Business, Government & Society – Notes on Relevant Journals

Berend (2000) From Plan to Market, From Regime Change to Sustained Growth in Central and Eastern Europe * After the state socalism collapsed in Central and Eastern Europe in the early 1990s, the Washington consensus of 1989 (a broadly accepted set of criteria for a reform program) was adopted as a blueprint for the process of transformation. * Central elements: * Macro-economic stabilization (for countries with significant inflation and indebtedness) * New institutions Legislation * Price and trade liberalisation * Radical privatization * Most of the â€Å"transformatologyâ€Å" literature is based on the assumption that the elimination of deformed non-market economies, a restoration of market, and private ownership, paired with a laissez-faire free market system would automatically solve all major economic/social problems of the transforming countries. The economic crisis within the Central and Eastern Europe area started much earlier – in the mid-late 1970s when growth slo wed significantly and the terms of trade for the state socialist countries began to deteriorate (1973 first oil shock 20% decline, for some even 26-32%) Schumpeter’s theory of â€Å"structural crisis†: advancements in technology lead to decline of the old leading sectors and export branches based on old technology, generating wide-ranging slow-down and decline and causing an economic crisis even in rich, advanced countries.However, although rising new technology led to the emergence of new industries, new leading export sectors and an impressive new boom in the US and other advanced countries, the Central and Eastern Europe countries experienced a â€Å"peripheral structural crisis† – they suffered all the negative consequences of a the â€Å"structural crisis† but due to not having sufficient resources for R&D, know-how and financial sources, they were not able to take advantage of the technological development.After 1989, when the countries of th e region lost the protection from Comecon’s isolation and regional self-sufficiency, they were forced to enter the world market and compete with the advanced countries (already adjusted to new technology) and also on their own opened domestic market. Consequence: the peripheral structural which had prolonged since 1973 continued and worsened during the 1990s. Also contributing to the economic crisis: serious macro-economic policy errors e. excessive devaluation of the currency; too abrupt opening to trade with the West; and the failure in government management of the state sector * Foreign trade deficits increased dramatically and nearly all countries in the region dropped into an indebtedness trap – debt service consumed about 40-75% of the countries’ hard income and quite a few started to lose control over inflation * Economic policy during the transition: Change was too fast countries of transformation should not have attempted to jump directly from a central ly planned to a laissez-fair economy and from an entirely state-owned to a 100% privatized economy * State regulations and government policy were needed self-regulating mechanisms were not yet developed, market imperfections and non-market friendly behaviour were present * Suggestion (Kolodko) : A regulated market, instead of a self-regulation market, a mixed economy with a restructured and efficient state-owned sector for at least a period of time, and a â€Å"fine mixture between market and stae† would have been a more natural transition from plan to market * However, this approach was not adopted and led to a collapse of many old companies (lost a bulk of their value and had to be sold for a fraction of their previous value) mass unemployment, sharp decline in living standards (especially for vulnerable layers of society) * Outcome: Industry recovered only in two countries – Poland and Hungary * Some experienced a new crisis – Bulgaria and Romania * Russia an d Ukraine as well as several other successor states of the Soviet nion had experienced constant decline throughout the entire decade * Poland, the Czech Republic, Hungary, Slovakia and Croatia – market economies are functioning, economic decline and rapid inflation are over, the annual economic growth is impressive * Performance differences: * Often explained by the lack of determination to pursue radical reforms author agrees * However, besides pursuing systemic change, the countries in transformation also have to adjust to the â€Å"structural risis†, by restructuring the economy according to the requirements of modern technology to reach a sustained and higher than average growth technological and structural transformation of the economy are central elements of the transition * Window of opportunity slowly opened after 1989 when direct foreign investment became the key factor in technological modernization and restructuring in the area but only played an important r ole in the three frontrunners of transformation – Estonia, Latvia and Slovenia * In addition, not all investments contributed to restructuring, some of them served only to enlarge the investors’ markets. However, key investments were made in the most backward infrastructural sphere, especially telecommunication that serves as the basis for any kind of technological progress to date. * Investments had positive effects on Eastern Europe where they generated growth of domestic business which led to economic growth (especially in Poland).Big transnational businesses were also obliged to reinvest some of its profits and to use domestic products and sub-contractors initiated small local business activities. * Russia, the successor states of the Soviet Union, and most of the Balkan countries exhibited minimal progress in restructuring. FDI was minimal in this area and mostly went into the extracting branches of oil, gas and raw materials; transnationals are present but do not develop processing industries and export branches. Consequently, this area was unable to adjust to the late 20th century technological revolution and declined into a continuous peripheral structural crisis. In those Central European countries, where impressive FDI assisted technological-structural adjustment, transformation is paving the way to sustained growth and catching up with the West. These countries became memers of NATO and are candidates for EU membership. Murrell (1993): What is Shock Therapy? What Did it Do in Poland and Russia? Poland: * Shock therapy failed in Poland * The reform program implemented in January 1990 comprised a number of related measures * Fiscal policy was tightened considerably budget surplus in Q1 1990 * Real value of the money supply was halved * Tight limits were placed on credit * Trade liberalisation removed all restrictions * Anti-inflation wage tax was set at strict levels Government made a commitment to privatisation on a massive scale * Soli darity and the Catholic Church were two of the strongest social institutions in Eastern Europe helping to maintain the shock therapy model * Once it was realised that the shock therapy was not going to produce as many benefits as expected, it came under severe attack gradually, many of the elements of the initial program were withdrawn or weakened monetary policy was loosened * Further movement away from the shock program occurred throughout 1991 in the face of massive and open opposition to the government’s policy * Fiscal and monetary policy were considerably loosened budget deficit began to rise to the levels of 1989 * Reversal of trade policy tariff rates increased and selective protection was endorsed * Although policy was modified during the two years following the big bang, the commitment of the large part of society to change was never in doubt. * Change was inexorable (kohklematu), given the collapse of the communist regime that had blocked reforms that had been dema nded for so long. * Nevertheless, Polish economy started to show first signs of success after policy was rescued from the shock therapists. Russia: Stages of the reform chronology in Russia are similar to those in Poland, but without a successful outcome * Less preparatory reform during the communist period in Russia * Core group of reformers were radical and ambitious, and more removed from its own society than were the Polish reformers * Radical reforms had hardly advanced beyond their explicitly destructive first phases before they were rejected by society * By 1991 economic reform in the Soviet Union had hardly progressed beyond the stage of decentralisation within the old system and it was still very equivocal * Price controls and state orders contributed to about 75% of economic activity * Small private sector did not thrive on its own, it was in a symbiotic relationship with the state sector * Law on contract had not been implemented by the end of USSR * Russia’s econo mic and political leaders still did not fully comprehend the difficult conceptual and institutional issues related to establishing macroeconomic control and they had little experience Russia could not match Poland’s years of contact with the West, the experience and knowledge of its policymakers gained in the worldwide academic community, and the years of learning in interactions with the world financial community. * In 1990 and 1991, the Russian government had been gradually gained power (and this was accelerated by the failed coup). * In late October 1991, Russian President Boris Yeltsin announced his intention to launch a radical attack on the country’s economic problems. He had been given freedom in administrative and policy choices for one year and he decided to assign the policymaking duties to a group of theorists, who had a strong preference for rapid change and who had vague idea about how to bring this change about * Murrell argues that shock therapy was the guiding force of policy as Russia began real economic reform in January 1992. * The reform (1992) was certainly more radical than the Polish big-bang, including: * Freeing of most prices * Removal of the old supply system * The complete liberalisation of imports * A thoroughgoing change in the tax system * Rapid closing of the budget deficit * Stringent tightening of monetary policy * A privatisation program with very ambitious goals Preparation for early convertibility of the ruble together with and immediate relaxation of rules on foreign exchange trading * Renegotiation of the existing trading relationships with the other ex-republics * There was greater determination in Russia to undermine the existing institutions of government; the incoming government viewed its mission as an attack on the old Soviet system. * In several areas, the degree of shock, the amount of policy implementation, and even actual policy were unclear * Uncertainty about the nature of policy was present even among those at the apex of government * As early as February 1992, criticisms about the economic policy started to arise * As 1992 proceeded and the economic crisis became more threatening, some old mechanisms of control began to return * Broad powers to control prices and to use central directives on production * To avoid large scale bankruptcy, the government began to make credit available to nterprises in significant amounts * Due to a threat that better enterprises were being brought down with the bad ones, directors of enterprises formed an alliance along with independent labour unions to put pressure on the government, which was forced into compromise with these interest groups * Direct consequence of the policies introduced in January 1992 was that the political forces representing the dominant economic interests of the old Soviet system were much stronger than they had been before those policies were introduced * The short burst of shock therapy in Russia had considerable s uccess if destruction is counted as a goal. But the destruction of the old was hardly matched by the creation of market-oriented institutions of economic control. Blanchard (1994): Transition in Poland * First two years: * Large decreases in GDP * Even larger decreases in industrial production * Output stabilised in mid-1992 * Employment declined initially more slowly than GDP, but has kept declining despite the turn in output * Hardening of budget constraints * Subsidies to state firms were decreased Tax arrears, interenterprise arrears and bank loans were limited and decreasing * Sources of output decline during the first 2 years: * Stabilisation * Price liberalisation * Collapse of trade between Central and Eastern Europe countries * State firms are controlled by workers with uncertain stakes and horizons, and have limited access to finance; state has remained de jure owner of state firms but is not able to exercise its control rights control has reverted to the workers * Led to slow adjustment of employment to decreasing output, appropriation of profits to workers in the form of wages and low restructuring and investment * Slow privatisationFidrmuc (2003): Economic reform, democracy and growth during post-communist transition Key point: There are merits to simultaneous democratisation and liberalisation – democracy reinforces economic liberalisation, which in turn leads to better growth performance. Democracy is clearly not a necessary condition for high growth (as the examples of Chile and China illustrate), but as the experience of the post-communist transition countries shows, democracy results in policies and institutions that facilitate economic reforms and create an environment that is favourable for growth. However, democratisation alone is not the key to growth; it is through its positive impact on economic liberalisation that it improves growth performance. By 1993, barely 3 years into transition, three frontrunners – the Czech Repub lic, Hungary and Slovenia – attained a level of political freedom and civil liberties comparable to the UK, France or Germany. * Most post-communist countries succeeded in sustaining at least a moderate level of democracy, despite very turbulent economic and political developments, military conflicts or coup attempts. * The high speed of democratisation reflected not only the desire of these countries’ citizens to live in democracy, but also the encouragement or outright pressure from Western governments, international organisations and especially the EU which made democracy and explicit precondition for accession negotiations. Democracy has a positive effect on progress in implementing market-oriented reforms. * Economic liberalisation, in turn, has a positive effect on growth * Therefore, democracy indirectly improves growth performance. * Economic performance during transition and initial conditions affected the progress in democratisation – countries that we re more developed at the outset of transition and those that grew faster during transition in turn implemented greater degree of democracy. Growth performance during transition: * All post-communist countries experienced dramatic contraction of economic activity at the outset of the reforms, but the subsequent transition paths diverged considerably. Some countries reached the bottom of transformational recession after 2-4 years and then recovered * Some, most notably Poland grew at impressive rates subsequently * Others (Bulgaria, the Czech Republic and Romania) experienced a second dip later on * In contrast, most Soviet Union countries experienced deep and protracted depression with little subsequent recovery –> for Moldova and Ukraine, transition resulted in a decade of continuous decline * By 2000 only 4 countries have exceeded the 1989 level of output * Berg et al. (1999) found that the initial output fall is attributable primarily to initial conditions and macroeconomic instability, whereas the effect of liberalisation on growth was overwhelmingly positive. When