Affirmative Action :: essays research papers

AFFIRMATIVE ACTION I. â€Å"We didn’t land on Plymouth Rock, my brothers and sisters – Plymouth Rock landed on us!† Malcolm X’s observation is brought out by the facts of American History. Snatched from their native land, transported thousands of miles – in a nightmare of disease and death – and sold into slavery, blacks were reduced to the legal status of farm animals. Even after emancipation, blacks were segregated from whites – in some states by law, and by social practice almost everywhere. American apartheid continued for another century.   Ã‚  Ã‚  Ã‚  Ã‚  In 1954 the Supreme Court declared state-compelled segregation in schools unconstitutional, and it followed up that decision with others that struck down many forms of official segregation. Still, discrimination survived, and in most southern states blacks were either discouraged or prohibited from exercising their right to vote. Not until the 1960’s was compulsory segregation finally and effectively challenged. Between 1964 and 1968 Congress passed the most sweeping civil rights legislation since the end of the Civil War. It banned discrimination in employment, public accommodations (hotels, motels, restaurants, etc.), and housing; it also guaranteed voting rights for blacks in areas suspected of disenfranchising blacks. Today, several agencies in the federal government exercise sweeping powers to enforce these civil rights measures.   Ã‚  Ã‚  Ã‚  Ã‚  But is that enough? Equality of condition between blacks and whites seems as elusive as ever. The black unemployment rate is double that of whites, and the percentage of black families living in poverty is nearly four times that of whites. Only a small percentage of blacks ever make it into medical school or law schools.   Ã‚  Ã‚  Ã‚  Ã‚  Advocates of affirmative action have focused upon these differences to support their argument that it is no longer enough just to stop discrimination. Liberal Democrats feel that the damage done by three centuries of racism now has to be remedied, they argue, and effective remediation requires a policy of â€Å"affirmative action.† At the heart of affirmative action is the use of â€Å"numerical goals.† Opponents call them â€Å"racial quotas.† Whatever the name, what they imply is the setting aside of a certain number of jobs or positions for blacks or other historically oppressed groups. Conservative Republicans charge that affirmative action really amounts to reverse discrimination, that it penalizes innocent people simply because they are white, that it often results in unqualified appointments, and that it ends up harming instead of helping blacks.   Ã‚  Ã‚  Ã‚  Ã‚  The issue of preferences to address historical patterns of racial, ethnic, and gender discrimination has received a great deal of attention nationally.

Internal And External Factors Effect The Levels Of Management Essay

How Internal And External Factors Effect The Levels Of Management For a company to be successful in the long term today, they must be diverse. The company needs to be able to adapt to changes. The need for these changes can present themselves from many angles. Some would include changes in the economy, marketing, or even a change in the target audience. A company has to look at more than just the four levels of management. Organizations must look at how internal and external factors can affect the four levels of management, and adjust accordingly for these changes to be successful in today’s world. Diversity  There are many types of diversity, racial, ethnic, cultural, age, gender, and geographic. But diversity can also include experience and skills. A company’s ability to survive depends on their ability to adapt to current changes. The diversity within a company must be taken into consideration during the four functions of management. The most successful companies will be those that recognize the power of diversity in their workforce and in the product mix, and effectively create products and services that appeal to their increasingly diverse customer base. By including diversity in the planning stage, Amazon. om would reflect diversity in their business. This would results in better products and a wider range of consumers giving them an advantage over competitors. The company must understand its’ organizational structure, and the social and cultural perspectives of its’ employees in order to be effective, efficient, and promote an environment suitable for progress. Employees who are diverse in skills, experience, and background help to builds a strong organizational foundation. Increasing globalization requires companies to have more interaction with diverse cultures and backgrounds. Organizations must be prepared to teach themselves and their employees to value multicultural differences. Management must motivate their employees to attend diversity training in order to be educated on different cultures and traditions and to respect these differences. Diversity is critical to a company’s success. We are part of a worldwide economy with global competition. Diversity can increase productivity, marketing opportunities, recruitment, and the organization’s image which, in turn, can increase profits (Leading With Diversity, nd). Globalization Globalization has changed the face of business. In today’s business market, international business is necessary in order to gain an advantage. Amazon. com understands this requirement. With the formation of the Internet and Internet marketing, globalization was a beneficial perk which changed the business market, providing a way for companies to reach businesses and customers from around the globe at the click of a mouse. Amazon. com was created to work in the global business environment through the Internet. The company handles B2B and B2C relations and transactions. Amazon. com uses an online customer data base to keep up with the demands of customers. The company created an Internet e-business model, and built up from these based on information obtained from customers. â€Å"The company’s strong infrastructure supports its mission to be the leader in e-commerce,† (â€Å"A Conceptual Analysis f the Key success of Business in â€Å"terms of Internet Marketing, 2012). Customers are always looking for convenience in today’s global economy. Amazon. com uses technological innovation to drive growth and deliver convenience to its customers. An online business, such as Amazon. com, bases goals for â€Å"Planning† on these factors. In order to deliver strategic value, a company such as Amazon. com works to extend globally to reach customers and retailers internationally. Amazon. com began with a B2C platform, but management saw the potential to be an online global leader by handling B2B relations as well. When Organizing, management adds software, e-commerce capabilities, and access for businesses to use the online company’s resources. Amazon. com has created a global online business through proper planning and organizing that delivers strategic value. Management Leading can mobilize and motivate employees. Amazon. com has extended its sales and products through extended branches in different parts of the world to provide services anytime and anywhere through the Internet and globalization. Through the Controlling process of management, online companies such as Amazon. com have continuously improved and expanded services to all over the world. As a result of success through correctly utilizing the four functions of management, Amazon. com is a leading fortune 500 company who uses globalization through the World Wide Web to deliver fast, successful services to customers and retailers. Without the possibility of globalization through technology, e-commerce would not be enough for the company to stay on top. Technology Technology is constantly changing and considerably hard to keep up with. Because of these changes, managing at Amazon. com would definitely be a challenge. Managers must start with the planning phase by evaluating and determining consumer’s needs for buying, selling, using, and shipping which can show both internal and external growth. Personal data is shared online and is protected to ensure safe transactions. Amazon. com ensures that identity theft is never an option through their technology. Organizing all the data gathered from technology can also help management keep track of trends, sales, and possible returns. Once this information is shared among management, they are then able to lead employees with training on how to implement new technology like software, security protection on servers. Amazon. com also ensures employees are adhering to company policy with the use and access of services online. The controlling phase of management is completed by watching over the progress of smart phone applications, Internet home use, and shipping sales. By watching progress and being sure initial goals and challenges are being met, the security of consumer information and products are not being put to risk, and if a problem arises, management can catch it early enough to take care of the situation. With technology making access to Amazon. com so much easier for consumers, the management of this constant changing technology can be a huge challenge with so many options for access and keeping the information protected with encryptions. Innovation With an ever changing market, a great business has to be able to become what the consumer needs at any given moment. This requires innovation. Innovation involves any new idea, product, process, technology or service that a business introduces to its consumer. When it comes to innovation and the planning process, a business needs to be aware that factors such as the market, the customer’s current needs, and even what products competitors have released, can affect the current business plan. There needs to be flexibility in the business plan to account for these changes. A business needs to have leaders who are able to understand how their business is being currently run and how it can be run in the future. This allows them to see ow changes in the business plan might affect all aspects of the business. A business manager needs to be open-minded and encourage its employees to share their ideas on new business models, new ways to make a profit and even ways to improve existing business methods so that the current business plan is both innovative and effective. When it comes to innovation and the organizing process, a company needs to be aware of the current business plan at all times. The need for a business to be innovative and adapt to the changes in the market can cause all four functions of management to need adjusting frequently. If the business plan is changed, the company needs to re-gather and assign all its resources, employees and finances to ensure that the new plan can be implemented fully and in an organized manner. Innovation affects this function of management in a more indirect way; by changing the planning process, the directing process changes. When a company decides to change their business plan, they have to re-direct the staff. When evaluating the staff, the manager needs to be sure that they are on track to meet the goals outlined in the planning process. Innovation can cause the goals to change, thus causing managers to re-evaluate the employees to be sure they are still on track. Ethics Every business is run by a set code of ethics. Ethics are different for every person, as they are an individual’s personal take on what is right and what is wrong. A business uses a code of ethics to ensure that every employee abides by the same set of standards and upholds the values of the organization with which they work. When it comes to the planning process, ethics play a key role. The company needs to know how they want their business to appear to the public and develop their plan around that. If a company wants to appear ethical and trustworthy to its customers it has to provide great customer service at all times. This meant that Amazon. com had to create a safe site, a quality product, and be sure to deliver the product promptly. When it comes to organizing and ethics, Amazon. com had to be sure to keep all resources, employees, and finances in order to keep their word on the quality of both their product and their delivery times. For the customer to believe that Amazon. com is an ethical and trustworthy site requires employees and resources to be organized at all times. When it comes to leading their employees, it is important to be sure that they are not only on task but also following the company’s code of ethics. If having a safe site, a quality product, and prompt delivery is important to Amazon. com; it needs to be important to all their employees as well. When analyzing the progress being made, the manager needs to also be sure that the staff is remaining diligent in their efforts to ensure quality customer service. Ethics are found in every facet of a company and therefore they need to be monitored regularly. Conclusion There is so much more that goes into maintaining a successful business in today’s competitive marketplace than just the four levels of management. The company must always be aware of and be able to adapt to many changing factors. These factors come from many places in the marketplace. Some are external and the company will have little to no control over these and must simply adapt. However the internal factors can be controlled by the company through monitoring and policy changes. The company that can notice the changing factors and integrate and adapt to these changes will be successful in today’s competitive marketplace.

