Services Marketing

Australasian Marketing Journal 18 (2010) 41–47 Contents lists available at ScienceDirect Australasian Marketing Journal journal homepage: www. elsevier. com/locate/amj How the local competition defeated a global brand: The case of Starbucks Paul G. Patterson *, Jane Scott, Mark D. Uncles School of Marketing, Australian School of Business, University of NSW, Sydney, NSW 2052, Australia r t i c l e i n f o a b s t r a c t Americanised the coffee tradition. Keywords: Service brands Service quality Global branding International business Starbucks Coffee The astounding growth and expansion of Starbucks is outlined, both on a global scale and within Australia. The focus then shifts to the abrupt closure of three-quarters of the Australian stores in mid 2008.Several reasons for these closures are described and examined, including that: Starbucks overestimated their points of differentiation and the perceived value of their supplementary services; their service standards declined; the y ignored some golden rules of international marketing; they expanded too quickly and forced themselves upon an unwilling public; they entered late into a highly competitive market; they failed to communicate the brand; and their business model was unsustainable.Key lessons that may go beyond the speci? cs of the Starbucks case are the importance of: undertaking market research and taking note of it; thinking globally but acting locally; establishing a differential advantage and then striving to sustain it; not losing sight of what makes a brand successful in the ? rst place; and the necessity of having a sustainable business model.O 2009 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved. 1. Introduction ‘‘Shunned Starbucks in Aussie exit† (BBC News, 4 August 2008) then shifts focus to describe the extent of the store closures in Australia, before offering several reasons for the failure and lessons that others might learn from the case. 2.Background ‘‘Weak coffee and large debt stir Starbucks’ troubles in Australia† (The Australian, 19 August 2008) ‘‘Memo Starbucks: next time try selling ice to Eskimos† (The Age, 3 August 2008) ‘‘Taste of defeat for the mugs from Starbucks† (Sydney Morning Herald, 31 July 2008) ‘‘Coffee culture grinds Starbucks’ Australian operation† (Yahoo News, 3 August 2008) When the announcement was made in mid 2008 that Starbucks would be closing nearly three-quarters of its 84 Australian stores there was mixed reaction. Some people were shocked, others were triumphant.Journalists used every pun in the book to create a sensational headline, and it seemed everyone had a theory as to what went wrong. This case outlines the astounding growth and expansion of the Starbucks brand worldwide, including to Australia. It * Corresponding author. Tel. : +61 2 9385 1105. E-mail addresses: p. [email  pro tected] edu. au (P. G. Patterson), [email  protected] com. au (J. Scott), m. [email  protected] edu. au (M. D. Uncles). Founded in 1971, Starbucks’ ? rst store was in Seattle’s Pike Place Market.By the time it went public in 1992, it had 140 stores and was expanding at a breakneck pace, with a growing store count of an extra 40–60% a year. Whilst former CEO Jim Donald claimed that ‘‘we don’t want to take over the world†, during the 1990s and early 2000s, Starbucks were opening on average at least one store a day (Palmer, 2008). In 2008 it was claimed to be opening seven stores a day worldwide. Not surprisingly, Starbucks is now the largest coffee chain operator in the world, with more than 15,000 stores in 44 countries, and in 2007, accounted for 39% of the world’s total specialist offee house sales (Euromonitor, 2008a). In North America alone, it serves 50 million people a week, and is now an indelible part of the urban lands cape. But just how did Starbucks become such a phenomenon? Firstly, it successfully Americanised the European coffee tradition – something no other coffee house had done previously. Before Starbucks, coffee in its current form (latte, frappacino, mocha, etc. ) was alien to most US consumers. Secondly, Starbucks did not just sell coffee – it sold an experience.As founding CEO Howard Schultz explained, ‘‘We are not in the coffee business serving people, we’re in the people business serving coffee† (Schultz and Yang, 1997). This epitomised the emphasis on customer service such as making eye contact and greeting each customer within 5 seconds, 1441-3582/$ – see front matter O 2009 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved. doi:10. 1016/j. ausmj. 2009. 10. 