Supply Chain Management Creating Competitive Advantage

Supply Chain Management Creating Competitive Advantage According to extensive Christopher (2005) the supply chain can basically be described as a triangular relationship between three Cs, the customer, the company and competitors. Christopher and Hines (2004) both suggests that the term chain should be replaced by network as the number of inter-connections between suppliers can be extensive. A well-managed supply chain can be a resource that enables an organisation to develop and sustain competitive advantage in a global market in a volatile economic environment together with industry re-organisation and increases in internet driven sales. Supply chains compete not companies is Christophers motto on his web page and summarises how competition is a key issue for organizations. With the advent of internet shopping there is an abundance of competitors ready to provide ever demanding consumers with the products they desire. Consumers want better quality, faster delivery and at a lower cost. Individual businesses cannot function alone, but have an inter-dependent relationship with integrated supply chains, whose success or failure is ultimately determined in the marketplace by the end consumers (Christopher and Towill, 2001; Monczka, Handfield, Giunipero Patterson 2009). Organisations that focus on developing the most cost effective and efficient supply chains will be the market winners and achieve a competitive advantage. A companys competitive advantage can be defined as the ability to make a higher profit than competitors through differentiation of products or services from those of competitors and better products or services in terms of quality and cost than competitors. Good supply chain management (SCM) enables quick response from supply chains to meet customer demands. In order to maintain competitive advantage dynamic businesses need short lead times, the ability to manage the peaks and troughs of demand (Sabath, 1998), and incorporate time-based competition (Stalk, 1988; Droge, Jayaram Vickery 2004). The aims of the literature review are to examine what contributes to a dynamic company in respect to a sustainable competitive advantage, responsive supply chain management (RSCM) with relation to dynamic industries including the fast fashion industry. The literature review will examine the factors that contribute to a companys strategy development for product differentiation and competitive advantage. Porters (1990) five forces analysis provides organisations with a framework to identify competition and market position will be discussed. The relevance of time-based competition and a review of different types of supply chains including supply chain management will also be presented. The different types of supply chains to be examined include value supply chains, agile and lean supply chains and Responsive Supply Chain (RSC). The literature review concludes with an assessment of the apparel industry in the UK and implications and impact of the supply chain. Is the supply chain as effe ctive as the literature depicts? Internal analysis of an organisation An internal analysis of a company provides managers with an insight into the success of the business for example how effective are its current strategies? Are its resources deployed effectively to support its strategies? In addressing such questions it is the business itself that determines it competitiveness. If a company undertakes an internal analysis it can identify competencies and core competencies which can be developed the importance of which will be discussed again later in this review. The internal analysis can also examine value-added activities and again these will be discussed in more detail later. Managers can also evaluate financial performance particularly in relation to competitors and identify areas of weakness. In many companies the majority of products go through the following stages; research and development prototyping, and then introduction of the new product, if the product is successful there will be market growth and profitability and competitors will become apparent. There will be a period of growth during which the product matures and this is the stage of product differentiation where the product dominates the market. Eventually the product declines as either new products are developed or improved upon by the competition. Management should know what stage their products are in as they can then develop their strategy. Business strategy analysis Business strategy is a process consisting of three phases; strategic analysis, strategic selection and strategic implementation. Strategic analysis evaluates the companys position in the market, the strengths and weaknesses of the product, and evaluates other companies who represent the main competitors. Strategic selection and implementation involves obtaining the goals identified as a result of the strategic analysis. Porter (1990) developed a framework known as the five forces model which assists with the analysis of factors contributing to a competitive advantage and to develop a competitive strategy based on positioning in the market. In a similar way to a SWOT analysis the five forces analyses competitive intensity and the attractiveness, in terms of the profitability of a company. Figure 1: from The five competitive forces that shape strategy by Michael E Porter Harvard Business Review 2008 The five factors illustrated in Figure 1consist of; the risk of entry into the market by potential competitors; the bargaining power amongst buyers; the bargaining power of suppliers; the closeness of substitutes to an industrys product all four of which contribute to the final factor which is the intensity of competition amongst established companies within an industry There are factors that moderate the threats firstly; the threat of new entry competition may be moderated by factors such as economies of scale, product differentiation, capital requirements, or switching the cost to buyers. Second, the buyers power may be moderated by the number of buyers relative to sellers, product differentiation, buyers profit margins, switching costs to other products and how important the product is to the buyer. The third force is the threat of substitute products moderating factors includes the relative price and quality of the substitute product and switching the cost to the buyer. The fourth force is the determinants of supplier power, supplier concentration, availability of substitute inputs, importance of suppliers input to buyer and suppliers product differentiation. These factors