considering separately the effects of liberalisation on state and private sectors, they conclude that liberalisation contributed to the contraction in the state sector, but this was more than compensated by the expansion in the private sector. The further a country lies from Brussels, the more reluctant it was to implement radical economic reforms – therefore, being father away from Western Europe is associated with lower growth, although the relationship is often not significant. * Engagement in military conflicts, not surprisingly, lowers growth. * On the other hand, once the war is over, the affected countries tend to grow more rapidly as they make up for the loss of output. * Government expenditure does not have a significant impact on growth Democracy and growth: * The post-communist countries implemented, at least initially, economic and political reforms simultaneously. In so me cases, political reforms even preceded the economic ones.Hellmann (1998): Winners Take All: The Politics of Partial Reform in Postcommunist Transition Key point: A conventional approach suggests that in the short-term, economic reforms are believed to generate high transitional costs before long-term gains are realised. Therefore, politicians in democratic systems are reluctant to undertake radical reforms whose benefits will not be realised before the next elections. For an economic reform to be successful, governments need to focus on restraining the net winners of the reform as they are the one’s responsible for setting the highest obstacles for the advancement of the reforms. The partial reform model: Explains why some countries have maintained partial reform over time, even though the short-term costs are higher and the overall gains are lower than those associated with more comprehensive reforms * Explains why post-communist countries in which the net winners of the reform process appear to have significant political power over economic policy-making nevertheless have remained mired in a partially reformed economy * Provides a possible explanation for the strong link between democracy and economic reform among the postcommunist transitions that stresses the advantages of including the very groups that suffer from the transitional costs of reform Conclusion: The costs of transition have been substantial in all transition economies – to varying degrees, each country has faced some combination of high inflation, high unemployment, declining real incomes, decreasing state services, and increasing uncertainty. * However, the losers of the reforms have not constituted the main political obstacle to the progress of reform. * In fact, it is these countries in which governments have been most vulnerable to the losers’ threat of an electoral backlash against reform that have adopted and sustained the most comprehensive reform programs. * In contrast, governments insulated from electoral pressures have made, at best, only partial progress in reforming their economies. * Moreover, economic reforms, once adopted, have rarely been reversed, even when the reform governments that initiated them have been ousted.In addition, there have been cases in which electoral backlashes were followed by intensification of reform in some areas * Partial reforms were predicted to generate rent-seeking opportunities arising from price differentials between the liberalised sectors of the economy and those still coordinated by nonmarket mechanisms * Rapid foreign trade liberalisation without complete price liberalisation managers were able to sell their highly subsidised natural resource inputs (oil/gas) to foreign buyers at world market prices * Privatisation coupled with the creation of an effective corporate government structure reduces asset stripping by enterprise insiders. Actors who enjoyed extraordinary gains from the distortions of a partially reformed economy have fought to preserve those gains by maintaining the imbalances of partial reforms over time – the winners from an earlier stage of reform have incentives to block further advances in reform that would correct the very distortions on which their initial gains were based. In effect, they seek to prolong the period of partial reforms to preserve their initial flow of rents, though at a considerable social cost. * Therefore, the challenge posed by the winners is based on a set of assumptions about the costs and benefits of reform that differs from the assumptions of the conventional J-curve pattern upon which most existing models of the political economy of reform are based. J-curve assumes that economic reforms generate concentrated costs in the short term and dispersed benefits over the long term, whereas Hellman has demonstrated that in the postcommunist transitions, economic reforms have tended to produce highly concentrated gains to particula r groups in the short term, while dispersing the transitional costs of reform throughout the economy. * The partial reform model stresses the need to restrain the winners by increasing competition with other groups or by restricting their ability to veto reform measures unilaterally. * In this view, expanding political participation to include the losers in the policy-making process could place limits on the concentrated political power of the winners and prevent them from sustaining a partial reform equilibrium. * One of the fundamental tenets of the politics of economic reform has always been to create a constituency of winners with a stake in sustaining and advancing the reform process. This has been a common strategy both for making the reforms irreversible and for building up the necessary political support for further reforms. * Yet a comparison of the post-communist transitions suggests that the winners can do far more damage to the progress of economic reform than the losers . * Therefore, the success of economic reform depends both on creating winners and constraining them. * Paradoxically, the most effective means of constraining the winners in the post-communist transitions has been to guarantee the political inclusion of the very constituency that most existing political economy models seek to exclude: the short-term losers of reform. Progress in the implementation of market reforms could reduce the private gains to the initial winners over time, while increasing efficiency gains for the economy as a whole from winners’ perspective, J-curve is reversed * Countries that adopt more comprehensive reforms at the start have a narrower gap between the income curves of winners and losers. More on PARTIAL REFORM and other information: Roland (2002): The Political Economy of Transition Normative political economy – focuses on the decision-making problem of reformers Reformers face 2 types of political constraints: * Ex ante political constraint s – feasibility constraints * Ex post political constraints – related to backlash and policy reversal Relaxing political constraints – 4 options: 1.Building reform packages that give compensating transfers to losers from reforms * Easiest way – ‘Buy their acceptance’ * In the real world and transition economies it is hard to do 2. Making reforms partial to reduce opposition * Partial reform, usually in the framework of a gradualist strategy, has some clear disadvantages. It yields lower efficiency gains than a complete reform. * However, partial reform also has several potential advantages over full reform – it is less costly in terms of compensation payments to losers. * If partial reform is less costly to reverse than full reform, political acceptability can be easier than for full reform because it provides an option of early reversal. If a partial reform is implemented, a continuation toward full reform seems unattractive to a majo rity then it is always possible to come back to the status quo (Russia – turned back too early?! ) * Gradualism thus lowers the cost of experimenting with reform and thus makes a move away from the status quo more easily acceptable to a majority. * Partial reform can also build constituencies for further reform through the use of â€Å"divide and rule† tactics (showing that rejection of a current reform plan can lead to the adoption of a plan that would hurt them even more, they may prefer to accept the first one) and the optimal choice of sequencing of reforms (e. g privatisation of those enterprises with â€Å"good† outcome first) 3.Creating institutions that make a credible commitment to compensating transfers * Can offer benefits * However entails economic costs * E. g extending voting franchise- ensuring poorer segments of population vote 4. Waiting for deterioration of the status quo to make reform more attractive * Sometimes only option is to wait * Howev er, decision-making paralysis may occur if political decision making is characterised by different parties trying to push the burden onto the other parties Understanding the difference in transition paths between central European countries like Poland and Russia and the former Soviet Union on the other hand: * Law and property rights: One argument – the extent of state capture and rent seeking was much more important in former Soviet Union countries than in central Europe and this difference goes a long way in explaining differences in output performance (EBRD, 2000; Hellman and Shankerman, 2000) * Geopolitical factors * Quite important, although they have been underestimated since the beginning of the transition – in geopolitical terms, the transition represents the shift of central Europe and the Baltic states toward western Europe several nations are given the opportunity to have more interaction with western Europe or even join the European Union * Entry to the EU implies adopting the political and economic system of the west. The potential reward of belonging to the club of western nations makes it more worthwhile to undergo the cost of transition.Moreover, the geopolitical factor increases the perceived cost of reversing transition policies, since such reversals would raise the risk of being left out of the western club, an outcome than many in central and eastern Europe would view as disastrious. Geopolitical impact of transition for Russia: * Transition represents the loss of the Soviet empire and also of territories (Ukraine or the Baltic States) – wound to Russian nationalist pride * Trauma of the loss of superpower status could be compensated for by economic gains from transition to a certain extent. Unfortunately, such gains have not materialised so far for the majority of Russians. Entry of Russia into the EU is neither expected nor especially desired. * Thus, resistance to transition proved much harder in the former Soviet Un ion than in central and eastern Europe. Sequencing: The sequence of reforms in transition economies are roughly in line with political economy theory, which suggests that reforms expected to be more popular should be adopted first and the less popular reforms tend to be delayed. For example, in both Central and Eastern Europe, democratic reforms preceded economic reforms because support for democracy was much stronger than support for economic reforms. * Apart from political reforms, certain other institutional changes can be decided at an early stage of reforms. For example, establishment of institutions for competition policy should be among the first reforms to be implemented in transition economies.This reduces the danger of existing monopolies going into private hands, which may have enough power to prevent the government from introducing competition policy or any other measures that are opposed to their interests. * Another important early step in the sequence of transition re forms is encouraging the development of a small private sector prior to more comprehensive reforms (in Hungary, small private sector was already producing 10% of industrial output by 1990) * As the Big Bang Price Liberalization in Vietnam showed, the prior existence of a viable private sector buffered the shocks of economic liberalization and macroeconomic stabilization and facilitated a supply response.In Vietnam, after the implementation of a radical price liberalisation, output initially fell, but an impressive growth in agriculture still led to positive growth in GDP. * In transition economies, the best firms tend to be privatized first as the privatization of more profitable firms creates political support and goodwill to for further privatization and other reforms. * Another set of sequencing issues arises with regard to mass privatization. Mass privatization in countries like Russia created a sudden and strong concentration of economic power among insider managers. This is es pecially dangerous because a sudden shift of economic power to insider managers may make it easier for them to threaten or use bribery against politicians and regulators to take advantage of subsidies or favorable legislation.The insider uses the threat of reducing economic activity and destroying jobs which leads to inequality of wealth which in turn might increase political instability. Trade-off between the speed of reforms and the size of budgetary transfers: * The theory of political economy suggests that faster reforms involve higher compensation costs like unemployment benefits and pensions due to a higher level of restructuring. In addition, there are claims that a faster rate of restructuring in transition economies is associated with a worsening fiscal state. * However, the role of the social safety net in helping overcome political constraints is quite clear.In the case of central European countries like Poland and the Czech Republic, the social safety net has helped to m itigate the negative ffects of transition on income inequality, especially for the most vulnerable proportions of the population. Role of political institutions: * When it comes to the role of political institutions and the progress of reforms, there are contradicting views. * Empirical analysis by Hellman and EBRD has found that stronger executive branch of government tends to be associated with less progress in reform, whereas there tends to be a positive correlation between the broadness of coalition and the progress of reforms. * However, empirical findings by Rubini and Sachs, among others, have shown that weak executive branch and broad coalition goverments are obstacles to reforms. Faster progress in reforms due to broader coalition may be explained by the fact that if reforms are accepted by broader coalitions, perhaps there is less chance they can be reversed. * However, broad coalitions tend to paralyze decision making due to the holdup power of some groups and to differin g views within the coalition. * Another possible interpretation is that the population is eager to get reforms implemented, whereas the politicians and those holding office are opposed to it. In that case, closer checks on the executive branch and frequent elections are a way to force the politicians to move, whereas politicians with more discretion would choose to block reforms. According to Roland, the most likely explanation for the positive correlation between progress of reforms and broadness of coalitions and weakness of the executive branch is that it is likely that the countries where it was the easiest to push for democratic reforms, are also the countries where resistance to economic reforms was relatively smaller. Whereas in countries with less initial support for reforms, it is quite likely that both democratic reform and economic reform are less advanced. Therefore, the differences in initial conditions of reform are what determine the intensity of political constraints , and thus the initial choice of political institutions, and hence the initial choice of policies. Popov (2000) – Shock Therapy vs Gradualism:Primary issue regarding transition performance – strength of institutions Secondary – speed of reforms * By now most economists would probably agree that because liberalisation was carried out without strong market institutions it led to the extraordinary output collapse in CIS states * The worse initial conditions for transformation, the greater the probability of the deep transformational recession, and hence the more likely delays in liberalisation * Gradualists objected to the elimination of old regulations and institutions before the new ones are created, warning that the institutional vacuum may have a devastating impact on output Transformational recession Supply-side phenomenon – reallocation of resources (restructuring) due to market imperfections is associated with the temporary loss of output Argument: Di fferences in economic performance in post-communist countries during transition appear to be associated predominantly not with chosen reform paths, but with the magnitude of initial distortions in industrial structure and external trade patterns, and with the initial level of economic development. The higher the distortions (militarisation, over-industrialisation, â€Å"under-openness† of the economy and the share of perverted trade flows), the worse is the performance as measured by the GDP change. And the higher was GDP per capita before transition, the greater were distortions embodied in fixed capital stock, the more difficult it was to overcome these distortions to achieve growth. The impact of speed of liberalisation appears to be limited, if any. Reasons (distortions): * High defence expenditure and the need for conversion * Overcoming the effects of the Cold War Defence expenditure was abnormally high – declines in defence output were not offset by increases in non-defence output * Reallocation of resources from industry to services * External trade distortions – the degree of openness of socialist economies (the share of external trade in GDP) * In most countries, including the majority of the former Soviet republics, trade was relatively underdeveloped * A bit better in Azerbaijan, Hungary and Vietnam * Shift to world market prices in interrepublican trade led to reduced trade – prices used were completely different (resource commodities underpriced, finished goods overpriced) Policy factors: institutions, rule of law and democracy The decline of the institutional capabilities contributed a great deal to Russia’s and CIS poor economic performance * Regardless of the criticism against â€Å"big governments† and too high taxes in former socialist countries, the downsizing in the government that occurred in most CIS states during transition went too far – drastic reduction of government spending (50% and more in real terms in the course of just several years) cannot lead to anything else but institutional collapse * In addition, in most CIS states the reduction occurred in the way that instead of shutting some programs down completely and concentrating limited resources on others, governments kept all programs half-alive, half-financed and barely working Three major patterns of change in the share of government expenditure: 1) Under strong authoritarian regime – China Cuts in government expenditure occurred at the expense of defence, subsidies and budgetary financed investment, while expenditure for â€Å"ordinary government† remained largely unchanged 2) Under strong democratic regimes – Poland * Budgetary expenditure, including â€Å"ordinary government† expenditure declined only in the pre-transition period, but increased during transition itself – social safety nets? 3) Under weak democratic regimes – Russia * Reduction of the general le vel of government expenditure led not only to the decline in the financing of defence, investment and subsidies, but to the downsizing of â€Å"ordinary government† which undermined and in many nstances even led to the collapse of the institutional capabilities of the state * Russian pattern of institutional decay proved to be extremely detrimental for investment, and for general economic performance To sum up, Gorbachev reforms of 1985-91 failed not because they were gradual, but due to the weakening of the state institutional capacity leading to the inability of the government to control the flow of events. Similarly, Yeltsin reforms in Russia, as well as economic reforms in most other FSU states, were so costly not because of the shock therapy, but due to the collapse of the institutions needed to enforce law and order and carry out manageable transition. Therefore, there is enough evidence that differing performance during transition, after factoring in initial conditions and external environment, depends mostly on the strength of institutions and not so much on the progress in liberalisation per se. Democratisation without strong rule of law usually leads to the collapse of output.After allowing for differing initial conditions, it turns out that the fall of output in transition economies was associated mostly with poor business environment, resulting from institutional collapse. Liberalisation alone, when it is not complemented with strong institutions, cannot ensure good performance. Ericson (1991): The Classical Soviet-Type Economy: Nature of the System and Implications for Reform Characteristics of the Soviet-type economic system: * A hierarchical structure of authority * Rigid, highly centralised planning of production and distribution * A commitment to maximal resource utilisation * Formal rationing * Exhaustive price control * The lack of any liquidity or flexible response capability * The lack of legal alternatives to assigned economic rela tionships * Absolute and arbitrary control by superiors Incentives that are geared to meeting the plans and desires of evaluating superiors Any economic reform must struggle against these characteristics and their natural consequences. One important consequence is that while the administrative superstructure has been subject to rather frequent â€Å"reform†, the physical structure of production and interaction has changed only very slowly. Strengths and weaknesses of the traditional Soviet-style system: Strenghts: * Very good at mobilising scarce resources and concentrating on a few clear, well-defined objectives (that can be expressed in measurable, quantitative and communicable terms and that yield large observable outcomes) * Building of major heavy industrial capacities * Collectivisation of agriculture * Post-war reconstruction of industry Development of an unprecedented military-industrial complex * Maintenance of the world’s last true empire Weaknesses: * Centra l authorities lack the information and physical capability to monitor all important costs * Decisions made in ignorance of opportunity costs lead to a vast range of negative externalities: * Damage to the capability of users to produce (especially with needed quality) * Unusable output forced on others in the system * Destruction of the resource base due to improper exploitation * Collateral damage to agriculture etc * Incentives used lead agents to: * Avoid any change or risks * Shun innovation * Ignore information important to others * Work to rules regardless of the impact on othersThus, while the traditional Soviet economic system has been effective in achieving a few centrally definable and achievable objectives, it is also inherently wasteful and inefficient in the pursuit of those objectives. Implications for reform: 2 monumental obstacles: * Vast resource commitment – however, lack of resources currently available in Soviet-style economies is probably not the most ser ious obstacle, for it might be dealt with through aid from abroad * Primary obstacle: characteristics of the Soviet-style system are interconnected and mutually supporting, altering one or a few is merely disruptive of the stable functioning of the system and its effectiveness.Thus, a meaningful reform must eliminate all characteristics more or less simultaneously. THEREFORE Partial reforms will not suffice The analysis implies that radical reformers are correct to seek the total replacement of the traditional system. Radical marketization and privatisation undercut of destroy each of the nine defining characteristics of the traditional system. Fischer & Gelb (1991): The Process of Socialist Economic Transformation Enterprise reform: * Enterprise reform, which requires the imposition of bottom-line discipline, definition and change of ownership, and reform of management, is the heart of the transformation process. Two phases (opinions differ which should come first) * Restructuring * PrivatisationSlow privatisers argue that firms should be sold off gradually after restructuring. They emphasise the danger of severe economic dislocation if too much change is attempted quickly. Fast privatisers argue that the benefits of a rapid and irreversible shift to private production outweigh the costs of reduced state revenue. They believe that comprehensive and rapid ownership reform is necessary to increase efficiency. * Broad distribution of shares, or vouchers with which shares can be bought, across the population The Role of the State: * Redefining the previously all-encompassing role of the state is one of the greatest challenges for reform.Institutions and professions taken for granted in market economies have to be re-created and reformed to support markets: * Secure legal environment to protect property rights and regulate commercial relations * Accounting and audit systems are needed to organise and monitor information * Investments in human capital to complement the system reforms in areas such as: accounting, credit and market analysis and bank inspection. * Management skills need to be upgraded and modernised (especially in finance and marketing) * In some areas, such as financial markets, reform may require a greater state role than before. * Reforming governments need urgently to: * Introduce broad-based taxes and to develop the capacity for tax administration, rather than continue to depend on profit remittances from state enterprises. * Institute a social safety net, especially for those affected by the new phenomenon of open unemployment * Liberalisation of labour and capital markets is also important.Labour market reform measures to make it easier to hire/fire labour, relaxation of wage regulation, introduction of unemployment insurance, establishment of institutions (inc. employment agencies) to encourage labour mobility. Capital market reform development of financial markets and private sector institutions (inc. banks). However, freeing input markets should not be an early priority. * Enterprise reform is the heart of the transformation process. 2 phases: restructuring and privatisation. Slow privatizers vs fast privatizers. Reforming governments will have to introduce broad-based taxes and develop the capacity for tax administration, rather than continue to depend on profit remittances from state enterprises. The reforming goverments will also have to develop a social safety net. Sequencing of reforms: Reforms need to include macroeconomic stabilisation, price reform, trade reform, small-scale privatisation, new regulations for private investment, the creation of emergency unemployment insurance and the start of work on new tax, legal and regulatory institutions. * For countries with severe internal/external imbalances, priority no. 1 has to be macroeconomic stabilisation (e. g sharp cuts in firm-specific subsidies, tight credit limits, trade liberalisation at a heavily depreciated exchange rate, fixing th e nominal exchange rate (in countries with high inflation)). Stabilisation can be assured only by following consistent macroeconomic policies over periods of years. Shleifer (1997) : Government in Transition Key point: Russian government is less effective in serving the market economy – as well as its people – than the Polish government. But why? Arguments to the effect hat Russia is historically and culturally incapable of good government (such as low trust and anti-market culture) lack support. More convincing argument: Russia has not had as radical a change in its government, in terms of both structure and personnel, as Poland or the Czech Republic. Comparison of Poland and Russia: * Both were industrial economies at the time reforms began * Both economies faced substantial disruption from the collapse of COMECON and other trade following the demise of the Soviet Union * Both economies were in poor condition when the reforms began, suffering from inflation, goods sh ortages and declining production. * Both experienced a near-collapse of the state prior to transition. In Poland – total demise of the communist party and its military regime * In Russia – the Gorbachev government faced a similar crisis, which led to the dissolution of the Soviet Union and the creation of independent Russia * After communism collapsed, both countries moved to fragmented, rapidly changing party systems and â€Å"semi-presidential† regimes, in which a conflict between president and legislature was present from the start. * Both were led in their transition by charismatic, populist presidents committed first and foremost to the destruction of communism. However, despite these similarities as of 1990, the two countries appeared in 1996 to have very different results of their reforms. I argue that an essential part of transition to capitalism is the transition of government.Despite similar economic reforms, government in Russia continues to retain su bstantial political control over economic life, and moreover uses this control to pursue predatory policies toward business. The political transition in Russia has not gone nearly as far as it has in Poland, and this slowness of political transition disturbs economic growth. Government in transition: * Even when the communist power collapsed, some remnants of a large government often remained, ready to continue political control. The principal goal of the political transition was to replace these remnants with institutions supportive of capitalism. This entailed two steps: * Depoliticisation – government control replaced with control by market orces * Price liberalisation – eliminates price controls that were used by planners to either stimulate or discourage production of particular goods, or to create shortages that allow planners to maintain their power over resource allocation. * Stabilisation – imposes a harder budget constraint on the government, and thus prevents politicians from using subsidies to encourage firms (and regions) to pursue political ends * Privatisation – removes direct control over firms from the government * New functions taken on by government: provision of laws and regulations that support a market economy. * The state had to be weakened overall, but strengthened in a few areas. * However, even with the three radical measures taken, the government retains much regulatory power which it can use to either support market economy or hurt it. Shock therapy does not guarantee depoliticization (as politicians can still exercise control in other ways) or a transformation of government institution which includes: * creation of laws and legal institutions that protect private property, enforce contracts between private parties, but also limit the ability of officials to prey on private property * creation of regulatory institutions that deal with competition, securities markets, banking, trade and so on * Despite sho ck therapy, politicians in Russia, particularly at local level, retain enormous control over economic life, which they use to pursue political ends and to enrich themselver. * This makes them rather different from politicians in Poland * Russia is also behind in creating the institutions of a new market economy. ALSO Transition of government into one that supports