Sciences, Cardiff University, Glamorgan Building, King Edward VII Avenue, Cardiff CF10 3WT Research papers can be downloaded from the website: www. skope. ox. ac. uk ISSN 1466-1535 Abstract This article explores the realities of managerial work in two major British supermarket chains.While the prescriptive literature welcomes the displacement of bureaucratic management by rote with leadership, empirical account s of what managers actually do underscore how the purported tenets of leadership tend to disappear upon closer inspection, even at the discursive level. This study observes and discusses the discrepancy between the rhetoric of leadership articulated by executives at the corporate head offices and the actual roles and responsibilities of managers in stores.Work was tightly controlled and managers had little real freedom. We draw on empirical evidence to argue both that while leadership in practice secured only trivial freedoms such freedoms were highly valued and that academic analysis should follow these managers in their ability to distinguish between rhetorical flourishes and reallife job design. Leadership in practice is mundane and local. Keywords: leadership, leaders, managers, control, deskilling, supermarkets, retailIntroduction This article explores the realities of managerial work in two major British supermarkets chains. While the prescriptive literature welcomes the displ acement of bureaucratic management by rote with leadership (see for example Zaleznik 1992), empirical accounts of what managers and leaders actually do underscore how the purported tenets of ‘leadership’ tend to disappear upon closer inspection, even at the discursive level (Meindl et al. 1985, Alvesson and Sveningsson 2003a, 2003b, Tengblad 2004).Kelly (2008) has taken issue with the tendency in the leadership literature of discounting the ordinary everyday work activity of managers in lieu of a continued effort to theoretically pin down how leadership really ought to be conceptualised. He argues that the common terminology used by various writers conceals a wide diversity of practice and that leadership is locally produced. We join Kelly’s contention that ‘the apparently mundane practices that are made accountable and therefore observable remain unexplicated and actively ignored’ (2008:774) and that this is regrettable.We diverge from his emphasis on the reification of leadership through language games, however, and focus instead on the dissonance between the salience of leadership in the popular and practitioner representations of management jobs and the actual limits to the discretion, initiative and control that managers are able to exercise in the concrete, routine and core practices associated with their roles. This dissonance was actively exploited by the supermarkets’ business models.Celebratory accounts of leadership were cascaded down the managerial hierarchy, from the corporate head office to the departmental managers, to spur managerial staff to greater efforts in routine work. The empirical material we use to support these claims comes from a study of managers and managerial work in the stores of two of Britain’s largest supermarkets. In the four store sites where research was carried out, the work of managers was heavily prescribed, with ordering, product ranges, stock levels, store layouts, pricing , special offers and staffing policies all set out by respective functional divisions at head ffice. Their work was also closely monitored, and their personal performance assessed, through the constant and close inspection of the sales, profit and customer service performance scores of the stores and departments they were responsible for. In line with Hales’ (2005) observations, these managers were not entrepreneurial visionaries, but links in a chain with little real influence over policies and procedures. 1Their work was generally confined to striving to meet a range of very demanding performance targets over which they themselves had little, if any, control. In both supermarket chains, leadership by managers in stores was considered vital for company performance, with ‘the importance of people’ to competing with rival chains and ‘keeping customers satisfied’ repeatedly stressed by the full range of interviewees. Yet this leadership was to be exerc ised in specific and specified ways.Both managers in charge of stores and those in charge of departments had little power over most aspects of their work but were expected to lead, inspire, motivate and monitor staff on customer service (in the widest sense). Head office executives and store-level managers themselves in both chains repeatedly stressed the charismatic and inspirational elements of leadership. In particular, this depiction of leadership required managers to mediate between the dual pressures of much service sector work, to minimise costs but maximise customer service (Taylor and Bain 1999, Korczynski 2001, 2002).In this context, leadership appeared to be a euphemism for the demand that managers mobilise their personal physical, emotional and social resources to make up for the discrepancies between targets and resources and be ardent pursuers of the employer’s end of the wage-effort bargain. This type of contained leadership bears little resemblance to the cele bratory accounts but it is probably a far closer reflection of the realities of workplace practice. While the article stresses the mundane nature of managerial jobs in supermarket stores, it also highlights the way both individual managers and shopfloor workers use the leadership rhetoric.This rhetoric was valued by the managers largely because of its unreality; while they ostensibly ‘bought in’ to the rhetoric, in practice, most were adept at negotiating the dissonance between it and real work and none sought to put its wider tenets into practice. On the shopfloor, the dramatic language of leadership and transformation was used to legitimise managerial freedoms; these were trivial but they nevertheless proved an escape from scripting for people management and were deeply valued by the managers themselves.We elaborate on the constitutive parts of our arguments in the rest of this article. First, we provide a critical review of the popular ways of conceptualising leaders hip in the literature and the way these are problematic in relation to managerial work in practice. Then we introduce the specific context of retail work and of our study to highlight the significance of both to an inquiry into the discrepancy between leadership rhetoric and managerial practice. This is followed by a discussion of the contradictions inherent in 2 eadership on the supermarket shopfloor and the nature of the spaces that remain for initiative and freedom. Managers, Leaders and ‘Real Work’ It is popular to claim that managerial work is changing, that hidebound and bureaucratic managers who impede workplace performance are being (or should be) replaced with charismatic and visionary leaders who know when to subvert rules, inspire enthusiasm in their followers and contribute to corporate dynamism (Zaleznik 1992, Alimo-Metcalfe and Alban-Metcalfe 2005). Such claims, clearly, need to be tempered with caution (Storey 2004a, 2004b).Students of business and manage ment have long suffered from those thrills of novelty, which set critical descriptions of the existing and unfashionable against enthusiastic predictions of what an ideal type of the latest fad might look like. An unfair but recurrent practice which, as Storey (2004a) notes, is being repeated for leadership. This advocacy is rendered possible, at least in part, by the paucity of empirical accounts of who leaders are and what it is they actually do (see for example Jackson and Parry 2008).When data is available, authors rarely write about transformational activities. Rather, they stress how ordinary leaders are and how mundane their work is (Carlson 1951, Meindl et al. 1985, Alvesson and Sveningsson 2003a, 2003b, Tengblad 2004). Even charismatic leaders are not unfettered (Robinson and Kerr 2009). Empirical enquiry strips leadership of its universal grandeur and helps depict a practice that is both contested (Collinson 2005) and locally defined (Kelly 2008). Bureaucratic forms of con trol are still going strong (Power 1997, Hales 2002, Protherough and Pick 002) and old-fashioned supervision rather than inspirational leadership is at the heart of most jobs (Delbridge and Lowe 1997, Hales 2005). Kelly (2008), in his analysis of the nature of leadership and the various discourses that surround it, has argued that leadership as a practice is locally defined and here we propose one example of such local definition:. In this study, the requirements of customer service did indeed shape the demand for leadership skills, but not quite in the way that the proponents of the spread of transformational leadership suggest.What was at stake was not an entrepreneurial transformation. On the contrary, managers’ actions were tightly controlled and those controls were increasing. As well as following orders from head office, store and department managers were simultaneously required to inspire, enthuse and motivate the front-line 3 staff they were responsible for. The posit ive connotations of the word leadership helped to motivate individual managers, as they in turn sought to motivate others (Etzioni 1961).Here the dissonance between the leadership rhetoric and workplace realities was not an analytical lacuna but an important part of the process since images of leaders needed to be inspirational rather than accurate. Retail Work Retail work accounts for a significant proportion of the working population, with 12 per cent of UK workers employed in retail (Burt and Sparks 2003). While this work can be skilled, from the glamour of the ‘style labour markets’ (Nickson et al. 2001), to the product knowledge of expert assistants in France (McGauran 2000, 2001), the wide-ranging skills of apprentice-trained workers in Germany (Kirsch et al. 000) or the impressive educational achievements of Chinese retail workers (Gamble 2006), most British jobs are not. For the majority of British supermarkets, the main skills policy pursued is one that is â₠¬Ëœtantamount to a personnel strategy based on zero competence’, zero qualifications, zero training and zero career (Gadrey 2000). Margins are tight and the extensive centralisation and standardisation of supply chains and products (Baron et al. 2001) extends to work and work processes (Felstead et al. 2009).Workers are valued for their presence and their temporal flexibility, not their skills, and presence and temporal flexibility are seldom highly paid. The retail sector accounts for 26 per cent of British low paid workers (Mason et al. 2008) with 75 per cent of sales assistants and 80 per cent of checkout operators compensated at rates below the low pay threshold (Mason and Osborne 2008). Part-time and women workers, who dominate the sector (Arrowsmith and Sisson 1999, Burt and Sparks 2003) are particularly badly affected. Some stores deploy sophisticated human resource anagement techniques such as psychometric tests (Freathy and Sparks 2000) and merit-based pay but these are set against generally low wage rates, rigid control mechanisms and limited discretion (Arrowsmith and Sisson 1999, Broadbridge 2002, Burt and Sparks 2003). Against this backdrop, recent writing on retail employment from a strategic perspective has increasingly emphasised the role of management and managers in the overall performance of companies (Booth and Hamer 2006, Hart et al. 2006). It argues that the link between managers’ work and store (or firm) performance is 4 hrough ‘lay’ workers, in one example, asserting that ‘without strong management and leadership skills, store and employee productivity suffers together with lower staff motivation, ultimately leading to lower profits’ (Hart et al. 2006:281-282). However, lists of actions such as ‘providing good pay and benefits, praise and encouragement and support and training, or even at the most basic level, ensuring employees receive their correct rest periods at work’ (Booth and H amer 2006:299) do not accurately depict the real remit of managers in large-scale retail organisations.Methods and Methodology This research was part of an EPSRC/AIM funded project on the organisation and experience of employment in retailing. Since our main interest was in the processual aspects of work, a multi-pronged, qualitative approach was adopted, as this was best suited to compare and contrast official organisational statements with real life practices and experiences. Research was conducted in two of Britain’s largest supermarket chains, here referred to as Retail 1 and Retail 2, respectively.Retail 1 had 356 stores and employed over 160,000 people. Retail 2’s portfolio of stores included the convenience store format, which brought its total number of stores to 823, but it had slightly fewer employees at around 150,000. By and large, their