all contribute to the fifth force the competition and rivalry amongst existing firms which depends on the diversity, size and number of competitors, how quickly the industry i s growing and the range of product differentiation. Porters views have been disputed by Booth and Philip (1998) and Edwards (1997) who suggest that organisations should be flexible and unite both cost leadership (lowest production cost or higher rate of return) and differentiation in order to give customers unique value. Other criticisms include Porters emphasis on analysis and little information about formulation or implementation as van den Bosch de Man (1994) argue diagnosis does not necessarily lead to health (p. 14). According to Mintzberg (1990) the organisation must gain market power diminishing the buyers and suppliers power which although the five factors may mean economic power it could be mistaken for political power and finally bias towards large, established businesses as new companies or industries can only be analysed once they are established (Hamel and Prahalad 1989). Other critics (e.g. Sharp Dawes) have also labeled Porters conclusions as lacking in empirical support; have been justified using selective case studi es to support his perspective and for inconsistent logical argument in his claims. The sources-position-performance model (SPP) (Day and Wensley, 1988; Hunt and Morgan, 1995) is also a strategic framework for competitive advantage and reflects Porters 1985 proposal of positional advantage in respect of either cost or differentiation. The SPP model proposes that an organisations sources (for example superior skills or resources) can be maximised to achieve a positional advantage (for example differentiation in lower costs or higher value) which finally results in a superior performance outcome (for example an increased market share and/or higher profitability). Day and Wensley (1988) suggest that a differential positional advantage can be achieved with the brand name, features that are innovative and a product that is of high quality. These factors contribute towards the potential for obtaining a secure market position and a profitable market performance. Doyle and Wong (1998) support this viewpoint reporting that successful companys differential advantage was acqui red through product differentiation, services and the reputation of the company. Competitive advantage can also be maintained by re-investing some or all of the profit back into the company. For better customer satisfaction and market understanding, companies are striving to achieve the best performance from their supply chains by three key components (Fisher, 1997) these include responsiveness of the supply chains, accurate demand forecasting and inventory management. In a dynamic, globalised and competitive environment, companies are under pressure to improve their supply chain strategies in order to be more responsive to customer demands. Christopher (2000) defines responsiveness as the ability of a supply chain to respond rapidly to changes in demand, in respect of amount and variety. (Fisher, 1997; Christopher, 2000, 2005) Uncertainties in demands are unavoidable due to the changing market conditions and customer expectations. In supply chains, inventory is the currency of service that helps deal with uncertainty and provides flexibility, though it can be costly (Chase and Aquilano, 1995; Bernard, 1999) Time-based strategies In current competitive markets if customers cannot get what they want from one company they will go to the competition. Leading companies such as Federal Express and Honda have demonstrated that if organisations are able to implement time-based strategies in areas such as production, developing new products, selling goods and the supply chain this can represents a powerful competitive advantage. In a survey of American companies Davis (1995) found that a high priority for the majority of organisations was time-based competitive strategy. Customers appreciate receiving their products promptly and this also encourages market growth as prompt delivery is a competitive advantage. It is not necessary to have a large stock of goods because efficient manufactures can deliver an order on the day it is received. The concept of time-based competition was introduced by Stalk (1988) and emphasises time as an important factor in developing and maintaining a competitive advantage. A time-based str ategy aims to reduce time in the stages of product proposal, development, manufacture, marketing and delivery. The business cycle time can be defined as the total time between receiving an order and getting the product to market which is particularly relevant to the fast fashion sector. If a company adopts a time-based strategy there appear to be a few strategies that can be implemented. Examples include starting afresh as it is not sufficient to just attempt to speed up existing activities. Another approach is to use a systematic framework to evaluate the requirements of customers and suppliers and then only undertaking only those tasks that fulfil the requirements. This strategy could reduce cycle time and could be implemented as part of the Total Quality Management (TQM) process. Another area that could be re-assessed is the approval process which means that the number of times a product or service needs internal approval before reaching the customer could be reduced. Stalk and Hout (1990) reported that successful companies that utilise time-based strategies will be able to offer a wider variety of goods at low cost and faster delivery times in comparison to the competition. Stalk and Hout also argue that there are a number of myths in business concerning increases costs when reduced lead times and response times are reduced however, when offered together with an increase in the variety of products which customers have requested there can be a very profitable upsurge for a time-sensitive company in comparison to the competition. It is also argued that time-consumption is quantifiable and therefore manageable. Successful companies focus on reducing delays and perhaps eliminating them altogether in order to gain a competitor advantage. Stalk and Hout argue that the majority of businesses can use time in a positive and constructive way and increase profitability. An example of flexible manufacturing and rapid response systems is presented by Ruch (1997) reports that in the past Motorola used to take three weeks to complete an order for a pager whereas an order is now completed in two hours. In relation to the fast fashion industry distribution is a major factor as the demand