Learning Diary Essay

All students from IBS, IT and tourism sat together in the conference room. We were introduced to many friendly tutors and teachers. I was very interested in the speech of Mr Juola- Head of the Rantaviitikka campus. We were also introduced a very useful book called study guide. After finished the class, I decided to created my own library card with my friend’s help. * 4th September 2012: The first look about IBS programme. At 10. 00 am, IBS coordinator-Mrs Anzelika Krastina introduced to IBS12 group of 40 international students. I was satisfied with this introduction because I knew about: study methods, course contents and project work and practical training issues. After lunch, we were introduced to IT & ICT course by Mrs Tuijja Kuisma. We also met IBS11 and IBS10 groups. I had many useful advices from Mrs Tuijja Kuisma. * 5th September 2012: Planning International evening project. From 8. 30-10. 00, we got together with friends from IT and Tourism. They makes me feel like there are no distance between different degree programmes. After that, we continued to discuss about the International evening project. Because we have 40 international students from about 8 different countries so our coordinator decided to divide the class into 4 groups. As a result, we will 4 performances from IBS12 group. After lunch, we came to room c117 to learn about education principles and policies. We were also presented a new study method called: problems based learning. this was a completely new experience for me and I was really excited to start with this study method. * 6th September 2012: A memorable day. We started later than the other days. At 11. 30 am, we gathered at Borealis auditorium to listen to Ms Ritva Ala-Louko, Head of language center talk about the topic called â€Å" Adapting to a new culture †. all the information given was very worthwhile for me because I knew how to adapt to new life, new culture without the help of family. At 13. 00 pm, the new students walked together to the University of Lapland for the information session â€Å"Getting to know Rovaniemi†. The session began with a video about Rovaniemi. It was so funny because I had seen this video when I searched information about Rovaniemi. After that, the presentation was about Finnish Law and Regulations; Permits and Licenses for Foreigners; Rovaniemi Congregation; sport services at RAMK and ULapland. The information provided me a general look about Rovaniemi. * 7th September 2012: Opening ceremony. That day, I got up early to prepare for the opening ceremony. Exactly, all first-year student officially entered the school gates and we were welcome by Mr Martti Lampela-the principal of Rovaniemi University of Applied Sciences. We listened his speech and also received some cute gifts from Ramk’s tutors. When the speech finished, the new academic year officially began. After lunch, the student tutors leaded students to the river bank by Pohjanhovi, the venue of traditional Rovaniemi UAS vs University of Lapland rowing test. Although, the RAMK’s team won easily but we had happy moments together. The day culminated in a party at night club Doris. Unfortunately, I was under 18 years old at that time so I could not participate in the party. * 10th september 2012: the first day of academic year 2012-2013. The first class was introduction to IT. Mrs Tuija Kuisma taught us to use the basic computer system in school and some useful tools like: optima, win-hawille as well. I had to keep them in mind because they would related to my future study. After lunch, i continued with †Cross-cultural Man† class. I was confused because Krastina’s voice was quite small. Unfortunately, i sat at the back of class. but i could understand the main point of the lesson. Mrs Krastina also so gave us the information about the Problem Based Learning method. At the end of the day, we did not have to have an English test because it was cancelled. * 11th september 2012: The orientation course and Cross-cultural Man class. The orientation course was about information literacy. We learned to use the e-library to search books, information, ect. We were given a form to fill in to create a library card but i already had this card. The important of the class was to provide students with the knowledge of e-library. After lunch, we studied about teamwork and PBL method in Cross-cultural Man class. in my group, we had to solve a real problem in teamwork. After discusing, we came up with the best solution and we had to write an essay about the importance of teamwork in school for the learning task. In my country, i did not have enough opportunities to work in a team so when i worked in a group i was not confident. I will improve myself in the near future. * 12th september 2012: Knowledge about reference and academic writing. Mrs Johanna made me feel very comfortable because of her enthusiam. She was always ready to help students to finish the reference. In the future, i will write many essays so i have to remind myself to study hard all the time. Pham Xuan Tung.

U.S. Army

Objectives1.1Recognize a situation, problem, issue, or opportunity that needs addressing. 1.2Determine the significance, scope, magnitude, and feasibility of finding a solution to the situation, problem, issue, or opportunity. 1.3Identify ethical issues involved in business research.1.4 Describe the business research process. ReadingRead Ch. 1 of Business Research Methods. Read Ch. 2 of Business Research Methods. Read Ch. 3 of Business Research Methods Read Ch. 4 of Business Research Methods. Participation & Discussion QuestionsParticipate in class discussion 4 out of 7 days in a week. & Respond to weekly discussion questions. Nongraded Activities and Preparation Resource: Business Research Methods Review the â€Å"Bringing Research to Life† sections of Ch. 1 & 3 of Business Research Methods.Respond to the following:†¢What evidence is presented that shows effort was made to understand the management dilemma? †¢Identify and classify all of the variables in the U.S. Ar my’s dud shell research. †¢What was Myra’s hypothesis for the U.S. Army’s dud shell research? What was the U.S. Army’s hypothesis? Nongraded Activities and PreparationResource: Business Research Methods Review Exhibit 4.1, â€Å"The Research Process,† in Ch. 4 of Business Research Methods.Find a case study of a research example in which a clear statement of the management dilemma leads to a precise and actionable research.Explain the management dilemma, the management question, and the research question(s).Answer the following questions:†¢Why did you consider the research to be actionable? †¢Was the business research process followed in its entirety?IndividualCurrent Events in Business ResearchWrite a 300-word summary of the business research process by describing the business research process from your experience in the workplace or in an article you find through the University Library. Format your paper consistent with APA guidelin es.Week Two: The Purpose of Business ResearchDetailsObjectives2.1State the purpose of the business research. 2.2Develop appropriate research questions and hypotheses. 2.3Identify dependent and independent variables in business research. ReadingRead Ch. 5 of Business Research Methods. Read Ch. 6 of Business Research Methods. Read Ch. 11 of Business Research Methods. Review Ch. 3 of Business Research Methods.ParticipationParticipate in class discussion 4 out of 7 days in a week. & Respond to weekly discussion questions.Nongraded Activities and PreparationApp DevelopmentIt is estimated that it costs approximately $55,000 to generate an application (app) for the Apple ® iPhone ® mobile digital device. Just offering an app is not a guarantee of success. The most successful apps are sold as downloads and they offer functional value. In addition, Apple takes weeks to review an app.Based on this information, answer the following questions:†¢If you worked for Apple, what research wo uld you want see in a proposal to approve a new app for the iPod ® mobile digital device? Why? †¢What research would not be appropriate? Why?IndividualBusiness Research EthicsResources: The University Library or the Electronic Reserve Readings Find an article using the University Library or in the Electronic Reserve Readings that discusses unethical business research conduct that has resulted in individuals or a firm being convicted, or at least tried for, this conduct. Some examples include the following:†¢Asking inappropriate questions †¢Skewing research results †¢Failing to maintain participants’ confidential information †¢Using participant information for unintended purposes such as selling goods or services Summarize the article you researched.Write a 750-word paper in which you address the following questions: †¢What unethical research behavior was involved?†¢Who were the injured parties? †¢How has the unethical behavior affecte d the organization, the individual, and society? †¢How could the unethical behavior be avoided or resolved? Format your paper consistent with APA guidelines.Learning Team ReflectionCollaborate with your learning team to discuss the previous week’s objectives. Discuss how you can apply them to a business setting or situation.

