Impact of foreign institutional investors on Indian stock market

Impact of foreign institutional investors on Indian stock market CHAPTER 1 Generalities of Study Introduction In the initial period the economic growth of all the countries were started by government planning and action by developing the agricultural, manufacturing and the infrastructure facilities of the country. Though these facilities were adequate for the economy but it didnt boost the domestic growth of the country as it did not lead to much saving or any further investment. Since these domestic savings were inadequate, countries had to depend on the loans from different countries for the development of their country through different public organisations. This led to growth of economies by increased foreign investments which came in the form of overseas loans. Foreign capital plays a significant role in the development of any economy. It fills the gap between domestic savings and its required investment for growth. But this investment limited the scope of growth as loans were not easily available. So countries induced foreign investments by allowing them to invest in the companies list ed on stock markets to a major extent. This led to development of stock markets. Stock Markets initially were just a way for people to invest their money into different companies and they were not that big. But as of today they have become an important part in the growth process of any country. Due to development of stock markets, economies are getting globalised and world is getting smaller. Hence the significance of stock markets has grown above leaps and bounds. As of today the Gross Domestic Production of a country largely depends on stock markets. As a result each country is trying to enhance its stock markets in order to attract foreign investments and to boost the growth process of their own country. The best decision of the century has been the financial liberalisation of the equity markets all over the world which gave opportunity for foreign investors to invest in domestic markets especially of the emerging economies. According to Lalitha, S (1992), the main reason for opening stock market for FIIs was to attract foreign investments and stop country from raising more debts. According to Cerny (2004), the behaviour of stock market is affected by the globalisation of the world economy. The Foreign Investors are eyeing these days on the Asian markets specially India due to many obvious reasons. First of all growth potential in Asian Markets is higher, secondly its cheaper in countries like India to invest as the costs are low, thirdly there is a higher investor base and fourthly mostly the Asian economies are developing and hence the Governments are welcoming to Foreign investors as they play a major role in boosting the growth of the country. Now the question that arises is who are Foreign Institutional Investors? According to SEBI, FII means an entity which is established or incorporated outside India and which proposes to make investments in India. According to Sehgal and Tripathi (2009) FIIs are speculators instead of investors as they tend to invest in stock for short term and after attaining short term gains they tend to move away to different company and this might lead to volatility in stock prices and may lead to financial crisis. FIIs investments in stock market increases volatility in market due to excessive liquidity but it also leads improvement in value of stocks. According to Choe et al., (1999) Froot et al., (2001) Griffins et al., (2002), Foreign Investors run after returns from stocks, in a way they will buy shares in those companies whose returns they expect to be high. According to Syste et al. (2003), Foreign Investors invest in large liquid companies which enable them to exit quickly at lower cost. Another research by Prasana (2008) Foreign Institutional Investors have been eyeing on Indian Markets because of the positive fundamentals of the economy and potential to grow fast. Since foreign investors are freely available and are unpredictable, therefore FIIs are always on look out for profit. FIIs move their investments regularly and because of these swings there is a tendency to be fluctuations in prices and hence increased volatility in the market. Another study by Clark and Berko (1997) finds that stock prices rises due to increase in capital flows by foreign institutional investors but they could not conclude that the rise in pri ces are for short term or for long term. Another finding which indicates positivity of presence of FIIs was produced by Banaji (2000). According to him, due to presence of FIIs in Indian market there has been improved transparency in the procedures, automation and regulations regarding disclosure and reporting standards were initiated. So it becomes the necessity to study the Impact Foreign Institutional Investors have on Indian Stock Market. Background of Indian Economy India was ruled for nearly 200 years by British rule and in 1947 it gained its independence.( http://www.iloveindia.com/history/modern-history/british-india.html) So the growth of India has come in the last 60 years in which Indian economy has been thriving to set its foothold in the world. Under the British rule India was mainly dependent on its agricultural production and few basic industries were in existence as in textile industry which was basically for the benefit of the British colony to support them in their trade for European goods by exporting Indian basic agricultural goods and textile manufactures. After Independence, India carried on with its policy of attaining self sufficiency and closed the doors for the foreign investors. But this policy of government limited the growth of economy. So in order to finance the needs to economy of providing basic necessities to its citizens and for getting over with the burden of loans as the foreign reserves were at their all time low, Government of India took support from World Bank and International Monetary Fund to get the country on to revival path. These organisations agreed to help Indian economy on the condition that they will allow foreign investors to enter India. So basically a reform process was initiated in India after balance of payment crisis of 1991 which was recommended by M. Narsimham, chairman of committee of financial system. This became starting point of deregulation of financial sector and development of various sectors of financial markets. This resulted in significant changes in Indian market from dull to highly buoyant stock market. As a result Indian markets were opened to foreign institutional investors in September 1992 and this event led to effective globalising of the financial services and since then the Foreign Institutional Investments have been rising positively year on year. These investments helped India in developing infrastructural facilities which were necessary for the growth of the country. These investments were led due to increasing confidence in Indian stock markets which were based on strong macro-economic fundamentals of the economy, abolition of long term capital gain tax, improved performance of Indian com panies and transparency in the regulatory system. The opening up of markets for foreign investors had its own pros and cons. Pros of financial liberalisation are that firstly stock markets had to improve its trading mechanism and match up to world standards and secondly with the presence of foreign investors, information system saw a drastic change. Con of financial liberalisation was that it brought destabilisation in the economy and increased more volatility in stock movements. But overall it increased confidence of