for current fashion trends require an efficient distribution system and competitive advantage will be lost if products are delayed in the distribution chain. There are two time-based strategies used; fast to market and fast to produce. Companies that are competitive regarding the to-market speed emphasise reductions in design lead-time. The company has the ability to minimise the time it takes to develop new products or make rapid design changes. Fast-to-product companies emphasise speed in responding to customer demands for existing products. Wal-Mart has been able to dominate its industry by replenishing its stores twice as fast as its competitors (Stalk 1998). Vickery, Droge, Yeomans and Markland (1995) found that new product introduction was the most consistent predictor of business performance. Development cycle time was second and production lead time and delivery speed were not as significant predictors of success as the first two. However this research is now quite old and it is possible that it is not relevant to the fast fashion business in terms of speed of delivery not being such a strong predictor of success As an example of a fast fashion company using time based-competition Gunasekaran (2001) cites Benetton an Italian company which produces distinctive casual wear for children, men and women and is a good example of an agile organisation using time compression. Benetton has centralised management and operations for a global market using more than 400 sub-contractors. The company has found that the fastest way to utilise a distribution system was through rapid feedback from over 400 travelling sales representatives, producers and the warehouse. If an item is selling the producers will work in fast-turnaround which has had a huge impact on reducing the time for replacement items. In order for this to be successful there needs to be a flawless flow of materials to allow agility in the production stage and this is organised by the production division. Benettons competitive advantage is the customer ordering system and the companys advance use of IT (p. 389-390). Gattorna and Walters (1996) report that Benetton delay dyeing their jumpers until the end of the supply process so standard jumpers are customised at a late stage and therefore allows some customer choice but without long lead-times and the risk of the product being outmoded. Davis (1995) states that Benettons system cost $30 million to build yet only eight people are required to operate it and the company can move 230,000 items of clothing each day. The warehouse is mechanised and the bar codes are scanned, goods are selected and transported. From order to store the overall cycle time for goods in stock is one week, if not in stock four weeks. Getting the right products to the customer at the right time, cost, place, condition and quantity, information technology and logistics networks are very dependent on the supply chain management and the type of supply chain used which will now be discussed in the following sections. Supply Chain Management The logistics involved in providing the consumer with the required products is complex. Issues such as time (as discussed above), outsourcing, off-shoring and global competition are a few examples and this means that the supply chain has taken on increasing importance (Monczka, Handfield, Giunipero and Patterson 2009). The supply chain is defined by Mentzer, Dewitt, Keebler et al (2001) as a group of three or more companies connected by an upstream or downstream flow of goods or services. Supply Chain Management (SCM) is the strategic organisation and proactively management of all the inter-related activities. The activities can be internal or external to an organisation and may also be across international and cultural boundaries. Supply management is defined by Monczka et al (2009) as a strategic approach to planning for and acquiring the organizations current and future needs through effectively managing the supply base à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..with cross functional teams (CFTs) to achieve the organisations mission (p. 8). SCM includes operations such as the evaluation and selection of the supplier; New Product Development (NPD); ensuring the implementation of the customers order; and maintaining demand and supply. According to Gattorna and Walters (1996) there are five basic functions required for a balanced supply chain which include procurement (maximum purchasing discounts); inboard logistics (low transportation costs); operations (low production costs), marketing and sales (wide product variety and high availability); and outbound logistics (low transportation costs). In order to develop an integrated supply there also needs a flow of information at three stages, strategic, tactical, and operational SCM differs from purchasing or procurement as Kalakota and Robinson (2000) state they much broader concepts, Purchasing is often described as the five rights; right quality, right quantity, right time, right price and right source (Baily, Farmer, Jessop, Jones 1994). SCM is a more dynamic and strategic approach than purchasing which is also referred to as strategic sourcing in the literature (e.g. Gottfredson, Puryear and Phillips 2005). The phrase strategic sourcing originated as a buzz word in the 1980s from management consultants such as PricewaterhouseCoopers when working with Blue Chip companies however the development of the term raises an significant and relevant issue concerning the emphasis that sophisticated, world-class leaders (WCL) place on SCM (Kasul, Motwani, 1995). Other companies may aspire to be WCL and this drives competition. An organisation particularly a newcomer to the market might benefit from trying to identify characteristics in WCLs as it might provide an opportunity to implement and improve their internal and external processes, core manufacturing strategies and develop a global strategy to achieve company-wide improvements towards WCO status and global competitiveness. A starting point could be the strategic management of the supply chain and there are four main factors that characterise supply chain management these are information, time, customer demand, and response strategy for problems. Firstly, there must be a good flow of information between groups or individuals who may be culturally diverse. Good communication promotes good relationships and reduces time delays in the chain. Cost and accessibility are issues that management must consider. The second factor is time, whether the supply chain is efficient which, as previously discussed, is seen as competitive