Employee retention Essay Example | Topics and Well Written Essays - 1750 words

Employee retention - Essay Example One of the first things a company can implement to retain employees is to offer benefits both tangible and intangible. According to the article â€Å"His job: helping employers hold on to their staff; High turnover can be costly. Consultant says its vital to offer respect, good pay, retirement plan† by Kasandra Kyle the most important thing that a potential employer can offer a new employee is good pay, respect and a retirement package . These benefits help make employees comfortable in their current position and will retain an employee sometimes even when another job offer with a more lucrative offer comes around. Another fringe benefit is the flexible work schedule. Although this is not practical in all cases, if it is at all possible it serves as an excellent retention strategy. Offering tangible and intangible benefits are essential, but it is imperative to work diligently to keep specialty trained staffers. The low turnover of maintaining skilled employees offers the benefits of low turnover and positions companies for growth. The author goes on to say that the cost of training specialty staffers can cost the company valuable time, enormous finances and slowed production (Kyle, 2008). Although it is important to offer workplace benefits at your larger companies, it is dire to offer those benefits at a small business. The article, â€Å"Workplace benefits are strategic in small business† states that recent study performed by MetLife’s annual Employee Benefits Trends study shows more than half (55%) of smaller employers, those with fewer than 500 employees say benefits play a very important role in employee retention. However, there is contradictory results as the study goes on to reveal that only 34% of workers at smaller employers say the benefits they receive are a very important reason to remain with their employer, versus 53% at larger firms. In addition, just 37% of employees at smaller corporations say they are

The Application of Operant Conditioning Techniques in a Secondary Classroom Essay Example for Free

The Application of Operant Conditioning Techniques in a Secondary Classroom Essay The Application Of Operant Conditioning Techniques In A Secondary Classroom Background A plethora of Studies have reported the effectiveness of operant conditioning techniques in altering the behavior of children in a number of different situations. There has been many studies in which teacher-supplied consequences have had effects on preschool and elementary school children in a regular classroom, but almost none in the secondary schooling classrooms. The results of these studies were that in smaller classrooms, students’ behavior improved with consequences given by the teacher. McAllister, Stachowiak, Baer, and Conderman now take a look at the effects of these consequences on a larger scale. This study sought to take an entire class of secondary school students and apply teacher-supplied consequences for misbehavior to discover if the behavior of the students improved. Methods The subjects consisted of 51 students ranging in age from 16-19 years, who all had similar I. Q. s and economic backgrounds. The experimental group consisted of 25 students (12 boys and 13 girls), Where as the control group consisted of 26 students (13 boys and 13 girls). Also, The experimental class was 70 minutes long and the control class was 60 minutes long. The teacher was a 23-year-old female who held a bachelors degree in education. She had one year’s experience in teaching secondary level English. The basic design of the experiment was a pretest-posttest control group design combined with the use of a multiple baseline technique in the experimental class. The behaviors chosen to be targeted were Inappropriate talking and turning around due to the fact that these behaviors had a high rate of occurrence. Inappropriate talking was classified as any vocal behavior portrayed by a student without the teacher’s permission. Also, any vocal behavior required that the student raise his or her hand before speaking, unless engaged in a group discussion. Inappropriate turning around was classified as any turning-around behavior in which the student turned more than 90 degrees away from the front of the room. An exception to this was when a student was required to turn around to distribute papers to their classmates as directed by the teacher. The observations were recorded for the experimental class using a sequentially numbered, 70-box table for each behavior. The observations of the control class were recorded using a similar, 60-box table. If either of the target behaviors occurred during any minute interval of time, it was recorded by placing a check mark in the corresponding box for that interval. Any further occurrences of the target behavior during the same time interval were not recorded. Thus, each time interval represented whether or not the behavior had occurred during the time interval opposed to the number of occurrences. A daily quantified measurement of each behavior was obtained by dividing the number of checked time intervals by the total number of intervals in that class period, which gave us a percentage of intervals in which the behavior occurred at least once. The baseline condition lasted for 28 days in which the teacher was asked to behave in her usual manner. The Average reliability for talking behavior was 90. 49% in the experimental class, and 89. 49% in the control class. Average reliability for turning behavior was 94. 27% in the experimental class and 90. 98 in the control class. Also, two aspects of the teacher’s behavior were recorded. The average reliability for teacher reprimand behavior was 92. 78% in the experimental class and 94. 84% in the control class. Average reliability for teacher praise behavior was 98. 85% in the experimental class and 97. 65% in the control class. The first experimental condition began in the experimental class on the 28th day. The teacher was to attempt to disapprove of all instances of inappropriate talking behavior whenever they occurred in a direct and verbal manner. The teacher was also asked not to threaten students with or apply other consequences such as keeping them after class or sending them to the office. In addition to these guidelines, the teacher was also asked to praise the entire class with remarks like â€Å"thank you for being so cooperative today†. The second experimental condition took place after the first one had been in effect in the experimental class for 26 days and had markedly reduced talking behavior. In this condition, the contingent social consequences for talking behavior were continued as well as implementing the same system of consequences for turning behavior. Results Inappropriate talking behavior during the baseline condition in the experimental class and the control class yielded similar results (25. 3% in the experimental class, and 23. 81% in the control class). On day 28 when the first experimental condition was implemented, inappropriate talking behavior immediately reduced. This decrease continued as time went on and finally stabilized at a level below 5%. At the same time, the control class continued to portray its previous level of inappropriate talking behavior. Inappropriate turning behavior during the baseline condition in the experimental class and control class was slowly increasing (15. 13% in the experimental class, and 14. 45% in the control class). On day 54 when the second experimental condition was implemented, the inappropriate turning behavior also began to decrease. This behavior continued to decrease during the remaining days of the study. The number of times the teacher reprimanded students for inappropriate behavior during the baseline period were 25. 76% in the experimental class and 22. 23% in the control class. During the first experimental condition, the teacher disapproved an average of 93. 33% of inappropriate talking behavior. During the second experimental condition, the teacher disapproved an average of 95. 0 % of inappropriate turning behavior. Conclusions The results clearly portray that by the teacher’s actions of praise and disapproval, she was able to reduce the amount of inappropriate talking behavior as well as the amount of inappropriate turning behavior. In reprimanding the students in a more direct manner, using names and calling the students out for misbehaving, the teacher was able to make a deeper impact on the student for his or her actions. Also, in taking away consequences such as staying after class, the teacher removed fear from the tudents and instead implemented proper behavior. The teacher also used praise to decrease the amount of inappropriate behavior of her students. She would say things like â€Å"what a great class today† or â€Å"you guys were on your best behavior today† to make the students feel good about being on their best behavior.

