Effectiveness of Communication in an Organizational Environment Essay

Effectiveness of Communication in an Organizational Environment - Essay Example The opposite group was allowed to ask questions and present its own views regarding the idea presented by the other group. I was also a part of one of the groups. Observation Initially the teacher explained the theoretical concepts of the topic to us. We were told about the factor that add to the effectiveness of inter-personal communication which included; completeness, conciseness, concreteness and clarity. Afterwards, we were told about the factors that could cause hindrance in the process of communication. The hindrances included physical noise present in the surroundings of the place where communication takes place, psychological noise that keeps a person from processing the information being communication due to a distraction or emotional situation and the difference between the social and academic background of the individuals communicating. After the explanation of the theoretical concepts, we were told about certain real life scenarios that occur in organizations and about t he flow of communication in the organizations. We were told that the hierarchical structures of organizations impair the free flow of communication in organizations and they cause delay in the delivery of information. ... wed in this scenario is that, the subordinate will communicate to his manager who will communicate the information to the relevant person in line with his position in the respective department and then the information would finally be communicated to the concerned individual. In this extensive flow, sometimes certain essential facts are lost from the information and a distorted version of the message is delivered. After the teacher was satisfied that both the groups had understood enough concepts to come up with ideas, the discussion started and each group was told to present an idea to improve the flow of communication in an organization along with sufficient justification. The members of both the groups started figuring out the ideas among themselves. In my group, only a couple of students were taking part actively. One of them said that organizations should remove hierarchical structures and adopt a flat structure. Another group member said that this idea was impractical and organ izations will not be able to adopt a completely flat structure. He advised that the organizations should introduce such a policy that allows all the employees to communicate to any person at any level of the organization without going through a specified channel. He also added that an ‘open door policy’ could be an example of such a policy. Other group members nodded at this idea and this showed that they preferred this idea over the idea presented before. However the group member who presented the first idea held the view that this idea was not that effective as the flow of communication in an organization cannot be brought unless a prominent change is not made in the authorities and responsibilities of the personnel of the organization. Other group members weighed the pros and cons of

Preety Vs Non Preety Thesis Example | Topics and Well Written Essays - 3000 words

Preety Vs Non Preety - Thesis Example It will be argued that those who appear better always do relatively better in their lives – keeping all other factors aside. It will further be contended that people who are physically more attractive tend to get more opportunities in their lifetime as compared to their colleagues with unattractive personalities. Moreover, the idea that people with more attractive physical appearances comparatively achieve more in their lives, will be put forward with the help of observation of each and every stage of a human life. ‘Physical appearance’, for the purpose of this paper must not be misinterpreted as ‘beauty’, as the idea of beauty as mere physical appearance is subjective. The physical appearance indicated throughout this paper will relate to only physical attractiveness which may find its roots in different characteristics of a person like his/her intelligence, approach, personality, richness, way of communication and/or prettiness etc. The paper propos es that even though a person’s physical attractiveness may not usually determine his/her working capacity, it is a recurring phenomenon that a person’s physical appearance affects other people’s perception of him thus giving rise to unequal distribution of opportunities amongst the working class based on their physical attractiveness (Loh). ... to show its effects† (Jackson) It is further proposed that the phrase ‘deciding his/her life’ refers to one’s eventual success in life through different stages that every human has to live e.g. childhood, teenage, young adulthood, adulthood and finally old-age. It does not mean that one’s personal life decisions are based upon his physical appearance, however, it refers to the idea that other’s decision with respect to him/her will definitely depend upon his/her physical appearance. The human society revolves around interdependence and notions of social contract (Hampton) which require social interaction and such social interaction is undoubtedly influenced largely by each individual’s physical appearances. Throughout the paper, the main focus will be upon the influence of physical appearance in the social interactions (reflections and perceptions) in different frameworks of various institutions that one happens to come across in his ent ire life-time. â€Å"Democratic or not, physical attractiveness has an important influence in almost every realm of behavior in which its effects have been studied† (Jackson). Through following three subdivided stages of one’s life, this paper will discuss above mentioned contentions in the light of physical attractiveness – (a) Childhood (Kindergarten), (b) Teenage and young adulthood (Middle & High School), (c) Adulthood & Old-age (Job market and Retired life). 2. Effect of Physical Appearance in one’s Childhood life: The birth of a child is known to have been the most beautiful gift of nature. But is this beauty enough to blossom that child as beautifully as others who were born at the same time as him? The most logical answer that follows is – no. There will always be an unequal distribution of resources

African Americans and the Prison System Essay Example for Free

African Americans and the Prison System Essay I. Introduction In the book the Mugging of Black America, Earl Ofari Hutchinson relays an interesting experience by a reporter. The reporter, who spent two and a half hours watching suspects march before Washington, D. C. Superior Court Judge Morton Berg, noted that all but one of these subjects was Black. He stated, ? Â §There is an odd air about the swift afternoon? Xan atmosphere like that of British Africa in colonial times? Xas the procession of tattered, troubled, scowling, poor blacks plead guilty or not guilty to charges of drug possession, drug distribution, assault, armed robbery, theft, breaking in, fraud and arson. According to Hutchinson, the reporter witnessed more than a courtroom scene; he witnessed the legacy of slavery. This paper will attempt expand on Hutchinson? Â ¦s theory. It will do so by first describing slavery and its lasting impact then it will attempt to show how the current criminal justice system mirrors slavery. PART 1: Slavery I. The History of Oppression and African Americans The history of the oppression as it relates to African Americans began in 1619. It was this year in which a Dutch ship brought the first slaves from Africa to North America. Following this arrival of twenty Africans in Virginia, white European-Americans created the institution of slavery. Slavery spread so quickly that by 1860 the original twenty slaves turned into nearly four million. In the beginning the legal status of these Africans was undefined. This absent definition created a lack of certainty which allowed for some slaves to become free after years of service. This only lasted briefly. In the 1660s, however, the colonies began enacting laws that defined and regulated slaves and the institution of slavery. One of the most important of these was the provision that black slaves, and the children of slave women, would serve for life. These ? Â §breeding laws were just the beginning. Soon, slavery in the United States was governed by a body of laws developed from the 1660s to the 1860s. Even though every slave state had its own slave code and case law, it became universal that slavery was a permanent condition. In addition to slavery being a permanent condition, slaves were also, under these laws, considered property. Slaves, being property, could not own property or be a party to a contract. Since marriage is a form of a contract, slave marriages had no legal standing. Most codes also had sections regulating free blacks. Under these codes blacks who were not slaves were still subject to controls on their movements and employment. These laws served not only as a physical limitation, but an ideological one also. In addition to granting slave owners and white people power over slaves and in some cases free blacks, the laws also granted slaveholders and white-Europeans an intangible source of power. Socially, the institution of slavery allowed white slave owners to believe they had not only physical control, but physical and mental superiority over the slaves. With only a few exceptions, all slaves were Africans. This fact placed the label of inferiority on black skin. The actual institution of slavery as it relates to master and slave lasted up in till the Civil war. The American Civil War was fought, in part, over slavery. During the war, President Abraham Lincoln issued the Emancipation Proclamation, which ? Â §freed all slaves. This seemingly, brought the end of slavery throughout the United States, but unfortunately left a lasting impression. From this point on slavery took on a new form as former slaves being associated with the label of inferiority. II. The lasting effects of slavery: continuous oppression Slavery is defined by Webster? Â ¦s dictionary as ? Â §The state of being under the control of another person . Aalthough the actual physical control and violence supposedly ended after the emancipation proclamation, The intangible theory of supremacy derived from the institution of slavery resulted in many lasting effects. These effects in and of themselves are a form of force, a form slavery. a. The lost sense of culture and cultural pride: Feeling of inferiority Slave drivers made great efforts to eliminate African culture. For instance Africans were beaten if they were caught speaking their native languages or carrying out native rituals . Therefore, they were not able to effectively pass the languages, stories and traditions on to their children. This forced suppression resulted in the loss of verbal records and a rich legacy of