markets from the one that preys on them has gone further in Poland than in Russia – regulators of small business exert more power over business in Moscow than in Warsaw and use this power to enrich themselves. In addition, the Russian government has not yet successfully taken on the basic market supporting functions, including police protection. * Russia is much more of a laggard in the transition of its government than it is in shock therapy. Human capital of politicians: Key point: Lack of turnover of human capital in Russian politics may well be a serious reason for the poor performance of its government * Many R ussian politicians are communist leftovers experiencing significant hardships understanding what is expected from them. Few of these leftover politicians have transformed themselves into capitalist politicians. In Poland, 75% of local leaders elected in Poland in 1990 had no record of government service and 45% of newly elected mayors were under the age of 40 – in Poland the people have largely changed and been replaced by a younger crowd, with some experience in both democratic politics and market economy, whereas in Russia, the local leaders are largely the very same people who were there before the reform began. In this respect Solidarity changed Poland – Russia would be a very different place politically if it had a similar revolution from below. Incentives of local politicians to support private business * Campaign support * If politicians need to collect campaign contributions to run their elections, they might favour new business as a source of potential campaig n donations * Local tax base * If politicians need to provide public goods to attract votes, and must collect taxes to pay for these goods, they would support the growth of new business to broaden the tax base * Personal share holdings Local politicians may support private business if they effectively become shareholders in it and profit personally when it does well Poland vs Russia: Elections: * Poland had held elections more consistently than Russia and officials at very local level – where small business would actually have a political say – are all elected. * Because of elections, Polish politicians appear to be much more supportive towards private business than Russian politicians. Tax base * In Poland, the principal source of funds for local governments are local taxes and fees, especially property taxes incentive to the local politicians to broaden the tax base to increase revenue through new business formation and employment * In Russia, over 2/3 of local gover nment evenues comes from their share in taxes collected by central government through negotiation governors have little incentive to broaden their tax bases and instead focus on negotiations with Moscow Personal financial incentives: * In Russia, many of the local officials see a rather short and insecure future for themselves in politics. If the private economy grows, they are likely to lose power because they will not be acceptable to the new business elites or will be replaced by younger politicians during new elections. Absence of political security may prevent the politicians from accessing the future profits of the firms, therefore many local government officials simply destroy local business through excessive corruption and regulation – they take what they can while they can. Initial conditions Poland had been pursuing economic reforms at least since the 1980s (much longer than Russia) Polish private sector was well established by 1990 when reforms began (by 1986 1/3 o f the Polish labour sector was employed in the private sector) * Poland had a much more substantial legal history and tradition to rely on – many of its commercial laws were adopted as soon as reforms began because they were based on Poland’s own pre World War II laws * National tradition made the implementation of at least some institutional reforms much easier. * Russia had been building capitalism for a much shorter time – Gorbachev’s reforms allowed some quasi-private firms in Russia, but few compared to Poland. Russia’s history of market institutions is sparse too – pre-revolutionary laws were an instrument of autocratic control, not protection against it; regulatory agencies have been created from scratch, employees often view their jobs as mandates for personal enrichment rather than efficient regulation. * However, author believes that importance of initial conditions can be overrated – many countries in Eastern Europe, such a s Slovakia and the Czech Republic, are growing rapidly even though they had as little private business before the reforms as Russia did. Some countries of FSU are also growing despite having a limited history of legal traditions and public institutions. With proper political incentives, initial conditions are often overcome. Suggestions: Acceleration of elections at the sub-regional or local level * Fiscal federalism – more generally the tax system – needs to be reformed as well. * Institutional reforms need to continue – legal reforms are most important among those, but creating functional bureaucracies, one at a time, is also crucial. * Russia made the mistake of beginning with economic reforms and delaying the political and institutional reforms (however, author believes that business pressures are likely to play a critical role in the political transition of Russia and of course they did not exist before economic reforms) Estrin (1991) – Privatisation in Central and Eastern Europe Key points: Appropriate mode of privatisation depends on the development of capital market institutions and the availability of foreign or domestic private capital * Transition must be rapid to be effective, so reforming governments have been faced with the tasks of selling assets whose value is far in excess of domestic resources. Privatisation: * Objective: to improve enterprise performance and national economic efficiency and to help public finances (Vickers and Yarrow, 1988) * Definition (Milanovic) – transfer from the public to the private sector of ownership in such a way that private individuals become the identifiable ultimate owners Seven central areas in which property rights and the mechanism of resource allocation must be altered in order to build a functioning market sytem: 1) Ownership and control 2) Means of allocation 3) Aims of the System 4) The Allocation of Labour 5) The Allocation of Capital 6) International Trade 7) Role of StateReformers in Central and Eastern Europe strongly believe that their recent history proves that when the state is owner, it will always interfere in the operation of firms in such a way as to hinder the beneficial impact of competition Hinds (1990) – absence of effective private property rights is at the heart of the failure of actual socialist systems, and must be immediately eradicated by widespread privatisation. Privatisation: * Important way of raising government revenues, but it will not affect the state’s long-term financial position if enterprise efficiency is not changed; may still be sensible from a revenue point of view is short-term conditions call for additional expenditures with limited availability of taxation or other income sources * Important element in building markets Significant role in the formation of labour market institutions and the process of wage bargaining * Privatisation prevents a reversion to the old systems How to Privatise and to W hom? One of the main problems – mass privatisation in countries where domestic savings are small and capital market institutions weak Arguments FOR selling state’s assets: * Considerable revenues * If monetary overhang threatens to destabilise the macroeconomy, privatisation could absorb some of the excess liquidity. * Owners established through a process of financial exchange will have the strongest demand effective corporate governance Arguments AGAINST selling state’s assets: * Unequal distribution of income and wealth Traditional modes of privatisation are very slow and most analysts agree that for transition to be effective the changes must be fast * Valuation problem – nothing upon which to base valuation (no relevant record of profitability), a significant proportion of companies are loss-making, thus it is likely that sales price will be negative * No domestic actors with the resources to buy Most of these problems are resolved by a free distribut ion of the state’s holdings: * No need to value the assets initially * No need to find domestic purchasers * Privatisation could be extremely rapid * Provided an operational scheme can be devised, privatisation can be constructed in a highly egalitarian way, preventing the early concentration of wealth in the hands of the nomenklatura or black marketeers who otherwise would be the people most likely to gain from privatisation Disadvantages of free distribution: * Losing the revenues from sales Possibility of weak governance if capital ownership is dispersed – central issue is whether population at large are the appropriate owners to dramatically improve company performance Potential buyers or recipients: * Public at large – external privatisation or privatisation from above * Transfer of ownership to shareholders * Foreigners – access to hard currency, superior management skills and technical know-how * Insiders – internal privatisation or privatis ation from below * Involves the sale of shares to workers and managers in the firm * Attractive: * Could be administered quickly and relatively easily, yet could still provide some revenue to the government * Participative organisations may be more productive * Negative: Yugoslav experience: employee control may conflict with effective corporate governance * No establishment of credible procedure for wage determination and for reducing inflationary pressures * Clearly not suitable for companies that require a significant degree of restructuring (probably the vast majority) * Unjust – workers and managers in profitable firms stand to gain considerably from the privatisation process, while those employed in loss-making firms would obtain nothing * Potential for bribery and corruption as workers and managers can use insider information to undervalue the assets or to transfer them illicitly into their own hands Roland (1994) – On the Speed and Sequencing of Privatisation a nd Restructuring Big bang approach – fast privatisation through mass privatisation plans with no definite sequencing, leaving the task of restructuring to the owners of the privatised firm Key point:Political constraints necessitate a gradual approach to restructuring and gradualism has implications for the speed and sequencing of privatisation. In particular, we ward on the danger of privatising too fast firms where restructuring should best be delayed for political reasons. Conclusion: A condition for successful gradual restructuring is a screening mechanism to separate good firms from bad ones. It is crucial to separate thee firms and their channels of finance, so that good firms would become independent of government through government and face hard budget constraints while bad firms would remain under government control with strengthened control. Arguments for the big bang view of mass privatisation: * Speed Price liberalisation in a state-owned enterprise economy will n ot give the correct incentives, thus it is necessary to achieve very quickly a critical mass of private ownership in order to get firms to respond to market signals. * If not done: * Danger of inertia – due to firms not taking new profit opportunities * Danger of continued soft budget constraints – loss-making firms expect to be bailed out * Importance of getting the State out of the economy * Committing the State to avoid continuous intervention in enterprise activity * Absence of clarified property rights * Danger of large scale decapitalisation by managers who have de facto control without assigned property rights Experience: * Poland Plan: combining fast privatisation through giveaways together with strong control rights given to mutual funds to avoid dispersed ownership of firms * Political constraints have played a major role in blocking Polish mass privatisation – in 1994, four years after the beginning of â€Å"big bang† in Poland, it is still not implemented * Russia * Speed of privatisation – obvious success (about 1/3 of workers were in privatised firms by end of 1993) * Problems with restructuring * Former managers are still in control (workers did not sell their shares to outsiders to assure outsider control; managers preventing them) Political constraints: There are 2 main sources of political constraints to privatisation: * Ex-ante political constraints – feasibility constraints * Proposals may be blocked – e. in Poland where coalition in power preferred distribution to workers whereas the Polish mass privatisation programme involved distribution to the population at large * In Russia, policy-makers took into account ex-ante political constraints by designing a giveaway plan favouring managers and workers (Boycko, Shleifer and Vishny (1993) justify that this was the only way to get privatisation adopted) * Sometimes coalitions push forms of privatisation that are economically not sensible but poli tically difficult to avoid * Ex-post political constraints – concern the danger of backlash and reversal of given politics * This may be the case when a programme advertised as very egalitarian induces a high concentration of wealth in the hands of a small number of people * However, political constraints related to redistribution of wealth and income may not be the most serious * More serious political constraints are related to serious income risks related to restructuring – general knowledge that there will be a massive shift from heavy industry to services, from big to small enterprises, but in most cases, nobody knows in advance which enterprises will survive and which will die Experience: * Big bang restructuring is not ex ante feasible * Gradual restructuring may be more acceptable ex ante because: * Gradualism allows for â€Å"divide and rule† tactics * Gradual resolution of uncertainty may enhance ex ante feasibility * Aggregate uncertainty related to u ncertainty: restructuring may be positive but it can go wrong, too advantage to moving gradually by starting to restructure only a subset of enterprises or sectors * Gradual eform packages tend to start earlier – Hungary and China * Optimal sequencing: * Better to start with reforms having the highest expected outcome for a majority and to delay the reforms that are expected to hurt the most Gradual restructuring and privatisation policies: * No political constraints – restructuring may be left to the new private owners * Political constraints – very fast and non-differentiated approach to privatisation danger of partial renationalisations (subsidising a great number of firms) and general delays in restructuring (due to soft budget constraints/no incentives) * Gradual privatisation policy allows for: Establishment of a screening mechanism separating good from bad firms * Best firms tend to get privatised first as they are more likely to find a buyer less large r edundancies and better performance * Privatisation may be slow, but it is possible to speed it up: * Managers incentives to restructure before privatisation especially when given shares * In Poland, although mass privatisation has been blocked, successful privatisation has continued at a fast speed especially in smaller and medium enterprises through a â€Å"liquidation programme† – management buyout * Emergence of a sound private financial system If good firms get privatised first, bad firms remain under state control private savings are allocated to good firms with high yieldings sound financial system may emerge * A credible pol