Kenneth Slessor Speech: Critical studies of Texts Essay

†The gulls go down the body dies and rots, and time flows past them like the hundred yachts.† Kenneth Slessor, a renowned poet and journalist was born on the 27th of March 1901 in Orange, New South Wales. Throughout his eventful life, Slessor was able to compose an array of poems through which he was able to convey his experiences through life. But why exactly are his poems still considered so relevant and significant in this era? Firstly, Slessor’s poems were widely recognised for their ability to accurately depict his understanding of humanity, life, death and change. Across his oeuvre he conveys a unique yet consistent view of the meaning of life and death. He presents this through the use of poetic techniques such as metaphors, repetition, similes and alliteration which are evident through all of his poems. Good morning/afternoon Mr Younes and Yr. 12. The poems â€Å"Out of Time† and â€Å"Beach Burial† are both compositions of Slessor’s later work that are considered memorable and influential by many of his critics. They are said to reveal his interaction with the environment and clearly depict his immediate emotions. I am sure that you will all agree that Slessor’s work is significant in today’s era because of his ability to cleverly and creatively use features to inter-relate the true essence of his poems. The poem ‘Out of time’ vividly initiates the essence of life and humanity as being primarily dominated and controlled by Time. Many critical analysis of Slessor’s work convey that his perception of time is that of a mystery, something that cannot be clearly defined and comprehended. His personal connection with time is deluded with the fact that it can be both a destructive force and a pleasure found in a moment. The adamant and unstoppable nature of time; causes it to solely control and thus highlight the vulnerability of the human existence. As observed in the first sonnet the destructive nature of time is expressed through the lines â€Å"Or time, the bony knife, it runs me through†¦time takes me, drills me, drives through bone and vein.† Metaphorically, time is referred to as a knife which is usually related with the feelings of betrayal and deceit. Thus, Slessor finds that time is a masked identity victimising humanity the ‘faceless host’ and moving on without hesitation or remorse. Similarly, Slessor’s experience as a war correspondent in El Alamein observing â€Å"†¦Convoys of dead soldiers† rolling to shore led to the inspiration of composing the elegy ‘Beach Burial.’ He explores the nature of time and the unfortunate occurrence of war. The intense and futile nature of war educates Slessor to conclude that time is the conqueror that withholds the universal fate of death. Have you ever felt invisible in a crowded area? Well, this is precisely what Slessor conveys death to be like. Death is commonly interpreted as the termination of life, a force that has an eternal end. Once our time is up we have no link to this world but are rather taken up to the â€Å"Other front.† Slessor clearly states that once death has its grasp, humanity will lose its identity as they will eventually be lost in a memory taken by time. This is reinforced in â€Å"Beach Burial† in the lines â€Å"Unknown seaman- the ghostly pencil wavers and fades†¦the wet season has washed their inscriptions†¦Ã¢â‚¬  The styles of Slessor’s poems are unique yet there is still a relative consistency evident throughout his oeuvre. In the poem â€Å"Out of Time† Slessor presents the poem in a cyclical pattern that imitates the nature of time. The last line of each sonnet is the beginning line of the next thus indicating a link throughout the poem. Slessor makes this style distinctive by beginning the poem with â€Å"I saw Time flowing like the hundred yachts† and ending with â€Å"And Time flows past them like a hundred Yachts.† Wouldn’t you agree that his use of repetition and personification of time clearly expresses the main value of this poem? Through these techniques Slessor cleverly portrays that time is a continuous force that will never come to an end but will always have its command over humanities life. On the contrary, the style of the poem â€Å"Beach Burial† is that of an elegy. By presenting his poem in this style, Slessor conveys the empathy that he felt as a result of his experience in El Alamein. The use of onomatopoeic reference â€Å"†¦The sob and clubbing of gunfire†¦Ã¢â‚¬  accurately depicts the futility and harsh nature of war. He then primarily expresses that death has the last say because in the end all of humanity will ultimately be untied by death through fate. This is portrayed in the line â€Å"Whether as enemies they fought†¦the sand joins them together.† A common technique that I am sure you all are aware off is that of water imagery. Water like time is a vast force that is eternal in nature, its ability to be both rough and calm precisely reflects the nature of time and the gloominess of death. The imagery of water is commonly used throughout Slessor’s oeuvre. It is reinforced in the stanzas of ‘Out of Time’ in the lines â€Å"So time, the wave, enfolds me in its bed†¦.water bends†¦the tide goes over.† And in â€Å"Beach Burial† in the lines â€Å"†¦They sway and wander in the waters far under†¦Ã¢â‚¬  As you may have noticed, the structural integrity of Slessor’s work can be seen as a solid representation of the values that he so intricately portrays. Both â€Å"Out of Time† and â€Å"Beach Burial† are composed with completely different structures yet still effectively portray the values of each poem. Composed of an ensemble of three quatrains and a couplet forming a sonnet, â€Å"Out of Time† is characterised by three sonnets. In each of these sonnets Slessor expresses a different aspect of time, linking them together to form a poem that is similar to that of an anecdote. However, the irregularity of the lines in â€Å"Beach Burial† mimics the movement of waves creating an atmosphere and mood that is both solemn and humble. Don’t you agree that this creative use of imagery precisely delineates the depth of Slessor’s emotions? Hopefully I have given you a thorough insight as to why Slessor’s poems are still relevant and significant today. It is evident to see that the themes and values that he expresses through his poems are off a universal significance and his ability to convey them through poetic devices accurately depicts the central notions of his poems. Thus, readers such as us and even critics are able to relate and recognise the articulate nature of his work and for this reason Slessor’s work will continue to be of a great significance.

Porsche Changes Tack

Porsche Changes Tack Yes, of course, we have heard of shareholder value. But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders. Dr. Wendelin Wiedeking, CEO, Porsche, Die Zeit, April 17, 2005. Porsche had always been different. Statements by Porsche leadership, like the one above, always made Veselina (Vesi) Dinova nervous about the company’s attitude about creating shareholder value. The company was a paradox.Porsche’s attitudes and activities were like that of a family-owned firm, but it had succeeded in creating substantial shareholder value for more than a decade. Porsche’s CEO, Dr. Wendelin Wiedeking, had been credited with clarity of purpose and sureness of execution. As one colleague described him: â€Å"He grew up PSD: poor, smart, and driven. † Porsche’s management of two minds had created confusion in the marketplace as to which value proposition Por sche presented. Was Porsche continuing to develop an organizational focus on shareholder value, or was it returning to its more traditional German roots of stakeholder capitalism?Simply put, was Porsche’s leadership building value for all shareholders, including the controlling families, or was it pursuing family objectives at the expense of the shareholder? Vesi had to make a recommendation to her investment committee tomorrow, and the evidence was confusing at best. Shareholder Wealth or Stakeholder Capitalism? Vesi’s dilemma was whether Porsche—Porsche’s leadership—was increasingly pursuing shareholder wealth maximization or the more traditional Continental European model of stakeholder capitalism.Shareholder Wealth Maximization. The Anglo-American markets—the United States and United Kingdom primarily—have followed the philosophy that a firm’s objective should be shareholder wealth maximization. More specifically, the firm should strive to maximize the return to shareholders, as measured by the sum of capital gains and dividends. This philosophy is based on the assumption that stock markets are efficient; that is, the share price is always correct, and quickly incorporates all new information about expectations of return and risk.Share prices, in turn, are deemed the best allocators of capital in the macro economy. Agency theory is the subject of how shareholders can motivate management to accept the prescriptions of shareholder wealth. For example, liberal use of stock options should encourage management to think like shareholders. If, however, management deviates too far from shareholder objectives, the company’s board of directors is responsible for replacing them. In cases where the board is too weak or ingrown to take this action, the discipline of the equity markets could do it through a takeover.This discipline is made possible by the one-share-one-vote rule