history. It is no secret that there is pride in culture. Taking away the culture takes away the pride and the motivation and results in feelings of worthlessness. b. no economic foundation Slave drivers not only attempted to deprive the Africans of there culture and pride, but they successfully robbed them economically. Slaves were forced to work without pay for years while padding the pockets of the slave owners. This deficit of economics resulted in an inability to establish an economic foundation in the United States. c. Unleveled playing field Along with the deprivation of financial resources, another significant factor concerning the state of African Americans is arrested development. Slaves were deprived of opportunities to learn and become more competitive in many areas of society. Black people were not allowed to read or learn to read, so they could not take advantage of written text. All these lasting effects placed blacks in a severely disadvantaged state when slavery was abolished, led a socioeconomic structure in which white people generally held the highest ranks and Black people generally held the lowest ranks. III. Maintaining oppression In order to maintain this socioeconomic structure, there always seems to be a new form of oppression set in place to maintain ? Â §slavery. As if the above detrimental effects of slavery were not enough, the White southerners were anxious to maintain more direct power and control over people with black skin, despite there classification as ? Â §free. The White southerners decided to, again, use the law in order crystallize there theory of inferiority and keep black people at the lowest ranks. In 1865, southerners created Black Codes, which served as a way to control and inhibit the freedom of ex-slaves. These historic Codes controlled almost all aspects of life, and prohibited African Americans from almost all the freedoms that had been won during the Civil War. The codes, which were blatantly racist and oppressive, were eventually suspended in June 1866, during the ? Â §reconstruction era. During this time period in America and despite resistance, African-Americans were slowly becoming part of this nations inclusion. By 1868, the 14th Amendment to the Constitution confirmed the long awaited citizenship for Blacks in America. By 1870, the 15th Amendment was added to the Constitution which made it illegal to deny the right to vote based on race. The Reconstruction era, although short-lived, showed the first real attempts of inclusive freedom for African-Americans since the abolition of slavery. Gains were taking place: Citizenship, Voting, Education, and Politics. But, the underlying desire to have power over those in black skin never subsided. Just like the black Codes, this desire to dominate again manifested itself in another form, Jim Crow Laws. These laws promoted discrimination and the denial of equal protection by law. Just like the codes, they too were eventually abolished. Just like the Codes, Jim Crow laws, the desire of our society to suppress those in black skin will soon take another form. Today that form is the Criminal Justice System. PART 2 The New Age Slavery: The Prison System I. The Prison Institution Prisons are big in the United States. During the past 20 years, the United States experienced a massive increase in incarceration. The prison population increased fourfold, from 330,000 in 1980 to nearly 1. 4 million in 1999, and the incarceration rate increased from about 140 to about 476 per 100,000 resident populations. Today there are more than two million Americans behind bars. But even more startling is the fact that more than one-half of these incarcerated Americans have black skin. Although black Americans only make up about 12% of the US population, they account for more then 30% of all arrests, 44% of all prisoners and 40% of prisoners on death row. II. Race and the Prison System These obvious disparities in the criminal justice system can be attributed to many different things ranging from racial profiling to the lack of opportunity and poor education, but most criminal justice observers believe that these disparities have emerged from the underlying assumptions rooted in slavery. The assumption that slaves were inferior has carried over to today. Currently this theory of inferiority and desire to maintain oppression influences one of the major policies in place attacking African Americans today, the ? Â §war on drugs. Most of the shocking disparities in the criminal Justice System as it relates to African Americans in prison can be attributed to the ? Â §war on drugs. According to a study by Human Rights Watch, African-Americans comprise 62 percent of the drug offenders admitted to state prisons. In seven states, blacks constitute between 80 and 90 percent of all people sent to prison on drug charges. According to studies of the U. S. Commission on Civil Rights, African-Americans constitute 15 percent of the national drug users, but comprise an amazing one-third of all those arrested on drug charges and 57 percent of those convicted on drug charges. The criminal justice system generally, and contemporary crime and drug policies in particular, serve as a means for White America to control the African Americans like they did in the 1600 . III. The lasting oppression Similarly to the black codes and segregation implemented after the abolition of slavery; restrictions are placed on prisoners after they are released. Once a prisoner is released from prison, parole and the bans on public assistance, public housing restrictions, etc. create barriers and a seemingly doomed cycle of dominance. Since half of the prisoners in prison are African American, these barriers, like the lasting effects of slavery, have a disproportionate effect on our black communities. III. The effects of oppression According to the Department of Justice? Â ¦s Bureau of Justice statistics, the number of adults in prison, jail, or on probation or parole reached almost 7 million during 2004. Since Blacks comprise 30 percent of probationers and 41 percent of prisoners. That means around 4,500,000 African Americans are affected directly by the criminal justice system. Unfortunately those African Americans sent to prison or under parole are not the only people affected. The impact on the black community does not stop at the prison door, conversely it goes far beyond. Even after a prisoner is released there are lasting effects to the prisoner, his or her family and the community as a whole. a. Demise of the Black family One effect of the high rate of incarceration of African American males in particular has been the decreasing number of marriageable men in the African American community. Along with high rates of homicide, AIDS-related deaths and other factors, this has created a substantial imbalance in the male-female ratio among adult African Americans. Whereas gender ratios for African Americans at birth are about 102-103 males for every 100 females, by the age range 40-44, this declines to 86 males per 100 females, whereas white rates are 100:100 for this group. b. Lost political voice The impact of the criminal justice system on the black community goes beyond the declining family structure to issues of political influence as well. As a result of laws that disenfranchise felons and ex-felons in various states, an estimated 1. 4 million African American males, or 13% of the black male adult population, is either currently or permanently disenfranchised as a result of a felony conviction. In fourteen states, a felony conviction can result in lifetime disenfranchisement, and in seven of these states, an estimated one in four black males is permanently disenfranchised. Thus, not only are criminal justice policies contributing to the disproportionate incarceration of African Americans, but imprisonment itself then reduces the collective political ability of African Americans to influence these policies. V. Solutions The constant demise in the structure of the black family, lost political influence and seemingly arrested development are all very familiar results of a history of oppression. Since these effects of slavery and disparities in the criminal justice system seemingly steam from hundreds of years ago there is no quick fix. Ideally the answer would lie in the destruction of all prejudice. But, it is impossible to erase the deep seated legacy and resurfacing effects of slavery. Therefore this problem must be attacked from a variety of different angles. Recommendations for change can be considered in the areas of awareness, legislative change, criminal justice officials? Â ¦ initiatives, and criminal justice/community partnerships. The following are some suggested that will allow for a beginning to a seemingly circular and endless problem. 1. Legislative Actions Legislation should be pushed to Reconsider Mandatory Sentencing Policies and Equalize Penalties for Crack and Powder Cocaine . 2. Criminal Justice Officials? Â ¦ Initiatives ?n Criminal Justice Officials should Expand Drug Policy Options And Expand the Use of Alternative Sentencing 3. Criminal Justice/Community Partnerships. The criminal Justice system and the community should attempt to Increase Community-based Diversion from the Criminal Justice System And Strengthen the Link between Communities and the Justice System VI. Closing Oppression in the form of institutionalization is nothing new to those dressed in black skin; it has been present since 1619. In this year Africans were brought to the United States and forced into the institution of slavery. Even after the abolition of slavery, a series of codes and segregation laws were set in place to maintain the suppression of black people because black skin was stigmatized as inferior. Even though the prejudice and biased codes and laws were eventually abolished themselves, this stigma remains. Because this theory of black inferiority was embedded in the American culture due to slavery, various means of oppression are able to continually resurface in different forms. Today that form is Criminal Justice System, more specifically the drug policies. Practically mirroring the institution of slavery, African Americans are being controlled and dominated by this system. Control by the USCJS includes the probation, parole, imprisonment, lost economic power, struggling communities and lost political voice. In order to end this vicious cycle of oppression, action must be taken. First people must be made aware of the disparities. Next those who are made aware must press for legislative change, criminal justice officials? Â ¦ initiatives, and criminal justice/community partnerships. The challenge for the community at large is to engage in broad discussion of the mix of family, community, and government initiatives that can begin to reverse the cycle that has been set in motion in recent years. Let? Â ¦s do what Abraham attempted o do in 1877, let? Â ¦s end this legacy of slavery.