target clientele overlapped and they were direct competitors with similar market shares. In each supermarket, detailed in terviews were conducted with head office staff who were responsible for determining strategies, setting policies and designing business processes.We were able to review a large amount and range of company material pertaining to company strategy, business models, performance indicators, human resource policies, recruitment and training programmes and change initiatives. Interviews were carried out with top executives in strategy, human resources, training, marketing, accounting, customer services and profit/productivity/performance improvement departments. In addition to this, in each chain, two locations were selected for store-level research; store A and store B at Retail 1, store C and store D at Retail 2.In the stores interviews were conducted with the (general) store managers, who would be managing anywhere between 200 and 400 employees, the secondary tier of between three and five senior managers, who had store-wide responsibility and supervised and coordinated the work of depa rtment managers, and the managers of the 12 to 15 different departments such as produce, customer service, or bakery, as well as a number of shopfloor workers. All of the managers were salaried, while all 5 of the shopfloor workers were hourly-paid. Store interviews with hourly paid workers were the most challenging.Our informants were welcoming and supportive but, owing to the tight margins and pressure on staff, few had time for interviews. The length of interviews with managers ranged from half an hour to multiple sessions of several hours, typically averaging an hour and a half to two hours. Some of the interviews with workers also lasted over an hour, but a number of them had to be interrupted after less than half an hour. All formal interviews were recorded, professionally transcribed and coded using NVivo Qualitative Data Analysis software.In total, 86 interviews were carried out, 46 in Retail 1, 34 in Retail 2, and the rest with a range of outside key informants including a top level executive of a third supermarket chain, industry experts based at the Institute of Grocery Distributors (IGD) and trade union representatives. In addition to the interviews, participant and non-participant observation was carried out by one of the research team at the Retail 1 head office and, more extensively, at one of the two Retail 1 stores included in the study (store A).In addition to observing recruitment group interviews, new employee induction sessions and a range of daily activities in the store, the researcher also worked shifts of 10 to 15 hours a week for six weeks on the delicatessen, fish, rotisserie, pizza and ready-meal counters. A research diary was kept during this part of the fieldwork and transcribed. ‘No Place to Hide’ Leadership was a ‘quality’ that was extensively referenced in the public presentations of managerial career paths in both supermarket chains.Retail 1’s literature on career prospects described the traini ng programme for shopfloor workers who wished to become department managers as being ‘built upon’ their ‘current leadership skills’ through on-the-job training, while that for department managers with ambitions to be store managers or deputies was said to help them ‘perfect their leadership style’. Retail 2’s careers information on the company website directed those with some previous retail management experience and ‘looking to grow into a leadership role’ to the ‘fast-track to Store Manager Development Program’.Hitting the link, interested parties were informed that nobody played a more important role in the supermarket’s everyday operations (turnaround) than the managers in the stores, whose leadership ‘inspires our people to deliver a great everyday customer experience’. Retail 2’s recruitment process for senior managers included psychometric tests that were, among 6 other qualitie s, designed to pick up leadership skills and potential. Retail 1’s rogrammes for management development included selection hurdles such as roleplay sessions where future managers were expected to stand out from among their peers by displaying the desired abilities, with ‘leadership’ prominent among these. While leadership skills and qualities were presented as core to the work of everyone and as particularly central for progression into managerial roles, in stores almost every aspect of work for every kind of employee, from shopfloor workers during their training period all the way to the general store manager, was set out, standardised and occasionally scripted by the experts at head office.Buyers sourced goods and set prices at the head offices, with computer networks monitoring sales in stores and re-ordering supplies. The corporate human resources department set wages and provided clear targets for store managers in terms of staffing, leaving stores with a ba lancing act between resources and targets. Checkout tills used electronic scanning, shelf-stackers followed planograms that provided detailed layout plans for displays, price guns printed out price tags, including reductions, as decided by head office software depending on the time of day. According to long-serving informants, limits on discretion were increasing.The remaining specialist departments, such as the delicatessen counter (which included meats, cheeses and fish) and the bakery, were coming under increasing levels of central control. A trained butcher (now the manager of a non-food department) revealed that most meats were now cut and packaged before arrival in store. The same was true for cheeses. In the smaller stores bakeries worked entirely from deliveries of frozen goods which they re-heated, and in larger stores there was a mix of supplier-packed, frozen, ambient and chilled products and goods baked in store.But even breads baked in store arrived ready made up with i nstructions on times for mixing, proving and baking. The only formally accredited staff in stores were pharmacists employed in special stand-alone units on some sites. Such a policy of standardisation was deliberate and referred to with pride. The wageplanning manager in the Business Improvement Group at Retail 1 head office summarised the challenge as ‘how lazy we can make it†¦ make the process easy for them so it becomes a natural habit’.This close prescription and standardisation of work tasks was not a surprising observation to make of hourly-paid workers, or in the context of retail employment, traditionally known for its reliance on low skills and low wages. What was unusual was that the same restrictions applied to managers. In fact, the managers were under 7 far greater surveillance in terms of observable results. Because performance and productivity measurements were taken at both department and store level, which were then linked back and traceable to ind ividual managers, their performance evaluation was quantified and routinised.There was no comparable performance evaluation of individual shopfloor workers except for those at the tills, although Retail 2 had just introduced a new performance enhancement programme to track the performance of individual workers. Yet these practices, too, only increased the number of indicators by which managers’ performance could be monitored, as the ultimate responsibility for meeting unit-based targets, as well as ensuring that individual workers showed the head-office dictated levels of performance, still lay with the managers.An executive in the productivity improvement division of Retail 2’s head office operations, who had risen through the ranks, observed that the role of store managers had changed considerably over the last twenty years: I think what we probably lost was a bit of the entrepreneurial or tradesmanship of the store manager to say, ‘Oh next week that’s g oing on offer, I want 200 of them next week’. Because they were good traders and experienced. And they knew how they were going to present it. Honestly, when I joined†¦ he store manager where I trained was a bit of a wide boy I suppose, but he would do things like – well he made me do it – Saturday afternoon if we were overstocked, I remember him saying ‘We’re overstocked on lettuces. [Name] go to the front door and stand there and sell your lettuces! ’ And you’d do things like say ‘Come on, here’s your lettuce! Get one for the rabbit! Half price! ’ And you’d literally drop them in people’s baskets as they walked through the door so they almost got no choice but to have your lettuce. productivity improvement manager, Retail 2, Head Office) But in the current arrangements, because of the focus on what Pye (1968) terms the ‘workmanship of certainty’, the emphasis in store for both manag ers and workers was on obedience to instruction. In fact, much of a manager’s work was about ensuring such obedience. [The parent company] is very much about†¦ they use a word quite a lot called compliance and there is a lot of compliance and the phrase they used†¦ was ‘there is no place to hide’ [Was that like an official thing? No, it was kind of like – you know with all the systems, their systems monitor everything, they monitor everything. Every little thing is monitored so there is no place to hide. I am not saying in terms of hiding things that are wrong but they see everything. (senior manager, Retail 1, Store B) A policy backed up by the motto ‘comply then complain’, which had clear implications for the way work was conducted. 8 [I]f the company says to you 9am Monday morning stand on one leg in the oyer, I want you to do it, at 9am and if that’s all of you, I want you to do it but then you’ll all stand there th inking why on God’s earth are we doing this, then ask the question, why do we need to do this? What benefit am I getting from it? But do it in the first place before you even complain about it, because until you’ve tried it you don’t know what it’s going to do, but it’s driving that culture. (general store manager, Retail 1, Store A) This approach was generally greeted with enthusiasm. I love this comply and then complain.You know because you put it right, you do it the way they want you to do it and then if it is not right you feed back what is wrong with it so you complain after you have had a go at it at putting it right. And I think that is absolutely vital. You know we have a duty to feed back and give that feedback but you know we don’t have that right until we have had a go at it†¦ the right way first. (training manager, Retail 1, Training Store) Unsurprisingly, such an approach influenced the skills expected of both workers and managers as well as leaving little space for transformational leadership.Skill levels were low and product knowledge in particular was a welcome, but almost optional part of work. Several of our informants did possess expertise and boasted strong personal interests in electronics or fish or experience in bakeries, but while this might allow front-line workers to develop a personal pride in aspects of their work it was not a job requirement and was rarely shared by the senior management team in stores, whose career progression was based on obligatory movement between different departments.Head office executives spoke of promoting people with an interest in a particular area of work, a ‘passion about food’ or ‘a personal interest’, and management training did provide product information as part of the process, but the demand for and emphasis on specialist knowledge was limited.Mason and Osborne’s (2008) comparison of supermarkets with electrical retail ers reveals that the (often supplier provided) training in product knowledge that characterised electrical goods had few parallels in supermarkets, while Gamble’s (2006) research into Chinese retailers showed a well educated workforce and a highly demanding customer base not reflected in our study. In these supermarkets, workers could apply for entry-level managerial posts as soon as their twelve weeks of initial training were complete (although the graduate training schemes in both supermarkets were rather different).Graduates were more noticeable in the head offices and in certain specialisms (three of the four store-based human resource (HR) managers we spoke to were graduates, compared to three of the 23 managers in Retail 1 Store A). But while one 9 of the HR managers thought that having a degree was useful for ‘the analytical side of what (managers) need to do’, in general formal qualifications were not a significant criteria for managerial posts. The vast majority of managers had come up from the ranks of hourly-paid shopfloor workers.Interestingly, the non-graduate managers all spoke of the encouragement they had received from their managers to embark on management training. In the absence of a universal demand for specialist training or knowledge, leadership, both demonstrated and potential, was presented as the key element in selection decisions for such career progression: I mean, when I interview managers to join my team, I’m not necessarily looking for ‘Do they know what baked beans and yoghurts are? ’ and ‘Have they filled them before? ’ I’m looking for attitude, I’m looking for personal resilience and I’m looking for a track record.What have they done before? What have they done in the past? But it doesn’t necessarily mean that if I’ve got a grocery manager position I want a grocery manager from another store. Because it’s about managing people, itâ₠¬â„¢s about managing hearts and minds really. (general store manager, Retail 1, Store A) But while store language focused on obedience and hearts and minds, the structural features of promotion ensured that, in practice, most managers and leaders were men. Moving between departments was an integral part of career mobility in both supermarkets.Promotion, even for the first foray into managerial duties, involved a switch of departments, while subsequent expansions of responsibility meant managers would be moved to increasingly larger departments in the stores. For general store managers, and for the second tier of senior management, geographical mobility was required and managers were expected to move between different stores in the same ‘regional cluster’ (generally between 15 to 25 stores, depending on the region). Interestingly, managerial informants stressed how lenient their superiors were when imposing these travel requirements. Annual performance appraisals istingu ished between preferences for a 30-minute or a one-hour commute. Retail 2 store managers were told by their regional bosses to prioritise their families and the general manager of Store B asserted proudly that he would not be despatched to the other end of the country against his will. But, while all managers seemed to accept that mobility was required, for others the geographical differences between managerial and front-line worker posts discouraged progression and helped to account for the fact that, while the lower ranks of supermarket workers were dominated by women, the managers were predominately male. 0 Many of the workers we interviewed were attracted to retail by the fact that it was part-time: women with caring responsibilities, students, young people and older workers dominated the workforce. People worked in their local stores and their limited hours often suited their other responsibilities or desire for education. Managerial posts, by contrast, were almost universally full-time despite, given the length of opening hours (24 hours for Retail 1 and 8am to 10pm for Retail 2), no one manager would be able to control their store continually (see Dalton 1966, Moss-Kanter 1977).We did meet two women managers in shared posts but these were rare and had been specifically created to accommodate these informants’ demands for job-sharing (see also Mason and Osborne 2008). Small Freedoms Unlike the transformational visionaries of the leadership literature, the freedoms enjoyed by the supermarket managers in this study were generally minor and illicit. Despite the recurrent official emphasis on ‘comply then complain’, most created their own small discretionary spaces.The most commonly cited example was in store, counter or shelf layout. Detailed specifications were sent down from head office dictating the number and placement of products. But these were based on national averages of other stores in that category with little sensitivity for local geography, tastes or customer-base. Accordingly, in practice local knowledge, personal interest and the desire to personalise space often triumphed over the formal specifications. It was, of course, possible to protest against layouts officially.The general manager of Retail 1 Store A had done so when he wished to re-site the movie and video booth in his city centre store, taking it out of the foyer where it was vulnerable to repeated thefts and switching it with a sandwich booth which would have benefited from being more readily accessible. His request involved developing a detailed business case and visits from senior management but was eventually turned down (or indefinitely postponed pending a fuller refurbishment to include a pharmacy).Others were less regulation bound. I just did it, I got told to do it. They put trust in me to change the layout in the store of Home and Leisure, to move products around if I believed it would gain sales. And for example all the Home secti on wasn’t together, DIY and water was with pots and pans, party ranges weren’t with disposable paper tableware, so I put a new shopfloor plan together to move it all around and we did that†¦ [A]t [names other store] I’d gone through a couple of revamps where I’d actually 11 hanged over 200 bays in [other store] because we went through revamps to get bigger and better ranges in so I’d done a lot of work in the past on how a department should flow and how it should look and how we get the best out of the ranges and stuff like that so putting that experience into here and grouping the departments together†¦ [Did you have to negotiate with Head Office? ] No, we just did it. (senior manager, Retail 1, Store B) Occasionally re-siting compensated for inadequacies in the briefing documents.One manager liked to get experienced staff to adapt official shelving briefs to suit the store: They know if they’ve been doing that for a couple of yea rs, they know what will sell and what won’t. Now [if] it’s a novice then they wouldn’t, so I’d need them to do it in space flexing which will tell them the quantity. The plan would tell them how many facings so, say, it was like that it wanted a capacity of 70 on four facings but you can fit that 70 on two facings I would expect you to do it to two facings.And that’s where you gain space as well on the plan if you needed to open up on something else because it wasn’t lasting on the shop. [So you’ve got to play around quite a bit? ] Yes, you’ve got to play around with it, yes. Everything’s not as easy as black and white on paper. (general merchandise manager, Retail 1 Store B) Occasionally individuals also needed to over-ride the computer systems to over-come limitations.The demand for hot dog rolls on bonfire night, more salads and fresh vegetables for barbecues on unexpectedly hot days and ensuring that local tastes wer e provided for through particular fish or flavours of roast chicken were matters of relative individual discretion. But most of these practices were heavily discouraged officially and many were formally denied. One manager of a Retail 2 supermarket during a first interview and guided tour of his store was enthusiastic about the way Retail 2’s head office experts designed and laid out the shelf space.An enthusiasm which lasted until one of the researchers took out a camera to photograph the excellent layout. He was immediately asked not to take photographs, since the manager had exercised his own discretion and did not want news of this individuality to get back to head office. People and Leadership Amidst the widespread use of regulation, standardisation and constraint there was one area where managers were both encouraged and expected to use their own discretion and, in the rhetoric of their head offices, exercise ‘leadership’.This was in the area of people mana gement. The structural means for doing this was very limited. Wages, 12 staffing levels and worker tasks were all pre-set by head office, although some local adjustments were possible. Store managers who recruited staff would be told how many ‘hours’ they could hire, but it was up to them to decide how to divide this up, so, for example, twenty hours might translate into three new part-timers working distinctive shifts. This often proved difficult to implement, since computer staffing levels did not always translate into viable recruitment.The personnel manager, she cares a lot, but [for] the company [it’s] all about its process, [it’s] not really about the people. And so the process is sort of disguised as this ‘caring’ – but it’s not. So these people, they just expect you to do more and more, and we take more and more sales but we don’t necessarily get the hours. Produce was given 20 extra hours for quarter three in line with sales and things, but I can’t recruit for these 20 hours because all that’ll happen is they’ll get taken away after Christmas or the sales won’t be there so I’ll never see them anyway.You know they’re not tangible, I can’t take them and use them. (produce manager, Retail 1, Store A) Much of this was work intensification. Head office staff expected local managers to know who they could allocate to particular tasks to save a few hours on the timesheet and this was considered excellence in leadership. [S]o we’re looking for the managers to not be creative in the ways they do their processes, I want them to follow the processes exactly how the systems define them†¦I want them to lay the store out how the system devises and I want them to fill the shelves how it says on the tin, if you like, but then absolutely be as creative as possible in the way you service the customers. More the way we would be going. (business impro vement director, Retail 1, Head Office) This ‘creativity’ was also set down in systems and structures of the stores. The performance of their departments or stores in terms of customer service was assessed through monthly ‘mystery shopper’ visits, while regular staff meetings provided managers with an opportunity to motivate.The morning shifts in both supermarkets began with caucus-style meetings, held in a central location on the shopfloor in Retail 1 and in a staff area in Retail 2, between the store manager, the upper management team and all the departmental managers who were on shift. Department managers held the same sort of ‘getting the day started’ meetings with their respective department staff. News about how the store or unit was doing in terms of the performance criteria was often a major theme; good performance was usually emphasised as a reason to feel good and underperformance as grave and in need of immediate attention.In the bri efing templates handed down from the head offices, spots were allocated for events to note, improve or celebrate. Managers’ motivational 13 role (whether through generating pride or alarm) was possibly most necessary during these meetings, as announcements, for example about the roll-out of new uniforms could be rendered exciting, or a letter of appreciation from a customer as emotionally touching, through their performative skills. Performance related pay was extensively used.For general store managers it could amount to as much as 40 per cent of salary and even hourly paid workers might earn over ? 100. Individual performance was supposed to be assessed separately, as one informant noted: ‘sometimes you can have a department which hasn’t performed well on paper but what that manager’s contributed to that maybe it’s a total different story’. But in practice, greatest weight was placed on store and overall company performance in a given tradi ng year. Both supermarkets used some version of recognition schemes where small monetary awards from ? 10 to ? 