foreign investors in Indian stock market. The last two decades has led to growing participation of Institutional Investors which includes not only the foreign Institutional investments but also investments by domestic institutional investors. Indian economy has been an attractive avenue for foreign investors as nearly 16% of the world population lives in India and also India has joined the elite club of 12 countries to cross trillion dollar economy. Other countries which have in past breached this trillion dollar economy mark in the past includes countries like U.S, Japan, Germany, China, France, U.K, Italy, Spain, Canada, Brazil and Russia. Besides this countrys stock Market capitalisation has also risen to $944 billion which is close to trillion dollar level. As per Credit Suisse Report, stock markets have risen in eight out of ten countries after reaching this mark. Foreign Institutions have played a major role in Foreign Investments in India which resulted in changing the face of Indian Stock Market. According to M Puri, ICICI Securities Chief, ( 2009) India has been looked upon as the safest destination for foreign investors. Foreign Institutional Investors are the companies which are registered outside India. They are registered with Securities and Exchange Board of India and they are guided by SEBI in participating in stock market through limits placed by it. The major source of their investment in Indian Stock market is through Participatory notes which are almost 50% of the money invested in markets. The disadvantage of participatory notes is that the investor is anonymous and hence it could be an investment by any organisation including terrorist organisations. Foreign Institutional Investors have invested more than $41trillion of funds in India in the past four years which resulted in bull market witnessing unprecedented growth with BSE Sensex rising in absolute terms. India has witnessed over a decade of FIIs portfolio flows and these flows have gained significance and have played a key role in the overall Indian Economy. The impact of foreign investments in India is significant. The increasing role of Institutional investors led to both qualitative and quantitative developments in Indian Stock Markets. The Foreign institutional investors has also impacted the domestic investors to a large extent in the sense that if FIIs sell the stocks then there is a situation of panic created among the domestic investors and they tend to sell as well. Hence there is a need to study its impact on Indian companies and economy in general taking into consideration all the factors affecting movement of stocks on Indian Stock Market. Significance of Study Indian economy is growing at a very fast pace. Most of the FIIs are investing in India due to its significant growth. These FIIs though they are investing in the country, they not only invest for profit they also are affecting the movement of stocks in stock markets. Hence they are impacting the stock market in a large way which is an important perimeter of the Indian economy as it contributes to the growth process of Indian Economy. So it is significant to study the impact of Foreign Institutional Investments on Indian Stock Market. Objectives of Study The main objectives of study are: To analyse the impact of FIIs investments on the shareholding pattern of Stock exchange companies. To find way to reduce risk associated with investing in stock market and to know when to exit. To look for investment opportunities CHAPTER 2 Review of Literature and Studies Determinants of FIIs Foreign Institutional Investors play a major role in the economic growth of India. Their impact is significant even though their market capitalisation is not much and is improving year on year. Several attempts have been made to understand the impact FIIs have on Indian Stock markets. According to Aggarwal 1997, Chakrabarti 2001 and Trivedi and Nair 2003(cited in Rai and Bhanumurthy) equity returns have positive impact on FIIs. But Gordon and Gupta,2003 ( as citied in Rai and Bhanumurthy) contradict by saying that foreign investors are here for earning profits, they invest in a company and make the price go up as other investors follow and then book their profits and leave. So it can be said that there is a bidirectional relationship between FIIs and equity return. After the bursting of infotech bubble in 1998 and Asian crisis, Chakrabarti (2001) analysed and found a shift in regime in the determinants of FIIs. He analysed that before the Asian crisis, any change in investment pattern by FIIs had a positive impact on equity returns but after Asian Crisis he found that if there is a change in equity return then the behaviour of FIIs change. But Trivedi and Nair (2003) are of a different view point, they feel that any investments made depend a lot on the risk associated with it. They further divide realised risk into two factors, ex-ante and unexpected risk. According to them, ex-ante risk is negatively related to FIIs whereas the relation of FII with unexpected risk is not certain. This is because uncertain activities can bring unimaginable loss or gain depending on the situation. Take for example U.S subprime crisis. Those crises were unexpected and they led to unexpected movement in stock markets and FIIs activity. Studies in the past have concluded that the return in source country and inflation in that country doesnt exert pressure on FII. But this theory has been contradicted by the recent subprime recession in US which led to most of FIIs withdrawing their investments in order to cope up with crisis in their own country. Hence if stock markets of foreign investors home country are doing well and there is stability in their economy then it leads to a positive impact on the investments by FIIs. According to Aggarwal 1997 (as cited in Rai and Bhanumurthy 2004) world stock market capitalisation has a positive impact on growth of FIIs in India. According to literature survey shows that most of the existing studies do not reflect the effect of stock volatility and also they do not account for realised risks in foreign and domestic markets. Another observation by Ahmadjian and Robbins (2005) after analysing firms in Japanese economy showed that foreign investors are more inclined towards profit making than going in for long term ownership. They tend to make money and move away towards other company. Investment Preferences of FIIs According to Douma, Pallathiatta and Kabir (2006) there is a positive impact of foreign ownership on firm performance and especially on the emerging economies. They also found the impact on business group affiliations of FIIs But FIIs dont invest in any firm, they invest in those firms which have good corporate governance as the firms with poor corporate governance are least protective about the investors and instead they are concerned about their own interest only, this was observed by Aggarwal, Klapper and Wysocki (2005). According to them companies which are controlled by block of shareholders they find it difficult to find external investors as they are derived by private benefits and may manipulate things accordingly. This was already concluded by Cho and Padmanabhan 2001 (as cited in Prasana 2008) that block shareholders influence firm performance. They also said that corporate governance of listed companies play an important role in attracting foreign investments. They also cl arified that block shareholders mean basically businesses run by family groups and distinguished them from times when government acts as block shareholders; they act quiet differently from private investors. Bhanumurthy and Rai (2003) made an attempt to examine the determinants