Pakistan Commercial Banks Risk Management

Pakistan Commercial Banks Risk Management ABSTRACT The agreement on international banking regulations dealing with how the banks handle the risk, the Basel Accord mainly focuses on the credit risk; according the Basel accord the bank assets divided into five main categories according to how they are risky. The five main categories are as (1) is assets without risk means 0% risk weighted, second one is 10% risk weighted, 3rd is 20% weighted, 4th is 50% weighted and last one is 100% weighted. When the banks perform international transactions they are required according the Basel Accord to hold assets minimum 8% aggregated risk according the Basel 1. The Basel 1 was written in 1988 by the Basel committee on banking supervision. All Banks of G-10 countries have try to implement this accord since the early 1990s. Now a days it is considered largely outdated and Basel committee working on Basel 1 to changing process in the shape of Basel II. This is also called Basel I accord. The document Basel I Capital Accord mainly designs to evaluate the capital in relation with the credit risk, and also the risk that can be a cause of losses in which the risk will occur if the party fail or unable to fulfill the obligations. It is mainly focus on the risk increasing modeling research process that is improvement toward the risk increasing research mode; however, it is over simplified calculations, and also classifications that have been simultaneously called for its disappearance, but the improvement in the shape of the Basel II Capital Accord and also other further agreements that are the sign for the continuously refinement for the risk and capital in the banking sector. Nevertheless, the document Basel I accords, will remain the first international instrument that evaluate the importance of risk with the relationship to capital, and also will remain as a milestone in the banking sector like finance and banking history. This study is mainly related to the risk management practices being followed by the commercial Banks in Pakistan. The questionnaire is used as a main tool to collect primary data and check the extent to which the risk management practices are being carried upon by the commercial banks in Pakistan. The six important aspects of risk management process are categorized as one dependent and five explanatory variables. This study aims to investigate the awareness about risk management practices within the banking sector of Pakistan. This study is comprised of data collected through both, primary as well as secondary sources. The purpose of using primary source data is to check the extent to which different risk management practices have been followed by the commercial banks in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements under one macro statement. It includes Risk Management Practices (RMP) as the dependent varia ble, and different aspects of risk management as the independent or explanatory variables. Whereas, the objective to use secondary data is to link the risk weighted Capital Adequacy Ratio to the different financial indicators of the commercial banks that are used to measure their soundness. CHAPTER 2 LITERATURE REVIEW Risk management practices by the Commercial Banks Within the last few years, a number of studies have provided the discipline into the practice of risk management within the corporate and banking sector. An insight of related studies is as follows: Amran, et al. (2009), this article mention the possible availability of risk exposà © in the annual reports of the Malaysian companies. The study was aimed to empirically test the characteristics of the sampled companies. And also the level of risk faced by Malaysian companies with the disclosure made was also assessed and compared. The findings of the research revealed that the strategic risk came on the top, followed by the operations and empowerment risks being disclosed by the selected companies. The regression analysis proved significantly that size of the companies did matter. The stakeholder theory explains well this finding by stating that As company grows bigger, it will have a large pool of stakeholders, who would be interested in knowing the affairs of the company. The extent of risk disclosure was also found to be influenced by the nature of industry. As explored within this study, infrastructure and technology industries influenced the companies to have more risk inform ation disclosed. Hassan, A. (2009), made a study Risk Management Practices of Islamic Banks of Brunei Darussalam to assess the degree to which the Islamic banks in Brunei Darussalam implemented risk management practices and carried them out thoroughly by using different techniques to deal with various kinds of risks. The results of the study showed that, like the conventional banking system, Islamic banking was also subjected to a variety of risks due to the unique range of offered products in addition to conventional products. The results showed that there was a remarkable understanding of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the Foreign exchange risk as well as credit risk and also operating risk. For the analysis regression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the most uncontrollable variables and the Islamic banks in Brunei needed to give more attention to those variables to make their Risk Management Practices more effective by understanding the true application of Basel-II Accord to improve the efficiency of Islamic Bank’s risk management systems. Al-Tamimi (2008) studied the relationship among the readiness of implementing Basel II Accord and resources needed for its implementation in UAE banks. Results of the research revealed that the banks in UAE were aware of the benefits, impact and challenges associated in the implementation of Basel II Accord. However, the research did not confirm any positive relationship between UAE banks readiness for the implementation of Basel II and impact of the implementation. The relationship between readiness and anticipated cost of implementation was also not confirmed. No significant difference was found in the level of Basel II Accord’s preparation between the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II based on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord. Al-Tamimi and Al- Mazrooei (2007) provide the comprehensive study relating of Bank’s Risk Management of UAE National and Foreign Banks. The outcome of this research is to find out that there are three most important types of risks facing the UAE commercial banks that were foreign exchange risk, 2nd one followed by credit risk and 3rd one is operating risk. And the result also found that the bank of UAE were also efficiently handle the risk; but the variables like as the risk identification, risk assessment and also analysis proved that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a huge difference if we compare the UAE National banks and foreign Banks in the practicing the risk assessment and risk analysis as well as risk monitoring and risk controlling process. Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk related to bank failures is the paramount concern of bank regulations. They argued that in order to assess the default risk of a bank, it is important considering its financing decisions as an endogenous dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. Major findings suggested that the dynamic endogenous financing decision introduced an important self-regulation mechanism. Basel Core Principles and Bank Risk: Does Compliance Matter? The recent financial crisis has sparked widespread calls for reforms of regulation and supervision. The initial reaction to the crisis was one of disbelief: how could such extensive financial distress emerge in countries where the supervision of financial risk had been thought to be the best in the world? Indeed, the regulatory standards and protocols of the advanced countries at the center of the financial storm were being emulated worldwide through the progressive adoption of the international Basel capital standards and the Basel Core Principles for Effective Bank Supervision (BCPs). The crisis exposed significant weaknesses in the financial system regulatory and supervisory framework worldwide, and has spawned a growing debate about the role these weaknesses may have played in causing and propagating the crisis. As a result, reform of regulation and supervision is a top priority for policymakers, and many countries are working to upgrade their frameworks. But what should the reforms focus on? What constitutes good regulation and supervision? Which elements are most important for ensuring bank soundness? What should be the scope of regulation? To date, the best practices in supervision and regulation have been embodied by the BCPs. These principles were issued in 1997 by the Basel Committee on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since then, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a global standard for bank regulators. Importantly, since 1999, the IMF and the World Bank have conducted evaluations of countries’ compliance with these principles, mainly within their joint Financial Sector Assessment program (FSAP). The assessments are conducted according to a standardized methodology developed by the Basel Committee and therefore provide a unique source of information about the quality of supervision and regulation around the world. Hence the international community has made significant investments in developing these principles, encouraging their wide-spread adoption, and assessing progress with their compliance. In light of the recent crisis and the resulting skepticism about the effectiveness of existing approaches to regulation and supervision, it is natural to ask if compliance with the global standard of good regulation is associated with bank soundness. Specifically, they test whether better compliance with BCPs is associated with safer banks. They also look at whether compliance with different elements of the BCP framework is more closely associated with bank soundness to identify if there are specific areas which would help prioritize reform efforts to improve supervision. The paper extends their previous work (Demirgà ¼Ãƒ §-Kunt, Detragiache and Tressel, 2008: henceforth DDT), in which they showed that banks receive more favorable financial strength ratings from Moody’s in countries with better compliance with BCPs related to information provision, while compliance with other principles does not affect ratings significantly. The policy message from this study was that countries should give priority to strengthening regulation and regulation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. Using rating information to proxy bank risk significantly limited the sample size in that study, making it necessary to exclude many smaller banks and many banks from lower income countries. Furthermore, after the recent crisis, the credibility of credit ratings as indicators of bank risk has also diminished, questioning the merit of using these ratings in the analysis. In this paper, they explore whether BCP compliance affects bank soundness, but instead of using ratings they capture bank soundness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can construct Z-scores using just accounting information, and because assessment data for additional countries have also become available, they can extend the sample size considerably relative to our earlier study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries analyzed in DDT). This is not just a simple increase in sample size: the sample of rated banks was not a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy point of view, they would like to investigate the effect of BCP compliance on all types of banks operating in different country circumstan ces, rather than a select subgroup. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank soundness varies across different types of banks. All in all, they do not find support for the hypothesis that better compliance with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional quality, and bank characteristics. They also fail to find a significant relationship when they consider different samples, such a sample of rated banks only, a sample including only commercial banks, and samples including only the largest financial institutions. In an additional test, they calculate aggregate Z-scores at the country level to try to capture the stability of the system as a while rather than that of individual banks, but also this measure of soundness is not significantly related to overall BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which refer to separate areas of prudential supervision and regulation, they continue to find no evidence that good compliance is related to im proved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and regulate market structure are associated with riskier banks. While these results cast doubts on whether international efforts to improve financial regulation and supervision should continue to place a strong emphasis on BCPs, a number of caveats are in order. First, insignificant results may simply indicate that accounting-based measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also reflect low quality in the assessment of BCP compliance, especially in countries where laws and regulations on the books may carry little weight. It might be also argued that assessments are not comparable across countries, despite the best efforts of expert supervisors and internal reviewing teams at the IMF and the World Bank to ensure a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not reflect reality or are not comparable across countries, then at a minimum they should lead us to question the value of these assessments in ensuring that supervision measures up to global standards. Review of related literature of this paper is as follows: Defining good regulatory and supervisory practices is a difficult and complicated task. Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to compile and analyze an extensive database on banking sector laws and regulations using various surveys of regulators around the world, and to study the relationship between alternative regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, comprehensive and timely information) and strengthen incentives for greater market monitoring (for example by limiting deposit insurance) improve bank performance and stability. In contrast, boosting official supervisory oversight and disciplinary powers and tightening capital standards does not lead to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or lower banking system fragility. They interpret their findings as a challenge to the Basel Committee’s influential approach to bank regulation which heavily emphasizes ca pital and official supervision. An important limitation of this type of survey is that it mainly captures rules and regulations that are on the books rather than actual implementation. IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors’ experience and the regulatory culture they are most familiar with. Nevertheless, although it is difficult to eliminate subjectivity completely, assessments are based on a standardized methodology and are carried out by experienced international assessors with broad c ountry experience. Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levine’s survey data and BCP assessments. They find that regulation and supervision in high-income countries is generally of higher quality than in lower income countries. They also note that the correlation between survey data and BCP data tend to be low, always less than 50 percent and in many cases in the 20-30 percent range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance. Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an overall index of BCP compliance and two indicators of bank soundness: nonperforming loans (NPLs) and loan spreads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) extends the set of countries and finds that better BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which encompasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. Better regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they rely on the Z-score to measure bank soundness. While the Z-score has its limitations, they believe it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are affected by a variety of forces other than fragility, such as market structure, differences in risk-free interest rates and operating costs, and varying capital regulation. Thus, cross-country comparability is a serious issue. In contrast with ratings, Z-scores do not rely on the subjective judgment of rating agencies’ analysts. Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher, indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance index is positive but not significant. If they exclude Japanese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and the coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, perhaps because of the lingering effects of Japan’s prolonged banking crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law index are significant (with the expected coefficients), while GDP per capita is not (though the coefficient remains positive). Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance index remains insignificantly different from zero also in the sample without Japanese banks. The same is true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the sovereign rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness changes if they alter the sample composition to include various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results refer to the sample excluding Japan, so that th e overrepresentation of Japanese banks does not distort the results. The first exercise is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs. If they restrict the sample to commercial banks only, thereby losing about 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moody’s, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance seems to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples: the first includes the largest 10 percent of banks within each country and the second includes the largest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample. The BCP compliance index is the weighted sum of compliance scores for several individual chapters of the Core Principles. Could it be that, even though overall compliance does not seem to matter for bank soundness, some aspects of the Core Principles might be relevant? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different components. In fact, in our previous study of Moody’s ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors. They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard grouping of principles used by the Basel Committee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the robustness of the results. There is only one component of the compliance index that has a fairly robust relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors’ powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all th e samples except those including only the largest banks. This finding supports the contention that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001, 2004, 2006). So far, they have considered individual bank risk. In principle, bank supervision and regulation should be primarily concerned with systemic risk, rather than individual bank risk, although in practice it is not always easy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data; since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the aggregate equivalent of the individual bank Z-score. More specifically, they aggregate profits and equity of all the banks in the country (for which they have data), they compute the standard d eviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. They then regress this measure on the BCP compliance score and a number of macroeconomic control variables. Their measure of systemic soundness is correlated with the macro variables as one might expect: higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. Once again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. Though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification. Remarks While the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are hard at work to upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for effective banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance wit h a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with riskier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the difficulty of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the current emphasis on these principles as key to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs. Pakistan Commercial Banks Risk Management Pakistan Commercial Banks Risk Management ABSTRACT The agreement on international banking regulations dealing with how the banks handle the risk, the Basel Accord mainly focuses on the credit risk; according the Basel accord the bank assets divided into five main categories according to how they are risky. The five main categories are as (1) is assets without risk means 0% risk weighted, second one is 10% risk weighted, 3rd is 20% weighted, 4th is 50% weighted and last one is 100% weighted. When the banks perform international transactions they are required according the Basel Accord to hold assets minimum 8% aggregated risk according the Basel 1. The Basel 1 was written in 1988 by the Basel committee on banking supervision. All Banks of G-10 countries have try to implement this accord since the early 1990s. Now a days it is considered largely outdated and Basel committee working on Basel 1 to changing process in the shape of Basel II. This is also called Basel I accord. The document Basel I Capital Accord mainly designs to evaluate the capital in relation with the credit risk, and also the risk that can be a cause of losses in which the risk will occur if the party fail or unable to fulfill the obligations. It is mainly focus on the risk increasing modeling research process that is improvement toward the risk increasing research mode; however, it is over simplified calculations, and also classifications that have been simultaneously called for its disappearance, but the improvement in the shape of the Basel II Capital Accord and also other further agreements that are the sign for the continuously refinement for the risk and capital in the banking sector. Nevertheless, the document Basel I accords, will remain the first international instrument that evaluate the importance of risk with the relationship to capital, and also will remain as a milestone in the banking sector like finance and banking history. This study is mainly related to the risk management practices being followed by the commercial Banks in Pakistan. The questionnaire is used as a main tool to collect primary data and check the extent to which the risk management practices are being carried upon by the commercial banks in Pakistan. The six important aspects of risk management process are categorized as one dependent and five explanatory variables. This study aims to investigate the awareness about risk management practices within the banking sector of Pakistan. This study is comprised of data collected through both, primary as well as secondary sources. The purpose of using primary source data is to check the extent to which different risk management practices have been followed by the commercial banks in Pakistan. Primary data is collected through the use of a questionnaire. The questionnaire comprises a number of statements under one macro statement. It includes Risk Management Practices (RMP) as the dependent varia ble, and different aspects of risk management as the independent or explanatory variables. Whereas, the objective to use secondary data is to link the risk weighted Capital Adequacy Ratio to the different financial indicators of the commercial banks that are used to measure their soundness. CHAPTER 2 LITERATURE REVIEW Risk management practices by the Commercial Banks Within the last few years, a number of studies have provided the discipline into the practice of risk management within the corporate and banking sector. An insight of related studies is as follows: Amran, et al. (2009), this article mention the possible availability of risk exposà © in the annual reports of the Malaysian companies. The study was aimed to empirically test the characteristics of the sampled companies. And also the level of risk faced by Malaysian companies with the disclosure made was also assessed and compared. The findings of the research revealed that the strategic risk came on the top, followed by the operations and empowerment risks being disclosed by the selected companies. The regression analysis proved significantly