001 42 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 leaning tables promptly and remembering the names of regular customers. From inception, Starbucks’ purpose was to reinvent a commodity with a sense of romance, atmosphere, sophistication and sense of community (Schultz and Yang, 1997). Next, Starbucks created a ‘third place’ in people’s lives – somewhere between home and work where they could sit and relax. This was a novelty in the US where in many small towns cafe culture consisted of ? lter coffee on a hot plate. In this way, Starbucks positioned itself to not only sell coffee, but also offer an experience.It was conceived as a lifestyle cafe. The establishment of the cafe as a social hub, with comfortable chairs and music has been just as important a part of the Starbucks brand as its coffee. All this came with a premium price. While people were aware that the beverages at Starbucks were more expensive than at many cafes, they still frequented the outlets as it was a place ‘to see and be seen’. In this way, the brand was widely accep ted and became, to an extent, a symbol of status, and everyone’s must-have accessory on their way to work. So, not only didStarbucks revolutionise how Americans drank coffee, it also revolutionised how much people were prepared to pay. Consistency of product across stores, and even national boundaries, has been a hallmark of Starbucks. Like McDonald’s, Starbucks claims that a customer should be able to visit a store anywhere in the world and buy a coffee exactly to speci? cation. This sentiment is echoed by Mark Ring, CEO of Starbucks Australia who stated ‘‘consistency is really important to our customers . . . a consistency in the product . . . the overall experience when you walk into a cafe . . the music . . . the lighting . . . the furniture . . . the person who is working the bar†. So, whilst there might be slight differences between Starbucks in different countries, they all generally look the same and offer the same product assortment. One way this is ensured is by insisting that all managers and partners (employees) undergo 13 weeks of training – not just to learn how to make a coffee, but to understand the nuances of the Starbucks brand (Karolefski, 2002) and how to deliver on its promise of a service experience.The Starbucks formula also depends on location and convenience. Starbucks have worked under the assumption that people are not going to visit unless it’s convenient, and it is this assumption that underlies their highly concentrated store coverage in many cities. Typically, clusters of outlets are opened, which has the effect of saturating a neighbourhood with the Starbucks brand. Interestingly, until recently, they have not engaged in traditional advertising, believing their large store presence and word-ofmouth to be all the advertising and promotion they need.Starbucks’ management believed that a distinctive and memorable brand, a product that made people ‘feel good’ and an e njoyable delivery channel would create repeat business and customer loyalty. Faced with near-saturation conditions in the US – by 2007 it commanded 62% of the specialist coffee shop market in North America (Table 1) – the company has increasingly looked overseas for growth opportunities. As part of this strategy, Starbucks opened its ? rst Australian store in Sydney in 2000, before expanding elsewhere within New South Wales and then nationwide (albeit with 0% of stores concentrated in just three states: NSW, Victoria and Queensland). By the end of 2007 Starbucks had 87 stores, enabling it to control 7% of the specialist coffee shop market in Australasia (Table 1). By 2008, consumer awareness of Starbucks in Australia was 90% (Shoebridge, 2008), with each outlet selling, on average, double the number of coffees (270 a day) than the rest of Australia’s coffee shops (Lindhe, 2008). 3. Expansion into Asia Starbucks currently operates in 44 markets and even has a sma ll presence in Paris – birthplace and stronghold of European cafe culture. Beyond North America, it has a very signi? ant share of the specialist coffee shop market in Western Europe, Asia Paci? c and Latin America (Table 1) and these regions make strong revenue contributions (Table 2). It is in Asia that they see the most potential for growth as they face increasing competitive pressure in their more traditional markets. Half the international stores Starbucks plans to operate in the next decade will be in Asia (Euromonitor, 2006; Browning, 2008). Indeed, Starbucks has done well in international markets where there has not traditionally been a coffee drinking culture, namely Japan, Thailand, Indonesia and China.In effect it has been responsible for growing the category in these markets. The ? rst Starbucks outside the US opened in Tokyo in 1996, and since then, Starbucks’ Japanese stores have become twice as profitable as the US stores. Unsurprisingly then, Japan is S tarbucks’ best performing overseas market outside North America. More than 100 new stores open each year in Japan, and coffee is now more popular than tea in terms of both volume and value (Lee, 2003; see also Uncles, 2008).As opposed to their entry into the Australian market, Starbucks made small changes to its formula for the Japanese market; for example, the invention of a green tea frappucino, and the provision of smaller drinks and pastries to conform to local tastes. Starbucks arrived in China in 1998 and by 2002 had 50 outlets, and 165 outlets by 2006 (BBC News, 2006), quickly becoming the nation’s leading coffee chain. Starbucks now sees China as its key growth market due to the size and preferences of the emerging middle class. In the Asia–Paci? region, Starbucks command of the specialist coffee shop market grew from 15% in 2002 to 19% in 2007 (refer to Table 2). The total market for cafes in China grew by over 135% between 1999 and 2004 to reach US$2. 