of FIIs by using the monthly data from January 1994- November 2002 by analyzing the effect of return, risk and inflation in domestic and foreign economy. They firstly calculate the domestic and foreign returns from daily returns on BSE Sensex and SP 500. After the analyses they find out that FIIs inflow depend on stock market returns, inflation rate and Ex-ante risk. According to Yin-Hua and Woidtke 2005 (cited in Prasana 2008) investors protection is weak when company board is dominated by members of controlling family and it gets difficult to separate the ownership from management then firm value is inversely related to family ownership firms. Their view was supported by Choe, Kho, Stulz (2005) who analysed US investors and concluded that they hold fewer shares in companies where ownership structure is more conducive to insiders. Another observation by LI (2005) was that if there was poor corporate governance then foreign investors tend to prefer other route of Foreign Direct Investment instead as Foreign Institutional Investors. Going further in accessing the information on firm ownership, Leuz, Nanda and Wyoscki (2003) assessed the firm level characteristics and found family control increases insider trading which gives less benefit to foreign investors. They were supported by Haw, Hu, Hwang and Wu (2004) who concluded that firm level charact eristics cause information asymmetry problems for FIIs. In order to analyse the investment preferences of FIIs, Dahlquist et al (2003) analysed the foreign ownership and firm characteristics of Swedish Stock Market and they concluded that FIIs prefer firms which are large, pay low dividends and have a huge cash holdings. Whereas Covirg et al (2007) were of the view that foreign managers have comparatively less information than domestic managers and hence they concern FIIs preference to be based on size of sales and stocks which are listed on foreign soil. According to Li and Jeong-Bon 2004 (as cited in Prasana 2008), FIIs are in a better position to analyse the public information and hence they tend to avoid stocks with high cross-corporate holdings whereas according to Morin 2000 (as cited in Prasana 2008) as they analysed the French model of shareholding and management of FII pattern concluded that France has undergone a rapid change and has gone away with the traditional system of FII holding and facilitated with new techniques which demands corporate management. Stock Market Volatility Research by Forbes and Rigobon (2002), Bekaert, Harvey and Lumsdaine (2002a,b) , Edwards (2000) and others focussed on stock market volatility concentrating on moving of volatilities among different economies and also of the financial crisis which happened thereafter. Bakaert and Harvey 2000 (as cited in Batra 2004) analysed equity returns of a group of emerging markets before and after financial reforms. According to Aggarwal, Inclan and Leal 1999 (as cited in Batra 2004) local events and happenings make the stock markets to turn volatile in emerging economies. In order to draw this conclusion they analysed emerging stock markets for volatility for period of 1985-95 and by using ICSS algorithm they identified points of sudden change when some event occurred or when there was large movement in stock market volatility. They calculated the variance at each point. According to De Santis and Imrohoroglu 1997 (cited in Ranjan Kumar Dash and Sumanjeet Singh) studied the behaviour of volati lity in emerging markets and the effect of liberalisation on financial markets and concluded that volatility decreased after liberalisation. Their study was contradicted by Singh (1993), Grabel (1995), Levine and Zervous (1998), Kamminsky and Schmickler (2001 and 2003), Nission (2002) and Edwards et al. 2003 (cited in Ranjan Kumar Dash and Sumanjeet Singh) by saying that financial liberalisation increases stock market volatility. In Indian context, Samal 1997 and Pal 1998 (cited in Ranjan Kumar Dash and Sumanjeet Singh) found that FIIs investment is the major source of volatility whereas stock market volatility was lower in liberalized economy. This view was supported by Richards 1996 who took three different methodologies and two different sets of data to calculate the volatility in emerging markets and came with the conclusion that there was no empirical evidence which supports that liberalization of economy increases volatility in stock markets. Hamao and Mei 2001(as cited in Batra 2004) examined Japanese market at a time when foreign portfolio investments in Japan were small and found no proper evidence to prove that foreign investments tend to increase volatility more than increase in volatility due to domestic investors. Folkerts Landau and Ito 1995 (as cited in Batra 2004) computed market volatility in emerging economies at different periods in which there was a difference in flow of portfolio and found in case of Mexico that stock prices were less volatile when Foreign flows were more volatile and vice versa for Hong Kong. According to Nilsson (2002) by using Markov regime switching model in Nordic Stock markets, liberalisation in stock markets leads to increase in volatility. Nilsson also evidenced that higher volatility and higher expected returns have strong links with international stock markets. Considerable attention has been paid these days to stock market volatility and especially after global recession. Stock Markets had been highly volatile in emerging markets like India and its study becomes important. Investment strategies of FIIs There has been a considerable amount of research done on the investment strategies of FIIs which show the Positive feedback and herding strategies being followed by FIIs. Research done by Lakonishok, Shleifer and Vishny (LSV) 1992(cited in Sehgal and Tripathi 2009) looked at the investment behaviour of 769 US tax exempt equity funds managed by 341 money managers for the period of 1985 to 1989. They concluded that there was no herding by money managers but it was prevailing in the behaviour of stock prices of small companies than in large companies. The reason given by LSV is that information on large stocks is easily available whereas small companies do not provide much information to public, so money managers look at the investments by other big investors into small stock and follow them. According to LSV, it is difficult to find the effect of herding as at times a small amount of herding can bring significant movement in stock prices. An argument was put forward by Dornbusch and P ark (1995) that foreign investors follow positive feedback strategy which leads to stock unusual movement in stock prices. Wermers 1998 (cited in Sehgal and Tripathi 2009) used LSV measures to check the presence of herding among mutual funds. He took the quarterly data of mutual funds from 1975 till 1994 and concluded that mutual funds showed existence of herding. He also analysed stocks and concluded that herding among those stocks tend to be higher which had reported higher amounts stock returns in the previous quarter. He concluded that investors buy those stocks which had good returns in the previous quarter and sell those stocks which had poor quarterly results. After computing average level of herding by Wermers model it was concluded that herding is more in mutual funds than in stocks. But after analysis of trading behaviour of large pool of mutual funds it was found that the herding behaviour in fact reduces in mutual funds and it was justified as large pool of mutual funds carry stock which have large amount of capitalisation and companies with large capitalisation tend not to do any herding. A nother analysis by Bonser- Neal et al 2002 (cited