that size of the companies did matter. The stakeholder theory explains well this finding by stating that As company grows bigger, it will have a large pool of stakeholders, who would be interested in knowing the affairs of the company. The extent of risk disclosure was also found to be influenced by the nature of industry. As explored within this study, infrastructure and technology industries influenced the companies to have more risk inform ation disclosed. Hassan, A. (2009), made a study Risk Management Practices of Islamic Banks of Brunei Darussalam to assess the degree to which the Islamic banks in Brunei Darussalam implemented risk management practices and carried them out thoroughly by using different techniques to deal with various kinds of risks. The results of the study showed that, like the conventional banking system, Islamic banking was also subjected to a variety of risks due to the unique range of offered products in addition to conventional products. The results showed that there was a remarkable understanding of risk and risk management by the staff working in the Islamic Banks of Brunei Darussalam, which showed their ability to pave their way towards successful risk management. The major risks that were faced by Brunei banks that was the Foreign exchange risk as well as credit risk and also operating risk. For the analysis regression model was used to explain the results which shown that the Risk Identification, or Risk Assessment and Analysis were also the most uncontrollable variables and the Islamic banks in Brunei needed to give more attention to those variables to make their Risk Management Practices more effective by understanding the true application of Basel-II Accord to improve the efficiency of Islamic Bank’s risk management systems. Al-Tamimi (2008) studied the relationship among the readiness of implementing Basel II Accord and resources needed for its implementation in UAE banks. Results of the research revealed that the banks in UAE were aware of the benefits, impact and challenges associated in the implementation of Basel II Accord. However, the research did not confirm any positive relationship between UAE banks readiness for the implementation of Basel II and impact of the implementation. The relationship between readiness and anticipated cost of implementation was also not confirmed. No significant difference was found in the level of Basel II Accord’s preparation between the UAE national and foreign banks. It was concluded that there was a significant difference in the level of the UAE banks Basel II based on employees education level. The results supported the importance of education level needed for the implementation of Basel II Accord. Al-Tamimi and Al- Mazrooei (2007) provide the comprehensive study relating of Bank’s Risk Management of UAE National and Foreign Banks. The outcome of this research is to find out that there are three most important types of risks facing the UAE commercial banks that were foreign exchange risk, 2nd one followed by credit risk and 3rd one is operating risk. And the result also found that the bank of UAE were also efficiently handle the risk; but the variables like as the risk identification, risk assessment and also analysis proved that the banks are more efficient in risk management process. Finally, the outcome of the result showed that there was a huge difference if we compare the UAE National banks and foreign Banks in the practicing the risk assessment and risk analysis as well as risk monitoring and risk controlling process. Koziol and Lawrenz (2008) provided a study in which they assessed the risk of bank failures. They said that assessing the risk related to bank failures is the paramount concern of bank regulations. They argued that in order to assess the default risk of a bank, it is important considering its financing decisions as an endogenous dynamic process. The research study provided a continuous-time model, where banks chose the deposit volume in order to trade off the benefits of earning deposit premiums against the costs that would occur at future capital structure adjustments. Major findings suggested that the dynamic endogenous financing decision introduced an important self-regulation mechanism. Basel Core Principles and Bank Risk: Does Compliance Matter? The recent financial crisis has sparked widespread calls for reforms of regulation and supervision. The initial reaction to the crisis was one of disbelief: how could such extensive financial distress emerge in countries where the supervision of financial risk had been thought to be the best in the world? Indeed, the regulatory standards and protocols of the advanced countries at the center of the financial storm were being emulated worldwide through the progressive adoption of the international Basel capital standards and the Basel Core Principles for Effective Bank Supervision (BCPs). The crisis exposed significant weaknesses in the financial system regulatory and supervisory framework worldwide, and has spawned a growing debate about the role these weaknesses may have played in causing and propagating the crisis. As a result, reform of regulation and supervision is a top priority for policymakers, and many countries are working to upgrade their frameworks. But what should the reforms focus on? What constitutes good regulation and supervision? Which elements are most important for ensuring bank soundness? What should be the scope of regulation? To date, the best practices in supervision and regulation have been embodied by the BCPs. These principles were issued in 1997 by the Basel Committee on Bank Supervision, comprising representatives from bank supervisory agencies from advanced countries. Since then, most countries in the world have stated their intent to adopt and comply with the BCPs, making them a global standard for bank regulators. Importantly, since 1999, the IMF and the World Bank have conducted evaluations of countries’ compliance with these principles, mainly within their joint Financial Sector Assessment program (FSAP). The assessments are conducted according to a standardized methodology developed by the Basel Committee and therefore provide a unique source of information about the quality of supervision and regulation around the world. Hence the international community has made significant investments in developing these principles, encouraging their wide-spread adoption, and assessing progress with their compliance. In light of the recent crisis and the resulting skepticism about the effectiveness of existing approaches to regulation and supervision, it is natural to ask if compliance with the global standard of good regulation is associated with bank soundness. Specifically, they test whether better compliance with BCPs is associated with safer banks. They also look at whether compliance with different elements of the BCP framework is more closely associated with bank soundness to identify if there are specific areas which would help prioritize reform efforts to improve supervision. The paper extends their previous work (Demirgà ¼Ãƒ §-Kunt, Detragiache and Tressel, 2008: henceforth DDT), in which they showed that banks receive more favorable financial strength ratings from Moody’s in countries with better compliance with BCPs related to information provision, while compliance with other principles does not affect ratings significantly. The policy message from this study was that countries should give priority to strengthening regulation and regulation in the area of information provision (both to the market and to supervisors) relative to other areas covered by the core principles. Using rating information to proxy bank risk significantly limited the sample size in that study, making it necessary to exclude many smaller banks and many banks from lower income countries. Furthermore, after the recent crisis, the credibility of credit ratings as indicators of bank risk has also diminished, questioning the merit of using these ratings in the analysis. In this paper, they explore whether BCP compliance affects bank soundness, but instead of using ratings they capture bank soundness using the Z-score, which is the number of standard deviations by which bank returns have to fall to wipe out bank equity (Boyd and Runkle, 1993). Because they can construct Z-scores using just accounting information, and because assessment data for additional countries have also become available, they can extend the sample size considerably relative to our earlier study, to over 3,000 banks from 86 countries (compared to 200 banks from 37 countries analyzed in DDT). This is not just a simple increase in sample size: the sample of rated banks was not a representative sample, because rated banks tend to be larger, more internationally active, and more likely to adhere to international accounting standards. From a policy point of view, they would like to investigate the effect of BCP compliance on all types of banks operating in different country circumstan ces, rather than a select subgroup. In this study, the richer sample allows us to explore whether the relationship between BCPs and bank soundness varies across different types of banks. All in all, they do not find support for the hypothesis that better compliance with BCPs results in sounder banks as measured by Z-scores. This result holds after controlling for the macroeconomic environment, institutional quality, and bank characteristics. They also fail to find a significant relationship when they consider different samples, such a sample of rated banks only, a sample including only commercial banks, and samples including only the largest financial institutions. In an additional test, they calculate aggregate Z-scores at the country level to try to capture the stability of the system as a while rather than that of individual banks, but also this measure of soundness is not significantly related to overall BCP compliance. When they explore the relationship between soundness and compliance with specific groups of principles, which refer to separate areas of prudential supervision and regulation, they continue to find no evidence that good compliance is related to im proved soundness. If anything, they find that stronger compliance with principles related to the power of supervisors to license banks and regulate market structure are associated with riskier banks. While these results cast doubts on whether international efforts to improve financial regulation and supervision should continue to place a strong emphasis on BCPs, a number of caveats are in order. First, insignificant results may simply indicate that accounting-based measures, such as Zscores, do not adequately capture bank soundness, especially for small banks and in low income countries, where accounting standards tend to be poor. They may also reflect low quality in the assessment of BCP compliance, especially in countries where laws and regulations on the books may carry little weight. It might be also argued that assessments are not comparable across countries, despite the best efforts of expert supervisors and internal reviewing teams at the IMF and the World Bank to ensure a uniform methodology and uniform standards. If their negative results arise because compliance assessments do not reflect reality or are not comparable across countries, then at a minimum they should lead us to question the value of these assessments in ensuring that supervision measures up to global standards. Review of related literature of this paper is as follows: Defining good regulatory and supervisory practices is a difficult and complicated task. Barth, Caprio, and Levine (2001, 2004, and 2006) were the first to compile and analyze an extensive database on banking sector laws and regulations using various surveys of regulators around the world, and to study the relationship between alternative regulatory strategies and outcomes. This research finds that regulatory approaches that facilitate private sector monitoring of banks (such as disclosure of reliable, comprehensive and timely information) and strengthen incentives for greater market monitoring (for example by limiting deposit insurance) improve bank performance and stability. In contrast, boosting official supervisory oversight and disciplinary powers and tightening capital standards does not lead to banking sector development, nor does it improve bank efficiency, reduce corruption in lending, or lower banking system fragility. They