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02/21/2012

Executive Briefs - 4 scenarios


Q1 Mergers and Acquisitions

Mergers and takeovers have become commonplace events. Nothing is considered too large or too ambitious. During 1999 there were more than 8,000 merger announcements in the United States alone.  Although the pace of merger activity has slowed significantly from its peak in 1999, these corporate combinations will continue to figure importantly in the strategy of many companies (Carey & Ogden 2004).  Fueled by a number of factors including globalization, which has vastly expanded the scope of traditional markets; deregulation of industries; technological advances that have opened the door to new cross-industry partnerships; and a competitive climate that has forced companies to become both more efficient and more creative Mergers and takeovers will continue to be a path of choice for many companies in the years ahead. Looking back at a history of mergers and acquisitions, it is clear that not all of these deals are successful; indeed, both the successes and failures have been fairly well chronicled in the press and in management literature. By some estimates about two-thirds of deals that are publicly announced will ultimately either fail to take place or will fail to produce anywhere near the shareholder value anticipated (Carey & Ogden 2004).

 

Some of the larger mergers have been staggering disappointments to shareholders, either falling apart over unforeseen culture issues or by demonstrating once again that bigger is not necessarily better. As the pace of Mergers and Acquisitions (M&A) activity has multiplied, so too has the knowledge and the level of required expertise. Mergers that may once have been merely a matter of financial accounting and due diligence now frequently give rise to a host of issues requiring broad consultation. Legal and regulatory matters, compensation and personnel questions, integration and leadership strategies, along with complex financial and accounting questions, are now a routine part of every significant deal. As a result, the demand for information about every aspect of M&A transactions has escalated (De Rond 2003). Despite the abundance of published material on mergers, the world of merger strategy and tactics remains highly secretive. There are few opportunities open to CEOs eager to exchange views with other corporate leaders who may be more experienced and knowledgeable about the mechanics and strategy of mergers (De Rond 2003). Mergers and takeovers take place due to the declining status of a company, the need for advancements in technology, globalization and many others. Recently the company has taken over a number of mining resources in South East Asia and Africa. The acquisition of the mining businesses in South East Asia and Africa aims to reduce cost through vertical integration. In the merger and acquisition process, the firm will have lesser expenses in producing aluminum and steel. The company can use the newly acquired mining facilities to gather minerals that can be used to create newer products that have the same creation process as the aluminum and steel products. The company doesn’t have to hire new personnel to create the products; they can just alternately create the steel and aluminum products and then the new products.  The company can gather additional income from the creation of newer products made from minerals and materials found in the mining facilities. 

Q2 Financial Failure

Business enterprises in the private sector must be managed in such a way that they are able in the long term to earn at least as much money as they spend, otherwise the managers responsible are writing the death sentence of such enterprises. And if this happens, the only question is how long it will be before things fall apart, and what the manner of collapse will be, including the losses to be suffered and the people to suffer them. In the long term, no bankruptcy act in the world can ever make up for the failures of business managers. Solvency and the risk of bankruptcy are two complementary expressions of exactly the same phenomenon (Kirkegaard 1997). Solvent enterprises run no risk of bankruptcy, and enterprises threatened by bankruptcy are insolvent. Financial statements that describe solvency on a regular basis also regularly describe the risk of bankruptcy. Financial statements that regularly contain a calculation of solvency are exactly the same as financial statements that constantly show the calculated risk of bankruptcy. Development failure involves the failure of the market by itself to achieve a rate of growth of output and well-being deemed satisfactory by the society (Kirkegaard 1997).

 

Development failure is dynamic in nature; it is not simply a static failure to achieve allocative efficiency. Development failure implies a dysfunction in the processes necessary for the achievement of ongoing economic development. It implies a failure of the economy’s institutions to adapt and to develop new competencies appropriate to new situations. Thus, the existence of development failure provides the rationale for government actions to discover the nature of the dysfunction and to correct it. In the absence of corrective action and in the presence of significant foreign competition, de-industrialization is likely to occur at least in advanced economies. The types of development failure correspond to the main types of processes necessary for economic development to occur. These include financial failures. Financial failure occurs to the extent that financial institutions fail to channel funds to those activities that are most important for the society’s continuing economic development (Tomer 1999). The report on the financial failure of the company will focus on knowing the events that transpired before the financial failure of the firm. The report would focus on the share price and why it suddenly decreased value. It will determine the reasons for the crumbling share price and what should have been done to prevent such problem. It will investigate the persons responsible and liable for the share price crumbling. The report would give attention to the directors and the rumors that they manipulated the share price for personal gain through their own share trading, that preferential deals had been done with associated entities, that borrowings had been classified as revenue giving the false impression that they represent ongoing revenue. The report would try to gain evidence on the involvement of the directors on the financial failure. The report would give attention to the company’s CEO and his comments touting the success of the firm before the financial failure. The report would identify any irregularities with the CEO and it will know whether the comments of the CEO and the sudden failure are just coincidental or a well thought of plan.