in Sehgal and Tripathi 2009) analysed the foreign trading behaviour on Jakarta Stock exchange between 1995 and 2000 and found positive feedback trading and herding by foreign investors but they didnt find any evidence indicating destabilising of markets due to foreign investors during Asian crisis. Richards 2002 (cited in Sehgal and Tripathi 2009) used data pertaining to net purchases by foreign investors in six Asian emerging markets over 1999-2001 and found an evidence of positive feedback trading. According to Kim and Wei (2002) foreign investors who live outside Korea are more likely to indulge in positive feedback trading and herding strategies as compared to their branches and subsidiaries who are living in Korea or any foreign national staying in Korea. According to them this difference in trading behaviour arises due to different kind of processing of information by those living outside Korea than those living inside. CHAPTER 3 Data and Methodology Research Methodology and Design According to Collis and Hussey (2003), Methodology refers to overall approach to research process which includes underpinning of theory, collection of data and analysing it. However the research process adopted depends to a great extent on the approach taken by the researcher. Research design is the general plan of how to go about answering the research question. It gives the logic behind every interpretation. Due to nature of research carried out the prime focus has been on gathering the secondary data which is relevant to analysis being carried out. According to Collis and Hussey (2003), there are two main paradigms of research that is qualitative and quantitative. Qualitative research is followed by those people who have phenomenological bent as it deals with understanding the behaviour of human beings. Therefore it is also known as Phenomenological Paradigm. On the other hand Quantitative research refers to those who relate to positive view of the world and therefore this kind of research is also called as Positivistic Paradigm. Positivistic paradigm is used basically in natural sciences as this approach gathers facts with subjectivity of the nature of research and individual bias. For the purpose of research both qualitative and quantitative data will form part. Qualitative Data: this data has been collected by: Studying into the certain days on which markets fluctuated in upside or downside direction to a great extent Studying the changes in regulations by the Securities and Exchange Board of India in relation to foreign institutional investors. Studying the behavior of domestic investors and other factors affecting the market. Studying the basis on which the foreign institutional investors entered Indian Stock Market and there enter and exit strategy and its impact on Indian economy. Quantitative Data: this data has been collected by: Studying the market capitalization of foreign institutional investors and their cumulative effect on stock market Looking in the growth of number of institutional investors and the share of their investments year on year. The research onion below in the diagram gives an overview, how to achieve the objectives by using the techniques in each layer of the onion. In order to carry on with the research each onion of the Research Onion has been peeled systematically so as to get in the right direction. The philosophy adopted for the purpose of research is Positivism philosophy as research has been undertaken mostly from the data already published in journals, articles, previous researches etc. Approach taken by the researcher is mainly inductive as maximum data is qualitative and it has been of utmost importance to cover every aspect of research. Researcher has taken the case study strategy to analyse the data. The Researcher has used Mixed Method research choice in the sense the data collected comprises of both qualitative and quantitative data. The time horizon for research has been longitudinal as this research has been carried on after observing the behaviour of stock markets over a long period of time and on happening of any event. While carrying out the research it has been kept in mind that the research objectives and the characteristics of the information collected match. In order to analyse the Impact of FIIs on Indian Stock market, a thorough research has been done from different sources which includes RBI and SEBI publications, newspaper articles, journals, previous research done on the topic and also from internet. For the purpose of our research study we are looking into the data till financial year 2008-09. Limitations of Study: This study has been taken during the time when impact of recession has not been fully analysed and its exact nature and impact on the movement of stock markets and Financial Institutional Investors cannot be justified as it is a global recession. So research may miss out some of the implications of recession and may not correlate to impact which FIIs may have during the normal market conditions. Data has been collected mostly through online source. It was not possible to conduct personnel interviews with top brokers in India due to distance barriers. Hence the findings and analysis has been derived on the basis of data available online. Summary of Research: The majority of this research is conducted by making use of secondary sources of data which includes journals, articles, books, magazines, newspapers, Internet and other electronic sources. The research in this area has already been conducted but the purpose of this research is to generate new ideas and to gain further understanding into the subject by looking into each and every detail of it. This research is conducted at the time of recession, the condition which was not prevalent earlier, so it is expected to bring new concepts and theories into existent and it will also over rule some of the studies that have already been conducted. CHAPTER 4 Analysis of Indian Stock Market Overview of Indian Stock Market Stock markets were first introduced to India in 1875 as a non profit making organisation. Bombay Stock exchange is the oldest stock market in whole Asia. Stocks in India are traded on the stock exchanges which are around 23 which includes Bombay Stock Exchange and National Stock Exchange. Stock exchange is a corporation which provides its brokers to trade stocks of companies which are listed with them. The organisation of Stock Exchange, its systems and practices are regulated by Securities Contract, (Regulation) Act (SC(R) ACT), 1956.They are highly efficient organisations which have led to growth of securities market. Stock exchanges trade securities which include shares, unit trust, pooled investments and also bonds which are listed on them. Members of the stock exchange act as its agents as they are only allowed to trade on behalf of their customers who pay brokerage to them for the services provided by them. Stock exchanges also provide plenty of services as in issuing and redee ming shares and also in payment of dividends to its shareholders through its participants or members. Stock exchanges are important even though it is not necessary to issue shares via stock exchange. Shares are normally issued through Initial Public Offering (IPO). Stock exchanges play a major role in the economy as of today as they help with expansion plans of the country by mobilising the savings to investments and also by redistributing wealth among the economy. Stock exchanges maintains the records of all the shareholders at one central location but shares that are traded on stock exchange they are not dependent on that central location as the computerisation has made it easier to trade stocks. All stock exchanges have become an important part of world market for securities as global investors can invest in any market from anywhere. Importance of Stock Markets in India: Stock markets play an important role in the economy as they are now the financial indicators of growth in any country. They represent the crux of functioning of all the sectors of country. NSE NIFTY comprises of 50 top Indian companies from each sector and BSE SENSEX comprises of 30 companies from all the sectors. The following points describe the role stock markets play in India: Improving Corporate Governance: Since Stock markets are regulated by SEBI, companies are bound to follow the rules and regulations in order to have a good market value of their stocks on stock markets. This is possible only if they keep their shareholders satisfied. So they