0 could be given out, and this was largely at managers’ discretion to ‘celebrate success’, as there was ‘a lot of pressure on everybody to perform all the time’ (bakery manager, Retail 2). But managers appreciated that the effectiveness of such schemes was limited: [A] lot is spending time with them and motivating them. You know if you motivate them they work far better than – [How can you motivate them? What do you have at your disposal to motivate them? ] You don’t really have any financial really, apart from you’ve got the yearly bonus, you know colleagues get a yearly bonus.So you’ve got the bonus to aim for. I don’t know really†¦ I think everyone is motivated by doing a good job and job satisfaction and spending time with people and I think a lot of it as well is getting to know colleagues, I know just about everyone by their first name and things like that. (senior manager, Retail 1 Store A) The financial outcomes of managers’ work were assessed through daily checks and monitoring of sales, waste, loss of products and the profits their departments or stores generated. Many were factors over which they had little control.Describing her Key Result Areas, which included absences, sales, labour turnover, waste and the customer service score, the HR manager (Retail 1, Store A) commented, ‘[s]o all my key result areas are linked with everybody else’s, so it’s my influencing skills that are really being looked at for that†¦ As a manager, you’re paid to manage; you’re not paid to fill the shop necessarily’. This confidence was widespread. But as the store managers pointed out structural conditions, including local labour markets, might be ignored in head office plans but heavily influenced how effective such work intensification could be.One, who was responsible for staffing a city centre store in a University town, spoke with 14 envy of a friend who managed a rural outlet. If workers in the city centre felt unfairly treated, they had a choice of part-time service sector jobs to move to. Their rural counterparts, in the absence of other local job opportunities, stayed in post (many had been there since the store opened). Yet this was the area over which managers were deemed to have most control and many seemed to accept this. When our informants spoke about leadership, their most common reaction was to emphasise the difference that they, as individuals, could make.A graduate departmental manager in his early 20s noted that he needed to ‘work on leadership and people skills’. It was not that these managers did not appreciate the impact that computer breakdowns, local labour markets, employee turnover, stock levels and the weather could have. They did, and dealt with such problems every day. But they also saw them as excuses for a lack of leadership. It was the managers’ job to enthuse and inspire others, even when policies and practices had not been explained to them and even if they disagreed with head office decisions (see also Smith 1990, Watson 1994).According to three of our informants: The depot might have been short of people and deliveries haven’t turned up on time. That could throw things off. Or promotional stuff hasn’t turned up. But there’s nothing in a store that we can’t fix, and it’s all about driving the right attitude in the management teams. Because if you drive that attitude well, you can fix anything. (general store manager, Retail 1, Store A) At the end of the day we’ve got to be the leader†¦ I think there’s a difference between being a manager and being a leader and we have to become leaders and†¦ e need to keep a real positive approach, because if we turn round to staff and say yes, wh at we may think in our heart of hearts is one thing, but when we go out there we’re out on stage, we’ve got to perform and say, ‘OK, it’s tough, but however if we all do this that and the other and get stuck in, we’re going to win this’. And you’ve somehow got to inspire your people out there, you know, so you’ve got to leave that at the door, because we can’t do anything about that.Somehow, what you have got to do is deal with the colleagues you have got, to ensure that they’re motivated, trained, they’re quick to do the job, and hyped up, and they’re going to go out there and deliver it. (senior manager A, Retail 2, Store C) OK, if I’m in store today and we get the [mystery shopper] man and I get 90 per cent, then that’s on my watch so was I here, was I up in the office looking at the PC or was I downstairs driving the availability, saying, ‘Where are those cauliflowers, whereâ⠂¬â„¢s that, where’s that, where’s that? Or did I allow there to be nobody on produce because both the departments’ managers†¦ are on the same day off, and when they came in there was no cauliflower or lettuce because the person 15 down there was actually on the till and I didn’t actually know†¦ Yes, so if I’m going to be running a store tomorrow, for instance, I should really know who’s in what’s going on and any problems. (senior manager B, Retail 2, Store C) Leadership in these supermarkets was very specific and very detailed. Formal HR practices, meeting templates and detailed systems were in place.Informants gave examples that included monitoring work to ensure people were achieving their targets, retraining those who were not; monitoring stock levels; and being present on the shopfloor. However ultimately encounters with people, whether employees or customers, could not be scripted. The leadership rhetoric, because of its lack of links to the reality of daily work, was used as a motivational tool to persuade managers to work more intensively themselves and encourage others to extra effort. Discussion and Conclusions This article has presented an empirically based discussion of leadership in British supermarkets.The managers we observed were constrained by extensive regulation. Their experience of deskilling and discretion, consent and control bears little resemblance to the entrepreneurial visionaries described by writers on leadership. Yet despite that, most of our informants described aspects of what they did as leadership, maintaining proudly, and often in defiance of the evidence, the difference that they as individuals could make. Evidence from elsewhere confirms the impact that line managers have (Rainbird and Munro 2003) but this impact is not without limits.Here, head office systems, computerised schedules, pre-packaged and automatically ordered goods, design planograms and set hours and pay rates provided internal constraints just as location, labour market and the local economy supplied external ones. Our informants needed to accept the leadership rhetoric enough to assert that they could make a difference, but not so much that that difference was extended to questioning the constraints on them; a difference accepted in practice by most. This leads us to two conclusions. Firstly that leadership was a small freedom rather than a radical transformation (see also Rosenthal et al. 997, Edwards and Collinson 2002 on empowerment). It affected only the minutiae of the work but even this trivial level of discretion made a great deal of difference to the individual managers. The illicit freedoms of revising store layouts and adjusting stock orders, which managers engaged in to make their mark on work and improve store 16 performance, were matched by official and acceptable areas of freedom in the unscriptable areas of people management. These trivial freedoms lead us to ou r second conclusion on the implications for academic analysis. Leadership is, at least in part, what leaders do, how they do it and who they are.If, as here, mainly male managers worked to pre-set routines with tightly monitored targets then this needs to feature in our understanding of leadership. Yet to date, most accounts have neglected the mundane aspects of work, the very elements highlighted as core in this study. The leadership rhetoric, valued for its emotive qualities and its unreality, was used by managers and their superiors to value, inspire and intensify their input. Managers showed a sophistication missing from many academic writings in their ability to distinguish between rhetorical flourishes and real-world job design.Given this, we suggest that future research may wish to focus more clearly on the unexciting, hackneyed and everyday aspects of work and to consider the form the language of leadership really takes on the shopfloor. The unrealities of leadership are imp ortant but they have already absorbed too much academic attention and need to be clearly distinguished from the realities. Future studies, developed through empirical evidence, need to provide a nuanced, local and empirically based understanding of what really happens. 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Are Viruses Considered To Be Living Organisms - Essay Example In 1876, even though the nature of virus was not recognized at the time, yet, it was anticipated that the number of species of virus are greater than that of all other living things put together. Viruses are parasites as they can’t nurture themselves and require a host cell for nutrition, growth and reproduction. All viruses are harmful; in fact their capability to operate as ‘mobile genes’ is considered to have inclined the hereditary make-up and development of higher living beings. Indeed their similarity to the genetic material of higher organisms that can move from one genetic material to another can be considered to be as evidence of their beginning. Nowadays, many experts consider that viruses have been descended from bacterial plasmids (small package of genes residing on the outer side of the chromosomes of bacteria and have the ability to transfer from one bacterium to another). Viruses are not similar to human or bacterial cells. They are tiny creatures t hat can’t be seen with a normal light microscope. Their size is said to be of only one-millionth part of an inch. Viruses may even infect bacteria to reproduce themselves; the Bacteriophage virus for example requires bacteria for the completion of its life cycle. Once infected, the host cell stops its functioning rather starts serving the viral requirements resulting in the onset of infection to the host (Holzenburg and Bogner, 2002). Viral Structure A virus mainly consists of three parts. 1. Capsid – It is a protein coat that environs the nucleic acid to protect it. 2. Nucleic acid – It is the basic genetic material; either RNA or DNA that grasps all the data for the virus and contrast each virus from another. 3. Envelope – It is a lipid membrane that envelops the capsid (protein coat). However, it is not present in all viruses. Those viruses that possess envelop are said to be enveloped viruses while those that lack it are called naked viruses. Fig1. Ch aracteristic Viral Structure Lytic cycle The lytic cycle which represents the life cycle of virus involves six basic steps 1. Adsorption as the virus gets attached to the host cell. 2. Entry: The attached virus then penetrates the cell by injecting its genetic instructions (RNA or DNA) into the cytoplasm of the host cell. 3. Transcription: The injected viral genetic material takes control of the host cell’s nucleus and starts directing the enzymes of the host. 4. Replication: Fragments of new viruses are made using particular enzymes. 5. Assembly: The fragments formed are then assembled to form new viruses. 6. Release: The novel viruses destroy the host cell and burst out to attack new host cells and continue this cycle. Virus Non Living or Living? Viruses are usually kept on the borderline between living and non living beings. Some features of viruses make them considered as living beings while other lead to the development of opinion of considering them as non living. Virus es are regarded as living on the basis of their proposed evolution via natural selection and ability to reproduce themselves. Viruses can be regarded non living as they are acellular and require a host to perform its metabolic and reproductive activities. Viruses are convoluted assemblage of molecules, including nucleic acids, proteins, carbohydrates and lipids, but unable to do anything on their own until they penetrate the host cell. The

Fibonacci, Mathematician of the Middle Ages Essay

Fibonacci, Mathematician of the Middle Ages - Essay Example Camposanto was mostly got ruined in 1944 and had to be expansively repaired. After a few years, revelation to the waterside climate started to take its charge on the sculpture and finally it was taken away, reinstated, cleaned and then returned to its old position next to Pisa's other memorable people, a place where it fits in. Leonardo was an Italian mathematician who was the initial brilliant Western mathematician right after the turn down of the Greek science. (Britannica Online Encyclopedia, 2008). Leonardo was born in 1170, Pisa, Italy. His father namely Guglielmo, was also call by the name Bonaccio. Leonardo's mother, Alessandra, passed away when he was nine years old. He was one of the leading and talented mathematicians of his time. At his time, performing even the easiest arithmetical problems with a non positional detail was a hard endeavor. For solving a particular problem, the merchants were strained to resort to the abacus. Fibonacci showed the new alternate computing technique which was based on printed algorithms somewhat better than on counting bits and pieces. Fibonacci traveled extensively in Barbary together with his father and was shortly derived on to the business tours to Egypt, Syria, Greece, Sicily and Provencal. He appears to have educated a good deal of his arithmetic in Barbary. All through the Mediterranean globe to learned Hindu and Arabic math under the most important Arab mathematicians of that era. He identified that arithmetic with Hindu figures is uncomplicated and more proficient than with Roman figures. However, Leonardo came back from his journey in 1200. Leonardo became a harmonious guest of the Emperor Frederick II who has the benefit of understanding arithmetic and science. Though, in 1240, the Republic of Pisa privileged Leonardo by giving him the name as Leonardo Bigollo and giving him his first pay. (Grimm, R. E., 1973). He wrote numerous important books which played a significant part in revitalizing prehistoric mathematical proficiency and he made noteworthy contributions of his own by himself. At the age of 32, in 1202, Leonardo wrote his first book namely Liber Abaci, which means "the book of abacus or book of calculation." After his first book got published, he wrote various books, therefore, Practica Geometriae in 1220, Flos and Liber Quadratorum published in 1225. Though, he wrote some other books as well, which regrettably, are lost. However, his work in number theory was totally ignored and almost unidentified all through in the Middle Ages. (Charles Burnett. January 14, 2005). Liber Abaci - 1202 Liber Abaci is also pronounced as Liber Abbaci. Its label has two familiar conversions, The Book of the Abacus or The Book of Calculation. In this book, Fibonacci brought in to Europe the Arabic figures, a most important part of our decimal structure, which he had studied by learning with Arabs at the same time when he was living in North Africa with his father. In interpretation of Liber Abaci, it is useful to be aware of Fibonacci's information for rational figures, a data that is intermediary in figure amid the Egyptian fractions, which was normally applied until