interpret their findings as a challenge to the Basel Committee’s influential approach to bank regulation which heavily emphasizes ca pital and official supervision. An important limitation of this type of survey is that it mainly captures rules and regulations that are on the books rather than actual implementation. IMF and the World Bank financial sector assessments have often found implementation to be lacking, particularly in low income countries, so that cross-country comparisons of what is on the books may hide substantial variation in the quality of supervision and regulation. BCP assessments have the advantage of taking into account implementation. Of course, assessing how rules and regulations are implemented and enforced in practice is not an exact science, and individual assessments may be influenced by factors such as the assessors’ experience and the regulatory culture they are most familiar with. Nevertheless, although it is difficult to eliminate subjectivity completely, assessments are based on a standardized methodology and are carried out by experienced international assessors with broad c ountry experience. Cihak and Tieman (2008) analyze the quality of financial sector regulation and supervision using both Barth, Caprio and Levine’s survey data and BCP assessments. They find that regulation and supervision in high-income countries is generally of higher quality than in lower income countries. They also note that the correlation between survey data and BCP data tend to be low, always less than 50 percent and in many cases in the 20-30 percent range, suggesting that taking into account implementation may indeed make an important difference. A number of papers also use BCP assessments to study bank regulation and performance. Sundararajan, Marston, and Basu (2001) use a sample of 25 countries to examine the relationship between an overall index of BCP compliance and two indicators of bank soundness: nonperforming loans (NPLs) and loan spreads. They find BCP compliance not to be a significant determinant of these measures of soundness. Podpiera (2004) extends the set of countries and finds that better BCP compliance lowers NPLs. Das et al. (2005) relates bank soundness to a broader concept of regulatory governance, which encompasses compliance with the BCPs as well as compliance with standards and codes for monetary and financial policies. Better regulatory governance is found to be associated with sounder banks, particularly in countries with better institutions. In this paper, as already discussed they rely on the Z-score to measure bank soundness. While the Z-score has its limitations, they believe it is an improvement over measures used in previous studies, namely NPLs, loan spreads, interest margins, and capital adequacy. Because different countries have different reporting rules, NPLs are notoriously difficult to compare across countries. On the other hand, loan spreads or interest margins and capitalization are affected by a variety of forces other than fragility, such as market structure, differences in risk-free interest rates and operating costs, and varying capital regulation. Thus, cross-country comparability is a serious issue. In contrast with ratings, Z-scores do not rely on the subjective judgment of rating agencies’ analysts. Results from the baseline regression, relating bank soundness measured by the Z-score to the degree of compliance with the BCPs. In the sample including all countries, the Zscore is higher, indicating a sounder bank, for banks with lower operating costs in countries with higher GDP per capita. Also, non-commercial banks tend to have higher Z-scores, while the other control variables are not significant. The coefficient of the BCP compliance index is positive but not significant. If they exclude Japanese banks, which account for over 20 percent of the sample, the fit of the model improves markedly (the R-squared increases from 10 percent to 19 percent) and the coefficients of many regressors change substantially.12 This suggests that the variables explaining the Z-score of Japanese banks may be somewhat different than for the rest of the sample, perhaps because of the lingering effects of Japan’s prolonged banking crisis on bank balance sheets. For example, in the sample excluding Japan inflation and the rule of law index are significant (with the expected coefficients), while GDP per capita is not (though the coefficient remains positive). Also, banks with a higher ratio of net loans to assets have higher Z-scores, perhaps because Basel regulation mandating minimum levels of risk-adjustment capital forces these banks to hold more equity. Also, in the sample excluding Japan larger banks have lower Z-scores, likely because they tend to hold less capital than smaller banks. Despite these differences, the coefficient of the BCP compliance index remains insignificantly different from zero also in the sample without Japanese banks. The same is true when they add to the regression additional macro controls, such as exchange rate appreciation, private credit, or the sovereign rating. In the regressions, they explore how the relationship between BCP compliance and bank soundness changes if they alter the sample composition to include various categories of financial institutions to explore whether BCP compliance may affect soundness for alternative types of banks. All these results refer to the sample excluding Japan, so that th e overrepresentation of Japanese banks does not distort the results. The first exercise is to examine the widest sample possible, i.e. one that includes investment banks/securities houses, medium and long-term credit banks, nonbank credit institutions, and specialized government credit institutions. These are institutions that in most countries are unlikely to fall under the perimeter of bank regulation and supervision, so they have excluded them from the baseline sample. When they include them, the sample size grows by 25 percent, but the main regression results are unchanged. In particular, bank soundness is not significantly affected by compliance with the BCPs. If they restrict the sample to commercial banks only, thereby losing about 300 banks compared to the baseline sample, once again they find that regression results remain very close to the baseline. When they focus only on banks rated by Moody’s, as in our earlier work, the sample shrinks considerably (to just over 300 banks), and the coefficient of the BCP compliance index becomes positive and significant, albeit only at the 10 percent confidence level. Thus, BCP compliance seems to have some positive effect on the soundness of this specific group of banks. To explore this issue further, they ask whether this result is driven by the fact that rated banks are larger banks. To do so, they consider two alternative samples: the first includes the largest 10 percent of banks within each country and the second includes the largest 20 percent of banks in the entire sample. In both cases, the BCP compliance index has an insignificant coefficient, as in the baseline sample. The BCP compliance index is the weighted sum of compliance scores for several individual chapters of the Core Principles. Could it be that, even though overall compliance does not seem to matter for bank soundness, some aspects of the Core Principles might be relevant? In fact, it may be possible that the overall index is not significant because of offsetting effects of its different components. In fact, in our previous study of Moody’s ratings, they found that, although overall compliance did not seem to matter, higher financial strength ratings were associated with better compliance with principles related to information provision to supervisors. They address this question by re-running the baseline regressions breaking down the compliance index into seven components, based on the standard grouping of principles used by the Basel Committee. An important caveat is that compliance scores are fairly strongly correlated, which may make it difficult to disentangle the effect of one set of principles from the others. They replicate the regression for different samples of banks to investigate the robustness of the results. There is only one component of the compliance index that has a fairly robust relationship with bank Z-scores, and that is compliance with Chapter 2 of the BCP, i.e. principles having to do with supervisors’ powers to regulate bank licensing and structure. Interestingly, this component of the index is negatively correlated with bank soundness, so that banks in countries were regulators have better defined powers to give out licenses and regulate bank activities tend to be riskier. This result holds in all th e samples except those including only the largest banks. This finding supports the contention that supervisory systems that tend to empower supervisors do not work well (Barth, Caprio, and Levine, 2001, 2004, 2006). So far, they have considered individual bank risk. In principle, bank supervision and regulation should be primarily concerned with systemic risk, rather than individual bank risk, although in practice it is not always easy to make this distinction. Could it be that BCP compliance, while not relevant to individual bank soundness, is important to ensure the stability of system as a whole? To address this question, it would be ideal to test whether BCP compliance reduces the probability of a financial crisis. However, since crises are rare events, this type of test requires a panel of data; since they have BCP compliance assessments only at a point in time, they are restricted to cross-sectional data. Nonetheless, to explore this question they compute a rough measure of systemic soundness as the aggregate equivalent of the individual bank Z-score. More specifically, they aggregate profits and equity of all the banks in the country (for which they have data), they compute the standard d eviation of aggregate profits, and then they compute an aggregate Z-score. This measure tells us by how many standard deviations banking system profits must fall to exhaust all the capital in the banking system. They then regress this measure on the BCP compliance score and a number of macroeconomic control variables. Their measure of systemic soundness is correlated with the macro variables as one might expect: higher growth, low inflation, low inflation volatility, appreciation of the currency, favorable sovereign ratings are all significantly associated with higher values of the aggregate Z-score. Once again, though, the BCP compliance index does not seem to be a significant determinant of banking system soundness. Though it is positive, the coefficient of the BCP index is small and not statistically significant in any specification. Remarks While the causes and consequences of the recent financial crisis will continue to be debated for years to come, there is emerging consensus that the crisis has revealed significant weaknesses in the regulatory and supervisory system. Resulting calls for reform have led to numerous proposals and policymakers in many countries are hard at work to upgrade their regulatory frameworks. This paper seeks to inform the on-going reform process by providing an analysis of how existing regulations and their application are associated with bank soundness. Specifically, they study whether compliance with Basel Core Principles for effective banking supervision (BCPs) is associated with lower bank risk, as measured Z-scores. They find no evidence of a robust statistical relationship linking better compliance with BCPs and improved bank soundness. The analysis of aggregate Z-scores to capture systemic stability issues yields similarly insignificant results. If anything, they find that compliance wit h a specific group of principles, those giving supervisors powers to regulate bank licensing and structure is associated with riskier banks, potentially suggesting that such powers may be misused in practice. While our results may reflect the difficulty of capturing bank risk using accounting measures, or the inability of assessors to carry out evaluations that are comparable across countries, nevertheless they raise questions about the relevance of the Basel Core Principles, the current emphasis on these principles as key to effective supervision, and the wisdom of carrying out costly periodic compliance reviews of BCP implementation in the IMF/World Bank Financial Sector Assessment Programs.