Avon in Global Markets Essay

1. Referring to this chapter and Chapter 9, evaluate Avon’s Strategic International Human Resources practices in global markets regarding development of a global management cadre, HCNs, and building company associates and independent representatives in host countries. Avon Strategic International Human Resources practices in global markets: In this day and age the world is no longer bound by distance; the gap between countries and cultures are shrinking. Most business try attempt to take advantage of this and expand beyond the borders of their homeland. The idea of world market share is lucrative to most businesses not to mention profitable. Such With the great expansion and lucrative prospects, there is a strong expansion creates need for international human resource management. Human resource management is the whole process of recruitment and selection of the employees, it has been perceived by many observers as a key ingredient and accounts for the success of companies on world markets. Sales force: â€Å"In international business, consumer companies cannot operate efficiently without having best and most well- trained sales force† (Deresky, 2010, p. 378). Hence by acquiring a local employees with proper skills and adequate company’s knowledge benefits the company in an aspect of better understanding of the surrounding environment and communication advantage of common language and for this reason, Avon has hired million local door to door representatives to advance their work force and to improve their international market. Recruitment and selection: â€Å"In addition, valuingValuing workforce diversity and providing equal opportunity is important to the company† (Deresky, 2010, p. 379). Qualities such as culture empathy, that isthe appreciation and respect of beliefs, values and behavior, interpersonal skills, such as communication and the capacity to build trust, managerial, and decision making abilities  particularly under condition of isolation environment and other crucial qualities including self-motivation, ethical standard, relationship building, organizations skills and so on are looked for. This strategy facilitates Avon to identify full potential of the recruits and their competencies. Female CEO: Avon is a company which caters to women and is ranrun by women. Having a female in charge serves a fundamental advantage since she can better understand the target customers and their needs. This, hence helps Avon to well implement and execute their goals successfully. Before Andrea Jung took over as CEO the company was struggling with low revenues and high debts. Once Andrea Jung took charge, she has implemented several efficient policies in both US offices and foreign offices that helped to boost up the company’s revenue and got rid ofeliminated the debt problems the company was facing. This has allowed the company to retain its reputation and increase its sales network and all while continuinge to grow into new markets such as India and China. Goodwill: Avon’s dedication to charity has been a part of company’s policy for more than 125 years. This builds a close relationship between and the company and the society in which it functions. Not to mention brings a It also provides greatvery good publicity and a set up for numerous PR campaigns. Avon’s foundation helps provide funds for cancer researches, for scholarships and other charitable programs. In addition to workforce diversity and minority recruitment, the company supports various programs in women’s empowerment. Leadership programs: â€Å"Like other companies, Avon runs leadership programs on the job training seminars on a regular basis.† (Deresky, 2010, p. 378). This provides employees with the tools, knowledge and the ability to impact and inspire their followers and thereby sharpen their skills and knowledge in the effective manner. The programs help in strengthening the area of weaknesses  and provide accountability and clear vision. 2. Describe how Avon’s business model has changed in light of demographic and social changes in the United States and abroad. What role has IHRM played in the company’s global expansion? Avon has had to adapt its business model due to demographic and social shifts. In the United States, for example, resources have become less differentiated and the biggest way for a company to gain a competitive advantage is with a well-developed workforce. Technological advancements have also created the need for Avon to have an online platform in order to efficiently manage their workforce. Changes abroad have also impacted Avon. For instance, new emerging markets such as India, Russia and China have created new opportunities for the company. However, these countries must be analyzed to understand how to establish a workforce as well as the social and demographic factors that can affect their human resource practices (iei.e.; the social role of women; restrictions on certain business practices). In the global market, Avon hires and trains the new local workforce in its door-to-door selling model and adapts their distribution strategies to the local needs by including mail, phone, fax, retail outlets, and web sites for working women and to accommodate other cultural and logistical practices. Human resource management plays a huge role in dealing with knowing who to recruit for the global workforce, what qualifications can be expected, how to best motivate them and what levels of productivity can be expected from them once integrated into the company’s network. The role of IHRM for Avon in global expansion include: 1) Training in both virtual and time-based seminar; 2) Adapting and adjusting the operation to local industrial relations systems. 