Power in Business Negotiations

Power in Business Negotiations Introduction Power in negotiations process has been regarded as one of the elements that contributes to, and influence the outcome of the negotiation. It is through this factor that multinational corporations and large organizations use power to get what they want in a negotiation process. This is achieved through the availability of resources and information at their disposal. Another factor is the use BATNA (Best Alternative to a Negotiated Agreement), how best negotiating parties use their BATNA the result will be winning in a negotiation process. This essay seeks to discuss how power can disadvantage the underdog in the negotiation process. The discussion will first start by defining negotiation, its characteristics and types of negotiations. Then Power and its sources. I will further on with samples from case studies discuss how power disadvantage the underdog, followed by the theoretical perspectives. Last but not least the recommendations and the conclusion. Negotiation French (2008) defines negotiation as a process of making joint decisions when the parties involved have different preferences. On daily activities people are involved in negotiation process, it is worth noting that, because of the different preferences people have; they engaged in a negotiation process in every communication that takes place. In that, negotiation can be considered as a way of finding the best solution with others or coming to agreement in the process of decision making. This is supported by Furnham (2005) who is of the view that negotiation is one aspect of decision making which according to him it is always overlooked. Negotiation takes place before, during and after decision making. We acknowledge that where more people engage in negotiation the more disagreements are likely to arise over diverse matters on our daily activities. Salamon (2000) contend that negotiation applies to a particular process of dialogue between different people to resolve their differences so as to reach an agreement. Brett (2007) states that negotiation is process by which people with conflicting interests determine how they are going to allocate resource or work together in the future. People lead negotiations to discuss different aspects of matters of life affecting them, in that way negotiation come in different forms and in different situations, and the solutions to these situations are different, therefore the strategies must be different too. The scholars shows that negotiation is a dynamic process of which two parties with different objectives will confer together to reach an agreement to reach common goal. The characteristics of negotiation, which are common in different situations. With reference to http://www.pathways.cu.edu.eg/subpages/training_courses/Negotiation%20Skills7/Chapter1.htm#1_1 are as follow; There are two or more parties   There is a conflict of interest between two or more parties   The parties negotiate because they think they can use some form of influence to get a better deal that way than by simply taking what the other side will voluntarily give them or let them have. The parties, at least for the moment, prefer to search for agreement rather than to fight openly, have one side capitulate, permanently break off contact, or take their dispute to a higher authority to resolve it. When we negotiate, we expect give and take.   Successful negotiation involves the management of intangibles as well as the resolving of tangibles Types of Negotiation According to Lewicki and Hiam (1999), they state that there are five legitimate negotiation strategies, which are as follow; Competitive (win-lose) this is a strategy where the outcome is important but the relationship is not. It is a win-lose strategy used. Competitive is used if one wants to win at all costs and the negotiator has no concern about the future relationship. With regard to big companies using power to manipulate, their way in getting what they want in negotiations, this strategy will work well. As the intentions of these big corporations is to win in any given situation, and relationship seems as if not important in their thinking. In this strategy the big companies uses coercive and hostile tactics to win. Confrontational and emotional deploy are used in driving the negotiations to their advantage. For example, during elections ruling party and opposing parties attacks each other in negotiating with people of their constituencies to convince them to vote for them. Collaborative (win-win) outcomes and relationships are both important, negotiators therefore attempts at all time to maximize their outcome on the other hand preserving the relationship. The end results are that both parties find a solution to their needs. Compromising (split the difference) both outcomes and relationship are somewhat important hence the need to take each others needs into consideration. This strategy if often used when collaboration cannot be met. Avoiding (lose-lose) in this strategy either outcome or relationship are of importance. Negotiator withdraws from active negotiation. Accommodating (lose-win) the outcome is not important rather the relationship. The negotiator is more concern with keeping a good relationship with another party than achieving good results. Power Salacuse (2000) contend that Power is an intensely practical subject for all international negotiators, who by their very missions are intensely practical persons. With relation to the question at hand, It is important to have an over view of the concept of power and how does it disadvantage the underdog in the negotiation process and benefit those who have power. (French, Rayner, Rees Rumbles, 2008) are of the view that power is the ability to get someone else to do something you want done, or the ability to make things happen or get things done in the way you want. Looking at the point in the question at hand, that Multinational Corporation and other big organizations use power to get what they want in negotiations, it therefore, shows that power can indeed disadvantage the underdog in the negotiation process. That is one party is disadvantaged where the other holds formal power, there is that relative power positions in negotiations. With this regard one can argue that the big or ganizations have the ability to move decisions in their desired way. This point is supported by (Wolfe McGinn 2005) who argues that imbalances in power are evident in most relationships whether at inter-organizational level or at international level. They are of the view that the power imbalances stems from asymmetry in dependence between parties. Sources of Power Information sources of power / Expert Power Having knowledge/Information that will influence the outcome of the negotiation, therefore planning and research increases information. Power based on position Legitimate power and resource control power are based on the position ones holds. With reference to the argument of how power can disadvantage the underdog, resources are essential tool in negotiations; therefore, if one party has control of that, then this will disadvantage another party. Power based on personality and individual differences (Lewicki, Barry Saunders 2010) contend that individuals have different psychological orientations to social situations. Personal, cognitive, motivational and skills, enables one to have power. Contextual sources of power. This refers to the fact that power is based on the context, situation or environment in which negotiation takes place. If one party is negotiating within its environment that can boost power. According to Wolfe McGinn (2005) they are of the view that power imbalances are there in all levels of relationships at international level, inter-organizational or inter-personal levels. The author argues that relational theories of power vary with regard to whose perspective is considered the target of influence, the influencing agent or both parties. Scholars hint that theories of power examine the power relationship from the perspective of target of influence. This then lead us to the fact that for one to know exactly how much power he/she has, will evaluate that during the negotiations, in that way one will be able to assess the other party at the negotiation table who are at that time the focal point of comparison. Assessing ones power accurately serves a critical social function and awareness of the distinctions from and similarities with a counterpart (Gill and Swann 2004). This is derived from subjective cost benefit analysis derived from Social exchange theory rooted from economics, psychology and sociology. How Power can Disadvantage the underdog in the negotiation Process Having discussed on the concepts of negotiation and power, I will now show how power can disadvantage the underdog in a negotiation process. As it is already mentioned in the discussion regarding power factor in the negotiation process, it is imperative to argue that power influence in decision making between parties involved in the negotiation process. (Bacharch Lawler 1981) contend that, Power is the central determining factor in negotiation. (Lewicki Hiam 1999), they are of the view that, the key source of power in negotiation is information. That is, the planning for the negotiation is based on the knowledge that you have about your objectives and that of another party, with that then you will be informed enough to refute their position or support. The information must be accurate in that as a negotiator you will have more power. The other point is that of expertise, and good communication skills and resources. For example, the case study of the Conoco oils company and the indi genous people of Ecuador. This is a typical example that when a big company like Conoco had information and the resource, the company managed to manipulate and convince the government of Ecuador, that the project of drilling oil will benefit the people, hence there were some other negative consequences, which were going to affect the indigenous people. In this scenario the underdog were the indigenous people of Ecuador whose lives were going to be impacted on negatively. Power asymmetry between a stronger and weaker party. Structural analysis argues that the strongest will always win. Multinational companies have branches in many countries, for example KFC, Ford. The advantage of having these especially in developing countries is that they bring in wealth and jobs, thus increasing the Gross National Product (GNP) and the Gross Domestic Product (GDP) of a country. However there are some problems in the sense that the jobs are often low-skilled or less paid, much of the profit made goes outside the country. The companies may also pull out if the economy of the country goes down, for example in Zimbabwe. In Botswana Hyundai pull out to set its plant in South Africa one of the reason of relocating was that Botswana has a problem of small market. The companies are interested in making profits. Therefore, these big companies hold power in the sense that they have the