Intrapersonal communication Essay

Dr. Kelly PenzUniversity of Saskatchewan- College of Nursing In the Article Warrior caregivers: Understanding the challenges and healing of First Nations men, Mussell describes the Medicine wheel as a conceptual framework to guide an individual to understand the four significant aspects of self which includes: physical, emotional, intellectual and spiritual aspects of self (Mussell, 2005). In this paper I have utilized the four aspects of self as an integrated approach to display who I am. In terms of the physical aspect of myself, the biggest challenge that I have faced was moving out from home. I used to live with my family in Saskatoon and moved to Regina alone a few weeks ago to pursue my education in Nursing. Along with my education, one of the main reasons to move out was so I could gain some independence. Moving to Regina from Saskatoon has been very difficult for me, as I have been facing many challenges. In terms of living alone now and physically away from my family, it has been hard for me to keep up with a healthy nutritional diet because I have to cook on my own now and I am not experienced in cooking. It has also been hard to keep up with daily exercise due to time management because I am either trying to catch up with schoolwork or working a part time job to cover my expenses such as rent, groceries and much more. While living at home I was the complete opposite of what I am now, I used to eat very healthy and exercise regularly because I didn’t have to worry about working a part time job and neither did I have to make any meals since my mom would always cook. Going from a very dependent individual to an independent individual has taught me many responsibilities and priorities in life and accepting this challenge I believe will help me establish my own identity. Emotionally, I have strong relationships with my family, friends and loved ones. The most important relationship I have with is my family, especially my mom who has raised my sister and I as a single mother. My family has taught me most of my values, disciplines and beliefs. My friends I believe are the ones who understand me the most no matter what the situation is. I am able to share absolutely anything with them, especially my best friend, and receive great advice. The most intimate  relationship I share with is my boyfrien d Dhiren who I have been dating for two years now and being with him makes me feel very loved and a sense of belonging. We share a very understanding trusting relationship where we set limits and boundaries to when it comes to being committed to each other. The several different relationships I have with different people shapes the way I interact with people now because I feel the more I am able to let everything out of me and share it with others, I am able to build on myself in terms of becoming less shy and getting out of my comfort zone to talk to others. Intellectually, I am always eager to learn and take upon new challenges. I am a type of person who learns very quickly and have always taken great interest in my education. Most of the knowledge I encompass has been taught to me by experience or directly through schooling. My work experiences has allowed me to teach others about my knowledge, for example I used to work in a Math learning center where I helped and guide children from grade school to high school with any math questions. Currently I work in a cellphone store and my work allows me to provide knowledge on the latest technology within the several different kinds of phones and educate customers. I believe that the more kn owledge I inherit, it shapes my critical thinking abilities and displays my understanding of everything around me. Spiritually, I am a Muslim and I strongly believe in the faiths and beliefs of the Muslim religion. In the article, Mussell describes the spiritual of self from the Medicine wheel as valuing the creation of Great Spirit which I agree to (Mussell,2005). I believe that God is the creation of everything and I value how much we should worship its creation such as respecting the environment because I think God is always watching over our good and bad deeds. I believe that if one has committed a bad deed then they should be punished for it and people who have done good deeds will be rewarded. My spiritual beliefs in my religion come from the teachings from my family and what their past generations had valued which has shaped me in thinking about religion how I do today. In conclusion, the physical, emotional, intellectual and spiritual aspects of self very much structures how one would represent their self identity, how others perceive them and the ideal self image. From my perspective, all four aspects in the Medicine wheel integrate together to create a framework to reflect on how the person I have become, in terms of how I think, the reasoning behind my logic and  how my past experiences has shaped me to the person I am today. References Mussell, W.J Bill . â€Å"WARRIOR-CAREGIVERS: Understanding the Challenges and Healing of First Nations Men.† Aboriginal Healing Foundation. N.p., n.d. Web. 21 Sept. 2014. .