3. Since 70 percent of Avon’s revenues are generated outside the United States, what recommendations would you provide to the company regarding dealing with a culturally diverse workforce and a multicultural marketplace in the coming years? Avon is already on the right track in dealing with a multicultural  marketplace. It currently â€Å"maintains 5.8 million independent representatives and approximately 42,500 associates in over a hundred countries† (Deresky, 2010, p. 378). Avon has a strong brand that is well known internationally. This helps the company attract top-notch employees that truly want to work for Avon. Although many would see Avon’s culturally diverse workforce as a challenge it is actually one of Avon’s greatest strengths. Avon’s diverse employees are already aware of the cultures with which they are conducting business because the employees share the same culture as the consumers. The employees understand what types of products their culture demands and which they do not. This helps to prevent excess supply or wasted marketing efforts on products that are of no interest in certain markets. In addition, with Avon’s large focus on door-to-door selling their diverse workforce is extremely helpful because these employees are fluent in their native languages and will be able to excel in conversing with their potential customers in efforts to produce sales. As stated in the case study, Avon’s 5.8 million independent representatives â€Å"are self-managed Host Country Nationals who know the culture and the ways to do their business in their home turf† (Deresky, 2010, p. 379). These representatives help to minimize the culture shock Avon employees would normally experience had they not had any previous experience dealing with a foreign country and were expected to conduct business there. Since Avon has employees and representatives hailing from the countries in which they are conducting business it makes the sales aspect much easier since there is minimal cultural disconnect between the consumer and the sales personnel. Therefore, my recommendation is that Avon continues its efforts to hire employees from various cultures especially in areas in which Avon currently conducts or plans to conduct business. However, hiring a diverse workforce can prove difficult when poorly managed. Luckily, â€Å"Avon’s managers realized that becoming aware of intercultural differences and getting the appropriate training play an important role in the development of a productive sales force† (Deresky, 2010, p. 377). Avon understands that their employees are the key to success; therefore it is imperative that they maintain employee efficiency, productivity, and morale. The company is able to ensure this via the four areas of compensation, fringe benefits, professional development, and workforce environment. Employees greatly enjoy these  benefits as well as working for Avon, which helps fuel, the company’s outstanding performance. My recommendation is that Avon continues their pursuit of maintaining a diverse workforce. The company must ensure they are constantly training their employees in areas such as new product offerings, dealing with various cultures, and performing efficient sales. As Avon looks to continue its expansion they must ensure they understand each marketplace prior to moving in and beginning business. In order to expand their multicultural marketplace Avon must work to put together solid research teams that will be in charge of understanding and discovering all facets of a country’s economy and population. This will allow Avon to be well prepared and easily determine which products will be sold in which countries b ased on the population’s preferences. 4. Avon’s future global expansion is contingent on hiring and retaining the best workforce and salespeople in global markets. What training and cross-cultural practices would you recommend to the company to deal with this area? In order for Avon to develop the best global workforce they must consider cultural sensitivity, motivation, ethical-standards, relationship building, and organizational skills (Deresky, 2010, p. 377). Avon can achieve the best global workforce by continuing to provide leadership programs and on-the-job training seminars on a regular basis. If Avon wants to continue expanding globally, they may consider continuing their global geographic (area) structure. This structure allows regional and local managers to address, and solve issues based on their knowledge of the local culture, government regulations, and business transactions (Deresky, 2014, p. 247). The benefits of this structure were evident in the case where Avon’s China General Manager, Ms. Jung, noticed the need to change their distribution strategies in order to adapt to local costumers needs (Deresky, 2010, p. 379). Ms. Jung also noticed the need for international representatives to gain faster online access to improve training (Deresky, 2010, p. 379). Avon has done a great job thus far in hiring and retaining one of the best workforce and salespeople in the global market. A rising middle class in the emerging markets will help Avon reach people they have never reached  before. If Avon wants to continue their success, they must consider their cultural environment and continue evolving their training technicstechniques and technology. 5. China is expected to be a major market for Avon. If you were to advise Avon, how would you develop a competitive IHR plan for the company? Starting with assessing Avon’s successes in the international realm, it should be noted that Avon approximates â€Å"70 percent of the company’s revenues come from selling its products in international markets† (Deresky, 2010, p. 376). A second important factor that would need to be considered for developing a competitive IHR plan for the company would be to ensure a â€Å"brand identity† existed or could be created in China if it was not present as of theat the time Avon was planning to venture into the country. A brand identity, as defined by Investopedia is â€Å"how a business wants a brand’s name, communication style, logo and other visual elements to be perceived by consumers† (Brand Identity, 2014)). It would be obvious to state that Avon should begin to compare and contrast the brand identity of other major personal hygiene and makeup companies that have previously set up shop in China. Evaluating Estee Lauder and L’Oreal, for example could prove to provide fruitful information on which types of marketing and advertising campaigns may or may not work in global China. While major companies such as these have previously completed the leg work in customer recruiting, Avon could gain much advantagesmany advantages from reviewing these strategies and applying some to their market model within China. Avon would also need to immediately define the knowledge and skill set models that managers and sales personnel would need to have in order to be successful in this major foreign market. Working in a country such as China will be much different in many cultural areas as compared to operating within America. Cultural sensitivity issues should be highlighted, as well as motivational factors of what might energize customers to purchase Avon’s products. Perhaps time sensitivity issues could be a point of training for managers and sales representatives as well. Questions such as how much time should be spent on trying to convince a customer to purchase products or when is a good time of day to try and sell to customers should be analyzed as well.? All of these  issues should be strategized and should be provided as in-depth training to employees and managers alike before deploying teams of representatives into the streets of China. It will be equally important, when developing a competitive IHR plan to ensure employees are consistently referring back to Avon’s five values and principles, which include â€Å"trust, respect, belief, humility, and integrity† (Deresky, 2010, p. 377). Having the ability to reach back to these core values and principles, sales representatives will succeed by remembering the values and traditions that helped to make Avon successful in other countries. 