Bad News Message Essay Example | Topics and Well Written Essays - 500 words - 3

Bad News Message - Essay Example it fell in a bucket of water when a child was attempting to use it unsupervised, it is considered as a personal irresponsibility and the warranty does not cover damage to the products due to personal irresponsibility. So unfortunately, your request regarding the refund or replacement of the hair dryer you purchased cannot be entertained for the following reasons: Our company’s technicians, however, will be more than happy to repair your hair dryer but there will be service charges applicable and answer any queries regarding its maintenance. We assure you that our technicians would be able to repair your hair dryer and make it reusable in no time, as we are here for your service. If you are interested in getting your hair dryer repaired then contact at us at our repair centre and let us know. If you are aware of someone else having similar problems with their products, please recommend us to them as we will be more than happy to help them

Chattel Slavery Essay Example for Free

Chattel Slavery Essay Indentureship was supposed to differ from slavery, however, the servants were treated as harshly as the slaves Chattel- African slaves were treated as commodities System of slavery whereby an individual and their offspring are recognised by the law as being the property of another person for life. This system was established by Europeans and formed the basis of transatlantic slavery With due respect to the Is good intentions, from all that I have read and studied it would be a mockery to compare Indian indentureship to African chattel slavery in the Caribbean. Firstly, Indians were allowed to retain: their family (Africans had theirs split up); their language (Africans had the use of theirs forbidden); their religion (Africans had theirs banned); their music (Africans had the drum representing the voice of their gods banned by laws, some of which remain on the statute book in Barbados to this day). This highlights the all-important difference between indentureship and slavery: The heart of slavery was not the horrible labour conditions. If that were so, slavery and indentureship might be comparable. The heart of slavery was the stealing of the Africans soul his language (the eyes through which one sees the world), his gods, his family, his musical sounds. That is why some 169 years after Emancipation, many Africans in the Caribbean remain enslaved. Some say enslaved mentally (in distinction to physical slavery), but this is misleading. SLAVERY IS MENTAL. Captivity is physical. Why the Africans have taken longer to restore their race as opposed to Indians, Jews and other ethnic groups that suffered at the hands of White Supremacy is because no other people were ever subjected to what the Africans suffered. If you capture a people and reduce them to harsh, brutal conditions of exploitation, once they survive, when that is brought to an end the people will soon rehabilitate themselves. But when you take away a peoples tongue, their connection to the ancestors, their gods; when you smash their family life so that the male loses respect for the female and vice versa; when you teach them to hate their skin, their lips, their hair, so that they hate anyone that looks like them then you will have destroyed the culture and soul of that people and recovery will be almost like a resurrection. That is why it has taken Rastafari, Vodun, Orisha and the other spiritual potencies to awaken and heal the descendants of the African slaves. Secondly, millions of Africans died on the dreadful crossing from Africa. How many Indians perished on their way here? The Trans-Atlantic trade in captive Africans and African chattel slavery lasted roughly from 1473 to the 1880s some four centuries. Indian indentureship lasted from the 1840s until when the end of the 19th century? Thirdly, the trade in African captives depleted the African homeland tremendously. Consequently, up to this day, in contrast to the huge populations of India and China, the African continent is badly underpopulated. In fact, it has been estimated that even if all the Black people returned tomorrow to Africa, it still would not be fully populated. Walter Rodney in   provides some Statistics to give an idea of the devastating effect that the trade in Africans had on Africa for four centuries. Whole towns and villages were wiped out. Ethnic groups disappeared. Others were driven to war on their neighbours or face the prospect of having their own group captured and shipped to the New World. The natural line and trajectory of material and spiritual development for millennia in Africas history up to the time of the Trans-Atlantic Trade in captive African was interrupted, disrupted and corrupted. While it is true that India suffered horribly as a result of the British penetration of India during the period of indentureship, history attests that neither the scale nor the time period of this penetration can match the reality of the impact of the Slave Trade and Slavery on Africans and their Motherland. But while the enslaved Africans unlike the indentured Indians had their ancestral cloak ripped from them, the White man could not take the living nucleus of their culture and its memory from them. So (as they say whoever loses his life shall gain it) they took this breath of their culture and created the living soul of Africa in the Caribbean they recreated their musical forms, they reconceived their ancient gods through new prisms (likje Judedo-Christianity, for example in Haitian Vodun and Rastafari), they revived their sense of an organic connection to the earth, they rediscovered the taste of their traditional cuisine, and so on. And that is why we find that almost all that is distinctive about indigenous Caribbean culture owes its inspiration, its image and likeness, to Africa. It is also probably why there is no enduring large-scale mass Back to India or Back to China movements coming out of the Caribbean. In a sense, Mother India and Mother China were not taken away from their indentured children in the Caribbean since they continued to wear their traditional dress, listen to their traditional music, speak their traditional language and worship ther traditional gods. When the true history of the last 5 centuries of the recently past millennium is finally placed in proper perspective, the incomparable tragedy of the African people during the era of the slave trade and slavery will come fully to light. It is without precedent in human history. I close by suggesting that the Indian people who are essentially of African origin as Rashidi has documented have a secure place in Rastafari, and as the Mansinghs have shown in their research, they have made a valuable contribution to the development of the Rastafari way of life. Indentured servants were working on contract to repay a debt, usually for transportation to America. Chattel means personal property, so chattel slaves were legally considered property, the same as a mule or a goat. An indentured servant worked for his/her master without pay until the debt was paid off. Typically, for repayment of the cost of being taken from England to America, the time of service was seven years, although it ranged from four to ten. At the end of that time, the indentured servant was free to leave and find other, gainful employment. There were cases of abuse by masters in which additional time was added by charging the servant for things like rent, food, lost or broken tools or products, etc. , because indentured servants were usually not well-educated and could be taken advantage of. The only ways a chattel slave could be released from a lifetime of unpaid service were manumission (being legally given freedom by his/her owner) or purchase, either by himself/herself rare, but possible or by a third party, such as societies of abolitionists who purchased slaves freedom for them. The best-known of these groups bought land in west Africa and founded there the nation of Liberia, for the purpose of resettling freed American slaves. Interesting sidelight: the term indentured is related to words like dentist and dental. An indentured servant had a written contract with his master. At the time the contract was signed, it was torn in two. The master kept one half and the servant kept one half. To ensure that these halves were part of the original document, the tear-lines were deliberately made irregular and jagged so that no other piece of paper would match. The jagged tearing was indented it looked like teeth

What Is The Importance Of Food Security Environmental Sciences Essay

What Is The Importance Of Food Security Environmental Sciences Essay World Food Day, 16 October, highlights the need to ensure that all people have physical and economic access at all times to enough nutritious, safe food to lead healthy and active lives. More than half the worlds population lives in low-income, food-deficit countries that are unable to produce or import enough food to feed their people. More than one-third of all children are malnourished and 6 million children a year die of causes related to malnutrition. Most of the worlds hungry people are found in the developing world, but 34 million live in the developed world. Soil degradation, chronic water shortages, inappropriate agricultural policies and population growth threaten food production in many countries. While growing export crops such as coffee, cocoa and sugar produces export income, it can lead to a decrease in basic food production, causing hardship for people who are poor. Between 1960 and 1990 world cereal production more than doubled, food production increased by one-third per head, daily intake of calories increased by one-third, and real food prices fell by almost half. There is enough food in the world for everyone to have enough to eat, but it is unevenly distributed. Background What is food security? Food security exists when all people, at all times, have physical and economic access to enough safe and nutritious food to meet their dietary needs and food preferences for an active and healthy lifestyle. (World Food Summit 1996) To be food secure means that: Food is available The amount and quality of food available globally, nationally and locally can be affected temporarily or for long periods by many factors including climate, disasters, war, civil unrest, population size and growth, agricultural practices, environment, social status and trade. Food is affordable When there is a shortage of food prices increase and while richer people will likely still be able to feed themselves, poorer people may have difficulty obtaining sufficient safe and nutritious food without assistance. Food is utilised At the household level, sufficient and varied food needs to be prepared safely so that people can grow and develop normally, meet their energy needs and avoid disease. What happens when people do not have food security? For the more than 800 million people who do not get enough regular, healthy food, ill health and a shorter life expectancy are real risks. Children, and especially very young children, who suffer from food insecurity will be less developed than children of the same age who have had sufficient food. They will most likely be shorter and weigh less, and be less able physically and intellectually, because of poor nutrition. Why is there food insecurity? Poverty Poor people lack access to sufficient resources to produce or buy quality food. Poor farmers may have very small farms, use less effective farming techniques, and/or be unable to afford fertilisers and labour-saving equipment, all of which limit food production. Often they cannot grow enough food for themselves, let alone generate income by selling excess to others. Without economic resources and a political voice, poor farmers may be forced on to less productive land possibly causing further environmental deterioration. Addressing poverty is critical to ensuring that all people have sufficient food. Health Without sufficient calories and nutrients, the body slows down, making it difficult to undertake the work needed to produce food. Without good health, the body is also less able to make use of the food that is available. A hungry mother will give birth to an underweight baby, who then faces a future of