resources, money in its varieties is a powerful tool in negotiation. As highlighted most of these multinational companies as they come to developing countries in their journey to make profits, they turn to use and abuse the lay people who are so desperate to make ends meet in trying to fight poverty. For example in Botswana, the Chinese building construction companies most of them win tenders from government and other organizations, but they do not produce good projects which lasts, because after they have won tenders, some of the services they out source to local companies but at a lower price and pay lower wages to its employees which are locals. Whilst they gain more profit the weaker partner suffers. The stronger side gains its power from the magnitude and diversity of its resources. Wolfe McGinn (2005) comment that, in an asymmetric relationship, in which the power balance between the parties is unequal, the relatively high-power party is likely to have his or her interests addressed during a negotiation, while the interests of the lower-power party may be ignored. The relative power is seen in a case in South Africa where drug companies use their muscles over the poor. Glaxco SmithKline, Merck, Pfizer and Eli Lilly the big four, and there are others in Europe and the U.S. almost as big wield such enormous financial and political clout. It is a cartel and like all cartels they want monopoly power it is a basic economic tenet that monopolies lead to higher prices which is why many governments try to break them up. McCullum (2010). In this case the big four pharmacies do not like the idea of cheap drugs for diseases like HIV/AIDS to be imported, the attempt of the case is to block the government from importing cheap generic medicines from developing countries like Thailand. As they are more concerned with their profit making not with the fact that poor people are dying because they cannot afford expensive drugs. The case is supposed to take place in Pretoria. (The big four and 42 pharmacies against the government of South Africa). Back at the British, Swiss, American and German headquarters of the Big Four they claim patent protection for a minimum of 20 years on their intellectual property which means no generic manufacture. The argument they make is that poorer countries cannot afford even cheap medicine, and they donate the drug to them. In this we see manipulation tactics used in this negotiation process. A competitive approach is used. The companies are more concerned with their win over the negotiation. It is reported that companies have spent three years and millions of American dollars preparing their case. However, one can see that in broader prospect the interest does not lie with the poor people but the big four to enrich them selves, it should be observed that these companies are from developed countries as mentioned. The case is still ongoing. Another case study is that of ASDA(Asquith and Dairies) it is a British retail chain store, founded in 1965. It became a subsidiary of American chain store Walmart in 1999. ASDA is the second largest store in the UK, its marketing strategy has always been based solely on low price. It has been reported that ASDAs parent Walmart has made bid to South African retail group Massmart. It has put in a non-binding proposal. However a memo has been leaked out that, the document lays out how to structure a meeting with suppliers, Use this opportunity to take control and set the agenda. Open outrageously (include plenty of fat). The bigger the opening figure, the bigger the settlement figure. Buyers should have prepared three concessions that cost Asda nothing but will assist their trading position. Only concede if you have to. Be tactful, but be firm. A threat is only a threat if it is followed through. Remember always that we are negotiating on behalf of our customers! Asda issued the document to buyers last year and the strategies used by major supermarkets have come under greater scrutiny. This case study shows how the giant tore like ASDA is starting to manipulate their way into the Africa market, their tactics in negotiations reflect the kind of negotiation strategy they are using, which in this scenario is the Competitive strategy (win-lose). Another factor that is over looked by Asda is the morals and ethics in the business. The misrepresentation to opponents network and they are more focused on their power motive over the suppliers in South Africa. As indicated ASDAs mandate is based on low prices, therefore they will negotiate with suppliers to bring the suppliers to sell at a more lower prices so that ASDA at its end product will make more profit. Therefore, the underdogsin this case are the suppliers- who are expected to sell at a lower price to ASDA, hence their profit making will be lower. The consumers are also going to buy the products at a higher price which will be costly. Contradiction to the ASDAs mission of selling at a lower price. Theoretical Perspective Competitive positional negotiation/Distributive theory. In this theory the focus is on positions that conflicting parties declare. http://internetmediator.com comments that competitive negotiation strategy is, essentially, a manipulative approach designed to intimidate the other party to lose confidence in their own case and to accept the competitors demands. This happens in desperate situations like in cases where companies exploit the ordinary people by paying them lower wages. Competition experienced here is for limited resources. In this theory, power is the central argument, the resent strike of the University of Botswana staff unions over salaries is a typical example of this practice. Because of the limited resources that is the 30 million that was in debate to be shared amongst the staff in general. According to the reports made the two university staff unions formed an alliance and entered into negotiations with the management regarding the salary increment. The two parties did not agree with what the consultants report proposed, though the management agreed with it. However, the negotiations came to stall, and the unions withdrew from negotiations and went on strike. The management used their cohesive power and threats by a no work no pay notion The assumption of the competitive theory is that negotiation is the division of the limited resources, when one side gains the other side loss. High opening demands are made and concede slowly. This is done in such a way that the organizations, which have, power gains more than the other does. Game theory can also be used to elaborate on the concept of power and negotiation. Corvette (2007:185) contend that game theory is useful in understanding how to develop successful strategies, and the process is like a game in that there is some competition going on. With regard to power disadvantaging the underdog, in relation to the theory; this can be seen as a game as the theory dominate the empirical negotiation predicting bargaining outcomes on negotiators utilities. Multinational corporations and other big organizations use all the utilities and in most instances they are able to predict the outcome that weaker parties will surrender to the outcome of the negotiation. Summary In summary the question that can be posed is as negotiators how do we make the playing-field level? This playing field, we refer to the negotiation process that we found ourselves or encounter on daily basis. And how do we ensure that all parties regard the process as legitimate? For the process to be regarded as legitimate the issue of ethics should be taken in to serious condition. As power in negotiation process disadvantage the underdog, it is important to highlight on the issue of ethics in negotiations and its importance in its contribution in stabilizing the relationship between parties. It is of importance to acknowledge the fact that collaboration between negotiation parties is important so as to maintain a relationship after negotiations. Furthermore to note that the issue at hand is not in the power balance but in the situation at the negotiation table Another recommendation is that multinational corporation and big organizations be able to consider and approach negotiation processes on win-win approach, so as to maintain good relationship after negotiation. Taking an example of ASDA/Wal-Mart and suppliers in South Africa. It is important for the corporation to consider their negotiation strategy and focus on maintaining relationship with suppliers, so as the intended goal of providing business in Africa can blossom hence improve the economy. For small organization, groups or individuals it will be advantageous for them to form alliances to be able to counterpart the big companies, when it come to negotiations, for example the case study of Conoco oil drilling company. For indigenous people to succeed in stopping the oil drill, the human rights groups and other various international environmental movements formed an alliance and opposed the plan. Salacuse (200) support this statement by commenting that the most effective way for a weaker party to increase its power at the negotiation table is to build supportive relationships with strong third parties who are not at the table. A third party in most cases is the one who has influence over your adversary in the negotiation. The other factor is to use power of competition to leverage power (Lewicki 2010). In the negotiation context a means can be made to distribute power by diffusing that one of big organizations so that negotiation environment can be conducive and accommoda tive hence use of good tactics can be well practiced to achieve positive negotiation outcomes. Conclusion Power is regarded as a tool in negotiation process to be used to disadvantage the underdog. This is highlighted in the definition of both negotiation and power. The case study have been used to outline how the power is indeed used by multinational corporations and big companies in getting what they want in the negotiation process. It is important to note that the weaker party can be generally stronger than first assumed by the stronger partner, taking for example the Conoco case study that though this is a big organization, the smaller human right groups managed to stop the project. This demonstrates that the weaker party has devices and tactics at its command to augment its power and that the stronger party usually does not fully understand or appreciate the potential power of the underdog. The alliances strengthen their BATNA (Best Alternative to a Negotiated Agreement) to their opponent; small companies can find other means to diffuse the power of big organization in the negotiati ons. It is therefore imperative for the big organization to take this into consideration and know that they can be outwitted in their game regardless of the resources they have. The recommendation views out the issue of ethics, that by using power the underdog should not be abused or cheated in the negotiation process, therefore collaborative can be used to address the issue of resources to benefit all parties.