advantage. As the amount of competition in both the domestic and international markets increases organisations must have an efficient supply chain in order to compete. The third point also previously discussed involves the increasing demands and expectations of consumers and also the range of alternative options available to them therefore management may also want to consider customer loyalty. The final point in supply change management is the organsations response strategy to any major disruptions in both supply and downstream production which will the lessen the impact on lost sales. SCM necessitates good team work as it involves those who are purchasing the goods, the supplier, quality assurance and other associated roles the relationship is not adversarial as may have been the situation in traditional purchasing but in business SCM encompasses a win-win situation for the supplier and the company purchasing the goods. The relationship needs to be beneficial for all parties to allow for rapid change which is particularly relevant for the fast fashion industry. When developing a supply chain strategy Fisher (1997) stated that in order to implement the optimal approach the relationship between supply and demand must be coordinated to take into account the type of product, demand and sales predictability. Products can be categorise into two generic types, fashion and commodities. Fisher states that fast fashion has a short life-cycle and high demand uncertainty, and that there is the risk to the supply chain of both stock out and outmoded products. Popular, trendy clothing requires a management strategy that can co-ordinate the supply and demand and allow companies to respond faster to the marketplace. Commodities that are basic products, such as tinned food, they have comparatively long life cycles and have a low demand uncertainty usually because they are well-established products with a known consumption pattern. The driving force for commodity supply chains is the reduction of cost. Hills (1993) manufacturing strategy metrics, notes that the main difference between the two groups of products for fashion products is the emphasis is on availability, while for commodities is the emphasis is on price. Supply chains and value chains A business can be considered as a system that converts inputs (resources or materials) into an output (goods or services). All of the internal actions of a company add value to the inputs. The value of the completed product is equal to the price a consumer is prepared to pay. The activities of a business can be broken down into a sequence of activities know as the value chain. Porters value chain model was developed in the 1980s and proposes that an organisations supply chain can lead to a competitive advantage (Porter 1985; 1996). Porter original model proposed that the value supply chain was focused on the companys internal employees. Porter stated that a supply chain is a subset of a value chain, for example all personnel within the organisation are part of a value chain whereas they are not part of the supply chain. A diagram of Porters model is shown in Figure 2 two components are shown the Primary and Support activities. Support activities are shown in the horizontal flow and are the operational part of the value chain (the supply chain). Primary activities directly add value while support activities add value indirectly by supporting the effective implementation of the primary activities. At an organisational level the value chain is depicted as being broader than the supply chain because it includes all activities in the form of primary and support activities. The difference between the end value and the total cost is the margin. Figure 2: The Value Chain (Porter 1996) The value chain has developed and expanded from Porters original concept (the internal employees of an organisation) to include suppliers and customers and is referred to as the extended value chain or extended enterprise. This development has occurred because progressive companies acknowledge that successful management of cost, quality and delivery may depend on suppliers that are located several levels away from the producer. Porters value-chain analysis provides an explanation of how much value is added to an organisations final products or services in comparison to the original cost of the materials or resources. There is a clear relationship between value-adding activities, such as the core competences and competences which provide knowledge and skills necessary to undertake the value adding activities and resources which form the inputs to a companys value adding activities. In order to maintain a competitive advantage a company should be able to undertake an analysis of the value chain which should enable a company to obtain a breakdown of all the activities the organisation undertakes and to identify the core activities and their relationship to core competences. A competence is a quality or a collection of qualities which the companies in a particular industry possesses A core competence or distinctive capability is a quality or collection of qualities which is specific to a particular organisation which enables it to produce above the average performance of the industry as a whole. As a result of a distinctive capability is an output that customers value more highly than those of competitors, the competitive advantage. In order to be successful in business companies certain competencies are necessary but the core competences are the differential. The company should be able to identifying areas where the cost of adding the value is greater than the value added; the identification and assessment of non-value adding activities. A good TQM process involves defining the process for producing products or services, using mapping or flow-charting techniques to identify non value-added tasks these tasks are then either improved or eliminated. Management can develop strategies to find new ways to acquire value (for example a new production plant near to the companys head office with add value because transportations costs will be less). In respect to SCM the amount of the value added by teams within an organisation should be assessed and periodically reviewed and any blockages that reduce a companys competitive advantage must be identified. The assessment of the organisations value chain should not be undertaken in isolation but considered together with its association with suppliers, distributors and customers. It is also necessary to verify whether the value chain supports the organisations current strategy for example if strategy is to cut