that exists in most Anglo-Ame rican markets. Copyright  © 2007 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professor Michael H. Moffett for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. Special thanks to Wesley Edens and Pilar Garcia-Heras, MBA ‘06, for case-writing assistance. Stakeholder Capitalism. In the non-Anglo-American markets, particularly continental Europe, controlling shareholders also strive to maximize long-term returns to equity.However, they are more constrained by powerful other stakeholders like creditors, labor unions, governments, and regional entities. In particular, labor unions are often much more powerful than in the Anglo-American markets. Governments often intervene more in the marketplace to protect important stakeholder interests in local communities, such as environmental protection and employment needs. Banks and other financial institutions often have cross-memberships on corporate boards, and as a result are frequently quite influential. This model has been labeled stakeholder capitalism.Stakeholder capitalism does not assume that equity markets are either efficient or inefficient. Efficiency is not really critical because the firm’s financial goals are not exclusively shareholder-oriented since they are constrained by the other stakeholders. In any case, stakeholder capitalism assumes that long-term â€Å"loyal† shareholders—typically, controlling shareholders—rather than the transient portfolio investor should influence corporate strategy. Although both philosophies have their strengths and weaknesses, two trends in recent years have led to an increasing focus on shareholder wealth.First, as more of the non-Anglo-American markets have increasingly privatized their industries, the shareholder wealth focus is seemingly needed to attract international capital from outside investors, many of whom are from other countries. Second, and still quite controversial, many analysts believe that shareholder-based multinationals are increasingly dominating their global industry segments. Porsche AG I know exactly what I want and what must happen. I am the real one. You can be sure. Dr. Wendelin Wiedeking Porsche AG was a publicly traded, closely held, German-based auto manufacturer.Porsche’s President and Chief Executive Officer, Dr. Wendelin Wiedeking, had returned the company to both status and profitability since taking over the company in 1993. Wiedeking’s background was in production, and many had questioned whether he was the right man for the job. Immediately after taking over Porsche, he had killed the 928 and 968 model platforms to reduce complexity and cost, although at the time this left the company with only one platform, the 911. Wiedeking had then brought in a group of Japanese manufacturing consultants, in the Toyota tradition, who led the complete overhaul of the company’s manufacturing processes. Wiedeking himself made news when he walked down the production line with a circular saw, cutting off the shelving which held parts. Porsche had closed the 2004/05 fiscal year (ending July 2005) with â‚ ¬6. 7 billion in sales and â‚ ¬721 million in profit after-tax. Wiedeking and his team were credited with the wholesale turnaround of the specialty manufacturer. Strategically, the leadership team had now expanded the company’s business line to reduce its dependence on the luxury sports car market, historically an extremely cyclical business line.Although Porsche was traded on the Frankfurt Stock Exchange (and associated German exchanges), control of the company remained firmly in the hands of the founding families, the Porsche and Piech families. Porsche had two classes of shares, ordinary and preference. The two families held all 8. 75 million ordinary shares—the shares which held all voting rights. The second class of share, preference s hares, participated only in profits. All 8. 75 million preference shares were publicly traded. Approximately 50% of all preference shares were held by large institutional investors in the United States, Germany, and the United Kingdom; 14% were eld by the Porsche and Piech families; and 36% were held by small private investors. As noted by the Chief Financial Officer, Holger Harter, â€Å"As long as the two families hold on to their stock portfolios, there won’t be any external influence on company-related decisions. I have no doubt that the families will hang on to their shares. † One of the consultants, focused on lean manufacturing techniques and Porsche’s overwhelming levels of subcomponent assemblies and various automotive parts and inventory, was quoted as saying, â€Å"Where is the car factory? This looks like a mover’s warehouse. 1 2 TB0067 Porsche was somewhat infamous for its independent thought and occasional stubbornness when it came to discl osure and compliance with reporting requirements—the prerequisites of being publicly traded. In 2002, the company had chosen not to list on the New York Stock Exchange after the passage of the Sarbanes-Oxley Act. The company pointed to the specific requirement of Sarbanes-Oxley that senior management sign off on the financial results of the company personally as inconsistent with German law (which it largely was) and illogical for management to accept.Management had also long been critical of the practice of quarterly reporting, and had in fact been removed from the Frankfurt exchange’s stock index in September 2002 because of its refusal to report quarterly financial results (Porsche still reports operating and financial results only semi-annually). Porsche’s management continued to argue that the company believed itself to be quite seasonal in its operations, and did not wish to report quarterly. It also believed that quarterly reporting only added to short-te rm investor perspectives, a fire which Porsche felt no need to fuel (see Appendix 4).Exhibit 1 7,000 Porsche’s Growth in Sales, Income and Margin Operating Margin 28% Millions of euros (â‚ ¬) Sales 6,000 20. 8% 5,000 18. 0% 18. 2% 17. 9% 20% 24% 4,000 13. 6% 3,000 11. 6% 12. 0% 16% Operating Margin (EBIT / Sales) 12% 2,000 7. 0% Operating Income (EBIT) 8% 4. 2% 1,000 2. 0% 0 1996 1997 1998 1999 2000 2001 2002 2003 4% 0% 2004 2005 Note: EBIT = earnings before interest and tax. But, after all was said and done, the company had just reported record profits for the tenth consecutive year (see Exhibit 1).Returns were so good and had grown so steadily that the company had paid out a special dividend of â‚ ¬14 per share in 2002, in addition to increasing the size of the regular dividend. The company’s critics had argued that this was simply another way in which the controlling families drained profits from the company. There was a continuing concern that management came first. In the words of one analyst, â€Å"†¦ we think there is the potential risk that management may not rate shareholders’ interests very highly. † The motivations of Porsche’s leadership team had long been the subject of debate.The compensation packages of Porsche’s senior management team were nearly exclusively focused on current year profitability (83% of executive board compensation was based on performance-related pay), with no management incentives or stock option awards related to the company’s share price. Porsche clearly focused on the company’s own operational and financial results, not the market’s valuation—or opinion—of the company. Leadership, however, had clearly built value for all stakeholders in recent years, TB0067 3 nd had shared many of the fruits of the business, in the form of bonuses, with both management and labor alike. â€Å"We are aware that our lofty ambitions for products, processes , and customer satisfaction can only be achieved with the support of a high-quality and well-motivated team. Here at Porsche, we have such a team—and we believe that they should share in the success of the company by means of special bonus payments. †2 Porsche’s Growing Portfolio Porsche’s product portfolio had undergone significant change as CEO Wiedeking pursued his promise to shareholders that he would grow the firm.The company had three major vehicle platforms: the premier luxury sports car, the 911; the competitively priced Boxster roadster; and the recently introduced off-road sport utility vehicle, the Cayenne. Porsche had also recently announced that it would be adding a fourth platform, the Panamera, which would be a high-end sedan to compete with Jaguar, Mercedes, and Bentley. 