Tom Wolfe’s: O Rotten Gotham Essay -- New York City Literature Transpo

Tom Wolfe’s: O Rotten Gotham â€Å"It got to be easy to look at New Yorkers as animals, especially looking down from some place like a balcony at Grand Central at the rush hour Friday afternoon.† (Tom Wolfe). â€Å"O Rotten Gotham† argues that New Yorkers are in a state of behavioral sink. It would not be long before a â€Å"population collapse† or a â€Å"massive die off†. Throughout the article, Wolfe made his opinion clear. He believes everything New Yorkers go through is unhealthy and inhumane. Humans were compared to rats using the overcrowding, the ways of life, and the filth as examples. From the adrenaline rushes and car horns to helicopter noises and constant overcrowding, New York City is a constant stress causing environment. Dr. Hall, another author presented in the article, saw this overcrowding in the city causing a lot of problems. He states that work takes place in massively congested areas such as small cubicles in offices. This, however, is not just a problem in New York City. All across the US people are confined to a cubicle for their work space. It is not the end of the world either. You are there a certain amount of hours a day, and when workers come home they can relax and spread out. New York City homes are not the most spacious, but they are not as bad as being in a cubicle. Wolfe really makes you look at the differences your environment can make and how it affects its citizens. One with no knowledge of city life would probably be disgusted of it after reading this article. If they were looking to move to New York City, they would most probably think it through again. Who would want to live in filth with animals? What Wolfe doesn’t mention in his article are all of the good things about New York City.... ...ace to place to fit the needs of the area. When you listen to Wolfe, you get one side of the story. Without knowing the other side anyone would agree with him and his opinions. Thirty years ago the city was on its way to a massive behavioral sink, but has been cleaning up its act. The streets, subway systems, workplaces, and attractions have all cleaned up and done there part. More and more people are living in the city. Wolfe believes that this city is on its way to the sink, but the city is proving him wrong. SOURCES: Anderson, Chris and Runciman, Lex. A Forest of Voices: O Rotten Gotham. Peter. www.citynoise.org/index.php?article=610 O’Sullivan, David. Morehead State University student from Yonkers New York. Crime Rates and New York City. http://www.policetalk.com/nyc_crime_rate.html NYC Subway Systems. http://www.ny.com/transportation/subways/

Mercedes :: essays research papers

The 1996 Mercedes E320 sustained crash damage to the passenger side front. After we set up and measured the vehicle on the caro-liner frame rack, we found there to be extensive panel, sub frame, and suspension damage. Including consequential interior damage, IE; Driver/passenger airbags deployed, dash panel assembly, and passenger airbags deployed, dash panel assembly, and passenger side mirror. After a complete damage assessment report, we then began disassembly of all damaged panels and assemblies. After the disassembly we decided which parts would be salvaged off of our 1997 Mercedes E320, which parts would be purchased new or those which would need to be straightened and refinished. Once the damaged panels were removed we were able to attach the 10-ton hydraulic ram assembly to the frame rack and began the frame straightening repairs. Our initial pulls were to fix the sway problem of the passenger side front sub frame. This was accomplished by wrapping a chain around the misaligned sub frame, pulling in a straight, level manner opposite the direction of the misalignment. We did several pulls in this manner, stress relieving, before and during, with a ball peen hammer before repositioning for the next pull until brought back into specification. We then positioned our 10-ton ram to the passenger front for repair of the frame rail mash and sag situation sustained on impact. We wrapped the chain around crash impact bar and used it as the hook up point for our pulls. Pulling and stress receiving until it also was within specifications. Our final pull was to the suspension passenger side A-arm. We simply attached our chains to the A-arm and pulled it back into positio n. At this point, we could now begin sectioning and panel removal. This was first done by deciding which panels were to be removed and which were to be repaired. Then all of the spot welds that needed to be removed were marked with a paint marker, so as to only to remove the necessary welds. Some spot welds were located underneath seam sealer and or insulation. We then removed the material with a hand torch to burn the seam sealer, then a steel bristled brush to scratch off the burnt material. We then center drilled all of the marked spot welds with an 1/8† drill bit, followed up by a 5/16† spot weld removal bit to drill out the spot welds along all of the panels to be removed.