costs the analysis should focus on this. If strategy is the production of high quality goods the focus should be on strategies to improve quality outcomes. Outsourcing is an activity that can be used as part of the overall sourcing strategy for services. Outsourcing entails the transfer of staff and assets to an external or third-party company which then provides them back as a service. Outsourcing is an example of companies concentrating on their core activities and competences while getting the support activities done by someone else as such outsourcing has the potential of giving both parties a competitive advantage. The role of SCM is to evaluate which activities the company should undertake and which should be outsourced. An important consideration is that there will be different value chains for different organisations because not all activities within a company are of the same importance in adding value to its products. Activities that do add value are the core activities and are usually linked closely to the core competences. An organisations value chain will also be part of the value chains of other companies, for example the suppliers and distributors and customers. It is unusual nowadays for a solitary organisation to undertake all the value-adding activities ranging from design, production, delivery and service provision for a product. Three different types of supply chains will now be discussed in the following section, agile supply chains, lean supply chains and RSC Agile supply chain Supply and demand has been identified as the Increasing volatility in demand and competitive pressures force more frequent product changes (Gattorna and Walters 1996) agile supply chains are usually dominated by surge (Fisher 1997). An agile supply chain has to be created to manage uncertainty, satisfy consumer demand and ensure profitability. The definition of agility Agility means using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile marketplace (Naylor, Naim, Berry, 1999 p. 62) Todays consumers demand variety and companies need to demonstrate customer responsive behavior with suppliers, being able to adjust quickly to meet market demand and to replace one product for another. In a genuinely agile business the strategy and supply chain relationships are developed to such an extent that volatility of demand is dealt with (Christopher 2000). Uncertainty is characteristic of todays markets as a result of a combination of factors which include the globalisation of the supply chain, concurrent inexpensive IT and communications; increased ability to develop product variety and reduce product life cycles while remaining cost competitive. These drivers promote end-consumers promote these drivers to demand greater choice and improved value (Li 2009). These dynamics are especially relevant in the context of the fashion industry and clothing retail in general (Sparka and Fernie, 1998; Jones, 1998; Jones 2002). With economic changes in recent years and greater global co mpetition responsiveness is essential throughout the supply-chain (Gattorna, 1998; Pine, 1993; Goldman, Nagel, Preiss 1995; Christopher, 2005) with such significant changes, successful organisations have to remain competitive while adapting to changing marketplace conditions (Brown and Eisenhardt, 1998). A significant feature of an agile organisation is flexibility (Christopher 2000) and this idea originates from flexible manufacturing systems (FMS). Agility is necessary in environments that are not predictable with volatile demand and consumers require variety. If a product is highly fashionable then, by its very nature, its demand will be unpredictable (Mason-Jones, Naylor, Towell 2000) Agile supply chains are market sensitive which means there is a quick response to consumer demand. This is quite different to many organisations which are forecast driven rather than demand driven. Technology can assist in demand driven organisations as data can be quickly accessed from the point of sale. As mention in the section on SCM communication between the members of the supply chain is an important factor in its success. Shared information between supply chain partners requires collaborative working and process integration between buyers and suppliers, joint product development, common systems and shared information. This form of co-operation in the supply chain is becoming ever more prevalent as companies focus on managing their core competencies and outsource all other activities. Mason-Jones and Towell (1999) undertook a simulation model of the fashion trade supply chains and corroborated that enhanced agility resulted from enrichment information along the supply chain. Lean supply chain The agile supply chain is closely connected to the lean supply chain although they are separate and have different purposes. Lean supply chains work well in environments where demand for variety is low and the environment is predictable whereas agile manufacturing is implemented where demand is volatile, and lean manufacturing is put into effect where there is a stable demand. Mason-Jones et al (2000) offers a further third option which they term the Leagile Paradigm a hybrid mixture of both types of supply chain. Responsive Supply Chains

Law of Diffusion of Gases

Thomas Graham studied the behavior of the diffusion of gases of unequal densities when placed in contact with each other, using air as his control. He wanted to numerically prove how the diffusion of the gas volumes was inversely proportional to the value of the density of the gas, under constant temperature and pressure. The significance of this experiment was that in led to a reevaluation of the concept of the movement of matter, realizing that diffusion dealt with small immeasurable elements of matter, as opposed to large volumes of air, as perceived in the corpuscular theory, shedding light into the study of the behavior and structure of matter. Graham’s initial objective was to establish a numerical value regarding the gas density and its diffusiveness for ten different gases, establishing that the greater the gas’s density the smaller the value and rate of diffusiveness compared to air. He predicted that gases moved by diffusion when placed together in the form of minute volumes, were the heavier gas would tend to accumulate on one side while the lighter gas displaced towards the denser gas until a uniform mixture was achieved. In light of this, he predicted that if controlling temperature and pressure he would achieve the gases to diffuse and establish a numerical value. However no hypothesis was established based on the limited information