911. The 911 series was still the focal point of the Porsche brand, but many believed that it was growing old and due for replacement. Sales had seemingly peaked in 2001/02 , and fallen back more than 15% in 2002/03.The 911 was a highly developed series with more than 14 current models carrying the 911 tag. The 911 had always enjoyed nearly exclusive ownership of its market segment. Prices continued to be high, and margins some of the very highest in the global auto industry for production models. Although its sales had been historically cyclical, 911 demand was not priceelastic. The 911 was the only Porsche model which was manufactured and assembled in-house. Boxster. The Boxster roadster had been introduced in 1996 as Porsche’s entry into the lower-price end of the sports car market, and had been by all measures a very big success.The Boxster was also considered an anticyclical move, because the traditional 911 was so high priced that its sales were heavily dependent on the disposable income of buyers in its major markets (Europe, the United States, and the United Kingdom). The Boxster’s lower price made it affordable and less sensitive to the business cycle. It did, however, compete in an increasingly competitive market segment. Although the Boxster had competed head-to-head with the BMW Z3 since its introduction in 1996, the introduction of the Z4 in 2003 had drastically cut into Boxster sales. Boxster sales volumes had peaked in 2000/01.Volume sales in 2003/04 were down to 12,988, less than half what they had been at peak. Cayenne. The third major platform innovation was Porsche’s entry into the sports utility vehicle (SUV) segment, the Cayenne. Clearly at the top end of the market (2002/03 Cayenne sales averaged more than $70,000 each), the Cayenne had been a very quick success, especially in the SUVcrazed American market. The Cayenne introduction was considered by many as one of the most successful new product launches in history, and had single-handedly floated Porsche sales numbers in recent years.The Cayenne’s success had been even more dramatic given much pre-launch criticism that the market would not support such a high-priced SUV, particularly one which shared a strong blood-line with the Volkswagen (VW) Touareg. The Porsche Cayenne and VW Touareg had been jointly developed by the two companies. The two vehicles shared a common chassis, and in fact were both manufactured at the same factory in Bratislava, Slovakia. To preserve its unique identity, however, Porsche shipped the Cayenne chassis 17 hours by rail to its facility in Leipzig, Germany, where the engine, drive â€Å"Porsche Stays on Course,† Dr.Wendelin Wiedeking, President and Chief Executive Officer, Porsche Annual Report 2003/04, p. 5. 2 4 TB0067 train, and interior were combined in final assembly. 3 A new six-cylinder version was introduced in 2004 to buoy Cayenne sales after the initial boom of the introduction year, by offering a significantly cheaper model choice. 4 As illustrated by Exhibit 2, Porsche’s platform innovations had successfully grown sales volumes over the past decade. Exhib it 2 Units 0,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Note: Excludes sales of the discontinued 928 and 944/968 models in 1994-1996. These models totaled 1005 in 1995 and 104 in 1006. 911 sales in 2004 and 2005 include 222 and 660 Carrera GTs, respectively. Porsche’s Expanding Platforms and Growing Sales 911 Boxster Cayenne Panamera. On July 27, 2005, Porsche announced that it would proceed with the development and production of a fourth major model—the Panamera. The name was derived from the legendary Carrera Panamericana long-distance road race held for many years in Mexico.The Panamera would be a premium class, four-door, four-seat sports coupe, and would compete with the premium sedan models produced by Mercedes Benz and Bentley. Pricing was expected to begin at $125,000, rising to $175,000. Production was scheduled to begin in 2009 at a scale of 20,000 units per year. This new model would g ive Porsche a competitive element in every major premium-product market segment. The Most Profitable Automobile Company in the World Porsche’s financial performance and health, by auto manufacturer standards, European or elsewhere, was excellent.It was clearly the smallest of the major European-based manufacturers with total sales of â‚ ¬6. 4 billion in 2004. 5 This was in comparison to DaimlerChrysler’s â‚ ¬142 billion in sales, and Volkswagen’s The engine was, in fact, the only part of the Cayenne which was actually manufactured by Porsche itself. All other components of the vehicle were either outsourced or built in conjunction with other manufacturers. 4 The six-cylinder engine, however, was actually a Volkswagen engine which had been reconfigured. This had led to significant debate, as Porsche was criticized for degrading the Porsche brand. Comparing Porsche’s financial results with other major automakers is problematic. First, Porsche’s fiscal year ends July 31. Hence Porsche’s financial results for 2004 reported in Exhibit 3 are those for the August 1, 2003, through July 31, 2004, period. Secondly, Porsche announced that beginning with the 2004/05 period, which ended July 31, 2005, it would move to InternationalFinancial Reporting Standards (IFRS), rather than the German Commercial Code and special accounting requirements of the German Stock Corporation Law (German Generally Accepted Accounting Principles) which it has followed since it went public in 1984.These results will not be comparable to previous reporting years, and will require both Porsche and its analysts to reconstruct its financial history following IFRS. 3 TB0067 5 â‚ ¬89 billion. But, as illustrated in Exhibit 3, Porsche was outstanding by all metrics of profitability and return on invested capital. Porsche’s EBITDA, EBIT, and net income margins were the highest among all European automakers in 2004. 6 What also always stood out a bout Porsche was the average revenue per vehicle. At â‚ ¬83,671, only DaimlerChrysler was even close. Exhibit 3 European Automaker BMW DaimlerChrysler Fiat Peugeot Porsche Renault VolkswagenPorshe’s Competitive Positioning, 2004 Earnings Measures Sales (millions) â‚ ¬ 44,335 â‚ ¬ 142,059 â‚ ¬ 46,703 â‚ ¬ 56,797 â‚ ¬ 6,359 â‚ ¬ 40,715 â‚ ¬ 88,963 Revenue per vehicle â‚ ¬ 39,622 â‚ ¬ 78,056 â‚ ¬ 28,844 â‚ ¬ 19,354 â‚ ¬ 83,671 â‚ ¬ 19,291 â‚ ¬ 18,369 EBITDA â‚ ¬ 5,780 â‚ ¬ 10,280 â‚ ¬ 2,190 â‚ ¬ 4,502 â‚ ¬ 1,665 â‚ ¬ 4,414 â‚ ¬ 7,140 EBIT â‚ ¬ 3,745 â‚ ¬ 4,612 â‚ ¬ 22 â‚ ¬ 1,916 â‚ ¬ 1,141 â‚ ¬ 2,148 â‚ ¬ 1,620 Net Income â‚ ¬ 2,222 â‚ ¬ 2,466 -â‚ ¬ 1,586 â‚ ¬ 1,357 â‚ ¬ 616 â‚ ¬ 3,551 â‚ ¬ 677 EBITDA Margin 13. 0% 7. 2% 4. 7% 7. 9% 26. 2% 10. 8% 8. 0% Margin Measures EBIT Net Income Margin Margin 8. 4% 5. 0% 3. 2% 1. 7% 0. 0% -3. 4% 3. 4% 2. 4% 17. 9% 9. 7% 5. 3% 8. 7% 1. % 0. 8% Source: â€Å"European Autos,† Deutsche Bank, July 20, 2005; â€Å"Porsche,† Deutsche Bank, September 26, 2005; Thomson Analytics; author estimates. Renault’s results included 343 million in extraordinary income in 2004, accounting for net income exceeding EBIT. Porsche’s financial results, however, had been the subject of substantial debate in recent years as upwards of 40% of operating earnings were thought to be derived from currency hedging. Porsche’s cost-base was purely European euro; it produced in only two countries, Germany and Finland, and both were euro area members.Porsche believed that the quality of its engineering and manufacturing were at the core of its brand, and it was not willing to move production beyond Europe (BMW, Mercedes, and VW had all been manufacturing in both the United States and Mexico for years). Porsche’s sales by currency in 2004 were roughly 45% European euro, 40% U. S. dollar, 10% British pound s terling, and 5% other (primarily the Japanese yen and Swiss franc). Porsche’s leadership had undertaken a very aggressive currency hedging strategy beginning in 2001 when the euro was at a record low against the U.S. dollar. In the following years, these financial hedges (currency derivatives) proved extremely profitable. For example, nearly 43% of operating earnings in 2003 were thought to have been derived from hedging activities. Although profitable, many analysts argued the company was increasingly an investment banking firm rather than an automaker, and was heavily exposed to the unpredictable fluctuations between the world’s two most powerful currencies, the dollar and the euro. Exhibit 4 European Automaker BMW DaimlerChrysler Fiat Peugeot Porsche Renault VolkswagenReturn on Invested Capital (ROIC) for European Automakers, 2004 Operating Margin Sales (millions) â‚ ¬ 44,335 â‚ ¬ 142,059 â‚ ¬ 46,703 â‚ ¬ 56,797 â‚ ¬ 6,359 â‚ ¬ 40,715 â‚ ¬ 88,96 3 EBIT â‚ ¬ 3,745 â‚ ¬ 4,612 â‚ ¬ 22 â‚ ¬ 1,916 â‚ ¬ 1,141 â‚ ¬ 2,148 â‚ ¬ 1,620 Taxes â‚ ¬ 1,332 â‚ ¬ 1,177 -â‚ ¬ 29 â‚ ¬ 676 â‚ ¬ 470 â‚ ¬ 634 â‚ ¬ 383 EBIT After-tax â‚ ¬ 2,413 â‚ ¬ 3,435 â‚ ¬ 51 â‚ ¬ 1,240 â‚ ¬ 671 â‚ ¬ 1,514 â‚ ¬ 1,237 Interest Bearing debt â‚ ¬ 1,555 â‚ ¬ 9,455 â‚ ¬ 24,813 â‚ ¬ 6,445 â‚ ¬ 2,105 â‚ ¬ 7,220 â‚ ¬ 14,971 Invested Capital Stockholders' equity â‚ ¬ 17,517 â‚ ¬ 33,541 â‚ ¬ 5,946 â‚ ¬ 13,356 â‚ ¬ 2,323 â‚ ¬ 16,444 â‚ ¬ 23,957 Invested Capital â‚ ¬ 19,072 â‚ ¬ 42,996 â‚ ¬ 30,759 â‚ ¬ 19,801 â‚ ¬ 4,428 â‚ ¬ 23,664 â‚ ¬ 38,928 Capital Turnover 2. 2 3. 30 1. 52 2. 87 1. 44 1. 72 2. 29 ROIC 12. 65% 7. 99% 0. 17% 6. 26% 15. 15% 6. 40% 3. 18% Source: â€Å"European Autos,† Deutsche Bank, July 20, 2005; â€Å"Porsche,† Deutsche Bank, September 26, 2005; Thomson Analytics; author estimates. Invested Capital = total stockho lders’ equity + gross interest-bearing debt. Capital turnover = sales/invested capital. ROIC (return on invested capital) = EBIT – taxes/invested capital. ROIC. It was Porsche’s return on invested capital (ROIC), however, which had been truly exceptional over time.The company’s ROIC in 2004—following Deutsche Bank’s analysis presented in Exhibit 4—was 15. 15%. This was clearly superior to all other European automakers; BMW’s ROIC was second highest at 12. 