Nike, Inc. Case Study

Nike Valuation At North Point Group we believe we have developed the formula for investing success. As you know better than anyone, our Large-cap fund has exceeded all possible expectations in recent years as it outperformed the S&P 500 by 30% with respect to returns in 2000 and has continued the trend into 2001; as of the end of June 2001 it has already produced returns of 6. 4% while the S&P 500 has continued to struggle producing a return of -7. 3%. We believe these results are made possible by our â€Å"workhorses† of the market as we like to call them. For those of you that don’t know these â€Å"workhorses† are our holdings in companies that have been there through the history of modern America. These companies are those such as 3M, General Motors, McDonalds, and ExxonMobil, which have gone through the many roller-coaster type rises and falls that defines our nation’s economy and has utilized these experiences to prosper and grow step for step with our nation. We are here today to share and discuss our recent findings in our search for another candidate worthy of investment from our Large-Cap Fund. The company originally named â€Å"Blue Ribbon Sports,† now Nike Inc. has caught our attention. Initially known for their athletic performance shoes, Nike has developed itself into a sporting good and apparel monster while maintaining their domination in the athletic shoe sector over the last fifty years. In 1997, Nike reached the top of their game in terms of revenue, when they reported $9 billion in revenues in their annual report; however, since then their revenues have been at a virtual stand-still, hovering around $9 billion for the past five years. Despite their lack of improvement in the last half-decade we see progress in their near future, especially with them already well into the stage of recognizing problem issues within the company. They have realized that one of their major issues is that which made them into what they are today, their athletic shoes. They have maintained a large share of the athletic shoe market throughout their history but they have only just recently noticed that this share is slowly diminishing through time, as it has dropped six percent from 1997 to 2000. After taking a step back and looking at the big picture they realized their error in the recent past, they have placed too much of their focus on producing high-end, high-priced athletic shoes and have forgotten about the mid-priced shoes segment which fueled their growth for decades, and yet still remained the producer of 30% of their revenues. This focus will help bring the Nike brand shoe back into the homes of any American home no matter their income level. Along with their shoes, Nike has other plans to rejuvenate their corporate performance. The biggest of all was the acquisition of top exec, the former president and chief executive of the Polo Jeans division of rival Jones Apparel Group, Mindy Grossman. Nike sought out Ms. Grossman because of her exceptional performance in the clothing industry in hopes that she would take their apparel division to the top; a result which is not far beyond belief when considering the vast resources and influence that Nike already possesses. The hopes within the company are that these tweaks to their corporate approach along with some minor cost cutting adjustments in the company’s operations and administration will drive the company up the incline of revenue growth. With Nike reigniting their pursuit for excellence and fueling this fire by restoring their staple, mid-priced athletic shoes fit for every American, to its glory; it’s easy to believe in the potential of Nike, Inc. and jump on the bandwagon. Even though we believe in the potential of Nike, further financial evaluation is necessary before a decision affecting everyone in this room can be made. We got excited about the prospect of Nike becoming part of our fund not because of the name, and the reputation it carries with it, but because of their remarkable success through numerous decades and varying economic conditions. These factors paired with their current economic struggles and the impact those on the market price of Nike makes them a prime value investing candidate. WACC: We choose the weighted average cost of capital to use as our discount rate. We did this because we calculated future cash flows using the free cash flow to the firm method. By using this method we are able to account for the total free cash flows available to the owners after all expenses. This means that debt is accounted for in the intrinsic value of the company. In order to compute the WACC the following inputs must be calculated; cost of equity, after tax cost of debt, weight of equity and weight of debt. In this section of the analysis we will give a step by step breakdown of how we computed those inputs. Cost of Debt: The cost of debt is rate at which a company pays on its current outstanding debt. This rate is comprised of things like loans or bonds. Nike conveniently has only one issue of publicly traded debt. This is a bond that pays a 6. 75% coupon semi-annually. It was issued on 7/15/10 and is mature on 7/15/21. The current market price is $95. 60. To calculate the cost of debt we found the YTM of the only current outstanding bond issue. As of today we are nine days away from a coupon payment on 7/15/01. After this coupon payment there will be 40 more coupon payments. We are making the assumption that a coupon is paid on the date of maturity. As stated the price of the bond listed today is $95. 60. If the bond were actually to be bought and sold the price would need to reflect the interest accrued since the last coupon payment. To calculate this we subtracted the number of days since the last payment, 173, from the number of days in the period, 182 = . 95. We then took that number and multiplied it by the coupon payment divided by 2 in order to realize the coupon payment per period. (6. 75/2)= 3. 375(. 95) = $3. 2. Based on these calculations we have calculated the following inputs to solve for the YTM. Cost of Equity: The cost of equity is the return that stockholders require to invest in a company. There are many different ways to compute this value. We will look at CAPM, DDM and the earnings capitalization ratio. CAPM: We looked at two different ways to calculate CAPM. First using the 3 month T-Bill as a risk free rate (3. 59%) along with the arithmetic average of returns from 1926-1999 (7. 50%) to calculate the market risk premium. We used a beta of . 8 which is the average of the last 6 years. We believe this to be a good estimate because it accounts for volatility and decreased possible variance. Below is our calculation for the cost of equity. In the alternative CAPM model we used the 10 year Treasury bond as the risk free rate instead of the 3 month. We also used the geometric average of historical returns as the market risk premium. Below is the estimation of the alternative Cost of Equity. We believe that the second calculation of the CAPM using the 10 year bond and the geometric average is a more accurate representation of the cost of equity. The 10 year bond rate is a better indication of the real risk free rate since the fund is looking at value stocks which are generally held for longer periods of time. The geometric mean is also a more realistic calculation of the market risk premium because it calculated real return, as opposed to the arithmetic average which is just a straight average calculation. DDM: The calculation of the dividend discount model required a dividend growth rate and the current stock price. We obtained the dividend growth rate of 5. 5% from Valueline. The current share price is $42. 09. The calculation of the cost of capital using the DDM is below. The dividend discount model works best with companies that follow the constant slow growth path. This is because their dividends are generally a good reflection of earnings. Since Nike is not a slow growing company and their dividends are not highly correlated with changes in earnings we do not recommend using the DDM to estimate the cost of equity. Earnings Capitalization Rate: The earnings cap rate is the opposite of the P/E ratio. The inputs include an implicit growth rate which we calculated by multiplying current ROE by the current retention ratio of earnings. This growth rate is used to project EPS for the next year. The inputs and calculation of the cost of equity is shown below. The earnings capitalization ratio is not a good estimate of the cost of equity for the same reason the DDM was not a good model. This is because the retention ratio and the dividend payout ratio are dependent on each other. Since the dividend payout ratio is not a good indication of earnings than neither is a model that uses the retention ratio. Value of Debt: To effectively calculate the value of debt we used the market value of debt instead of the book value. This gives a better approximation of the current value of the debt. To calculate the market value we discounted the LT debt value that we obtained from the balance sheet. Below are the inputs and the present value of the LT debt. In addition to the market value of long term debt we need to add short term debt. This includes the current LT debt payment and the notes payable as found on the 2001 balance sheet. After adding these values we obtained the total market value of debt. Value of Equity: To find the value of the equity we used the market value of the current equity instead of using the book value. The market equity is calculated by multiplying the current number of shares by the current market price. Calculation is shown below. Capital Structure: Based on the market value of the debt and equity we calculated the capital structure. The numbers are shown below. {draw:frame} {draw:frame} WACC Calculation: To calculate the WACC we combined the weights of equity and value with the cost of each. The equation is as follows: {draw:line} {draw:line} {draw:line} {draw:line} (11,503/12,550) X 3. 42% + (1,047/12,550) X 2. 12% = 9. 44% {draw:custom-shape} {draw:custom-shape} {draw:custom-shape} {draw:custom-shape} Discounted Cash Flow Analysis: Revenue: To have a better estimate of Nike’s current condition, we calculated its discounted cash flow in order to find its NPV and a more realistic measure of Nike’s share price. We estimate that in the next 10 years Nike will have a revenue growth ranging from 6 to 7 percent. In 2002, revenue growth is projected to be at 7 percent. From 2003 to 2005, revenue growth will be 6. 