Spanish Food Essay -- Food Culture Cultural Research Papers

Spain, the third largest country in Europe, has a strong history and diverse culture dating back to when the Iberians first inhabited the land. The country lies between the Mediterranean Sea and Atlantic Ocean and the land ranges from mountains to meadows. Over hundreds of centuries, many different civilizations have inhabited the land influencing the people there today. From the Visigoths and Celts to the Romans of the Middle Ages, Spain has received a rich history and background. One of the strongest of its cultures is the food. All of these cultures brought a particular type of food and combined and blended with the food that exists there today. Spain is very popular for olives, vineyards, and citrus fruit. Another well-liked food is garlic, including varieties of peppers and spices. Once spice specifically—golden saffron—is essential in many recipes, including the Spanish Paella. There are many distinguished Spanish foods that encompass the daily life and culture of the country. The tapa is a way to sample a variety of Spanish foods. This method of eating is the cornerstone of Spanish cuisine. A tapa is a small dish of food, similar to an appetizer in the United States. Mainly in bars, they are served throughout the day. No single food makes up a tapa; it can be seafood, vegetables, or meat. Tapas normally are eaten primarily at two times of the day. The first is at or around 1:00pm for an early-afternoon snack. Normally, tapas are served prior to a large afternoon ...

Marketing Paper Heineken Essay

Heineken is a Dutch beer brewery company, which was founded in 1863, when Gerard Adriaan Heineken bought a small brewery in Amsterdam called â€Å"The Haystack†. In 1900 the company came up with it nowadays famous five-point star. In 1914 the company began expanding, starting with the production of their own bottled beers. By 1914 the company was one of the most loved import beers in the United States. From around 1948 Heineken began promoting their beer on a large scale. With slogans as â€Å"Heerlijk helder Heineken† (meaning: Delicious clear Heineken) and â€Å"Good people bring home Heineken†. In 1968 Heineken comes up with an innovation that will be used for over 30 years, the barrel with an attached draft pipe. This way an innkeeper only has to connect the barrel from the outside. In the same year Heineken also takes over their rival company Amstel. However, Amstel will keep its own identity and they will both follow different strategies. In the early 1980’s Heineken is available in 145 countries around the world. After the fall of the Wall in 1989, Heineken will even expand further into Eastern Europe. For instance, Heineken acquires Brau Beteiligungs A.G. (BRAG), in 2003. Until now, that is still the largest acquisition in Heineken’s history. In 2005 Heineken comes up with an innovative system that would take over the markets once more: The portable Heineken Draught keg. In 2010 Heineken is active in 170 countries and still trying to expand. They have 120 breweries globally, and employ 54.000 people. In the 120 breweries Heineken owns, Heineken brews more than 200 different kinds of beers and ciders, Heineken Premium beer being the most famous one. In Heineken’s Annual Report of 2009 Heineken has stated that 18 percent net growth in net profit. They reported revenue of â‚ ¬14.701 million; their net profit was â‚ ¬1.055 million. Their revenue of â‚ ¬14.701 million came from a consolidated beer volume of around 125 million hectoliters.[1] Heineken N.V. and Heineken Holding N.V. Stock exchange and management scheme Heineken N.V. and Heineken Holding N.V. are both represented on the Stock exchange list. Heineken Holding holds 50.005 % interest in Heineken N.V. FEMSA holds a 9.245% interest in Heineken N.V. The free float interest in Heineken N.V. is 40.75%. L’arche Green N.V., is owned by the Heineken family for 88.75% and by Greenfee B.V., which owns the remaining 11.25%. L’arche Green N.V. holds a 50.075% interest in Heineken Holding N.V. FEMSA holds a 14.94% interest in Heineken Holding N.V. Free float interest in Heineken Holding N.V. represents 34.94%.[2] We have put a stock exchange and management scheme in Appendix A. Products, Geographical Markets and Market Positions As Heineken brews around 200 different kinds of beers and ciders, we will first state a couple of recognizable brand names. However after that, we will focus on the Heineken Premium Pilsner, or Heineken Premium segment. We will differentiate on the premium segment because otherwise our paper will become to elaborate. Products Heineken most famous brand is Heineken Premium Beer. Below I will mention other brand names that Heineken brews in their breweries. I chose to name the products they brew in Western Europe; this is due to the fact that Heineken is Europe’s largest and leading beer brewer. In Europe the most brewed beers and ciders that Heineken brews are: – Heineken – Amstel – Desperados – Gà ¶sser – Strongbow – Edelweiss For a total overview of all the beers that Heineken brews in the worlds, you can visit http://www.heinekeninternational.com/products_brands_brands.aspx For the relevance of this paper, it is not necessary to name all these brands. Geographical Markets Below you will find a table with the geographical distribution of consolidated beer volume, this is off al of the beers and ciders Heineken brews in the world. |In thousands of hectolitres[3] |2010 |% | |Western Europe |45,394 |31.1 | |Central and Eastern Europe |42,237 |29.0 | |Africa and the MIddle East |19,070 |13.1 | |The Americas |37,843 |25.9 | |Asia Pacific |1,328 |0.9 | |Consolidated beer volume |145,872 |100 | The premium segment is listed below. |Segment |Volume |Percentage | |Western Europe |7,600 |29,3% | |Central and Eastern Europe |2,800 |10,8% | |Africa and the Middle East |2,100 |8,2% | |North and South America |9,000 |34,7% | |Asia Pacific |4,400 |17,0% | |Total |25,900 |100% | Market positions Western Europe In Western Europe Heineken is market leader in countries including The U.K., The Netherlands, France and Italy. Heineken is the number two as beer brewer in countries such as Belgium, Finland, Ireland, Spain, Portugal and Switzerland. Western Europe is a highly important segment for Heineken as a company, Europe as a whole has about 850 million inhabitants, and together they are consuming 40,1 percent of the total premium segment, on average only the America’s are drinking more premium beer. Central and Eastern Europe In Central and Europe Heineken is also the largest beer brewer. Being the market leader in several countries Heineken brews 42.237 million liters of consolidated beers and ciders. The volume of Premium beer however is slightly low, only 10,8 percent. Africa and the Middle East Heineken is becoming more and more successful in countries in Africa, after starting the Heineken Africa Foundation the brand has become highly popular in sub-Sahara countries. Due to the high population of expatriates, Heineken is able to sell premium beers in African and Middle Eastern countries. North and South America This is the only segment Heineken does not own a market leading position. Heineken does enjoy number two positions in Mexico, Brazil, Chile and Argentina. In 2010 their position was strengthened after buying FEMSA. Asia Pacific The Asian market has been growing for multiple consecutive years. Heineken holds strong positions in Thailand, Vietnam, Australia, New Zeeland, Singapore and Taiwan. The fact that Heineken is a strong brand in Singapore is because of the earlier mentioned reason, the reason being expatriates. Cultural issues affecting Heineken When researching cultural issues, we thought of a case we had to deal with in the International Management II course. This case dealt with expatriates in Saudi Arabia. The common belief in Saudi Arabia is the Islam; their holy book is the Koran. The Koran states: Regarding Alcohol – The Holy Quraan states: â€Å"They ask Thee concerning Wine and Gambling, Say: In them is great sin, and some profit, for men; but the sin is greater than the profit.† (Surah Al-Baqarah:219) This means that all Islamic people should refrain from alcohol. The fact that Islamic people should refrain from alcohol makes it hard for Heineken to find a market in Saudi Arabia for Heineken beers or other ciders containing alcohol. However, Saudi Arabia is a country in which a lot of expatriates live and work. Expatriates are (mostly) western people, who do live according to the Koran. This means that these expatriates are able to drink a beer after work. The fact that this is able for expatriates makes it easier for Heineken to sell their brews in countries such as Saudi Arabia. However, this is the kind of problem Heineken mostly has to deal with. These kinds of problems are not hard to solve. We were not able to find more problems, only those that are similar to the problem we described above. We can conclude that Heineken is a very large MNE, Multi National Enterprise, however, we have not jet reviewed Heineken’s current performance. In the following section of our report we will analyse the performance of Heineken N.V. over the last five years. Therefore, will balance their financial performance against another large brewer’s performance, namely SABMiller. |Revenue (Change in % of the year before) |Heineken |SABMiller | |2010 |9.7% |4% | |2009 |2.7% |6% | |2008 |27.3% |15% | |2007 |6.2% |22% | |2006 |9.6% |19% | In this table the growth of the revenue is reviewed since SABMiller’s total revenue is more than Heineken’s. Although Heineken kept growing their revenue in the last five years, their competitor’s revenue kept growing as well. SABMiller generated even a bigger growth of their revenue compared to Heineken. Therefore we can state that although Heineken has increased their revenue in times of financial crisis, this does not imply that the performed extraordinary well compared to their competitors. According to John Hagel III, John Seely Brown and Lang Daviso in their blog article on ‘The Best Way to Measure Company Performance’ (2010), the return to equity ratio is not the best way to measure company performance. A different view is the one from the shareholders; since ROE focuses on the net income per share, it is a very commonly used method to measure company’s performance by shareholders. Therefore, this method is used in this paper and if we would use other methods our paper will become to