65%. Other major European automakers struggled to reach 6% to 7%. EBITDA (earnings before interest, taxes, depreciation, and amortization) is frequently used as the income measure of pure business profitability. EBIT (earnings before interest and taxes) is similar but is reduced by depreciation and amortization charges associated with capital asset and goodwill write-offs. 6 6 TB0067This ROIC reflected Porsche’s two-pronged financial strategy: 1) superior margins on the narrow but selective product portfolio; and 2) leveraging the capital and capabilities of manufacturing partners in the development and production of two of its three products. The company had successfully exploited the two primary drivers of the ROIC formula: ROIC = EBIT after-tax Sales x Sales Invested Capital The first component, operating profits (EBIT, earnings before interest and taxes) after-tax as a percent of sales—operating margin—was exceptional at Porsche due to the premium value pricing derived from its global brand of quality and excellence.This allowed Porsche to charge premium prices and achieve some of the largest of margins in the auto industry. As illustrated in Exhibit 4, Porsche’s operating profits after-tax of â‚ ¬671 million produced an operating margin after-tax of 10. 55% (â‚ ¬671 divided by â‚ ¬6,359 in sales), the highest in the industry in 2004. The second component of ROIC, the capital turnover ratio (sales divided by inves ted capital)— velocity—reflected Porsche’s manufacturing and assembly strategy.By leveraging the Valmet and VW partnerships in the design, production, and assembly of both the Boxster (with Valmet of Finland) and the Cayenne (with Volkswagen of Germany), Porsche had achieved capital turnover ratios which dwarfed those achieved by any other European automaker. Porsche’s capital turnover ratio had surpassed all other European automakers consistently over the past decade. As illustrated by Exhibit 5, Porsche’s growing margins and relatively high velocity had sustained a very impressive ROIC for many years. In recent years, however, invested capital had risen faster than sales.But Porsche was not adding fixed assets to its invested capital basis, but cash. The rising cash balances were the result of retained profits (undistributed to shareholders) and new debt issuances (raising more than 600 million in 2004 alone). As a result, fiscal 2003/04 had prov en to be one of Porsche’s poorest years in ROIC. Exhibit 5 2. 5 Porsche’s Velocity, Margin, and ROIC Margin ;amp; ROIC 20% Velocity = Sales/Invested Capital 2. 15 2. 0 2. 12 Velocity 1. 97 1. 99 1. 81 18% 1. 91 ROIC (Operating Margin X Velocity) 14. 2% 12. 5% 11. 7% 11. 6% 10. 5% 1. 19 10. 5% 1. 21 9. % 11. 6% 13. 8% 16% 12. 9% 1. 5 14% 12. 6% 11. 9% 12% 10% 1. 0 8. 0% 6. 1% Operating Margin 6. 4% 6. 0% 6. 4% 8% 0. 91 0. 84 6% 0. 5 3. 8% 2. 0% 3. 7% 4% 2% 0. 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0% Operating margin = ( EBIT – Taxes ) / Sales. Invested capital = cash + net working capital + net fixed assets. Porsche’s minimal levels of invested capital resulted from some rather unique characteristics. Invested capital is defined a number of ways, but Vesi used her employer’s standardized definition of cash plus net working capital plus net fixed assets. As illustrated in Exhibit 6, Porsche’s invested capital base TB0067 7 had be en growing rapidly in recent years, but not because of additional fixed asset investments. Porsche’s invested capital was growing primarily because of its accumulation of cash. 8 Vesi was concerned that using this measure of â€Å"invested capital† led to a distorted view of the company’s actual performance. Porsche’s minimal fixed-asset capital base resulted from the explicit strategy of the company as executed over the past decade.The development and manufacturing and assembly of the Cayenne was a clear example: †¢ Porsche had spent only $420 million in the development of the Cayenne. Auto analysts estimated that any other major automaker would have spent between $1. 2 and $1. 8 billion. †¢ Porsche had effectively avoided these costs and investments by co-producing the Cayenne with Volkswagen. The Cayenne shared some 65% of its parts and modules with the VW Touareg, with only 13% of the Cayenne’s actual wholesale value being derived fro m parts developed and manufactured by Porsche itself. The production agreement between Porsche and VW made VW responsible for all costs associated with quality problems arising at VW’s manufacturing facilities. Porsche paid VW a unit price for each Cayenne body produced in VW’s assembly facility in Bratislava, Slovakia. Porsche had successfully off-loaded both cost and risk. Exhibit 6 Asset Structure Cash Net working capital Net fixed assets Invested capital Liability Structure Short-term debt Long-term debt Total debt Equity Invested capital Porsche’s Managerial Balance Sheet (millions of euros) 996 â‚ ¬ 227 38 487 â‚ ¬ 753 1997 â‚ ¬ 281 116 578 â‚ ¬ 975 1998 â‚ ¬ 466 132 590 â‚ ¬ 1,188 1999 â‚ ¬ 730 225 649 â‚ ¬ 1,604 2000 â‚ ¬ 823 258 755 â‚ ¬ 1,835 2001 â‚ ¬ 1,121 369 960 â‚ ¬ 2,449 2002 â‚ ¬ 1,683 (355) 2,746 â‚ ¬ 4,073 2003 â‚ ¬ 1,766 (382) 3,215 â‚ ¬ 4,599 2004 â‚ ¬ 2,791 403 3,797 â‚ ¬ 6,992 2005 ↚ ¬ 4,325 (131) 3,641 â‚ ¬ 7,834 â‚ ¬8 19 â‚ ¬ 27 726 â‚ ¬ 753 â‚ ¬7 124 â‚ ¬ 131 844 â‚ ¬ 975 â‚ ¬ 10 114 â‚ ¬ 124 1,064 â‚ ¬ 1,188 â‚ ¬ 52 107 â‚ ¬ 159 1,445 â‚ ¬ 1,604 â‚ ¬ 20 82 â‚ ¬ 102 1,733 â‚ ¬ 1,835 â‚ ¬ 158 (49) â‚ ¬ 108 2,341 â‚ ¬ 2,449 â‚ ¬ 137 850 â‚ ¬ 987 3,086 â‚ ¬ 4,073 â‚ ¬ 70 859 â‚ ¬ 929 3,670 â‚ ¬ 4,599 â‚ ¬ 649 1,641 â‚ ¬ 2,290 4,702 â‚ ¬ 6,992 â‚ ¬ 1,107 2,026 â‚ ¬ 3,133 4,701 â‚ ¬ 7,834Net working capital = accounts receivable, inventories, and prepaid expenses, less accounts payable and accured expenses. This assumes ‘provisions for risk and charges' as equity. Porsche Changes Tack The summer and fall of 2005 saw a series of surprising moves by Porsche. First, Porsche announced that the â‚ ¬1 billion investment to design and manufacture the new Panamera would be largely funded by the company itself. Although the introduction of the Panamera had been anticipat ed for quite some time, the market was surprised that Porsche intended to design and build the car—and its manufacturing facility—nearly totally in-house.The new sports coupe was to be produced in Leipzig, Germany, at the existing Porsche facility, although a substantial expansion of the plant would be required. As opposed to the previous new product introductions, the Boxster and the Cayenne, there would be no major production partner involved. Porsche CEO Wendelin Wiedeking specifically noted this in his press release: â€Å"There are no plans for a joint venture with another car maker. But to ensure the profitability of this new model series, we will cooperate more closely than so far with selected system suppliers. 9 The German share of the value of the Panamera would be roughly 70%. Like the 911, Boxster, and Cayenne, the Panamera would bear the Made in Germany stamp. This methodology defines invested capital by assets, the left-hand side of the managerial balanc e sheet. Alternative definitions of invested capital focus on the right-hand side of the balance sheet; for example, as stockholder equity plus interest-bearing debt. Either version can also be netted for cash holdings under different methods. 8 Porsche’s cash and marketable securities grew from â‚ ¬2. billion in 2004 to over â‚ ¬4. 3 billion at the end of 2005 (July 31, 2005). Credit Suisse First Boston had in fact noted on September 21, 2005, just days before the VW announcement, that, â€Å"In our view, the only disappointment is that management indicated that the company would not look into returning cash to shareholders in the next 18 months. † 9 â€Å"Go Ahead for Porsche’s Fourth Model Series,† Porsche Press Release, July 27, 2005. 7 8 TB0067 The second surprise occurred on September 25, 2005, with the announcement to invest â‚ ¬3 billion in VW.Porsche AG, Stuttgart, seeks to acquire a share of approximately 20 percent in the stock capital of Volkswagen AG, Wolfsburg, entitled to vote. Porsche is taking this decision because Volkswagen is now not only an important development partner for Porsche, but also a significant supplier of approximately 30 percent of Porsche’s sales volume. In the words of Porsche’s President and CEO: â€Å"Making this investment, we seek to secure our business relations with Volkswagen and make a significant contribution to our own future plans on a lasting, long-term basis. Porsche is in a position to finance the acquisition of the planned share in Volkswagen through its own, existing liquidity. After careful examination of this business case, Porsche is confident that the investment will prove profitable for both parties. †¦ The planned acquisition is to ensure that†¦ there will not be a hostile takeover of Volkswagen by investors not committed to Volkswagen’s long-term interests. In the words of Porsche’s President and CEO: â€Å"Our planned investm ent is the strategic answer to this risk.We wish in this way to ensure the independence of the Volkswagen Group in our own interest. This ‘German solution’ we are seeking is an essential prerequisite for stable development of the Volkswagen Group and, accordingly, for continuing our cooperation in the interest of both Companies. † â€Å"Acquisition of Stock to Secure Porsche’s Business,† Porsche AG (press release), September 25, 2005. Porsche would spend approximately â‚ ¬3 billion to take a 20% ownership position in VW. This would make Porsche VW’s single largest investor, slightly larger than the government of Lower Saxony. 