5 percent. In the last 6 years of the forecast, Nike will experience a growth rate of 6 percent. The rationale behind this sales growth forecast is that Nike will be developing more midpriced shoes and increasing its apparel line. The midpriced shoes will offer consumers more affordable selection so sales are likely to increase. Nike’s plan to push its apparel line is also a good strategy to increase sales because athletic apparel is a good complementary to their shoes. Revenue growth will kick off with a good start but it’s projected to fall slightly to a more sustainable growth rate. COGS, SG&A: As Nike’s sales rate slowly declines in the next 10 years, their percentage of Cost of Goods Sold over Sales and Selling, General & Administrative percentage also decline. Nike plans to cut costs in the next 10 years. So as their costs decrease and sales increase, their percentage of COGS and SG&A to sales will decrease. NWC: Next, we calculated Nike’s change in net working capital. Net working capital is current assets minus current liabilities. To do this, we took the average of Nike’s asset in percentage to sales and liabilities over sales for the last 4 years. (Refer to Exhibit A). We then take those numbers and multiply it by the projected revenue to get the project current assets and current liabilities for the next 10 years. We took the difference to get the net working capital. The change in net working capital would be just the difference of one year to the next. Exhibit A. CAPEX, net Depr: We calculated the Capital Expenditure and depreciation using a similar model. The 2001 Nike annual report gave us some guidance that CAPEX would not increase in 2002 from the previous year. Based on an increasing cost of depreciation we forecasted 2002 CAPEX net Depr. to be $120 million. Using this projected 2002 value and the three years previous we calculated an average CAPEX net Depr. (See Exhibit B) We feel this average is the best way to estimate an unpredictable CAPEX number. We used this average in our forecasts through 2011. Exhibit B. Free Cash Flow: After we attain all the CAPEX and the change in NWC, we were able to do a ash flow by taking our net operating income after tax less CAPEX and NWC. For our terminal value, we used the Gordon growth model with a 3 percent growth rate. In our terminal value, we added back the CAPEX value because capital expenditure will eventually be zero in the future. We feel that it won’t be accurate to have a negative value for CAPEX fo r our terminal value. After calculating the future cash flows for Nike, we were able to find the intrinsic value of the company. Using our WACC of 9. 44 percent, we attained a NPV of $15,963 million. During this time, Nike had a current debt balance of about $1,047 million. We subtracted the debt from the NPV to get an equity value for the company of about $14,916 million. We took Nike’s equity value and divided by their total number of shares outstanding of 273. 3 for 2001 and got a price of $54. 58. Compared to the current market price of Nike’s stock of only $42. 09, Nike’s stock is undervalued by almost 30 percent. Based on our new estimates of Nike’s value, we think that these numbers reflect the company better than what the market says. We also did a sensitivity analysis of Nike’s stock using various discount rates. We can see that even at a discount rate of 12 percent, Nike’s stock would be $44. 7. This is still about $2 more than what the market valued Nike. Conclusion: Knowing that our key to success has been a value investing approach to Large-Cap mutual funds, it is easy to see that we are recommending the investment in Nike, Inc. on the basis of the findings of our financial analysis, which reports t he company as undervalued by over 29%. Essentially we are saying that according to our best analysis we believe that the company should be valued by the market at a price 29% higher than it currently is. In terms of stock price this is saying that although Nike is currently selling at $42. 9 we believe it should be priced at $54. 58. It is easy to figure out how this creates value for you as investors as long as Nike stays true to form and true to their word. We do not see the powers that be letting Nike die; they recommitted themselves and the company to excellence and have taken appropriate action to signify their sincerity. Their modifications to expenses in combination with their push of apparel and shoes, which despite its decline in market share is responsible for 30% of Nike’s revenues, will bring Nike out of their current slump. They will ake this happen over time by slowly working down expenses, in particular cost of goods sold and selling and administration expense, while working to increase revenues. We feel very strongly on the accuracy of both our analytical and corporate analysis in part because despite increasing selling and administrative expenses and fluctuating revenues Nike has ended each fiscal year for the last few years with a positive economic value added result. Over the past three years Nike has ended with an average EVA of $387 million, showing that they can go above and beyond market and investor expectations even while in a slump. Nike, Inc. Case Study Nike Valuation At North Point Group we believe we have developed the formula for investing success. As you know better than anyone, our Large-cap fund has exceeded all possible expectations in recent years as it outperformed the S&P 500 by 30% with respect to returns in 2000 and has continued the trend into 2001; as of the end of June 2001 it has already produced returns of 6. 4% while the S&P 500 has continued to struggle producing a return of -7. 3%. We believe these results are made possible by our â€Å"workhorses† of the market as we like to call them. For those of you that don’t know these â€Å"workhorses† are our holdings in companies that have been there through the history of modern America. These companies are those such as 3M, General Motors, McDonalds, and ExxonMobil, which have gone through the many roller-coaster type rises and falls that defines our nation’s economy and has utilized these experiences to prosper and grow step for step with our nation. We are here today to share and discuss our recent findings in our search for another candidate worthy of investment from our Large-Cap Fund. The company originally named â€Å"Blue Ribbon Sports,† now Nike Inc. has caught our attention. Initially known for their athletic performance shoes, Nike has developed itself into a sporting good and apparel monster while maintaining their domination in the athletic shoe sector over the last fifty years. In 1997, Nike reached the top of their game in terms of revenue, when they reported $9 billion in revenues in their annual report; however, since then their revenues have been at a virtual stand-still, hovering around $9 billion for the past five years. Despite their lack of improvement in the last half-decade we see progress in their near future, especially with them already well into the stage of recognizing problem issues within the company. They have realized that one of their major issues is that which made them into what they are today, their athletic shoes. They have maintained a large share of the athletic shoe market throughout their history but they have only just recently noticed that this share is slowly diminishing through time, as it has dropped six percent from 1997 to 2000. After taking a step back and looking at the big picture they realized their error in the recent past, they have placed too much of their focus on producing high-end, high-priced athletic shoes and have forgotten about the mid-priced shoes segment which fueled their growth for decades, and yet still remained the producer of 30% of their revenues. This focus will help bring the Nike brand shoe back into the homes of any American home no matter their income level. Along with their shoes, Nike has other plans to rejuvenate their corporate performance. The biggest of all was the acquisition of top exec, the former president and chief executive of the Polo Jeans division of rival Jones Apparel Group, Mindy Grossman. Nike sought out Ms. Grossman because of her exceptional performance in the clothing industry in hopes that she would take their apparel division to the top; a result which is not far beyond belief when considering the vast resources and influence that Nike already possesses. The hopes within the company are that these tweaks to their corporate approach along with some minor cost cutting adjustments in the company’s operations and administration will drive the company up the incline of revenue growth. With Nike reigniting their pursuit for excellence and fueling this fire by restoring their staple, mid-priced athletic shoes fit for every American, to its glory; it’s easy to believe in the potential of Nike, Inc. and jump on the bandwagon. Even though we believe in the potential of Nike, further financial evaluation is necessary before a decision affecting everyone in this room can be made. We got excited about the prospect of Nike becoming part of our fund not because of the name, and the reputation it carries with it, but because of their remarkable success through numerous decades and varying economic conditions. These factors paired with their current economic struggles and the impact those on the market price of Nike makes them a prime value investing candidate. WACC: We choose the weighted average cost of capital to use as our discount rate. We did this because we calculated future cash flows using the free cash flow to the firm method. By using this method we are able to account for the total free cash flows available to the owners after all expenses. This means that debt is accounted for in the intrinsic value of the company. In order to compute the WACC the following inputs must be calculated; cost of equity, after tax cost of debt, weight of equity and weight of debt. In this section of the analysis we will give a step by step breakdown of how we computed those inputs. Cost of Debt: The cost of debt is rate at which a company pays on its current outstanding debt. This rate is comprised of things like loans or bonds. Nike conveniently has only one issue of publicly traded debt. This is a bond that pays a 6. 75% coupon semi-annually. It was issued on 7/15/10 and is mature on 7/15/21. The current market price is $95. 