at their disposal of matter. However seeing how gases diffused proportionately despite the aperture size, Graham perceived that diffusion dealt with minute particles as opposed to large volumes. The gas’s diffusion volume was achieved once the gas inside the stucco container was entirely replaced by external air, being this new volume the equivalent volume of diffusion. Once established the volume, he used his law of diffusion to provide a numerical value and verify the exactness of his formula. This was achieved by observing the change in height of the level of mercury. The use of a stucco plug channel containers was suitable to lessen the effect of gas absorption by the material and avoid the gas’s expansion or contraction when atmospheric conditions varied; in addition to this the fact that temperature and pressure were kept constant meant the movement of the gases was because of simple diffusion and not by an external force. Using air as a unit measure, meant variations in duplicability of results due to the air’s heterogeneous nature making the experiment inconclusive. They used air as their measure unit since they did not have the technology to test the direct interaction of single separate samples of gases, being unable to study properly their behavior. This experiment was accurate when comparing the results with the theoretical values, and consistent to previous experimental observations. The results showed to be always below the theory value explained by means of their materials absorption nature and slight variations in conditions and instrument’s precision. Despite this Graham was able to establish a clear numerical relationship using equivalent diffusion volumes, however with slight exceptions to certain gases that had to be further tested. Graham’s prediction of being density a factor, which determined the diffusiveness of gas, was corroborated at the sight that lighter gases than air such as hydrogen diffused more easily. In addition the accuracy of the results helped to determine the value of the gas’s gravity, which would further provide evidence for the study of matter. In addition the fact that intermixture of gases was achieved under controlled conditions, despite the size of contact surface, provided evidence of minute particle diffusion and led Graham to speculated further on the constituents of matter, not explained through the corpuscular theory, would lead to development of the colloid theory in the future. In conclusion this research paper showed that Graham verified a numerical value for the diffusion of gases with varying densities. However Graham’s observations led him to further speculate on the idea that diffusion was related to immeasurable elements, as opposed to sensible volumes. This paper provides valuable evidence on how the study and discovery of minute particles evolved as the corpuscular theory failed to explain the nature of matter.

Sources Of Finance And Starting A Business Finance Essay - Free Essay Example

Sample details Pages: 4 Words: 1172 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Bank Overdraft Most businesses have an account with a bank. The bank deals with all the deposits (money put into the account) and withdrawals (money taken out). Most banks know that businesses do not always receive money from sales straight away. If you run a sandwich bar in a local trading estate then you might get money straight away when you sell your sandwiches. If you are a business selling electrical equipment to an electrical retailer then you may not get paid straight away when you deliver your goods. Trade Credit This is a period of time given to a business to pay for goods that they have received. It is often 28 days but some businesses might not pay for 6 months and on some occasions even a year after they have received goods. Don’t waste time! Our writers will create an original "Sources Of Finance And Starting A Business Finance Essay" essay for you Create order Credit Card A credit card works very much like trade credit. If you buy something using a credit card, you will receive a statement once a month with the details of the amount spent during the last month. You then have a certain period of time to either pay the full amount or a minimum amount. Lease Most businesses have to buy equipment and machinery of some sort. Many firms have a fleet of company cars which certain staff uses or vehicles that they use for distribution. There are a number of ways of buying these things. The business might go to the bank for a loan, arrange some sort of finance deal with the supplier, and use cash they have in the business or arrange a lease option. Bank Loans Bank loans are very flexible. They can vary in the length of time that the loan has to be repaid. Loans arranged with a bank that are less than one year are regarded as short term finance. As with any other form of loan there are interest payments to be made and this can be expensive and also can vary. Long term sources of finance Shares A share is a part ownership of a company. Shares relate to companies set up as private limited companies or public limited companies (plcs). There are many small firms who decide to set themselves up as private limited companies; there are advantages and disadvantages of doing so. It is possible, therefore, that a small business might start up and have just two shareholders in the business. Venture Capital Venture capital is becoming an increasingly important source of finance for growing companies. Venture capitalists are groups of (generally very wealthy) individuals or companies specifically set up to invest in developing companies. Venture capitalists are on the look out for companies with potential. They are prepared to offer capital (money) to help the business grow. In return the venture capitalist gets some say in the running of the company as well as a share in the profits made. Government Grant Some firms might be eligible to get funds from the government. This could be the local authority, the national government or the European Union. These grants are often linked to incentives to firms to set up in areas that are in need of economic development. In Cornwall, for example, there have been a number of initiatives to encourage new businesses to locate there. Bank Loans As with short term finance, banks are an important source of longer term finance. Banks may lend sums over long periods of time possibly up to 25 years or even more in some cases. The loans have a rate of interest attached to them. This can vary according to the way in which the Bank of England sets interest rates. For businesses, using