0 It clearly eliminated any possible hostile acquisitions which may have been on the horizon (DaimlerChrysler was rumored to have been interested in raiding VW. ) The announcement was met by near-universal opposition The family linkages between the two companies were well known. Ferdinand K. Piech, one of the most prom inent members of the Piech family which, along with the Porsche family, controlled Porsche, was the former CEO (he retired in 2002) and still Chairman of Volkswagen. He was the grandson of Ferdinand Porsche, the founder of Porsche.Accusations of conflict of interest were immediate, as were calls for his resignation, and the denial of Porsche’s request for a seat on VW’s board. Although VW officially welcomed the investment by Porsche, Christian Wulff, VW’s board member representing the state of Lower Saxony where VW was headquartered, publicly opposed the investment by Porsche. In the eyes of many, the move by Porsche was a return to German corporate cronyism. For years, â€Å"Deutschland AG† was emblematic of the cosy network of cross-shareholdings and shared non-executive directorships that insulated Germany from international capitalism.Wendelin Wiedeking, Porsche’s chief executive, himself invoked the national angle, saying this: â€Å"German solution was essential to secure VW, Europe’s largest carmaker, against a possible hostile takeover by short-term investors. † â€Å"Shield for Corporate Germany or a Family Affair? VW and Porsche Close Ranks,† Financial Times, Tuesday, September 27, 2005, p. 17. Germany, although long known for complex networks of cross-shareholdings, had effectively unwound most of these in the 1990s.The German government had successfully accelerated the unwinding by making most cross-shareholding liquidations tax-free in recent years, and both the financial and nonfinancial sectors had sold literally billions of euros in shares. This move by Porsche and VW was seen as more of a personal issue—Ferdinand Piech—rather than a national issue of German alliances. Many Porsche investors had agreed, arguing that if they had wanted to invest in VW, they would have done it themselves. The resulting ownership structure of Volkswagen in October 2005 was: 18. 3% Porsche; 18. 2% State of Lower Saxony; 13. 0% Volkswagen; 8. 58% Brandes Investment Partners; 3. 5% Capital Group; and 38. 19% widely distributed. Porsche still possessed the option to purchase another 3. 4%. 10 TB0067 9 There were also potential strategic conflicts between the two companies. Volkswagen’s premium segment company, Audi, was a distinct competitor to Porsche, particularly in light of the new Panamera project. VW itself had fallen on bad times (see Exhibit 3), and many VW watchers believed that the company needed activist shareholders.VW and its Audi unit were both suffering from high wage costs in German factories, and VW had been seeking wage concessions from many of its unions to regain competitiveness and profitability. Porsche had a reputation of being soft on German unions, and with the growing presence of both Porsche and Ferdinand Piech, critics feared VW would back away from its wage-reduction push. Porsche was not expected to be as cost-conscious or to push VW to ma ke drastic strategic changes.Instead, Porsche was expected to push VW to underwrite a number of the new models and platforms Porsche was in the process of introducing. There were, in fact, lingering allegations that a number of VW’s new product introductions had been delayed by the Cayenne’s production in 2003 and 2004. Shareholders in Porsche—the nonfamily-member shareholders—were both surprised and confused by this dramatic turn of events. Although the arguments for solidifying and securing the Porsche/ VW partnership were rational, the cost was not.At â‚ ¬3 billion, this was seemingly an enormous investment in a nonperforming asset. Analysts concluded that the potential returns to shareholders, even in the form of a special dividend, were now postponed indefinitely; shareholders would not â€Å"see the money† for years to come. The move was also seen by some as an acknowledgment by Porsche that it could no longer expand into new product categ ories without significantly larger capital and technical resources. Automotive electrical systems, for example, were increasingly complex and beyond capabilities possessed in-house by Porsche.The interest in VW, Europe’s second largest automaker to DaimlerChrysler, would surely provide the company with access to key resources. But why weren’t these resources accessible through partnerships and alliances, without the acquisition of one-fifth ownership in Europe’s largest moneyloser? The announcement of Porsche’s intention to take a 20% equity interest in Volkswagen in September 2005 was greeted with outright opposition on the part of many shareholders in both Volkswagen and Porsche. Major investment banks like Deutsche Bank immediately downgraded Porsche from a buy to a sell, arguing that the returns on the massive investment, ome â‚ ¬3 billion, would likely never accrue to shareholders. 11 Although Porsche and VW were currently co-producing the Porsche Cayenne and Volkswagen Touareg, this ownership interest would take the two companies far down a path of cooperation way beyond the manufacture of a sport utility vehicle. Although Porsche had explained its investment decision to be one which would assure the stability of its future cooperation with VW, many critics saw it as a choice of preserving the stakes of the Porsche and Piech families at the expense of nonfamily shareholders.The question remained as to whether this was indeed a good or bad investment by Porsche, and good or bad for whom? Vesi wondered if her position on Porsche might have to, in the end, distinguish between the company’s ability to generate results for stockholders versus its willingness to do so. Why should a small and highly profitable maker of sports cars suddenly hitch its fortunes to a lumbering and struggling mass-producer? That was the question that some alarmed shareholders asked this week when Porsche, the world’s most profitable carma ker, announced plans to buy 20% stake in Volkswagen (VW), Europe’s biggest carmaker.To some critics of the deal, Porsche’s move looked like a return to cosy, German corporatism at its worst. Since January 2002, when a change in the law encouraged German companies to sell their cross-shareholdings in each other, free of capital gains tax, new foreign shareholders have often shaken up fossilised German management. A deal with friendly compatriots from Porsche might rescue VW from this distasteful fate, particularly since foreign hedge funds and corporate raiders have been rumored to be circling VW. â€Å"Business: Keeping It in the Family,† The Economist, October 1, 2005. 1 â€Å"Porsche: We may never see the cash; downgrade to sell,† Deutsche Bank, September 26, 2005. TB0067 10 Appendix 1 (Millions of euros) Sales Cost of goods sold Gross profits Porsche’s Statement of Income, 1996-2005 (period ending July 31) 1996 â‚ ¬ 1,438 1,177 â‚ ¬ 261 24 3 15 64 â‚ ¬ 97 6. 8% 68 â‚ ¬ 29 2. 0% 3 â‚ ¬ 26 1 0 â‚ ¬ 25 1. 7% —-1997 â‚ ¬ 2,093 1,648 â‚ ¬ 446 339 21 67 â‚ ¬ 195 9. 3% 108 â‚ ¬ 87 4. 2% 7 â‚ ¬ 81 9 1 â‚ ¬ 70 3. 4% 45. 6% 40. 0% 1998 â‚ ¬ 2,519 1,853 â‚ ¬ 667 439 17 88 â‚ ¬ 334 13. 2% 157 â‚ ¬ 176 7. 0% 13 â‚ ¬ 164 22 â‚ ¬ 142 5. 6% 20. 4% 12. 4% 1999 â‚ ¬ 3,161 2,154 â‚ ¬ 1,007 571 29 84 â‚ ¬ 550 17. % 184 â‚ ¬ 366 11. 6% 12 â‚ ¬ 354 164 â‚ ¬ 191 6. 0% 25. 5% 16. 3% 2000 â‚ ¬ 3,648 2,527 â‚ ¬ 1,121 625 26 114 â‚ ¬ 636 17. 4% 197 â‚ ¬ 439 12. 0% 12 â‚ ¬ 427 220 â‚ ¬ 207 5. 7% 15. 4% 17. 3% 2001 â‚ ¬ 4,441 3,062 â‚ ¬ 1,380 793 61 87 â‚ ¬ 735 16. 5% 133 â‚ ¬ 602 13. 6% 14 â‚ ¬ 588 318 â‚ ¬ 270 6. 1% 21. 8% 21. 2% 2002 â‚ ¬ 4,857 2,981 â‚ ¬ 1,877 914 79 110 â‚ ¬ 1,152 23. 7% 279 â‚ ¬ 873 18. 0% 48 â‚ ¬ 825 363 (0) â‚ ¬ 462 9. 5% 9. 4% -2. 6% 2003 â‚ ¬ 5,582 3,250 â‚ ¬ 2,332 1,187 116 147 â‚ ¬ 1, 409 25. 2% 392 â‚ ¬ 1,017 18. 2% 88 â‚ ¬ 928 363 0 â‚ ¬ 565 10. 1% 14. 9% 9. 0% 2004 â‚ ¬ 6,359 3,787 â‚ ¬ 2,572 1,254 99 248 â‚ ¬ 1,665 26. % 525 â‚ ¬ 1,141 17. 9% 58 â‚ ¬ 1,082 470 (4) â‚ ¬ 616 9. 7% 13. 9% 16. 5% 2005 â‚ ¬ 6,574 3,501 â‚ ¬ 3,073 1,539 172 169 â‚ ¬ 1,875 28. 5% 510 â‚ ¬ 1,365 20. 8% 127 â‚ ¬ 1,238 459 (4) â‚ ¬ 783 11. 9% 3. 4% -7. 6% Selling, general & admin expenses Non-operating income Other income/expense, net EBITDA EBITDA/sales Depreciation & amortization Earnings before interest and tax EBIT/sales Interest expense on debt Earnings before taxes (EBT) Income taxes Minority interest Net income availabe to common Net income/sales (ROS) Sales growth Earnings growthSource: Thomson Analytics, June 2006, and author calculations. Appendix 2 (Millions of euros) Assets Cash ;amp; equivalents Receivables, net Inventories Prepaid expenses Total current assets Porsche’s Balance Sheet, 1996-2005 (period ending Jul y 31) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 â‚ ¬ 227 91 199 23 â‚ ¬ 540 â‚ ¬0 60 â‚ ¬ 1,324 917 â‚ ¬ 407 21 â‚ ¬ 1,027 â‚ ¬ 281 170 297 47 â‚ ¬ 795 â‚ ¬ 12 5 â‚ ¬ 1,536 994 â‚ ¬ 541 20 â‚ ¬ 1,374 â‚ ¬ 466 196 328 37 â‚ ¬ 1,027 â‚ ¬ 10 5 â‚ ¬ 1,623 1,062 â‚ ¬ 561 14 â‚ ¬ 1,617 730 202 357 42 â‚ ¬ 1,332 â‚ ¬ 30 9 â‚ ¬ 1,683 1,183 â‚ ¬ 501 110 â‚ ¬ 1,981 â‚ ¬ 823 321 396 45 â‚ ¬ 1,585 â‚ ¬ 177 14 â‚ ¬ 1,797 1,310 â‚ ¬ 487 76 â‚ ¬ 2,340 â‚ ¬ 1,121 439 468 29 â‚ ¬ 2,056 â‚ ¬ 253 38 â‚ ¬ 1,960 1,399 â‚ ¬ 561 108 â‚ ¬ 3,016 â‚ ¬ 1,683 638 487 50 â‚ ¬ 2,858 â‚ ¬ 539 39 â‚ ¬ 3,607 1,652 â‚ ¬ 1,955 214 â‚ ¬ 5,604 â‚ ¬ 1,766 823 539 42 â‚ ¬ 3,170 â‚ ¬ 552 42 â‚ ¬ 4,122 1,847 â‚ ¬ 2,276 346 â‚ ¬ 6,385 â‚ ¬ 2,791 939 726 23 â‚ ¬ 4,479 â‚ ¬ 733 21 â‚ ¬ 4,724 2,116 â‚ ¬ 2,607 436 â‚ ¬ 8,276 â‚ ¬ 4,325 971 572 17 â‚ ¬ 5,885 â‚ ¬ 1,211 27 â‚ ¬ 4,486 2,378 â‚ ¬ 2,108 295 â‚ ¬ 9,525Long term receivables Investments in unconsol subsidiaries Property, plant ;amp; equipment, gross Accumulated depreciation Property, plant ;amp; equipment, net Other assets Total Assets Liabilities Accounts payable ST debt ;amp; current portion due LT debt Income taxes payable Other current liabilities Current liabilities, total Long term debt Provision for risks ;amp; charges Deferred taxes Other liabilities Total liabilities Shareholders' Equity Non-equity reserves & minority interest Common Equity Shareholders' equity, total Total liabilities ;amp; shareholders' equity Common shares outstanding (millions) 117 8 3 156 â‚ ¬ 283 â‚ ¬ 17 481 1 1 â‚ ¬ 782 â‚ ¬ 148 7 10 241 â‚ ¬ 406 â‚ ¬ 116 541 4 4 â‚ ¬ 1,071 â‚ ¬ 159 10 8 262 â‚ ¬ 439 â‚ ¬ 114 648 n/a 0 â‚ ¬ 1,202 â‚ ¬ 193 52 10 174 â‚ ¬ 429 â‚ ¬ 102 856 n/a 5 â‚ ¬ 1,392 â‚ ¬ 240 20 17 248 â‚ ¬ 525 â‚ ¬ 102 95 1 (22) 2 â‚ ¬ 1,558 â‚ ¬ 236 158 28 303 â‚ ¬ 725 â‚ ¬0 1,312 (52) 2 â‚ ¬ 1,987 â‚ ¬ 305 137 200 1,027 â‚ ¬ 1,668 â‚ ¬ 317 1,619 97 437 â‚ ¬ 4,138 â‚ ¬ 337 70 71 1,378 â‚ ¬ 1,856 â‚ ¬ 337 1,916 173 350 â‚ ¬ 4,631 â‚ ¬ 368 649 61 855 â‚ ¬ 1,933 â‚ ¬ 1,457 2,378 182 2 â‚ ¬ 5,953 â‚ ¬ 440 1,107 187 1,064 â‚ ¬ 2,798 â‚ ¬ 1,985 1,281 36 5 â‚ ¬ 6,105 â‚ ¬ 10 235 â‚ ¬ 245 â‚ ¬ 1,027 17. â‚ ¬5 298 â‚ ¬ 303 â‚ ¬ 1,374 17. 