6. What is the role of IT in Avon’s markets, in particular in developing areas? What are the implications for training its representatives? â€Å"The new information technology†¦ internet and email†¦ have practically eliminated the physical cost of communications† (Karlgaard, 2004). Business activities and marketing activities cannot be realized without the use of information technology, marketing managers cannot make quality decisions, and marketing strategies cannot be designed and cannot be oriented business policies. Therefore in the modern enterprises all important managerial positions must be connected to computer networks and use information technology. The evolution of e-marketing has enabled Avon to include all its marketing activities online and has enabled them to contact their customers quickly and easily in order to meet their needs, wishes and requirements. This has helped Avon to maintain a long relationship with their customers, and fulfill their needs, and increase their loyalty toward the products of the organization. Furthermore, the availability of a great amount of information with in short period of time can be obtained at an instant through the use of information technology. In business, information is the most precious commodity in the market. A pPlethora of information can be acquired through electronic and communication media by using computers, information technology and information systemthrough information systems. Hence it is very resourceful to enterprises and therefore Avon is as well taking an advantage to gather the necessary data on the market about customers, their needs and habits and process data in to information. Consequently, usage of information. Information technology also helps Avon  to lower down their costs, proper time managementimprove efficiency, producing produce quality products, and advancing advance the company’s innovation. This is contributed all is due to the consumer information collected that provides the knowledge on consumer behavior that which helps the company reducing reduce uncertainties for marketing decision making and thereby assist in price settings, promotions, selection of target market as well as sales channels. The biggest strength of iInformation tTechnology is the ability to grow fast inquickly grow in developing markets. Avon use utilizes information technology for its training practices to its employeesemployee training programs. Instead of gathering all every representative in the office, Avon can upload training seminars videos online so that the employees can carry out training while they are home. â€Å"The company’s distribution strategies may have to be adopted to the local needs because of working women or other cultural and logistical considerations and include mail, phone, fax, retail outlets, and Web sites† (Deresky, 2010, p. 379). Therefore, UsageThe usage of technology in marketing has enabled Avon to grow rapidly and has led to marketing development through networks. It has ; it as well also enabled rapid and efficient communication, transfer of information over distance, creation of virtual organizations, shipment of goods, and direct payment via internet a nd so onas well as many others. All these element of new form of business that e-business have been easily adopted due to the actions of the company activities surrounding and marketing conditions in order to meet better customers’ needs and requirements. It is now essential method for Avon to control its operations. In conclusion, the iInformation tTechnology strengths of Avon allows Avon the company to have communication and information access on the fly anywhere in the world at a low cost. The IT infrastructure also allows the Avon team to quickly train the local Salesforce sales force and process orders with very low cool down. The implication of training representative in development areas, such strategy allows to bring Avon’s products straight to the consumer. The new representatives help Avon to organize orders, distribute orders, promote products and therefore create a strongstrong brand name recognition worldwide. 7. What do you think are Avon’s prospects in India, given that the per capita spending on beauty there is only $1, compared to between $100 and $200 in developed markets? Avon’s prospects in India look to be positive. India is one of the largest growing markets besides China, and they have a very large population when compared to other major counties such as Japan, United Kingdom, South Korea, Australia, Hong Kong, and Singapore. With the huge population in India, there are more than 370 million women between the ages of 15-64, which indicates a high customer base (Deresky, 2010, p. 379). The population in India is also growing at about a 1.3% each year. When compared to Singapore’s per capita spending, India has bright prospects despite their low per capita spending because of their. This is due to their huge population. Another reason India looks like a positive prospect is due to the untapped market, which can drive long-term growth. The company launched new anti-aging products aiming to reach 93% of the country’s population by 2015. The Avon also planplans to launch personal grooming products for men, which is another unta pped market. References Brand Identity. (2014). Retrieved from Investopedia: http://www.investopedia.com/terms/b/brand-identity.asp Deresky, H. (2010). International Management: Managing Across Borders and Cultures, Text and Cases (7th ed.). Prentice Hall. Karlgaard, R. (2004, November 19). Peter Drucker On Leadership. Retrieved from Forbes: http://www.forbes.com/2004/11/19/cz_rk_1119drucker.html

Doing Christian Ethics from the Margins Essay

Book Review: Doing Christian Ethics from the Margins Dr. David Traverzo Christian Ethics Gregory A. Keels 02/13/2012 Doing Christian Ethics from the margins is all about helping people explore the ethical issues of the marginalized. This book reveals as to how people who live in the margins of society deal with ethics. Also this book reveals how the same marginalized people worldview is different from the dominate culture who is not apart of the marginalized. This book is divided into four sessions, the first section dealing with theory while the last three gives specific case studies to the theory. The first session titled Ethical Theory deals with how Christian ethical systems are formed. The author Miguel A. De la Torre gives his understanding of ethical theory. The first main and important statement he makes in this section is when he talks about ethics being done in a particular social location. When he stated that it proved that ethics and social welfare comes together. A person’s upbringing and social surroundings affects his or her ethics. Also in this section the author talks about how white males generally dominated the academic ethics. This domination has many pitfalls. Some of these pitfalls include spiritual concerns that are excluded from social concerns, individualism, grace in favor of works, thinking more of heaven instead of the here and now, and failure to come up with a transformation praxis. These pitfalls reinforce ideologies of power that are connected to unjust social structures that include racism, classism, and sexism. The author puts up a challenge to every single reader to come up with a code of ethics that will identify with the example of Christ of standing against the ppressed. In the other three parts of the book the author gives case studies and show how his own hermeneutic circle applied to different ethical situations such as relationships, business, and global relationships. in each section there are four chapters. the first chapter explains the topics and the other three explains the topic with case studies. The hermeneutic circle is made up of five steps. In each of those five steps a per son’s worldview ethics is challenged and encourages the person to be more engaged in social transformation. The steps include observing, reflecting, praying, acting, and releasing. This pattern is a continuous circle repeating itself over and over. The significance of this book to the church is great significance. This model the author has presented could be used greatly in the church. When I was looking at this model I felt this is what the church should be doing. The church is only effective if it is