Absolute Thresholds and Differential Thresholds

Thus, the differential threshold is a relative concept. Weber’s law (1834) states the positive relation between the first stimulus and the second stimulus. The greater the initial stimulus, the stronger the additional intensity need for the second stimulus to be perceived as different. Absolute thresholdDifferential threshold Amount of stimulusOne stimulusTwo stimuli MeasurementDistance between stimulus and nothingDistance between two stimuli Compare between absolute threshold and differential threshold, absolute threshold just include one stimulus while differential threshold include two. In measurement, absolute threshold measures the distance between stimulus and nothing while differential threshold measures the distance between two stimuli. As I am a marketing student, therefore, the first thing which comes to my mind when I am trying to start off with this piece of journal is that, do these differences between the two thresholds matter with marketers’ marketing strategies? And after I do some research on the internet and with my personal experience, I am quite sure that it does matter. The importance of two thresholds can be different to marketers under different situations. Absolute thresholdDifferential threshold Advertising ElementsExposure, Size, ColorAdvertising quality PeopleInvolvement, motivation, attention, attitude Concerning advertising elements, absolute threshold focuses on exposure, size, color, etc to attract target customers’ attention while differential threshold focuses on the advertising quality appear to customer in order for them to percept the different between those. These two thresholds are based on different people and are closely related to their involvement, motivation, attention, attitude on the particular good or service. So different people will have different threshold when percept the same object. When a firm launches a new product or a new brand emerges in the market, this is when the absolute threshold is more important to marketers. Because absolute threshold measures the minimum intensity that the customers can percept, as the new brand or product probably needs recognitions from them, otherwise poor sales arise. Therefore, the higher the exposures of advertising advance to gain consumers’ attention. On the other hand, the well use of five sensory techniques in the advertising can easier imprint in their mind. When a firm is modifying a product or service (positive improvement or negative change) that either willing or unwilling to let a customer in perceiving the difference, the differential threshold will be considered to be more important. Because differential threshold measure the intensity difference needed between two stimuli before people can perceive, the intensity modify of a product that cause the customer percept or not is what marketers’ concern. For instance, marketers want to know to what degree of a price cut or a bigger meal can be percept by customers, and thus affect their motivation to consume more. On the other hand, marketers want to know to what degree of raise in price or a smaller meal that can’t be precept by customers, or else it will increase the customer’s cost risk and decrease his or her motivation in purchasing. When taking in the consideration in such a negative change, it reminds me with one of my personal experience. As I am a fan of Coca-Cola, I used to drink at least three cans a week and I would save those cans up on my own desk in order to bring those cans for recycling once a week. One day when I was doing the same practice after washing the can and try to put it to the group of cans on my desk, I found out that the can was smaller than those cans that I bought before, and when I took a look on the volume of the Cola, the drink can was cut to 330 ml from 355 ml which indicates a 7 percent reduction in the size of the can. I was kind of shocking that how come a Coca-Cola fan could not recognize such a change in size. After attending the lecture, I know that there is another dimension of sensory discrimination what is known as the â€Å"just noticeable difference† (JND). Weber’s work was applied to marketing by Miller (1962) which states that a 7 percent change in other sizes of similar products is needed before a change is noticed. This implies and explains what I experienced and how the marketers try to apply this theory in their strategic moves. Absolute Thresholds and Differential Thresholds Thus, the differential threshold is a relative concept. Weber’s law (1834) states the positive relation between the first stimulus and the second stimulus. The greater the initial stimulus, the stronger the additional intensity need for the second stimulus to be perceived as different. Absolute thresholdDifferential threshold Amount of stimulusOne stimulusTwo stimuli MeasurementDistance between stimulus and nothingDistance between two stimuli Compare between absolute threshold and differential threshold, absolute threshold just include one stimulus while differential threshold include two. In measurement, absolute threshold measures the distance between stimulus and nothing while differential threshold measures the distance between two stimuli. As I am a marketing student, therefore, the first thing which comes to my mind when I am trying to start off with this piece of journal is that, do these differences between the two thresholds matter with marketers’ marketing strategies? And after I do some research on the internet and with my personal experience, I am quite sure that it does matter. The importance of two thresholds can be different to marketers under different situations. Absolute thresholdDifferential threshold Advertising ElementsExposure, Size, ColorAdvertising quality PeopleInvolvement, motivation, attention, attitude Concerning advertising elements, absolute threshold focuses on exposure, size, color, etc to attract target customers’ attention while differential threshold focuses on the advertising quality appear to customer in order for them to percept the different between those. These two thresholds are based on different people and are closely related to their involvement, motivation, attention, attitude on the particular good or service. So different people will have different threshold when percept the same object. When a firm launches a new product or a new brand emerges in the market, this is when the absolute threshold is more important to marketers. Because absolute threshold measures the minimum intensity that the customers can percept, as the new brand or product probably needs recognitions from them, otherwise poor sales arise. Therefore, the higher the exposures of advertising advance to gain consumers’ attention. On the other hand, the well use of five sensory techniques in the advertising can easier imprint in their mind. When a firm is modifying a product or service (positive improvement or negative change) that either willing or unwilling to let a customer in perceiving the difference, the differential threshold will be considered to be more important. Because differential threshold measure the intensity difference needed between two stimuli before people can perceive, the intensity modify of a product that cause the customer percept or not is what marketers’ concern. For instance, marketers want to know to what degree of a price cut or a bigger meal can be percept by customers, and thus affect their motivation to consume more. On the other hand, marketers want to know to what degree of raise in price or a smaller meal that can’t be precept by customers, or else it will increase the customer’s cost risk and decrease his or her motivation in purchasing. When taking in the consideration in such a negative change, it reminds me with one of my personal experience. As I am a fan of Coca-Cola, I used to drink at least three cans a week and I would save those cans up on my own desk in order to bring those cans for recycling once a week. One day when I was doing the same practice after washing the can and try to put it to the group of cans on my desk, I found out that the can was smaller than those cans that I bought before, and when I took a look on the volume of the Cola, the drink can was cut to 330 ml from 355 ml which indicates a 7 percent reduction in the size of the can. I was kind of shocking that how come a Coca-Cola fan could not recognize such a change in size. After attending the lecture, I know that there is another dimension of sensory discrimination what is known as the â€Å"just noticeable difference† (JND). Weber’s work was applied to marketing by Miller (1962) which states that a 7 percent change in other sizes of similar products is needed before a change is noticed. This implies and explains what I experienced and how the marketers try to apply this theory in their strategic moves.

Healthcare law Assignment Example | Topics and Well Written Essays - 500 words - 1

Healthcare law - Assignment Example Wade 410 U.S. 113 (1973), where the House of Lords concluded that abortion was only allowed if it was to save the life of the mother. The lesson I have learned in this module is that neither the common law nor the statute allows the termination of pregnancy unless the life of the mother is in danger. Additionally, if it has been established that the continuance of the pregnancy will cause grievance harm to the child in case they are born in instances where they are born with mental physical defects or in instances where the pregnancy was acquired through incest or rape. I have also learned that sterilization is the surgical procedure that allows an individual to end their ability or capability to bear children (Tribhuwan & Patil, 2009). There is voluntary and involuntary sterilization; however, in involuntary sterilization it occurs to individuals who lacked informed consent and occurs in cases where the patients is incompetent or because the state has indicated that sterilization is compulsory especially in eugenic sterilization. The government retains the right to privacy of individuals in the sense that, it doe s not provide any statute that govern the reproduction as people have the right to choose whether they want to procreate or not. Therefore, involuntary sterilization has been highly disfavored by many as it has been held to be unconstitutional. The lessons I have learned in this module can be applied t may work by ensuring that people understand the statutes that govern issues or reproduction ensuring that people do not violate the fourteenth Amendment of the constitution. In the case of Skinner V Oklahoma ex. rel. Williamson, 316 U.S. 535 (1942), Skimmer was sentenced to involuntary sterilization under the Oklahoma Habitual Criminal Sterilization Act permitted the state to sterilize individuals who had been convicted form more than three times for crimes that amounted to felonies and moral turpitude. However, the

How surroundings effect people Essay Example | Topics and Well Written Essays - 1000 words