elaborate. Concluding from this table we can state that Heineken performed better over the last five years then one of its main competitors in terms of Return on Equity. ROE’s between 15% and 20% are considered desirable; Heineken met this standard very well. Although SABMiller is not coping with a low Return on Equity, they are nevertheless unable to meet that standard. |ROE (Return on equity) |Heineken |SABMiller | |2010 |14,1% |12,6% | |2009 |19,7% |13,4% | |2008 |22,7% |12,2% | |2007 |20,7% |12,5% | |2006 |18,6% |11,5% | To summarize, both Heineken and SABMiller maintained a high level of growth over the last five years; their revenue kept growing. Despite both companies kept growing their revenue, a look at the Return on Equity ratio shows that Heineken is more profitable then SABMiller. It is save to state that Heineken has financially performed well over the last five years. International market segmentation International market segmentation can be described as the process of dividing the entire market into smaller market segments. According to Hollensen’s Essentials of global marketing (2008) there are 4 steps a company has to take while segmenting the right market, these steps can be found in appendix B. In this section, Heineken’s international segmentation strategies are discussed following these four steps. Hollensen’s first step is â€Å"the selection of the relevant segmentation criteria,† every market has it’s characteristics, Heineken had to select the criteria that were relevant for them. Heineken had to take in account measurable factors such as the geographic location, language, industrial structure and political factors. In addition, they had to take in account factors that have a low degree of measurability, such as cultural characteristics and attitudes and tastes. Not all these factors are relevant for Heineken; the language is not that relevant to a brewing company, however, the taste of the consumer is. Heineken also segmented their export market using other characteristics. Important characteristics for Heineken are age, e.g. minimal drinking age; alcohol consumption, e.g. heavy or casual drinker; tastes, e.g. they might prefer sweeter beer to Heineken and geographic location, e.g. the distance to the brewery. The second step is the development of appropriate segments. In this step Heineken had to find markets and market segments that match their relevant selection criteria. The third step is the screening of segments to narrow down the list of markets/countries to choose from and make a decision. This screening process can be divided into two steps, first the preliminary screening, countries/markets both external criteria and internal resources have to be taken into account. Secondly the fine-grained screening where the firm’s competitive power in different markets should be taken into account. Heineken selects in this step the market segments where they want to participate in. The forth step is â€Å"to develop subsegments in each qualified country and across countries.† In this step Heineken turns it’s macro segments from step three to micro segments; they further define their market segments. Market targeting Targeting is the process of evaluating potential identified segments to select the one with the highest potential (Hollensen, 2008). Heinekens target markets consist of younger to middle aged people. Heineken’s marketing activities are focused on this segment; they want their market segment to relate Heineken beer to sport events, festivals and nightclubs. Heineken is successful in addressing this consumer segment; they are the preferred premium beer for a large market share. This target market does not differ a lot among countries, although they adjust their marketing to each market, these adjustments are minor ones. Market positioning Market positioning can be defined as the process of creating a preferable brand image in the minds of the target groups of a company. It is not only preferable for companies to establish a positive brand image, but a positive identity for their products and organization as well. Market positioning is important to Heineken; Heineken puts many resources in advertising and positioning projects. When a company considers market positioning, they are likely to use the four P’s, Product, Price, Place and Promotion. We will briefly introduce these concepts and we will examine them further in a different section of this article. The four P’s are the marketing mix; all these aspects should be taken in consideration when constructing a marketing program that delivers superior value (Kotler & Armstrong, 2005). Heineken is actively using its marketing mix to position themselves as a positive brand for their target market. Heineken is involved in several market positioning activities, for example, Heineken is one of the main sponsors of the UEFA Champions League, one of the largest soccer leagues in Europe. Their goal with sponsoring this league is for their target market to relate Heineken with this sport event, therefore creating a positive brand image. Another example of a market positioning activity that Heineken is involved in will be the sponsorship of a concert hall in the Netherlands, namely the ‘Heineken Music Hall.† Again, their goal is that their targeted customers are gaining affection with the positive experience of the concert and the brand Heineken. In addition, Heineken is opening and sponsoring fully branded bars around the world. Heineken sponsors these bars and you can find their brand logo almost everywhere. Heineken allocates many resources to their marketing department in order to do this around the world; this results in brand recognition everywhere. This is again a promotional activity conducted by Heineken to establish a better market position. Product strategies The product strategy is a marketing plan of a specific product accommodated to for instance the target market, desired product positioning within the market, and profit objectives. Almost always product strategies are based on the four P’s, financial targets, and budgets of the producing company. Now, a deeper look in the product strategies of Heineken shall be made.Firstly, Hollensen(2008)[4] states that there are three levels of a product. These three levels include: the core product benefits, the core attributes and the support services (figure below). As the figure shows there is a high possibility of standardizing elements of products at the level of â€Å"core product benefits, medium possibilities to standardize in the â€Å"product attributes† level, and a low possibility of support services being standardized. [pic]The most eye-catching core product benefits of Heineken include the technology, most important: the patented technology used to brew the beer and giving it the distinguishable taste Heineken is known for. Heineken does not change the brewing process in any foreign market it explores (Anthony Ruys, 2005)[5] so no matter where Heineken is consumed the taste will be exactly the same. Also the perceived value is a major core benefit for Heineken, Heineken is such a large brewery with so many (geographically dispersed) market that it is recognized all over the world, people in foreign markets see Heineken as a luxury beer and this is exactly what Heineken intended when entering the market, for example Heineken promotion strategy in when entering the USA market: Heineken hired a vast amount of actors to go to luxury bars and hotels and keep asking for a â€Å"Heineken† beer, when this continued over a long period those bars and hotels were almost forced to use Heineken. Salient detail: a test with blindfolds regarding several breweries, Heineken finished almost at the bottom of the list, when the same experiment was conducted with the names of the breweries in sight Heineken was the undisputed number one. (Peters, 2001) [6] Looking at the product attributes it is remarkable that Heineken maintains almost the exact same size, looks , and lay out in every foreign market to get a high recognition rate. So the design, packaging, and quality are practically the same in every foreign market, this way their brand name and status is strengthened. Because of this Heineken also tries to keep the product attributes standardized. Hence two slogans of Heineken: â€Å"Serving the planet†; and â€Å"meet you there†, meaning wherever one may go the familiar Heineken beer will be around.Finally there is the support services level, this is the level with the lowest standardization in the company. Heineken has many marketing involvements in bars and hotels and host numerous events. The biggest example of Heineken’s support service in their home country the Netherlands is the â€Å"Holland Heineken house†, It is a portable bar which is up and running on the scene at major sporting events (world cup soccer etc.). these events and marketing opportunities are not as easy to standardize like for instance the production process. For the simple reason that it is an unpredictable aspect of the company. Market entry and distribution strategies Heineken started exporting in 1876 with regular shipments to France, twelve years after taking over â€Å"de Hooiberg† (another dutch brewery established in 1592), but Heineken kept a low profile concerning the export. Only after the son of Gerard Adriaan Heineken took over, the export of Heineken experienced a big growth with market entries in for example the United States. The United States were a vast growing market but it came to a sudden hold in the 1920’s when the prohibition act or â€Å"Volstead act† was initialized. By 1970 however Heineken was available in 70 percent of retail outlets in the United States mostly because of Heinekens distribution process. After this success Heineken began exporting to practically every corner in the world. According to Hollensen (2008) entry strategies for foreign market are divided in two groups. When a company goes abroad and has to choose a entry mode a distinction should be made in internalizing and externalizing foreign investment strategies. As can be seen in Appendix C[7]. hierarchical modes offer to most internalization where export modes require the most externalization. Between these two extremities are the intermediate modes. These modes will be discussed in the next paragraphs and will show which mode Heineken adapted. Firstly, the hierarchical modes which covers the internal factors. This includes the international experience of a company and what the size of the