stunted growth, frequent illness, learning disabilities and reduced resistance to disease. Contaminated food and water can cause illness, nutrient loss and often death in children. The HIV/AIDS pandemic has reduced food production in many affected countries as productive adults become ill or die. Lacking the labour, resources and know-how to grow staples and commercial crops, many households have shifted to cultivating survival foods or even leaving their fields, further reducing the food supply. Addressing health issues will improve utilisation and availability of food. Water and the environment Food production requires massive amounts of water. It takes one cubic metre (1000 litres) of water to produce one kilogram of wheat and 3,000 litres of water to produce one kilogram of rice. Producing sufficient food is directly related to having sufficient water. Irrigation can ensure an adequate and reliable supply of water which increases yields of most crops by 100% to 400%. Although only 17% of global cropland is irrigated, that 17% produces 40% of the worlds food. Increasing irrigation efficiency and limiting environment damage through salinisation or reduced soil fertility are important for ongoing food availability. Where water is scarce and the environment fragile, achieving food security may depend on what has been called virtual water, that is, importing food from countries with an abundance of water. This may be a more efficient use of a scarce resource. Gender equity Women play a vital role in providing food and nutrition for their families through their roles as food producers, processors, traders and income earners. Yet womens lower social and economic status limits their access to education, training, land ownership, decision making and credit and consequently their ability to improve their access to and use of food. Food utilisation can be enhanced by improving womens knowledge of nutrition and food safety and the prevention of illnesses. Increasing womens involvement in decision making and their access to land and credit will in turn improve food security as women invest in fertilisers and better seeds, labour-saving tools, irrigation and land care. Disasters and conflicts Droughts, floods, cyclones and pests can quickly wipe out large quantities of food as it grows or when it is in storage for later use. Likewise, seeds can be destroyed by such environmental dangers. Conflict can also reduce or destroy food in production or storage as farmers flee to safety or become involved in the fighting. Previously productive land may be contaminated with explosive debris and need to be cleared before it can again be used for food production. Stored food, seeds and breeding livestock may be eaten or destroyed by soldiers, leading to long-term food shortages. Government spending needs to prioritise food security in the aftermath of conflict. Population and urbanisation Population growth increases the demand for food. With most productive land already in use, there is pressure for this land to become more productive. Poor harvests and higher costs lead many poor farmers to migrate to cities to look for work. Expanding cities spread out across productive land, pushing food production further and further away from consumers. This increases the cost of all the activities associated with producing and transporting food, and decreases the food security of the poor in cities. Trade Many poor countries can produce staples more cheaply than rich nations but barriers to trade, such as distance from markets, quarantine regulations and tariffs make it difficult for them to compete in export markets against highly subsidised farmers in rich countries. This deprives poor farmers of income and entire countries of the agricultural base they need to develop other sectors of the economy. In addition, trade imbalances prevent poor countries from importing agricultural products that could enhance their food security. What is being done? Improving food production Increasing the amount of food available is necessary to feed the growing population. The Green Revolution of the 1970s and 1980s led to huge increases in output, largely due to the cultivation of high-yielding varieties of rice and wheat, the expansion of land under production and irrigation, greater use of fertilisers and pesticides and greater availability of credit. In many countries these gains have reached their limit, and social and environmental issues must now be addressed. Further increases in food production depend on better integration of traditional knowledge with research; improving farming practices through training and the use of technology to increase outputs from current land without further loss of productive land; land reform to provide secure access to land for more people; and the provision of low-cost finance to help farmers invest in higher quality seeds and fertilisers and small irrigation pumps. While genetically modified seeds are being hailed as a means of improving crop outputs, there are also concerns about the ownership of seeds, adequate compensation for traditional knowledge and possible side effects. Economic growth and trade liberalisation Increasing food production leads to greater availability of food and economic growth in the domestic and/or overseas markets. Generating income can provide access to more and varied foods and provide cash for use in other areas of the economy, such as small enterprise and manufacturing, which in turn helps reduce poverty. Trade liberalisation is opening up markets slowly, but there are costly barriers to overcome. Work is underway through the Doha Round of multilateral trading negotiations in the World Trade Organisation to make trade rules fair, encourage trade liberalisation and assist developing countries to participate in the global trade environment. Distribution While there are sufficient resources in the world to provide food security for all, policy and behavioural changes are necessary to guarantee a fair share for all people, especially the poor. Building on a series of global conferences, in particular the 1992 International Conference on Nutrition and the 1996 and 2002 World Food Summits, countries have developed national nutrition plans and policies in nine major strategic action areas that: include mainstream nutrition goals in development policies and programmes improve household food and nutrition security protect consumers through improved food quality and safety prevent and manage infectious diseases promote breastfeeding care for the socioeconomically deprived and nutritionally vulnerable prevent and control specific micronutrient deficiencies promote appropriate diets and healthy lifestyles assess, analyse and monitor nutrition situations. The progress towards achieving these goals, however, has been much slower than intended. Recognising the role of women Gender equality is a prerequisite for the eradication of poverty and hunger. Many programs recognise the need for changes in access to food, land, credit, education, health and nutrition training and decision making in order to make effective use of womens roles in agricultural production and food preparation. Food aid The need for food during emergencies such as drought, disaster, population displacement and conflict is addressed by the distribution of basic food supplies and fuel. Early warning systems can predict problem areas, allowing action to be taken to keep people in their homes and help them back to food self-sufficiency as quickly as possible. Food sourced locally rather than internationally minimises the costs and disruption to local markets. In severe situations feeding may be necessary but often food aid is linked with work, health or education to avoid dependency and address the long-term causes of food insecurity.

Comparative Analysis of Forwards and Futures Contracts

Comparative Analysis of Forwards and Futures Contracts A Mauritian Perspective Abstract This research compares the OTC derivatives market with the exchange-traded derivatives market. Forwards contracts have been used as a representative for OTC markets and Futures for organised exchanges and the costs and benefits of each one have been analysed. This research has been done being with regard to the GBOT setting up in Mauritius. Forwards are frequently used contracts relative to others, in Mauritius. Hence, it is assumed that if the users have to shift to the GBOT, they will use futures contracts as a substitute for forwards since both have similar characteristics except that futures are more sophisticated than forwards. A survey has been done on the top one hundred and twenty companies in Mauritius out of which, only 70 have responded. The questionnaire aimed at determining the current derivatives position in Mauritius and a glance at the perception of the financial officers with respect to GBOT. Even though they believe that GBOT will benefit the country, they are unwilling to enter the market; while most of the respondents are unaware of GBOT and uncertain about the futures market and trade mechanism. Unexpectedly, it was found that some firms use futures for risk management. The results have been used to conclude whether it is viable for Mauritius to introduce an exchange and what measures can be taken to ensure that GBOT is successful. With respect to this research, it seems that the Mauritian market is not ready yet, to conceive this new development in its financial system but there are some measures that can be adopted to combat the inhibitors and there are much lessons to be learned from the record of derivatives mismanagement. List of Abbreviations AML Air Mauritius Company Limited CDS Central Depository and Settlement Company Limited CBOT Chicago Board of Trade CME Chicago Mercantile Exchange CFTC Commodity Futures Trading Commission EFP Exchange of Futures for Physical FSC Financial Services Commission FX Foreign Exchange GBOT Global Board Of Trade HSBC Hongkong and Shanghai Banking Corporation Limited MTM Mark-To-Market OTC Over-The-Counter SEM Stock Exchange of Mauritius STC State Trading Corporation S0 Spot price today ST Spot price at maturity USA United States of America 1.1 Introduction The presence of derivatives market has undoubtedly improved national productivity growth and standards of living. Alan Greenspan (Chairman of the US Federal Reserve System, 2005) Derivatives have gained prominence in the past few decades and are today a vital element in finance. Although they are the latest addition to the financial world, they have been witnessing a high rate of success. They have undergone constant innovation and active trade, notwithstanding the fact that they have led to a more complex form of hedging. Electronic trading and settlement facility has revolutionised the global financial and commodity markets by attracting international investors and increasing liquidity. 1.2 Background Theory 1.2.1 Hedging Hedging is a form of insurance that uses derivatives to absorb financial risk by locking in a price for a particular good. Its essence pertains to the uncertainties associated in prices of goods. Since prices of goods cannot be predicted with certainty, people speculate. Gol (1980) states that when everyone expects a price rise, all opinions seem to converge over a price rise, such that, if speculators enter the futures market, they would also be buyers rather than sellers and their buying activity may further aggravate the price rise. Speculation helps in effective risk management but sometimes backfires; for instance, many airlines speculated a rise in fuel prices and hedged their exposure with derivatives. Unfortunately, the financial crisis 2007-2008 caused fuel prices to decrease considerably in the spot market, but the airlines had the obligation to honour their derivative contracts at relatively higher prices. 1.2.2 Derivatives market Derivatives are financial instruments that derive their value from one or more underlying assets such as stocks, bonds, currencies, interest rates, commodities and market indices; for example, an oil futures contract derives its value from the price of oil- oil being the underlying asset. Derivatives are used extensively in financial and non-financial institutions. Forward contracts are the basic derivatives that stemmed from the goods market, and have thereupon paved the way for other derivatives. Some goods traded through derivatives are base metals, precious metals, agricultural products, energy products, foreign currencies, interest rate, and stock indices among others. Other includes contracts based on carbon, commodity indices, credit, fertilizer, housing, inflation, and weather. Source: Futures Industry Magazine 2009 For this research, commodities, assets, and goods are used interchangeably, irrespective of whether they are used in the financial, commodities or foreign exchange markets. 