Q3 Not for profit fraud

The co-operative movement has served a number of social functions, but the thinking has mainly been economic and political. Functions such as the employment of people with disabilities have only quite recently been taken up, and social services are, for the moment, just in the planning phase. Earlier, charities and organizations of people with disabilities were alone in these sorts of activities. In the 1960s much of this work was taken over by the public system. In many cases the organizations remained formally private, but they now work in the context of an agreement making them in reality part of the public system (Borzaga & Defourny 2001).  In the 1980s new voluntarism marked a reversal of these trends. A new commitment to grassroots social work arose, and new types of social enterprises were formed, at first outside the established co-operative tradition. The field of social services, however, is at a point where it is open to new developments, and a search for new possibilities is taking place. So far this has meant an interest in voluntary social work, charities and commercial solutions. But it is still possible that social enterprises will come into the picture as a possible model for future social protection activities. This depends, to a great extent, upon the course of societal development in the coming decades (Borzaga & Defourny 2001).

 

For a long time personal services were provided by the household or by charities or volunteers of one sort or another. The period of economic growth that began after the Second World War changed this situation. The establishment of social protection for all gave the social services financial resources on an unprecedented level and, at the same time, the public authorities were empowered to issue regulations to govern the use of these resources. Voluntary organizations may be charitable trusts, in which case they either rely on fundraising or endowed assets financial or buildings (Kiger 2000). They may also be instruments for development activity, as in the case of development trusts, which are quite numerous, and some form the core of community businesses. Major charities are playing an increasingly important role in providing welfare services, they already run residential homes, day centers, and domiciliary services such as. Charities and other voluntary organizations often specialize in supporting a particular target group, and this may be regarded as a traditional strength of the voluntary sector (Kiger 2000).The different charities that tried to help the victims of the catastrophic event that has occurred in Indonesia, Papua New Guinea and surrounding islands will be given a review on their performance and their spending practices. The review will focus on comparing what was promised by the charities and what have been done. It will take a look on whether the charities have rebuild houses and provided health and education improvements. The review will take a look at how the charities have spent the different donations given by the Australian public. The information needed for the review will be gathered through an interview with the different victims of the catastrophic event that has occurred in Indonesia, Papua New Guinea and surrounding islands. The review will determine whether the charitable institutions lived up to their reputation and image in other countries.

Q5 Authority investigating corruption

Today's market for illicit drugs is the product of a complex evolutionary process that began in the early years of this century. Although historians and anthropologists rightly point out that mind-altering drugs have been traded and consumed since antiquity, it was not until the twentieth century that this activity gained its distinctly illicit character .For most drug traffickers, the promise of some portion of the enormous profits to be made clearly provides the primary incentive (Stares 1996). The price structure of the drug industry, with large value added at successive stages in the supply chain, permits enormous profits to be made, particularly at the wholesale and retail level. Some examples of the markup at various stages in the supply chain are worth citing to illustrate the profit-making potential of the drug trade. Not surprisingly, it is widely believed that the principal drug trafficking groups and their leaders have amassed immense personal riches. In trafficking, as in production, the nature of the commodity facilitates participation (Stares 1996).

 

 For some the price may fall within the margins of their disposable income, while for others it may simply be too high. The price barrier, however, can be overcome by either acquiring more money legally or illegally or by using income in kind, including sexual favors. The sensitivity, or in economic terms elasticity, of consumer demand to subsequent changes in the price of drugs is difficult to assess precisely. It is believed that occasional consumers are likely to be more sensitive than heavy ones, and the elasticity of demand is likely to be lower for drugs that can cause physical or psychological dependence, than it is for others. The effect of price changes on consumer demand is likely to be greater over time.  In addition to price, availability has another element: the time, inconvenience, and personal risk involved in obtaining drugs. Some argue that this is often more critical than price in affecting the level of consumer use (Cohen 2005). Estimating the cost of drug crimes is particularly difficult. Drug abuse imposes many external costs: drug users might be less productive in the workforce and might commit crimes to support their drug habits; dealers might forgo socially productive work activities; society might be burdened with additional medical costs in treating drug addicts.  Some of these costs are clearly external and/or social costs irrespective of whether or not drug use is illegal (Cohen 2005). The investigation on the drug dealer would focus on his different connections and how his connections helped him have a better luck plying such illegal trade. The investigation would determine if law enforcers are in cahoots with the drug dealer. The investigation would gather necessary evidence against law enforcers who are in cahoots with the drug dealer. The investigation would focus on testimonial evidences and other vital evidences linking the drug dealer to the law enforcers. The investigators would make use of an insider to the drug dealer; the insider would determine the connections of the drug dealer and it would know if there is connivance between the drug dealer and law enforcers. The information that would be given by the insider would most likely be recorded through the latest technologies available. The recorded evidence would give a concrete proof against the drug dealer and his connections.

References

Borzaga, C & Defourny, J (eds.) 2001, The emergence of

social enterprise, Routledge, London.

 

Carey, DC & Ogden, D 2004, The human side of M & A: How

CEOs leverage the most important asset in deal making

Oxford University Press, New York.

 

Cohen, MA 2005, The costs of crime and justice, Routledge,

New York.

 

De Rond, M 2003, Strategic alliances as social facts:

Business, biotechnology, and intellectual history,

Cambridge University Press, Cambridge, England.

 

Kiger, JC 2000, Philanthropic foundations in the twentieth

century, Greenwood Press, Westport, CT

 

Kirkegaard, H 1997, Improving accounting reliability:

Solvency, insolvency, and future cash flows, Quorum Books,

Westport, CT.

 

Stares, PB 1996, Global habit: The drug problem in a

borderless world, Brookings Institution, Washington, DC.

 

Tomer, JF 1999, The human firm: A socio-economic analysis

of its behavior and potential in a new economic age,

Routledge, London.

 

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