5 â‚ ¬0 416 â‚ ¬ 416 â‚ ¬ 1,617 17. 5 â‚ ¬2 587 â‚ ¬ 589 â‚ ¬ 1,981 17. 5 â‚ ¬0 782 â‚ ¬ 782 â‚ ¬ 2,340 17. 5 â‚ ¬0 1,028 â‚ ¬ 1,028 â‚ ¬ 3,016 17. 5 â‚ ¬1 1,466 â‚ ¬ 1,467 â‚ ¬ 5,604 17. 5 (â‚ ¬ 0) 1,755 â‚ ¬ 1,755 â‚ ¬ 6,385 17. 5 â‚ ¬6 2,317 â‚ ¬ 2,323 â‚ ¬ 8,276 17. 5 â‚ ¬8 3,412 â‚ ¬ 3,420 â‚ ¬ 9,525 17. 5 Source: Thomson Analytics, June 2006, and author calculations. TB0067 11 Appendix 3 (Millions of euros) Porscheâ₠¬â„¢s Statement of Cash Flow, 1996-2005 (period ending July 31) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Operating Activities Income before extraordinary items Depreciation & amortization Other Cash Flow Funds From/For Other Operating Activities Net Cash Flow From Operating Activities Investing Activities Capital Expenditures Additions To Other Assets Increase In Investments Disposal of Fixed Assets Net Cash Flow From Investing Activities Financing Activities Net Proceeds From Sales/Issue of Com/Prf Stock Com/Prf Purchased,Retired,Converted,Redeemed Long Term Borrowings Inc(Dec) In ST Borrowings Reduction In Long Term Debt Cash Dividends Paid – Total Net Cash Flow From Financing Activities Exchange Rate Effect Cash & Cash Equivalents – Inc(Dec) â‚ ¬ 25 74 47 26 â‚ ¬ 171 â‚ ¬ 71 127 (0) 22 â‚ ¬ 220 â‚ ¬ 142 157 (7) 72 â‚ ¬ 363 â‚ ¬ 191 184 23 (5) â‚ ¬ 392 â‚ ¬ 210 197 11 (22) â‚ ¬ 396 â‚ ¬ 270 133 16 151 â‚ ¬ 570 â‚ ¬ 462 279 26 611 â‚ ¬ 1,377 â‚ ¬ 565 392 423 77 â‚ ¬ 1,456 â‚ ¬ 612 525 515 (349) â‚ ¬ 1,303 â‚ ¬ 779 510 42 (157) â‚ ¬ 1,175 (â‚ ¬ 184) (15) (14) (â‚ ¬ 214) (â‚ ¬ 230) n/a n/a (â‚ ¬ 230) (â‚ ¬ 174) (2) (0) 10 (â‚ ¬ 166) (â‚ ¬ 145) (12) (7) 27 (â‚ ¬ 136) (â‚ ¬ 257) n/a n/a 8 (â‚ ¬ 249) (â‚ ¬ 306) n/a (1) 23 (â‚ ¬ 285) (â‚ ¬ 1,833) 831 (â‚ ¬ 1,002) (â‚ ¬ 1,338) n/a 309 (â‚ ¬ 1,028) (â‚ ¬ 1,265) n/a 478 (â‚ ¬ 787) (â‚ ¬ 851) (63) (243) 226 (â‚ ¬ 932) â‚ ¬0 6 1 â‚ ¬8 (30) â‚ ¬0 102 (33) (5) â‚ ¬ 64 54 â‚ ¬0 (13) (â‚ ¬ 13) 185 â‚ ¬0 49 (21) (22) â‚ ¬6 1 263 â‚ ¬0 (36) (22) (â‚ ¬ 58) 4 93 â‚ ¬0 37 (26) â‚ ¬ 11 2 298 0 339 (102) (45) â‚ ¬ 192 (5) 562 â‚ ¬0 (39) (297) (â‚ ¬ 336) (8) 84 â‚ ¬0 639 n/a (0) (59) â‚ ¬ 580 5 1,025 â‚ ¬6 147 (69) â‚ ¬ 84 (32) 296 Source: Thomson Analytics, November 2005, and author calculations. Appendix 4 Porsche Dispenses wi th Listing in New York Stuttgart. The preferred stock of Dr. Ing. h. c. F. Porsche AG, Stuttgart, will continue to be listed exclusively on German stock exchanges. All considerations about gaining an additional listing in the U. S. A. have been laid aside by the Porsche Board of Management. The sports car manufacturer had been invited to join the New York Stock Exchange at the beginning of the year. The Chairman of the Board of Management at Porsche, Dr.Wendelin Wiedeking explained the decision: â€Å"The idea was certainly attractive for us. But we came to the conclusion that a listing in New York would hardly have brought any benefits for us and our shareholders and, on the other hand, would have led to considerable extra costs for the company. † The crucial factor in Porsche’s decision was ultimately the law passed by the U. S. government this summer (the â€Å"Sarbanes-Oxley Act†), whereby the CEO and the Director of Finance of a public limited company liste d on a stock exchange in the U. S. A. have to swear that every balance sheet is correct and, in the case of incorrect specifications, are personally liable for high financial penalties and even up to 20 years in prison.In Porsche’s view, this new American ruling does not match the legal position in Germany. In Germany, the annual financial statement is passed by the entire Board of Management and is then presented to the Supervisory Board, after being audited and certified by chartered accountants. The chartered accountants are commissioned by the general meeting of shareholders and they are obliged both to report and to submit the annual financial statement to the Supervisory Board. The annual financial statement is only passed after it is approved by the Supervisory Board. Therefore there is an overall responsibility covering several different committees and, as a rule, involving over 20 persons, including the chartered accountants.The Porsche Director of Finance, Holger P. Harter, made the following comments: â€Å"Nowadays in Germany, the deliberate falsification of balance sheets is already punished according to the relevant regulations in the Commercial Code (HGB) and the Company Act (Aktiengesetz). Any special treatment of the Chairman of the Board of Management of the Director of Finance would be illogical because of the intricate network within the decision-making process; it would also be irreconcilable with current German law. † Source: Porsche, News Release of October 16, 2002. 12 TB0067 Appendix 5 Porsche’s Share Price, 2004-2006 Source: www. porsche. com. TB0067 13

Workplace Diversity Research Paper Example | Topics and Well Written Essays - 1250 words

Workplace Diversity - Research Paper Example Demographic change like the woman in the workplace, organizational restructuring, and equal opportunities legislation, which need organization to evaluate their management practices and expand new and creative move toward to managing people. Changes will amplify job routine and customer service. Women in the Workplace The need to understand diversity is also driven by women in the workplace. Today's workforce has higher levels of participation in employment of women ever. The number of dual income families and single working mothers has increased. Therefore, diversity issues are covering both race and gender. Organizational Restructuring Significant changes in organizations as a result of downsizing and outsourcing, which has greatly affected human resource management. Working practices have changed due to the impact of globalization and technology and there is a tendency to longer hours of work. In general terms, usually, re-organization results in less people do more work. Legislat ion Federal and state legislation on equal opportunities describes that discrimination in the workplace illegal. These laws specify the rights and responsibilities of employees and employers in the workplace and keep the two groups responsible. Benefits of Diversity in the Workplace Diversity is beneficial to both employees and employers. Although the members are interdependent in the workplace, respecting individual differences can increase productivity. The diversity in the workplace can reduce demand and increase marketing opportunities, creative recruitment, and company image. In an era when flexibility and creativity are the keys to competitiveness, diversity is essential to the success of an organization. Furthermore, the penalty (loss of time and money) ought... This essay stresses that supervisors and frontline managers could benefit from reading this document. Supervisors and managers are the target audience, as they have to recognize the ways in which the workplace is changing, evolving, and diversification. Since managing diversity remains a major organizational challenge, managers must learn the management skills needed in a multicultural work environment. Supervisors and managers must be prepared to teach themselves and others in their organizations to appreciate the multicultural differences in both partners and customers so that everyone is treated with dignity. Diversity issues are now considered important and are expected to become increasingly important in the future due to increasing differences in the U.S. population This paper makes a conclusion that a diverse workforce is a reflection of a changing world and the market. Diverse work teams bring high value to organizations. Respecting individual differences will benefit the workplace by creating a competitive advantage and increased productivity. Diversity management benefits associates by creating a fair and safe environment where everyone has access to opportunities and challenges. Management tools in a diverse workforce should be used to educate everyone about diversity and issues, including laws and regulations. Most workplaces are made up of different cultures, so that organizations must learn to adapt to succeed.