6 billion. It is projected to grow another 144% by 2008 to reach US$6. 4 billion in sales. More specialty coffee shops are opening across China as a middle class with strong purchasing power emerges, although this rise in coffee consumption is highly concentrated in large cities such as Beijing, Shanghai and Guangzhou. Starbucks has said that it xpects China to become its biggest market after the US and the plan is to open 100 stores a year (Euromonitor, 2006). Signi? cantly, certain Western brands are valued by Chinese consumers and Starbucks appears to be one of them. A growing number of China’s 500 million urbanites favour Starbucks for its ambience, which is seen as an important signal of service quality, Table 2 Starbucks’ regional sales performance by outlets and value 2006. Region North America Asia Paci? c Western Europe Australasia World % of company sales (outlets) 79. 0 13. 6. 7 1. 1 100. 0 % of company sales (revenue in $US) 80. 5 10. 8 7. 7 1. 0 100. 0 Tab le 1 Starbucks’ share of the specialist coffee shop market in each major region. Region North America Western Europe Asia Paci? c Australasia Latin America Source: Euromonitor (2008b). 2002 (%) 44 17 15 6 0 2007 (%) 62 21 19 7 18 Source: Percentage of company sales in each region is calculated from retail sales within this market in 2006, with sales data drawn from Euromonitor (2007). P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 43 nd Starbucks’ design concept rests easily with China’s consumers, who tend to lounge with friends while sipping coffee. Its outlets in China frequently maintain larger seating areas than average outlets in other countries, and plush chairs and davenports are provided to accommodate crowds that linger. However, success for Starbucks in China is not a given, and they will face several challenges in the coming years. China’s accession to the WTO has led to the gradual relaxation of the policy gove rning foreign-owned retail outlets, and this will lead to more foreign investment and thereby competition (Lee, 2004).Several multinationals are engaged in selling coffee (including KFC, McDonald’s, Yoshinoya, and Manabe), and a number of local brands have recently emerged, some even imitating Starbucks’ distinctive green and white logo and its in-store ambience (notably Xingbake in Shanghai). Furthermore, the reduction of import tariffs on coffee will also encourage foreign investment in coffee. 4. The Australian retail coffee industry Australia’s taste for coffee is a by-product of the waves of immigrants arriving on the country’s shores following World War II. European migrants, predominantly Greeks and Italians, were the ? st to establish the coffee culture, which was later embraced more widely in the 1980s. For decades Australians enjoyed a variation of the ‘lifestyle coffee experience’ that Starbucks created from scratch in the US. Aust ralians did not need to be introduced to the concept of coffee as many other countries did. Savouring a morning cup of coffee was already a ritual for many consumers. It is fair to describe Australia’s coffee culture as mature and sophisticated, so when Starbucks entered Australia in 2000, a thriving urban cafe culture was already in place.This established culture saw Australians typically patronise smaller boutique style coffee shops, with people willing to travel out of their way for a favoured cup of coffee, especially in Melbourne where coffee has developed an almost cult-like following. For Australians, coffee is as much about relationships as it is about the product, suggesting that an impersonal, global chain experience would have trouble replicating the intimacy, personalisation and familiarity of a suburban boutique cafe.Furthermore, through years of coffee drinking, many Australians, unlike American or Asian consumers, have developed a sophisticated palate, enjoying their coffee straighter and stronger, and without the need to disguise the taste with ? avoured, syrupy shots. This love of coffee is easily quanti? ed. The Australian market is worth $3 billion, of which $1. 