1.2.3 Types of derivatives There are two distinct groups of derivative instruments: forward-based products and option-based products. Forward-based products are termed linear derivatives as they offer a linear payoff and include futures, forwards, and swaps. Conversely, option-based products are non-linear derivatives since they offer a non-linear payoff and include puts, calls, caps, floors, and collars. Other derivatives, such as options on futures, swaptions, and forward caps, combine the features of both forward and option contracts. Derivatives trade in over-the-counter (OTC) markets or in organised exchanges. OTC trading occurs among a few dealers via phone or electronic messages. OTC contracts are mutual agreements made through private negotiations and transacted outside a trading platform. However, some OTC derivatives are cleared via exchanges (e.g. in the Chicago Mercantile Exchange). Swaps, forwards, and customised options are OTC contracts. Exchange-traded derivatives are standardised in terms of quantity and quality (the amount and quality of the good is fixed) and negotiation is not possible. Organised exchanges employ both open outcry system and electronic order matching systems and share similar purposes to securities exchanges. They design the contract terms and operate a clearinghouse, which acts as a guarantor, settles all contracts, and regulates trading. Large securities firms and commercial banks act as derivatives dealers. Futures and standardised options are traded on exchanges. 1.2.4 Players The three broad categories of traders in the derivatives market are hedgers, speculators, and arbitrageurs. Hedgers use derivatives to reduce the risks that they face from adverse movements in prices of goods while speculators take a position to realise gains with a relatively small initial outlay. Arbitrageurs enter the market to realise gains without risking their own capital. Conclusively, hedgers transfer their risk to speculators and arbitrageurs and thus, boost liquidity on the market. 1.3 Objective of Study A well-regulated organised derivatives market encourages a sustainable financial development and increases savings and investment in the long-run, thereby promoting economic growth. However, the concern is how and when to discern the time for its implementation in small economies. This dissertation aims at analysing the benefits and drawbacks of using forwards and futures contracts. Forwards contracts can be used by minority users, without major procedures and regulation. Contrarily, futures require significant concern and assistance of the government to support and ensure a good operating system. The research is carried out with regard to the commodities market being set up in Mauritius. Forwards laid the groundwork for futures, hence, both are treated simultaneously throughout this study. Futures (exchange-traded) are enhanced forms of forwards (OTC) but differing somewhat in the way they are traded. The costs and benefits of the two instruments are analysed and compared. This will indicate whether it is viable for Mauritius to introduce a derivatives exchange and suggests the measures that can be adopted to ensure that its objectives are attained. Swaps and options are excluded from the study because they operate differently and due to word constraint. Forwards and futures are relatively simpler and typically alike, thus, rendering comparison easier. 1.4 Overview of Remaining Chapters Chapter 2 deals with the literature review while Chapter 3 is an overview of the derivatives market in Mauritius. Chapter 4 covers the research methodology section. Chapter 5 presents the analysis and findings of the research, followed by Chapter 6, which concludes this study and includes some recommendations. chapter two: literature review 2.1 Importance of Derivatives Market Several factors such as size, leverage, asset-liability duration, and taxes amongst others, affect the hedging decision of a firm. The Miller and Modigliani theory posits that hedging is fruitless in perfect financial markets. In reality though, markets are imperfect and hedging alters a firms value by influencing its investment decisions. Bessembinder (1991) distinguishes that hedging corporate risk with forward contracts increases firms value by reducing incentives to under-invest. He also advocates that large institutions are more likely to use derivatives due to informational economies of scale. Likewise, Haushalter (2000) finds a positive correlation between hedging decision and total assets and characterises it as the economies of scale in information and transaction costs of hedging. Hedging also enables a firm to negotiate with its customers, creditors, and managers, which improves contract terms. A research on African countries suggests that volatile international capital flows have the tendency to destabilise shallow markets and precipitate a crisis if there is a change in investors appetite and urges adoption of stronger domestic policies and local derivatives markets for financial risk management purposes (Adelegan, 2009). Hedging is a zero-sum game; one does not gain from trade unless another faces a loss. The gain to the buyer will be exactly equal to the loss to the seller of the forward contract, whilst the gain to the seller will be exactly equal to the loss to the buyer. Hieronymus (1971) defines hedging as taking a position in a futures market that is equal in size and opposite to a predetermined position in the cash market. Hence, a loss in one market is offset by a gain in the other market. This principle works since cash prices and futures prices of a commodity are expected to converge as the contract reaches expiry. Anderson and Danthine ( 1981) define a pure hedge term equal to the risk-minimising futures position corresponding to a predetermined cash position. A hedger, thus, uses the possibilities offered by futures markets to minimise his risk. 2.2 Forwards Market A forward contract is a bilateral binding agreement to buy or sell a specific quantity and quality of an asset, at a pre-determined price and pre-determined future time. Normally, contracts specifying settlement in excess of 30 days after the trade date are forward contracts. Forwards are the first and simplest derivatives that sprouted in the sixteenth century in the agricultural markets, wherein they were used primarily to resist adverse price movements. Dong and Liu (2005) advocate that the equilibrium forward reduces commodity price risk; the buyer and seller will transact at the price specified in the contract, whatever the price of the underlying asset in the spot market at maturity. A forward agreement is somewhat like a legal contract, customised with respect to the needs of the particular buyers and sellers, obligating delivery of the underlying asset under the conditions specified in the contract. The buyers and sellers negotiate over the contract terms. Anderson and Danthine (1981) claim that, in the forwards market, speculators are assumed to be risk-neutral, bidding competitively to exercise arbitrage opportunities. 2.2.1 Benefits of Forward Contracts 2.2.1.1 Risk Management Typically, a forward contract alleviates financial risks, thereby protecting traders. There is no initial investment in the forwards market since cash changes hand only on settlement of the contract at maturity. This causes less volatility in cash transactions, rendering cash flows easy to manage. 2.2.1.2 Settlement Facility Cases wherein the seller defaults for some reason, contracts may be mutually settled in cash. Duffie (1989) finds that in practice, only a small fraction of forward positions are actually delivered while most are closed out before delivery by a cash settlement. Sometimes, initial traders are able to transfer their contracts to someone willing to take their obligation. Per se, it offers a certain degree of flexibility. 2.2.1.3 Trade Linkages and other benefits Forwards allows negotiation on the contracting terms, which benefits traders, builds up trust, and strengthens trade links between parties. Wolak (2007) analyses an electricity company and concludes that forward contracts reduce the cost of production as well as its volatility, and increase pro?t. Likewise, Dong and Liu (2005) show that forward contracts in non-storable goods benefit both producers and suppliers. 2.2.2 Costs of Forward Contracts 2.2.2.1 Counterparty Default Risk Forward contracts mitigate financial risks but give rise to counterparty risk (risk of default), which is one of the prominent risks in OTC derivatives. Counterparty risk can cause huge losses. 2.2.2.2 Transaction Costs In order to ensure guaranteed deals, parties with good credit ratings should be identified, which is a very costly task. Nevertheless, these firms do have a possibility to default for reasons such as insolvency or bankruptcy. An ideal illustration is the collapse of the Lehman Brothers investment bank that has created the biggest turmoil in the worlds history; following which, more concern has shifted to the OTC market. 2.2.2.3 Legal procedures Once the terms and conditions of the contract are accepted, they must be adhered to otherwise legal procedures may entail. Forwards market is an unorganised form of trade with no ability to deal with conflicts other than seeking legal recourse that may be too costly. Influential and wealthy parties only may recourse to such practices. Besides, it causes damage to the dealers reputation. 2.2.2.4 Liquidity and Transparency issues There is no possibility of closing out or reversing a forward contract. Thus, forwards lack flexibility and liquidity and forward delivery is not guaranteed in the absence of a regulator. Additionally, since the contract involves only two entities, there is reduced transparency and possibility of mispricing the goods since not all the forces are at work. 2.2.2.5 Market Power and Bargaining Power Market power and bargaining power affect the capacity for negotiation along with the forward equilibrium price. As such, small investors with lesser power may suffer. Dong and Liu (2005) show that the forward equilibrium moves in favour of the participant with high market power, such that he gains from the contract. However, when negotiation costs are very high, both producers and buyers face a loss regardless of market power and use forward contracts for risk management rather than for gains. 2.2.2.6 Informational Inefficiency A study by Mahenc and Meunier ( 1983) stipulates that there is no proper information dissemination in the forward market but under conditions of imperfect information, forward trading indirectly creates efficiency in the spot market. The necessity to deal with the shortcomings of forward contracts led to the emergence of the futures market. 2.3 Futures Market A futures contract is an agreement between two parties to buy or sell a fixed amount of an asset at a pre-decided price and date. In this respect, futures share the same characteristics as forwards; for instance, they help buyers and sellers with long term planning by locking in a price. However, futures are more sophisticated than forwards. Financial futures were traded on shares of the Dutch East India Company in the seventeenth century, but modern futures markets originated in Japanese rice futures, which were traded in Osaka in the eighteenth century. Futures emerged with the grading system, which purported to ensure that at maturity, the quality of goods delivered was as specified in the contract, which eventually led to standardisation of futures contracts. Futures are standardised contracts in respect of quantity, quality, delivery date, and location. They trade on organised exchanges, which are responsible for setting the quantity, quality of the underlying asset in the contract. Moreover, the exchange sets the terms and conditions of the contract, which are non-negotiable by the traders. All investors are treated equally; small investors are also able to hedge without difficulty. 