bank loans might be relatively easy but the cost of servicing the loan (paying the money and interest back) can be high. If interest rates rise then it can add to a businesses costs and this has to be taken into account in the planning stage before the loan is taken out. The source of finance selected by the HAYATABAD FAST FOODS is loan because we will not invest all available money into the business. FACTORS FOR APPROPRIATE SOURCE OF FINANCE A business faces three major issues when selecting an appropriate source of finance for a new project: Can the finance be raised from internal resources or will new finance have to be raised outside the business? If finance needs to be raised externally, should it be debt or equity? If external debt or equity is to be used, where should it be raised from and in which form? Can the necessary finance be provided from internal sources? In answering this question the company needs to consider several issues: How much cash is currently held? The company needs to consider the amount held in current cash balances and short-term investments, and how much of this will be needed to support existing operations. If spare cash exists, this is the most obvious source of finance for the new project. If the required cash cannot be provided in this way then the company should consider its future cash flow. A cash budget can be prepared, but it is probably too detailed at this stage. A cash flow statement as shown in Example 1 would probably be more practical. Other factors can be The debt or equity decision Equity Finance Debt Finance Debt finance includes The duration of the loan Fixed v floating-rate borrowing Status of company Currency of borrowing IMPLICATIONS Implications of different sources of finance on a business are discussed below Implications of sources of finance can be good as well as bad for a business organizing firm Loanacirc;â‚ ¬Ã¢â€ž ¢s implications can be both good and bad or positive or negative. Itacirc;â‚ ¬Ã¢â€ž ¢s easily available but the problem is that while paying the loan back to the bank, individuals or organization interest has to be paid which means we have to pay almost double of the amount we borrowed. Leasing also has its impacts like giving of installments but its good because it doesnacirc;â‚ ¬Ã¢â€ž ¢t make that much burden on firm The other sources of finance also have their impacts including positive and negative both. The implications on HAYATABAD FAST FOODS source of finance which it has taken mean loan is to pay the interest. THE IMPLICATIONS OF SOURCE OF FINANCE SELECTED FOR MR JAVEDacirc;â‚ ¬Ã¢â€ž ¢S BUSINESS ARE: POSITIVE IMPLICATIONS: Getting the money you desired for your need. In some cases credit unions are better places to get loans than banks but it depends on the amount and use for the money. Competitive interests rates. Bank loans are always available. Can get in large amount. NEGATIVE IMPLICATIONS: Regular payment. Policy modification. Change in interest rate. Personal assets can be targeted. Have to pay back in stated time. Delay in taking loan because of so much paper work and bank policy. Not everyone could qualify for loans. Have to pay back with interest. REFERNCE LIST:- www.google.com www.ask.com www.investopedia.com www.businessdictionary.com www.encarta.com

Socialism vs. Capitalism Differences, Similarities, Pros, Cons

Socialism and capitalism are the two main economic systems used in developed countries today. The main difference between capitalism and socialism is the extent to which the government controls the economy. Key Takeaways: Socialism vs. Capitalism Socialism is an economic and political system under which the means of production are publicly owned. Production and consumer prices are controlled by the government to best meet the needs of the people. Capitalism is an economic system under which the means of production are privately owned. Production and consumer prices are based on a free-market system of â€Å"supply and demand.†Socialism is most often criticized for its provision of social services programs requiring high taxes that may decelerate economic growth.Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes. Socialist governments strive to eliminate economic inequality by tightly controlling businesses and distributing wealth through programs that benefit the poor, such as free education and healthcare. Capitalism, on the other hand, holds that private enterprise utilizes economic resources more efficiently than the government and that society benefits when the distribution of wealth is determined by a freely-operating market. Capitalism Socialism Ownership of Assets Means of production owned by private individuals Means of production owned by government or cooperatives Income Equality Income determined by free market forces Income equally distributed according to need Consumer Prices Prices determined by supply and demand Prices set by the government Efficiency and Innovation Free market competition encourages efficiency and innovation Government-owned businesses have less incentive for efficiency and innovation Healthcare Healthcare provided by private sector Healthcare provided free or subsidized by the government Taxation Limited taxes based on individual income High taxes necessary to pay for public services The United States is generally considered to be a capitalist country, while many Scandinavian and Western European countries are considered socialist democracies. In reality, however, most developed countries—including the U.S.—employ a mixture of socialist and capitalist programs. Capitalism Definition Capitalism is an economic system under which private individuals own and control businesses, property, and capital—the â€Å"means of production.† The volume of goods and services produced is based on a system of â€Å"supply and demand,† which encourages businesses to manufacture quality products as efficiently and inexpensively as possible. In the purest form of capitalism—free market or laissez-faire capitalism—individuals are unrestrained in participating in the economy. They decide where to invest their money, as well as what to produce and sell at what prices. True laissez-faire capitalism operates without government controls. In reality, however, most capitalist countries employ some degree of government regulation of business and private investment. Capitalist systems make little or no effort to prevent income inequality. Theoretically, financial inequality encourages competition and innovation, which drive economic growth. Under capitalism, the government does not employ the general workforce. As a result, unemployment can increase during economic downturns. Under capitalism, individuals contribute to the economy based on the needs of the market and are rewarded by the economy based on their personal wealth. Socialism Definition   Socialism describes a variety of economic systems under which the means of production are owned equally by everyone in society. In some socialist economies, the democratically elected government owns and controls major businesses and industries. In other socialist economies, production is controlled by worker cooperatives. In a few others, individual ownership of enterprise and property is allowed, but with high taxes and government control.   