8 billion relates to the coffee retailing market. For every cup of coffee consumed out of home, two cups are consumed at home (AustralAsian Specialty Coffee Association, 2006). Per capita consumption is now estimated at 2. kg-twice as much as 30 years ago. Whilst Australians are among the highest consumers of instant coffee in the world, they are increasingly buying coffee out of the home (Euromonitor, 2008c). More than 1 billion cups of coffee are consumed in cafes, restaurants and other outlets each year, representing an increase of 65% over the last 10 years. Even between 2000 and 2005, trade sales of coffee have increased about 18%. In 2007, the growth in popularity of the cafe culture resulted in trade volume sales growing at an annual rate of 5%.Some 31% of the coffee so ld through foodservice is takeaway, and it is thought that ‘fast coffee’ will be a growth area in future years (Euromonitor, 2008d). There is also a trend towards larger takeaway sizes, with 400 ml cups increasing in popularity (Euromonitor, 2008d). One might argue that Starbucks drove these trends, especially in regards to larger sizes. There are almost 14,000 cafes and restaurants serving a variety of coffee types in Australia, and during 2006/07, they generated $9. 7 billion in income (Australian Bureau of Statistics, 2008).However, despite these statistics, the coffee business does not guarantee success. As Paul Irvine, co-founder of Gloria Jean’s notes, ‘‘Australia is a tough retail market and coffee retailing is particularly tough†. According to of? cial statistics, the cafe business is not always pro? table, with the net pro? tability of cafes falling to about 4%. For a cafe to be successful, it has to offer marginally better coffee than local competitors, and do so consistently. Coffee drinkers in Australia are discerning, and they will go out of their way to purchase a good cup of coffee.They are not as easily persuaded as people from other countries simply to visit their nearest cafe. Secondly, for a cafe to make a pro? t, it needs to turn over 15 kg of coffee a week. The national average is 11 kg, so a cafe has to be above average to begin with to even make a pro? t. Any newcomer needs to understand this before entering the market. The other signi? cant constraint on pro? tability is the cost of hiring baristas, with a good one costing between $1000 and $1500 a week (Charles, 2007). However, it seems that this is a necessary cost in order to deliver a superior product.The question that then begs to be asked is: How well did Starbucks understand this existing coffee culture? Did they under-estimate the relational aspect of coffee purchasing in Australia, as well as the importance of the quality of ingredients and the skills of the person making each cup? Did they overestimate the value consumers attach to the in-store experience and the ‘third place’ concept? Or did they just look at the statistics regarding coffee consumption and think that operating in Australia was a license to print money? Did they simply see Australia as the next logical step to global domination?Starbucks has 87% of the US specialty coffee shop market, and only now is it beginning to feel pressure from non-traditional competitors such as Dunkin Donut, 7 Eleven, McCafe and Krispy Kreme (Burritt, 2007). However, in Australia, the competitive landscape is different. Gloria Jean’s dominates the high-street part of the coffee retailing market and McCafe dominates the convenience end (Shoebridge, 2008). Other signi? cant competitors include The Coffee Club and Wild Bean Cafe (an add-on to BP petrol stations) and Hudson’s Coffee (see Table 3).All offer a similar in-store experience to Starbucks, wi th McCafe from 2007 onwards refurbishing many McDonald’s stores to imitate the Starbucks’ experience, albeit at the economy end of the market. 5. Growth grinds to a halt . . . store closures In recent times however things have started to go wrong for Starbucks. Internationally, company earnings declined as cashstrapped consumers faced record petrol prices and rising interest rates meaning they have had to pull back on gourmet coffee and other luxuries. Sales fell 50% in the last 2 years, the US share price fell more than 40% over the past year and pro? s dropped 28% (Bawden, 2008; Coleman-Lochner and Stanford, 2008; Mintz, 2008). Consequently, Howard Schultz, the founder and chairman of Starbucks, resumed the position of CEO in 2008 with the aim of revitalising the business. He slowed the pace at which stores were opened (and in fact closed more stores than he will open in the coming year), introduced key performance targets (KPTs) and an employee rewards system in the US, and simultaneously shut down every store in America for three and a half hours of staff training (Muthukumar and Jain, 2008).Customer-oriented initiatives have included the addition of more food, the launch of the Starbucks card and Starbucks express, and the provision of highspeed wi-? internet access (Hota, 2008). Notably, Schultz acknowledges that the company’s focus has been more on expansion than on customer service – the very thing that was at the heart of its unique value proposition. 