2.3.1 Structure of the Futures Market Futures exchanges share the same purpose as securities exchanges. They usually have an integrated clearinghouse for clearing and settlement facility. Brokers, who are also members of the exchange, are responsible to match the buy and sell orders without buyers meeting sellers and vice-versa. Only members are allowed to trade on the platform, thus, a non-member wishing to deal in futures, should trade through a broker. The exchange connects buyers and sellers worldwide, communicates and keeps parties joint and ensures compliance with the terms and conditions of the contracts. Exchanges use open outcry in pits or electronic order matching systems or some use both, such as The Chicago Mercantile Exchange. Some authors argue that the open outcry system is more liquid and transparent than the automated system. Traders need to deposit a margin with the exchange prior to trade. The demand for margin (a percentage of the value of the contract) is referred as collateral or as a good faith deposit (Gay, Hunter, and Kolb 1986). All traders are required to have a minimum stated sum of money in their accounts. Contracts are settled on a daily basis: the mark-to-market system (MTM) which affects the contract price. If price of contract increases on a particular day, the holder makes a profit, which he can withdraw from his account, whereas if price decreases, he makes a loss and the amount is deducted from his account. As such, he is required to deposit a margin, referred as a call margin, to replenish his account to the threshold level, known as the variation margining system. Futures contract protect the value of inventories and partly finances the cost of storage since the future price of a commodity is dependent upon its cost of carry (Future price = cash price +cost of carry). This helps to improve marketing policies, financial planning, and long-term forecasting of prices. If ST is expected to be higher than current S0, then the current futures price will be set at a high level relative to the current S0. Likewise, if ST is expected to be lower at maturity, current futures price is set low. 2.3.2 Benefits of Futures Contracts Fundamentally, futures market confers two main purposes: price discovery and price risk management. The market provides protection against default, manipulation, and abuse. 2.3.2.1 Risk Management and Settlement Guarantee Moser (1998) reckons that futures contracts counteract default risk and protect traders through a set of rules. Firstly, standardisation protects traders as it ensures that the quality of the goods delivered is as specified in the contract. Moreover, the exchange can order its members to produce their financial accounts for inspection if their solvency is doubted. In 1873, the CBOT decided to expel any member who refused to abide by this rule (Andreas 1894). The margining and MTM system also contribute to curtail counterparty default risk as traders are called to supplement their account for the losses incurred on their contracts within 24hours; failure to do so causes their positions to be liquidated. There is a settlement guarantee in case of default while a tight regulation ensures that manipulation and abuse is virtually absent. 2.3.2.2 Price Discovery Futures market is transparent; pricing of commodities are fair and manipulations very difficult. Electronic trading on the exchange platform pools together all forces affecting the price of a commodity, leading to price discovery mechanism, which improves efficiency and lowers costs. Technology renders the exchange highly competitive since the market reacts very fast; prices and transactions are monitored constantly while information is captured continuously and incorporated in the intrinsic value of a good. Telser and Higinbotham (1977) concur that, futures market pools trade from diverse area into a central market, thereby increasing the heterogeneity of potential transactions. They proclaim that futures are liquid as transaction occurs readily at mutually acceptable prices and that homogenisation and clarity of the terms and conditions boost liquidity. 2.3.2.3 Liquidity One need not possess the underlying asset to sell futures while one may not be in need of a commodity to buy futures. Speculators and arbitrageurs enter the futures market without possessing or the intention of buying the commodity. Thus, the transfer of risks to different players in the market increases liquidity and maintains the equilibrium in demand and supply. Telser and Higinbotham (1977) statistically demonstrate that as the number of traders in the market increases, the market clearing prices become normal. Futures can be squared-off (reverse a position) without negotiation, thus making delivery non-mandatory. Positions can also be rolled-over. If period for hedge is later than the expiry date of the current futures contract, the hedger can rollover the hedge position by closing the existing position in a futures contract and simultaneously taking a new position in another futures contract with a latter expiry date. 2.3.2.4 Transactional and Informational Efficiency Futures market increases the informational efficiency of cash market and promotes import and export competitiveness. Cox (1976) empirically demonstrates that futures trading increases traders information about forces affecting supply and demand. His analysis rejects the claim that futures trading impose costs on producers, consumers, and others who handle the physical commodity. Additionally, evidences from more fully informed traders suggest that futures trade increases efficiency in spot markets. 2.3.2.5 Increase Export Competitiveness When entering forward contracts, exporters do not, usually, possess the entire stocks for export. Futures market enables them to hedge their projected purchase, until they have to buy in the physical market for exporting. Taking a position in the futures market will help to offset the gain/loss in the physical market; that is, at maturity the net loss/gain in futures market offsets the gain/loss in the physical market. Thus, exporters can accept contracts with longer duration and increase their competitiveness. 2.3.2.6 Offsetting gains and losses in the physical market Futures market also allows a hedger to take a position in the futures market opposite to the position he takes in an over-the-counter market. Such a transaction is termed: exchange of futures for physical (EFP). The OTC and futures positions should be for the same underlying assets or at least similar in terms of value and quantity. This results in the flexibility of customising the physical market with respect to the needs of traders, parallel to the OTC market and at the same time enjoying settlement guarantee in an exchange. Usually, margin requirements for EFP transactions are lower. EFP may seem appealing but is inefficient in fair pricing. Exchange Officials apprehend that EFPs would harm the futures market by reducing volume and liquidity and inhibit fair price discovery. 2.3.2.7 Diversification of portfolios Futures on commodities serve to diversify portfolios, since they are less volatile than financial securities. Bodie and Rosansky (1980) report an average excess return of 9.5% per annum for an equally weighted portfolio of commodity futures between 1950 and 1976. Their analysis reveals that equities are riskier than commodity futures. Furthermore, total return of the equally weighted commodity futures was negatively correlated with the return on long-term bonds, suggesting that commodity futures are effective in diversifying equity and bond portfolios. The benefits of diversification from commodity futures tend to be larger for longer holding. A similar analysis carried out by Gorton and Rouwenhorst (2005) confirms that commodity futures returns have been effective in providing diversification of both stock and bond portfolios. Weiser (2003), on the other hand, contends that commodity futures returns vary with the stage of the business cycle. He finds that commodity futures usually perform well in the early stages of a recession while stock returns are generally disappointing and in later stages of recessions, commodity returns fall while equities perform well. 2.3.3 Costs of Futures Contracts 2.3.3.1 Complexity Despite appealing benefits, futures contracts inherit some costs and the prime one is the complexity of handling them. Futures were generated to deal with the limitations of forwards but, in so doing, they brought a more complex form of hedging. Proper knowledge of the market is crucial; otherwise, hedgers may face unwanted losses. 2.3.3.2 Basis Risk Basis risk (the difference between spot and futures price) is inbuilt in futures market. Hedge positions are usually not perfect due to this difference. Working (1962) emphasises that the existence of basis risk prevents the elimination of all risks. Brorsen (1995) finds that changes in basis can cause forwards to be cheapest in some periods and futures to be cheapest in others. Therefore, the benefits of hedging can be enjoyed when the market is well understood. Advanced futures concepts about hedge positions, hedge ratios, and types of hedges should also be mastered as they benefit hedgers differently in different markets. 2.3.3.3 Mark-to-Market System (MTM)-cash drain out The transaction costs involved, such as, initial margin and variation margin in the MTM system freezes up working capital that could have yielded interest. Furthermore, the margin call should be paid before next opening of the market- a very short delay. These daily settlements make transactions volatile and cash flows cumbersome to maintain. Margin costs and brokerage commission discourage some investors, especially small traders, to enter the market. Williams (1986, 1987) shows that risk-neutral firms will hedge if transaction costs are lower in the futures market than in the cash market. Moreover, instances of dual trading exist, whereby brokers trade on behalf of their clients to earn a commission, without improving the customers position. 2.3.3.4 Large Number of Participants needed Futures contracts fail for lack of interest by market participants, that is, a low trading volume. Telser and Higinbotham (1977) statistically demonstrate that the benefit of an organised market is an increasing function of the number of potential participants and hence, an increasing function of the turnover of the potential participants in that market. They conclude that an organised futures market survive only if it is perfectly competitive, which is achieved when there are many participants. If the open interest (number of contracts outstanding) in the futures market declines, the volume of trade falls relative to the open interest. The commission and the margin are raised consequently. They even assert that there is a cost to the emergence and survival of an organised exchange. 2.3.3.5 Standardisation issues Standardised nature of contracts may cause over-hedging or under-hedging. For example, a contract specifies  £1000 to be sold while a hedger may need only  £800. Therefore, he over-hedges by  £200. Conversely, say a hedger needs  £1100, he under-hedges by  £100. 2.3.3.6 Uninformed Investors Increase Volatility Uninformed investors may increase price volatility in the futures market. If the market is inefficient in information, futures prices become biased predictors of future spot prices and causes cash prices and future prices to diverge rather than converge. Usually, futures contracts with longer maturity are closer to spot prices since time is required to assimilate unanticipated shocks. However, Kaminsky and Manmohan (1990) suggest that it is impractical to make any generalisations about the short-term and long-term horizons in commodity futures market. They find that for longer periods several markets are not fully efficient. In addition, Chernenko et al. (2004) study a wide range of futures and forward rates from financial markets and conclude that forward and futures prices are not generally pure measures of market expectations; per se, they may not be an efficient forecast of the future prices of assets. 2.3.3.7 Losses Faced By Investors Other studies indicate that large scale, professional speculators can profitably forecast commodity prices, but small traders cannot. Stewart (1949) considers futures-trading accounts for small-scale speculators and discovers that they face huge losses. Moreover, Houthakker (1957) and Rockwell (1967) find that large speculators earned profits and small speculators incurred losses for a particular set of data. Similarly, Working (1931) estimated that speculators in wheat futures, incurred losses. Empirical research shows that, for cattle and wheat producers, futures markets have lower transaction costs than forward contracts, while for small firms like farmers, the contracting costs might be higher because of opportunity cost of time in learning about futures, setting up a brokerage account, and managing margin calls. It would be unnecessary for small groups of traders, well acquainted with each other to transact among themselves than use futures. 2.3 Derivatives Mishaps The history of derivatives has witnessed some spectacular losses in the derivatives markets, which includes losses made by both financial (e.g. Amaranth hedge fund, Barings Bank) and non-financial institutions (e.g. Orange country, Shell, Metallgesellschaft). The Metallgesellschaft (MG) is a German oil company, which used futures to hedge its exposure in its early 1990s. MG hedged its position with long positions in short-dated futures contracts that were rolled forward. However, the price of oil fell and then came the margin requirements, which caused short-term cash flow pressures. Members of MG claimed that these were short-term cash outflows and in the long-run, there would be a cash inflow. However, this led to a serious issue as huge cash was drained out of the system. Consequently, MG executives closed out all their hedged positions. Therefore, one lesson to be learned is to be alert at all ti