active in the community. The church should be able to see what the need of the community, pray on it, act on it and then move onto the next need. Part of Christian ethics is doing the right thing when the problem is presented. Two of the case studies that I felt can greatly impact the church was the case studies on global and national poverty. the church has always played a major role in helping the poverty both globally and nationally. However I believe that the church need to realize that poverty is more then just not having any food or being homeless. Poverty is connected to social class. It is connected to those who can afford an education and those who can not. Poverty is also connected to those who can get hired for the high paying jobs and those who can only get the jobs that pay minimum salary and is not enough to raise a family. The church can do a better job in helping in that area. The main part of a Christian’s ethics is helping those who are in need. This is our primary responsibility. So in order to fulfill that responsibility we must understand the whole issue of poverty. The significance this book has on the society can be great. However I believe the church and society must be connected together. This helps those who read it understand the problems of the marginalized and how it can be addressed. It would be really helpful if those who were from the groups who hold the most power read this book for a better understanding of how the actions they do affect those who are marginalized. Just like I stated with the church and its response to poverty the society has to have the same response. However since the society is not the church the ethical response would be different. Those who are in high powerful positions have the ethical obligation to assist those who are in the marginalized. However what we see is those people exploiting the marginalized. When it comes to ethics as a whole this book as revealed to me no matter what position you are connected to rather it is Christian ethics, business ethics, or society ethics you have an obligation to help those who do not have the power to help themselves. It is not just about poverty either. There is an ethical obligation to help the marginalized when it comes to things like affirmative action, war, the environment etc. A strength I found in this is how the author used real life examples in his case studies that included people who were marginalized. By using real life stories it brought a whole new experience than from a typical text book. This help take the readers from a spectator view to an up close and personal view of what it is like to be in the marginalized. Another strength I felt the author had was the discussion questions at the end of each chapter. These discussion questions help the reader reflect and understand more about the marginalized. Also these discussion questions help the reader form a more solid ethic for the marginalized. The main weakness I saw in this book is how the author did not really go through the whole hermeneutic cycle. In each case study the first three cycles were used. It would have been better if the author used the whole cycle so that the reader could get a full example of how the cycle is used and the outcome of the cycle. Also it would have been helpful if the author had given some examples where this cycle has not worked. Perhaps it would even be helpful if the author had limited to just once case study in each section and go more in depth as to how the cycle worked in the case study. Overall I strongly recommend this book to those who have a desire to get an action plan that will have an impact on dealing with the marginalized. De La Torre makes a great case in challenging those who are in the dominate culture to give up the heavy power and special privilege they have so that those who are in the marginalized can live a better life. With making this challenge the author has given great tools for those who are committed to seeing the transformation of the marginalized. While this seem like a no brainer to some it might be still difficult for those in the dominate culture to accept. Some people might just not see how the dominate culture affects the marginalized while others feel they are doing just enough. Also you might get those who will say they will embrace De La Torre’s model but will fail to actually attempt to do it. It is going to take a lot of work and sacrifice to see true change. Who is willing to actually do that hard work? Who is going feel it is actually worth it? Regardless of where you fit in the spectrum we all have to do our part. If we all do not step in and say we are willing to make the sacrifices need to see a transformational change then regardless of what one group does it will not work. this has to be a group effort. I believe this is the point De La Torre was trying to bring across.

Solutions to the Global Climate Change Essay - 1389 Words

Global warming has become a world wide issue and an issue that is causing great controversy. It is an increase in the earths atmospheric and oceanic temperatures widely predicted to occur due to an increase in the greenhouse effect resulting especially from pollution (Dictionary). Global warming is a natural process, but because of increase in certain activities this process is taking a faster and more dangerous route creating global problems. Global warming was first theorized in 1894 by Jean Baptiste Joseph Fourier a French mathematician, who noticed the earth was gradually increasing in temperature. He came to the conclusion that the earth’s atmosphere was trapping solar radiation caused by the sun and reflecting this radiation back to†¦show more content†¦The increase in CO2 emission is primarily caused by the burning of fossil fuels. Fossil fuels are carbon-based fuels from fossil carbon deposits, including coal, oil, and natural gas. The burning of fossil fuels is a big part of life because it powers automobiles, heats and cools homes, and generates electricity. This combustion of fossil fuels is about 90% of the total emission in the world (Greenhouse gases, Climate change, and energy). When this fuel is burned, it pollutes the atmosphere and increases the global warming process. What makes CO2 dangerous is the fact that it is nonrenewable and it warms the earth faster. CO2 emissions should be lowered because when the earth is warmed up this and other greenhouse gases increase the rate at which the polar ice caps melt, resulting in increasing sea levels and flooding. To help reduce these CO2 emissions replacing a regular incandescent light bulb with a compact fluorescent light bulb can save 300 pounds of carbon dioxide a year (Al Gore, reduce your impact at home, 1), moving a thermostat down 2 ° in winter and up 2 ° in summer could save about 2,000 pounds of carbon dioxide a year (Al Gore, reduce your impact at home, 3). Another great way to reduce CO2 emission is by switching to energy efficient appliances which can save 175 million pounds of carbon dioxide. These are one of many fantastic ways to help save the environment and drastically reduce the amount of CO2 being put into the atmosphere(Al Gore, reduce yourShow MoreRelatedThe Threat, Responsibility, And Solutions Climate Change And Global Warming Essay1142 Words   |  5 PagesThe Threat, Responsibility, and Solutions to Climate Change and Global Warming â€Å"If the Maldives cannot be saved today we do not feel that there is much of a chance for the rest of the world.† - said Former President of the Maldives, Mohamed Nasheed, while sitting underwater signing a document calling for global reduction in carbon emissions. 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