How surroundings effect people - Essay Example The setting of the story is along an Ecuadorian river where Dillard is staying alongside some Americans and guides from Ecuador. In the second book; â€Å"Our Animal rights by † Anna Quindlen, the writer is writing to express dissatisfaction about people having entered the animal habit and displacing them, just to find settlement and a place to live. The issue here is does it mean that people should always displace animals from their original habitat whenever they increase in number? According to the two pieces of art, I think that people should always learn to adapt to the surrounding that prevail in their environment. There should be peaceful co-existence between animals and people. Both parties can be of mutual help if the relationship between them is well understood and taken good care of. Dillard tries to persuade people to believe that the jungle can offer best opportunities for exploration. The jungle has a lot of adventures that people can enjoy as they take adventure, he points that every year, there are many toddlers that are eaten by the mighty and powerful anacondas but that alone doesn’t make the jungle a place not good for human survival. When people live in the environment, they are able to devise ways of peacefully co-existing with animals. The main point of attention is the attractiveness within the forest. We have a 430 pound fish trapped from the river water. This is just an example of how adventures and economical living in the jungle can be. The reader employs a rather emotional appeal just to let the readers understand that living in the jungle if not life threatening. With reference to the Napo River, she says it is a â€Å"â€Å"bowl of sweet air, a basin of greenness, and of grace, and, it would seem, of peace† (Braw 3) this kind of description is meant to show the reader that the river is kind of a something huge, wide and enormous lined with beautiful green trees. This is actually a description that would

HR Training class Essay Example | Topics and Well Written Essays - 2000 words

HR Training class - Essay Example e management must evaluate; who needs the training, where the training should happen, when the training will happen, why the training should happen, as well as, how it would happen. To accomplish this, the management must conduct analysis-using information that relates to the organizational goals and objectives, jobs and other tasks, which the employees need to learn, competences that the employees must possess to execute their duties effectively, as well as, the employees that the human resource should train. An effective needs assessment, program would help the management to direct resources to the areas that have the greatest demand. The needs assessment, program should help in addressing the needed resources as far as customer service is concerned. It should as well help in evaluating the needed resources as far as enhancing productivity, achievement of organizational goals, as well as, improvement of the quality of goods and services are concerned. A needs assessment in customer service entails identifying the gap between what the human resource expects from the employees and the actual performance, as far as customer service is concerned. Needs and assess ment, therefore, helps in closing the gap. The assessment within the small retail business would include three levels, which this paper will justify their need. The first level is organizational assessment. Organizational assessment determines the current performance of the organization, as far as, offering quality services to the customers is concerned. The assessment will help in identifying if the employees possess the right skills, abilities, knowledge or competencies in customer service. The assessment helps in solving problems present in customer service. Different businesses have different customer service needs. For example, a manufacturing company would have different customer service needs compared to a retail business. This reflects the importance of assessing the needs. In other words, it would

Harvard Business Case-Pitney Bowes Inc Assignment

Harvard Business Case-Pitney Bowes Inc - Assignment Example The email overload is one of the discovered stresses of the workplaces. It is evident that the founders of Stamps.com did identify the same jobs to be done (Cefkin and Melissa, 2009, p.57). Q 2). The reason that caused the Pitney Bowes team to lose focus on something that did this job, and instead end up with a postage meter at a price point can be discussed below. The reason is when the experts of the company began to predict the advent of the letter less and paperless, Pitney Bowes replied by investing heavily in measures of diversification. The diversification includes the leasing and acquisition of aircraft fleets and trucks. Then the CEO, who came up established postage meter at a price point (Cefkin and Melissa, 2009, p.57). Q 3). The ability of a new business growth can be enhanced by relying on substantial acquisitions to achieve the strategic goals of the enterprise. The reason is that the purchases are cheaper, faster, and less risky than expansion that is organic (Cefkin and Melissa, 2009,

Daniel C. Smith , Teacher Case Study Example | Topics and Well Written Essays - 1000 words

Daniel C. Smith , Teacher - Case Study Example He entered into a discussion with the talk show host about teaching the African history in his class during the black history month. Procedural history The case was authored in the United States Supreme Court. This is where the proceedings started and the decision was made. The decision made was based on a motion summary of the judgment. The case was decided after all the evidence and interpolation of all constitutional issues were interpreted and considered in the case. Issues After the case was put before the judges several witnesses and information concerning the case was produced. He was given a chance to prove his case. School superintendent testified that he received a call from his secretary about calls that were being made into a radio show about a statement made by one of the teachers. The comments were about a banner hanged that read, â€Å"200 years of United States history, 2000 years of African history† the teacher continued and added his comments to â€Å"in 200 years we went to the moon. After 2000 years they are still urinating in the drinking and bathing water.† The superintendent responded to one of the messages from a group called Media watchdog. The group said it had a recording of the telephone conversation made to the radio show but they could not identify the caller. Daniel, who was later on identified as the caller, was given a chance to respond to the claims. ... In this case, there are two conflicting rules that are supposed to be considered. The constitution of the United States advocates for freedom of speech, while the ethics of public servants are asked to carry themselves with decor. The court will also look at the impact that the remarks had on the community. In addition, the intention of the remark will be a focus point. The court will try to make its decisions while considering all these facts. Analysis The court has heard all the comments and arguments from both sides. The court has heard what Mr. Daniels had to say about the accusations before the court he has been given to respond to the accusations. The remarks made that â€Å"in 200 years we went to the moon. After 2000 years they are urinatinging and drinking water†, are at the center of the case. These remarks were made in reference to the Africa history month. In making its decision the court will consider the repercussions that the remarks have in the community. The c onstitution is clear on how such malicious remarks should be treated. The respondent is a civil servant does not allow him to make sue constitution freedom approach is guaranteed responsibility. Such remarks can cause unrest in the county. The comments attracted a lot of attention from the media and other centers. This could affect a lot the subsa1tantive due process of the case. Many views on how the case should go were aired. On February 10, 2002, a concerned citizen wrote a letter the governor of the state. The letter was written by Mrs. C. Scott is protesting the treatment of Mr. Daniel. She stated that Mr. Daniel was simply exercising his freedom of speech. She demanded an investigation to be done about the case. On February 12, 2002, a board

Do my assignment Essay Example | Topics and Well Written Essays - 250 words - 1

Do my assignment - Essay Example rage American are their security and country’s economics that directly affects the amount and quality of food on their table, their shopping habits, their selection (most of the times it is the availability/affordability) of college/university, savings/investment and health. Obama might not have been the best when it comes to taking care of all these matters but he sure is a person that keeps things under budget. In my observation and from what I have learnt from my American friends, (I’m a student from the Middle East) the majority considers Romney a Neocon. He would probably waste precious resources of the US citizens in engaging unnecessary battles and wars. Americans don’t want their money to be spent on military ventures, painfully, outside the US soil. The Americans have their own battles to fight on their own soil. Being a military superpower doesn’t mean that each of its citizens is fed properly and sleeps in a warm

Endangered Species Act of 1973 Assignment Example | Topics and Well Written Essays - 250 words

Endangered Species Act of 1973 - Assignment Example As it is, there are already many in society that would argue that no exceptions whatsoever should be made.   In the end, to open up an exception to private enterprises as well, no matter how well-intentioned the organization might be.   In effect, were the government to open up such exceptions to others, the floodgates would literally come alive with individuals or organizations who felt their work was so important to the public welfare that it should be permitted to continue, no matter what the cost to a given species might be.   This would go against the very intent of the Endangered Species Act, not to mention create a bureaucratic nightmare for all affected agencies as they would be charged with the task of determining who to grant an exception to, and who to deny.   At some point, it would simply not work and would be ethically improper to proceed with that course of action.  