60. To calculate the cost of debt we found the YTM of the only current outstanding bond issue. As of today we are nine days away from a coupon payment on 7/15/01. After this coupon payment there will be 40 more coupon payments. We are making the assumption that a coupon is paid on the date of maturity. As stated the price of the bond listed today is $95. 60. If the bond were actually to be bought and sold the price would need to reflect the interest accrued since the last coupon payment. To calculate this we subtracted the number of days since the last payment, 173, from the number of days in the period, 182 = . 95. We then took that number and multiplied it by the coupon payment divided by 2 in order to realize the coupon payment per period. (6. 75/2)= 3. 375(. 95) = $3. 2. Based on these calculations we have calculated the following inputs to solve for the YTM. Cost of Equity: The cost of equity is the return that stockholders require to invest in a company. There are many different ways to compute this value. We will look at CAPM, DDM and the earnings capitalization ratio. CAPM: We looked at two different ways to calculate CAPM. First using the 3 month T-Bill as a risk free rate (3. 59%) along with the arithmetic average of returns from 1926-1999 (7. 50%) to calculate the market risk premium. We used a beta of . 8 which is the average of the last 6 years. We believe this to be a good estimate because it accounts for volatility and decreased possible variance. Below is our calculation for the cost of equity. In the alternative CAPM model we used the 10 year Treasury bond as the risk free rate instead of the 3 month. We also used the geometric average of historical returns as the market risk premium. Below is the estimation of the alternative Cost of Equity. We believe that the second calculation of the CAPM using the 10 year bond and the geometric average is a more accurate representation of the cost of equity. The 10 year bond rate is a better indication of the real risk free rate since the fund is looking at value stocks which are generally held for longer periods of time. The geometric mean is also a more realistic calculation of the market risk premium because it calculated real return, as opposed to the arithmetic average which is just a straight average calculation. DDM: The calculation of the dividend discount model required a dividend growth rate and the current stock price. We obtained the dividend growth rate of 5. 5% from Valueline. The current share price is $42. 09. The calculation of the cost of capital using the DDM is below. The dividend discount model works best with companies that follow the constant slow growth path. This is because their dividends are generally a good reflection of earnings. Since Nike is not a slow growing company and their dividends are not highly correlated with changes in earnings we do not recommend using the DDM to estimate the cost of equity. Earnings Capitalization Rate: The earnings cap rate is the opposite of the P/E ratio. The inputs include an implicit growth rate which we calculated by multiplying current ROE by the current retention ratio of earnings. This growth rate is used to project EPS for the next year. The inputs and calculation of the cost of equity is shown below. The earnings capitalization ratio is not a good estimate of the cost of equity for the same reason the DDM was not a good model. This is because the retention ratio and the dividend payout ratio are dependent on each other. Since the dividend payout ratio is not a good indication of earnings than neither is a model that uses the retention ratio. Value of Debt: To effectively calculate the value of debt we used the market value of debt instead of the book value. This gives a better approximation of the current value of the debt. To calculate the market value we discounted the LT debt value that we obtained from the balance sheet. Below are the inputs and the present value of the LT debt. In addition to the market value of long term debt we need to add short term debt. This includes the current LT debt payment and the notes payable as found on the 2001 balance sheet. After adding these values we obtained the total market value of debt. Value of Equity: To find the value of the equity we used the market value of the current equity instead of using the book value. The market equity is calculated by multiplying the current number of shares by the current market price. Calculation is shown below. Capital Structure: Based on the market value of the debt and equity we calculated the capital structure. The numbers are shown below. {draw:frame} {draw:frame} WACC Calculation: To calculate the WACC we combined the weights of equity and value with the cost of each. The equation is as follows: {draw:line} {draw:line} {draw:line} {draw:line} (11,503/12,550) X 3. 42% + (1,047/12,550) X 2. 12% = 9. 44% {draw:custom-shape} {draw:custom-shape} {draw:custom-shape} {draw:custom-shape} Discounted Cash Flow Analysis: Revenue: To have a better estimate of Nike’s current condition, we calculated its discounted cash flow in order to find its NPV and a more realistic measure of Nike’s share price. We estimate that in the next 10 years Nike will have a revenue growth ranging from 6 to 7 percent. In 2002, revenue growth is projected to be at 7 percent. From 2003 to 2005, revenue growth will be 6. 5 percent. In the last 6 years of the forecast, Nike will experience a growth rate of 6 percent. The rationale behind this sales growth forecast is that Nike will be developing more midpriced shoes and increasing its apparel line. The midpriced shoes will offer consumers more affordable selection so sales are likely to increase. Nike’s plan to push its apparel line is also a good strategy to increase sales because athletic apparel is a good complementary to their shoes. Revenue growth will kick off with a good start but it’s projected to fall slightly to a more sustainable growth rate. COGS, SG&A: As Nike’s sales rate slowly declines in the next 10 years, their percentage of Cost of Goods Sold over Sales and Selling, General & Administrative percentage also decline. Nike plans to cut costs in the next 10 years. So as their costs decrease and sales increase, their percentage of COGS and SG&A to sales will decrease. NWC: Next, we calculated Nike’s change in net working capital. Net working capital is current assets minus current liabilities. To do this, we took the average of Nike’s asset in percentage to sales and liabilities over sales for the last 4 years. (Refer to Exhibit A). We then take those numbers and multiply it by the projected revenue to get the project current assets and current liabilities for the next 10 years. We took the difference to get the net working capital. The change in net working capital would be just the difference of one year to the next. Exhibit A. CAPEX, net Depr: We calculated the Capital Expenditure and depreciation using a similar model. The 2001 Nike annual report gave us some guidance that CAPEX would not increase in 2002 from the previous year. Based on an increasing cost of depreciation we forecasted 2002 CAPEX net Depr. to be $120 million. Using this projected 2002 value and the three years previous we calculated an average CAPEX net Depr. (See Exhibit B) We feel this average is the best way to estimate an unpredictable CAPEX number. We used this average in our forecasts through 2011. Exhibit B. Free Cash Flow: After we attain all the CAPEX and the change in NWC, we were able to do a ash flow by taking our net operating income after tax less CAPEX and NWC. For our terminal value, we used the Gordon growth model with a 3 percent growth rate. In our terminal value, we added back the CAPEX value because capital expenditure will eventually be zero in the future. We feel that it won’t be accurate to have a negative value for CAPEX fo r our terminal value. After calculating the future cash flows for Nike, we were able to find the intrinsic value of the company. Using our WACC of 9. 44 percent, we attained a NPV of $15,963 million. During this time, Nike had a current debt balance of about $1,047 million. We subtracted the debt from the NPV to get an equity value for the company of about $14,916 million. We took Nike’s equity value and divided by their total number of shares outstanding of 273. 3 for 2001 and got a price of $54. 58. Compared to the current market price of Nike’s stock of only $42. 09, Nike’s stock is undervalued by almost 30 percent. Based on our new estimates of Nike’s value, we think that these numbers reflect the company better than what the market says. We also did a sensitivity analysis of Nike’s stock using various discount rates. We can see that even at a discount rate of 12 percent, Nike’s stock would be $44. 7. This is still about $2 more than what the market valued Nike. Conclusion: Knowing that our key to success has been a value investing approach to Large-Cap mutual funds, it is easy to see that we are recommending the investment in Nike, Inc. on the basis of the findings of our financial analysis, which reports t he company as undervalued by over 29%. Essentially we are saying that according to our best analysis we believe that the company should be valued by the market at a price 29% higher than it currently is. In terms of stock price this is saying that although Nike is currently selling at $42. 9 we believe it should be priced at $54. 58. It is easy to figure out how this creates value for you as investors as long as Nike stays true to form and true to their word. We do not see the powers that be letting Nike die; they recommitted themselves and the company to excellence and have taken appropriate action to signify their sincerity. Their modifications to expenses in combination with their push of apparel and shoes, which despite its decline in market share is responsible for 30% of Nike’s revenues, will bring Nike out of their current slump. They will ake this happen over time by slowly working down expenses, in particular cost of goods sold and selling and administration expense, while working to increase revenues. We feel very strongly on the accuracy of both our analytical and corporate analysis in part because despite increasing selling and administrative expenses and fluctuating revenues Nike has ended each fiscal year for the last few years with a positive economic value added result. Over the past three years Nike has ended with an average EVA of $387 million, showing that they can go above and beyond market and investor expectations even while in a slump.