company is. When Heineken went to the United States it had very limited international experience. Also, back then, Heineken was the largest brewery in the Netherlands, but compared to the world The Netherlands is a very small market so Heineken had a restricted size. It also includes product complexity and differentiation. The product complexity when Heineken expanded to the United States was very low, after all at that time it only produced Heineken beer, only later on the made products adjusted to several foreign markets and product differentiation was created. Secondly, the export modes which cover the external factors. There are a vast amount of external factors with the most important one: the social an cultural distance between the home and the host country. Cultural and social distance between countries like The Netherlands and Belgium or Germany are not that big, however there were a lot of competitors present in the same branch in that period so Heineken decided to expand elsewhere. For instance in the United States there were few competitor because of the prohibition. But when a â€Å"western† company wants to expand in Asia or in Arabic countries there is a huge social and cultural distance. In the 1970’s Heineken started to pay more attention to the foreign markets and built up their social awareness which decreased the â€Å"sociocultural distance†. The mode with the most externalization is the export mode. In this mode the company has the choice between direct-, indirect-, and cooperative export entry mode. With the indirect export entry mode the company is mildly interacting with the foreign market due to the fact that an independent organization will distribute the company’s product. There is low risk and low commitment but there is also low control of the local distributer etcetera. Furthermore there is the direct market entry mode, in this mode the company is directly selling to a importer in the desired foreign market. The exporter will be in charge of the ins and outs and the up- and downstream functions and maintain well supported ties with the foreign market. When both the indirect- and the direct mode are not applicable the cooperative mode comes in the picture where there is a local importer dealing with the downstream functions (marketing, sales, services) and the exporter is in charge of the upstream functions within the local company (for example: the R&D department). Heineken started off in the export mode not only because there was limited experience in foreign markets up till then. The company had to keep expanding because the market for breweries became ever more competitive, Heineken founded a new brewery in the Netherlands but also founded the Malayan breweries and breweries in Venezuela, Zaire and Italy. Furthermore Heineken took over several foreign breweries. Nowadays Heineken adopted a Hierarchical mode for the market entry this means that it is fully owned and controlled by the company, but also the company bears the risk of its actions. Every market Heineken operates in. Heineken’s headquarters are stationed in the Netherlands but there are several subsidiaries in foreign markets because the general assumption is that geographically dispersed markets differ a lot and many will require a different approach which are than dealt with by the subsidiaries. Promotion Strategies According to Hollensen (2008) â€Å"†¦ important are the promotion or the performance promises that the organization makes for its product or service in the target market†. Regarding to product decisions, promotion of products can be adapted or standardized to foreign markets. Figure 1 (see appendix D), provides an overview of how products can be promoted in foreign markets. With regard to figure 1, Heineken seems to fit in the box of ‘Straight Extension’, since both the product and the promotion strategy of the company are standardized (one product, one message worldwide (Hollensen, 2008)). This is also stressed by Heineken’s general promotion strategy across the globe, which effectively creates a connection between the brand and the customers. In addition, Herwin van den Berg, Marketing Director of Heineken in the Netherlands states that: â€Å"Marketing is about attracting, inspiring and binding consumers and ensuring timely wake-up calls to your own organization†. Firstly, the Heineken company includes besides the well known Heineken brand, over 170 different, often local, brands as well. This multi-brand strategy proves to be simple, but effective. The main idea of acquiring other suitable, local brands, is to serve Heineken as a premium beer alongside the acquired local brand. If some local brand proves to have a significant growth potential, the brand is of interest of the Heineken company. This policy actually creates a global position for, because the Heineken brand becomes recognized as being a premium beer. Secondly, according to the Heineken website (www.heinekeninternational.com), the company has developed a policy of ‘Selling beer safely’, this policy holds that professional Beer Promoters (BPs) sell and promote Heineken beer directly to the (potential) consumers This policy proves to be a successful promotion strategy in most countries, because this policy manages to satisfy all different constituencies of the company. Despite the use of BPs, Heineken strives to improve the overall safety and health of the Beer Promoters, since promoting beer can be quite hazardous. Therefore, Heineken developed policies in their breweries that cover all aspects that are influencing the working conditions of the BPs. In order to instruct and train the BPs for their job as a effective Beer Promoter all over the world, Heineken developed all kinds of training tools, varying from instruction DVDs and manuals, to leaflets and booklets. These training tools are continually being improved and redesigned to maintain a proper basis for implementing the right strategy. Additionally, these training tools are translated in several languages, in order to maintain a general promotion strategy all over the world. Thirdly, when comparing the Heineken websites in different countries, it is obvious that Heineken uses the same promotion campaigns all over the world (examples: Draught keg, Extra cold, Beertender) . What stands out are Heinekens green (premium) beer bottle on the homepage on each website, the use of bright green colors, a direct link to Heineken’s Facebook page, and depending on the country, promotion campaigns such as Heineken Music or the UEFA Champions League. Besides the use of global marketing campaigns, some websites display local, country specific content as well (such as the new Heineken Ellipse glass). Additionally, most websites are fully translated, and some only partially in the foreign country’s language. Fourthly, when comparing the TV-commercials (www.youtube.com) of Heineken in different countries, it is obvious that the company promotes its premium beer and new products in quite the same way across the globe. The company actively promotes what seems to be the ‘Heineken experience’ which holds that Heineken premium beer is being drunk in the same way by people all over the world. However, the company does produce country/region specific ads, with slight adjustments, mostly for the major markets. In Asia for example, the commercials seem to reflect that a Heineken premium beer can be gained after a hard day at work. In Hispanic countries, a Heineken premium beer stands for intimacy and closeness, and in the image of Heineken in Western countries is that nothing stands between a man and a Heineken premium beer. To conclude with, â€Å"Heineken portrays itself as a global brand that makes the world just that little bit more enjoyable through its mentality and innovative products† (Heineken Case, Sister.) Pricing Strategies â€Å"Pricing policy is an important strategic and tactical competitive weapon that, in contrast to the other elements of the global marketing mix, is highly controllable and inexpensive to change and implement† (Hollensen, 2008). The Heineken company sells premium beer, which holds that the beer is priced in upper segment of the beer market. By premium pricing, customers become perceived that Heineken beer is different from all other brands, in the sense of being of a higher quality. And so, the relative high price can be established simply because customers are willing to pay the higher price for the real and perceived quality. Moreover, by pricing the product relatively high, the product position in de minds of customers becomes on the desired (high) level. Since Heineken premium beer is a standardized product, there are little additional costs concerning modification of the product to foreign markets. Therefore, Heineken can adjust its prices easily to the purchasing power in a foreign market and so maintain its brand image of being a premium beer, by setting the price to the relative upper segment of a country’s local beer market. By conducting this policy, Heineken maintains a global image of being a premium beer. Moreover, in some foreign markets Heineken even has the advantage of the so called country-of-origin effect. Which holds that customers perceive a product made in a certain country of being of a desired quality. Apparently, the Netherlands have a high reputation in the global beer market, since, for example, the customers in the United States are willing to pay significantly more for Heineken premium beer. On average, for every 100 liters of Heineken beer shipped to the US, Heineken’s profit is estimated on about 21 euro’s. In contrary, the average profit per 100 liters of Heineken beer in other countries is estimated on about 11.70 euro’s (Elsevier website). In short, Heineken is able to maintain its image of being a premium beer through both the general perception of being of a high/premium quality, and the corresponding price that has to be paid for Heineken’s premium beer. Source: Based on Keegan, 1995, pp. 489-94 and p498, Table 13.1 ———————– [1] http://www.annualreport.heineken.com/nl/Een_kort_overzicht/index.html#financials [2] http://www.heinekeninternational.com/ownership_cg.aspx [3] http://www.annualreport.heineken.com/Other-information/countries-and-Brands/index.html [4] Svend Hollensen: Essentials of global marketing [5] http://www.alcoholpreventie.nl/bestand/2005MarketingphilosophyofHeineken.pdf [6] Peters and Van Dam: Dienen en verdienen (serve and earn) (2001) [7] Svend Hollensen: Global Marketing (p. 280)