History of scientific method Essay Example for Free

History of scientific method Essay Francis Bacon was born in London in 1561 and died 1626. He ended up being a great philosopher, an author, and the inventor of the inductive method, also known for advancing the scientific method. He was the second son of Sir Nicholas Bacon and Lady Anne Cooke Bacon. Lady Anne was the second wife of Sir Nicholas. Sir Nicholas was also the Lord Keeper of the Seal at the time, which is a job that would eventually be held by his son, Francis Bacon. Bacon started going to Trinity College in Cambridge in 1573, when he was only 11 years old. He completed his course of study there only two years later. After that he went to the school that his older brother, Anthony, went to which was Grey’s Inn, where he studied law after his father died in 1579. Bacon’s involvement in high politics started in 1584. He always aimed to change the thoughts of natural philosophy and tried to get himself in high political offices. However, Queen Elizabeth tended not to trust him very much especially he refused to agree to her request of funds for the Parliament. He decided to vote to allow the subsidies but to double the amount of time it takes to deliver them. â€Å"Bacon had emphasized the necessity of scientific improvement and progress. Since he failed to secure for himself a position in the government, he considered the possibility of giving up politics and concentrating on natural philosophy. It is no wonder, then, that Bacon engaged in many scholarly and literary pursuits in the 1590s†(Klein). In 1597, he published his first book, the seminal version of his Essays, though his income was still fairly unstable. I find it fairly humorous that Bacon planned to marry a rich widow named Lady Hatton, but was unable to because a man named Sir Edward Coke was courting her. In 1617, Francis Bacon was made the new Keeper of The Seal, and was made lord chancellor the next year and received the title of Baron Verulam. In 1620, Bacon wrote the book â€Å"Novum Organum,† which means â€Å"New Method. † He was the leading advocate of the inductive reasoning method. Inductive reasoning is the process that draws on the particulars of sensory evidence to form general principles(Fiero). He used inductive reasoning in attempts to improve the errors made by both Plato and Aristotle. â€Å"Aristotelian philosophy was based on a set of rules that governed the consistency between conclusion and a foundation that was accepted as unquestioningly true; Bacon’s philosophy was the opposite†(Soibelman). Bacon turned his back on Aristotle and Classical science. He looked to remove errors by blind obedience of religions and traditional authorities(Fiero). Bacon was also warned against four â€Å"Idols† that make clear and objective thoughts difficult. The first he called The Idols of the Tribe, which are deceptive things inherent in the mind of man, and so the entire human race has it. These may include that people always try to fit things into patterns, even if it isn’t actually in a pattern. They see what they want to see according to their beliefs because their six senses are flawed and are able to fool them(Terry). The next he called The Idols of the Cave, which are in the minds of each individual and are based on the individual education and background of each person. The â€Å"Cave† represents the mind. The person’s thoughts wander, some peoples thoughts wander more than others, through the cave of the mind. They can be changed by the person’s mood, education, background and habit. People will usually look back on conclusions they have learned before or come up with themselves and they will tend to favor the ideas that support those previous ideas. Individuals also tend to favor different things because of their background or education. For example, some will favor differences, while others favor similarities. People will see different things depending on their interests as well. The mathematician will see math and numbers in all things, like the T. V. character Charlie Eppes from the show Numb3rs. The chemist will see chemistry in all things and the architect tends to see shapes in all things. The third he called The Idols of the Marketplace, and that one was based on the verbal communication of people. It is based primarily on bad word choices and misunderstanding of others. He believed that, though people like to think they use words to express their thoughts on a subject, the words would replace thoughts all together. â€Å"†¦Words arise as substitutes for thoughts and men think they have won an argument because they have out-talked their opponents†(Hall). Words can have several different meanings. For example, the word light could mean the opposite of heavy or it could mean something that illuminates, such as the sun, a lamp, fire, or a beacon. Another example of this is the word like. Like could mean to be similar to, or it could mean to have a preference for something. Words can frequently work against what the speaker is really trying to say. They can make things seem different than what was really intended. The last was known as The Idols of the Theatre, which are hindrances caused by philosophy, tradition, theology, and science. Since these idols are practiced and defended by the well-educated people, the less-educated people tend to just accept their validity without question. This is how cults and even some religions have started. A person will take a single verse or small group of verses out of the Bible completely out of context and build a whole religion off of it. Using that method, a person could make the Bible say whatever they wanted it to say. The really sad part about that is that those cults will often still see themselves as, and call themselves Christians. People who follow these ways of thinking have children and grandchildren who just accept it as truth because it’s all they’ve known, so it becomes part of their way of life and influences their way of thinking. In 1626, Francis Bacon decided to try an experiment on how the cold would affect the decay of meat. So he bought a chicken and stuffed it with snow. Unfortunately, he caught a cold, which developed into pneumonia, and he died on April 9th. Bacon was the man that set up the basis that let people like Galileo come up with the theories that they did. Before this peoples’ philosophies were based on pure faith and, actually, had very little to do with logical reasoning. He was the guy that disagreed with the way things were and pointed them out. Descartes probably would not have gotten along with him very well. Even today, we base the majority of our philosophies on reasoning rather than just human belief. Actually, Bacon’s Four Idols are, even still, good things to watch out for and avoid. They do pose serious problems even if you aren’t a philosopher. There is a lot to be learned from the way Bacon looked at the world. Works Cited

Industrial Grinders Essay Example for Free

Industrial Grinders Essay With the introduction of less costly plastic rings by company, Henri Poulenc, Industrial Grinders is faced with a decision of a total changeover from steel rings to plastic rings for their machines that would also fit similar machines manufactured by other companies. Henri Poulenc has introduced the less expensive plastic rings in a small market affecting 10% of Industrial Grinders’ sales . Industrial Grinders believes the market will eventually change-over to all plastic rings. Industrial Grinders must decide a timeline for changing production. It is estimated that production could begin by mid-September. With raw steel and steel rings already in inventory, IG must sell-off existing inventory before changing total production to all plastic rings. a. Plastic Rings versus Steel Rings Steel rings last approximately 2 months Plastic rings last approximately 8 months 100 steel rings cost $263.85 to produce 100 plastic rings cost $66.60 to produce At a weekly profit/Loss, Net income for 690 steel units would be $390.00 At a weekly profit/Loss, Net income for 172.5 plastic units would be $437.80 If sales continue at 690 units per week from May to mid-September, 10,350  units will have been sold, leaving 15,100 steel rings in inventory at a cost value of $39,713. This would require approximately 22 more weeks of sales to deplete inventory. As steel rings will last for two months, the sale of existing steel rings will have a faster turn- around time for continued depletion of stock. Knowing that Henri Poulenc is affecting sales in only a small portion of Industrial Grinders’ territory, retooling for plastics should also begin while steel rings are being phased out. Industrial Grinders can continue to charge the same amount, or more, for its plastic rings, as Henry Poulenc has set the standard in pricing. During the upcoming slack period, the company will employ workers at 70% of regular wages to finish all steel production, while full-time staff completes retooling on available machines. Examine alternative theories, assumptions and ideas: a. Rings account for a substantial portion of Industrial Grinder’s revenue. b. Plastic rings, sold by Henry Poulenc, are sold for at least the same amount as Industrial Grinder’s steel rings. c. Only 10% of Industrial Grinder’s market is affected by Henry Poulenc. d. Henry Poulenc is the only company producing plastic rings. e. Shipping weight for plastic rings is less than steel rings. f. As plastic ring use spreads, the customer will demand the longer lasting plastic ring. g. Steel ring production will be phased out due to market demand for plastic rings. As the future production of rings within the industry will undoubtedly change from steel to plastic, Industrial Grinders must take swift action to keep up with industry changes and customer needs – jumping ahead of further competition. However, taking into consideration the 8 month life of plastic rings and their lower production cost as opposed to the 2 month life of steel rings at a higher production cost, sales must increase to sustain the higher profit margin of plastic rings. Determine the appropriate actions, alternatives or conclusions for the case: Industrial Grinders should change to plastic ring production. As plastic rings have been introduced by competitor, Henry Poulenc, rings with a longer life will be in increasing demand by customers. Industrial Grinders must forge ahead and heavily market the plastic rings as a better product for their customers. The plastic rings are less expensive to make, less costly to ship but have a longer life on machines. Although some revenue will be lost due to the longer life of plastic, Industrial Grinders will recoup losses with added sales. 2. Inventory Analyzing the cause of the problem or situation A changeover to plastic rings poses a problem for Industrial Grinders. Its inventory of special steel and inventory of produced steel rings must be dealt with before or during the production of plastic rings. a. Raw Steel The raw steel inventory cost value is $26,444. The steel cannot be sold to another party and will have to be used or counted as a loss to the company. b. Steel Rings The steel ring inventory cost value is $67,149. These rings could be sold within the existing market.The total cost of raw steel and steel rings inventory exceeds $93,000.00. The decision whether to use all raw steel and sell all existing steel rings becomes a major concern within Industrial Grinder’s management. Examine alternative theories, assumptions and ideas: a. Industrial Grinders wants to change from steel rings to more cost effective plastic rings. b. Management does not want to absorb the cost of unused inventory. c. Not all management agrees on use of raw steel inventory. d. The introduction of plastic rings will spread throughout the industry. e. Industrial Grinders could produce steel rings while retooling some machines for plastic production. f. Industrial Grinders could sell existing steel rings and take a loss on raw steel. Determine the appropriate actions, alternatives or conclusions for the case: Industrial Grinders is faced with a financial decision regarding disposition  of current inventory. Believing that the future lies with the more cost effective plastic rings, IG should continue to sell existing steel ring inventory while producing further steel rings, using the raw steel inventory on hand. The plant down time could use excess labor to deplete the raw steel. During this period, retooling could also occur and plastic ring production would begin. The machining changeover would be possible with a minimal cost of $1800.With Henry Poulenc affecting only 10% of IG sales, Industrial Grinders should deplete stock and introduce plastic rings. 3. Management Concerns Analyzing the cause or problem of the situation: Within management, it is agreed that plastic rings should be produced. However, the disposition of inventory on hand is not agreed upon between sales management / engineering and plant management/ parent company management. a. Sales Manager, Harry Greiner, believes inventory could be counted as a loss. Plastic production should begin and steel rings should no longer be sold. Selling both steel and plastic would be cause for market retaliation. b. Development Engineer , Anders Ericsson, is concerned about inventory not being depleted by plastic ring production in September. c. German Plant General Manager, Lawrence Bridgeman, is concerned about inventory. He believes, at the onset, that plastic rings should only be sold in markets affected by Henry Poulenc. d. Parent Company Head, Hein Van Boetzalaer, agrees to plastic rings but states that IG must use inventory. Examine alternative theories, assumptions and ideas: a. All but the Sales Manager are concerned about inventory cost. b. Selling plastic rings within some markets may cause steel ring sales to slump when other customers learn of the plastic rings and their longer life. c. The raw inventory could be in production during plant down time. d. The existing steel rings could be sold while the raw steel could be accepted as a loss. e. Henry Poulenc is the only company producing plastic rings. f. IG has time within the industry to sell all existing inventory while retooling for immediate production of plastic rings. Determine the appropriate actions, alternatives or conclusions for the case: Industrial Grinders upper management should implement the course of using and selling the existing inventory while retooling for plastic rings. Although sales and engineering opinions are taken into account, the idea of taking a loss for inventory on hand is unacceptable in IG’s current position. Henry Poulenc only affects 10% of IG’s current market. Upper management must make the decision on the company’s future operations. It is not proven that IG’s total market must immediately receive plastic rings. Depleting inventory, while offering plastic rings in the affected market , is an acceptable alternative. Depleting inventory first, then changing to all plastic rings is also an acceptable alternative. However, the parent company must decide the fate of inventory and future plastic production.