The mantra of socialism is, â€Å"From each according to his ability, to each according to his contribution.† This means that each person in society gets a share of the economy’s collective production—goods and wealth—based on how much they have contributed to generating it. Workers are paid their share of production after a percentage has been deducted to help pay for social programs that serve â€Å"the common good.†Ã‚   In contrast to capitalism, the main concern of socialism is the elimination of â€Å"rich† and â€Å"poor† socio-economic classes by ensuring an equal distribution of wealth among the people. To accomplish this, the socialist government controls the labor market, sometimes to the extent of being the primary employer. This allows the government to ensure full employment even during economic downturns.   The Socialism vs. Capitalism Debate   The key arguments in the socialism vs. capitalism debate focus on socio-economic equality and the extent to which the government controls wealth and production. Ownership and Income Equality   Capitalists argue that private ownership of property (land, businesses, goods, and wealth) is essential to ensuring the natural right of people to control their own affairs. Capitalists believe that because private-sector enterprise uses resources more efficiently than government, society is better off when the free market decides who profits and who does not. In addition, private ownership of property makes it possible for people to borrow and invest money, thus growing the economy.   Socialists, on the other hand, believe that property should be owned by everyone. They argue that capitalism’s private ownership allows a relatively few wealthy people to acquire most of the property. The resulting income inequality leaves those less well off at the mercy of the rich. Socialists believe that since income inequality hurts the entire society, the government should reduce it through programs that benefit the poor such as free education and healthcare and higher taxes on the wealthy.   Consumer Prices Under capitalism, consumer prices are determined by free market forces. Socialists argue that this can enable businesses that have become monopolies to exploit their power by charging excessively higher prices than warranted by their production costs.   In socialist economies, consumer prices are usually controlled by the government. Capitalists say this can lead to shortages and surpluses of essential products. Venezuela is often cited as an example. According to Human Rights Watch, â€Å"most Venezuelans go to bed hungry.† Hyperinflation and deteriorating health conditions under the socialist economic policies of President Nicolà ¡s Maduro have driven an estimated 3 million people to leave the country as food became a political weapon.   Efficiency and Innovation   The profit incentive of capitalism’s private ownership encourages businesses to be more efficient and innovative, enabling them to manufacture better products at lower costs. While businesses often fail under capitalism, these failures give rise to new, more efficient businesses through a process known as â€Å"creative destruction.†Ã‚   Socialists say that state ownership prevents business failures, prevents monopolies, and allows the government to control production to best meet the needs of the people. However, say capitalists, state ownership breeds inefficiency and indifference as labor and management have no personal profit incentive.   Healthcare and Taxation   Socialists argue that governments have a moral responsibility to provide essential social services. They believe that universally needed services like healthcare, as a natural right, should be provided free to everyone by the government. To this end, hospitals and clinics in socialist countries are often owned and controlled by the government.   Capitalists contend that state, rather than private control, leads to inefficiency and lengthy delays in providing healthcare services. In addition, the costs of providing healthcare and other social services force socialist governments to impose high progressive taxes while increasing government spending, both of which have a chilling effect on the economy.   Capitalist and Socialist Countries Today   Today, there are few if any developed countries that are 100% capitalist or socialist. Indeed, the economies of most countries combine elements of socialism and capitalism. In Norway, Sweden, and Denmark—generally considered socialist—the government provides healthcare, education, and pensions. However, private ownership of property creates a degree of income inequality. An average of 65% of each nation’s wealth is held by only 10% of the people—a characteristic of capitalism. The economies of Cuba, China, Vietnam, Russia, and North Korea incorporate characteristics of both socialism and communism. While countries such as Great Britain, France, and Ireland have strong socialist parties, and their governments provide many social support programs, most businesses are privately owned, making them essentially capitalist. The United States, long considered the prototype of capitalism, isn’t even ranked in the top 10 most capitalist countries, according to the conservative think tank Heritage Foundation. The U.S. drops in the Foundation’s Index of Economic Freedom due to its level of government regulation of business and private investment. Indeed, the Preamble of the U.S. Constitution sets one the nation’s goals to be â€Å"promote the general welfare.† In order to accomplish this, the United States employs certain socialist-like social safety net programs, such as Social Security, Medicare, food stamps, and housing assistance. Sources and Further Reference â€Å"Back to Basics: What is Capitalism?† International Monetary Fund (June 2015).Nove, Alec. â€Å".†Socialism New Palgrave Dictionary of Economics, Second Edition (2008).Newport, Frank. â€Å".†The Meaning of ‘Socialism’ to Americans Today Gallup (October 2018).