44 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 Table 3 Competition in the Australian specialty coffee chain market (chains arranged in order of the number of stores operating in Australia).Number of stores in Australia Gloria Jean’s 500 Year established in Australia 1996 Business model Price of an espresso coffee (e. g. , ? at white, cappuccino) Regular $3. 25 Small $3. 25 Standard $3. 40 Regular $3. 40 Small $3. 10 Tall $3. 60 Perform ance highlights and lowlights Franchise  Overall Winner, 2005 Franchisor of the Year  Sales rose 18% to an estimated $240 m for 07/08 driven by new stores and growth from existing stores  The fastest growing cafe brand in Australia and NZ  Number of stores up from 60 in 2002  Winner, 2008 Food Franchisor of the Year  The number of stores reported here includes NZ  Plans to open more sitesMcCafe Coffee Club Wild Bean Cafe 488 220 105 1993 1989 2004 Some store-owned, some franchise Franchise Part of a franchise with Wild Bean Cafe (BP) Connect Franchise Store-owned Hudson’s Starbucks 45 23 1998 2000  Plans to expand store numbers by 20–30% 08/09  Prior to closures in August 2008 there were 84 stores had a perceived lower quality product Sources: Various company reports as at the end of 2008. However, it seems that these measures were too late for the Australian operation. On 29th July 2008, Starbucks announced that it would be closing 61 of its 84 Australian sto res (i. . , 73%) by August 2008, resulting in a loss of 685 jobs. All of these stores had been under-performing (8 were in SA, ACT and Tasmania, 28 in NSW, 17 in Victoria and 8 in Queensland). This decline of Starbucks in Australia was not as sudden as many would have us believe and in fact some reports (Edwards and Sainsbury, 2008; Shoebridge, 2008) indicated that by late 2007 Starbucks already had:      accumulated losses of $143 million; a loss of $36 million for that ? nancial year; lost $27. 6 million the previous ? nancial year; loans of $72. million from Starbucks in the US; was only surviving because of its US parent’s support. Whilst the troubled economy might seem an easy scapegoat, with people tightening their belts and eating out less, it is unlikely that this was the core problem as evidenced by the continuing growth of their competitors. Indeed, coffee is no longer considered a luxury item by many Australians, but rather an affordable part of their daily ro utine. Instead, there is substantial evidence to suggest a number of factors combined to bring about Starbucks’ demise. . 1. Starbucks overestimated their points of differentiation and customer perceived value of their supplementary services ‘‘I just think the whole system, the way they serve, just didn’t appeal to the culture we have here† Andrew Mackay, VP of the Australian Coffee Traders Association, in Martin (2008) Whilst there was initial curiosity and hype about Starbucks, after trying it, many Australians quickly found that it failed to offer a particularly unique experience that was not offered by other chains or cafes.Given the strong established coffee culture and discerning palates of Australians, the core product – coffee – was not seen as particularly different from, say, a latte or short black from a good suburban barista, Gloria Jean’s or Coffee Club. Its point of difference in Australia, where a coffee culture alr eady existed, had to be in its supplementary or value-adding services – i. e. , its unique servicescape, engaging customer service, brand image and so on (Lovelock et al. , 2007).But was this worth a premium price, especially as the competition began replicating Starbucks in-store experience? Starbucks has since been harshly criticised by Australian consumers and the media. Their coffee has been variously described as ‘a watered down product’, ‘gimmicky’, and consisting of ‘buckets of milk’. These are not the labels you would choose to describe a coffee that aspires to be seen as a ‘gourmet’ product. It has also been criticised for its uncompetitive pricing, even being described as ‘‘one of the most over-priced products the world has ever seen† (Martin, 2008).Even the idea of the third place has come under criticism – ‘‘why would you want to sit around a pretend lounge room drinking a wea k and expensive coffee when you can go around the corner and have the real thing? † (Wailes, 2008). It seems that Starbucks’ rapid expansion, its omnipresence, somewhat standardised store design and recent insistence on staff achieving various sales KPTs (key performance targets) such as serving ‘x’ customers per hour, all combined to diminish the instore experience. The introduction of sales targets for front-line These closures saw 23 stores kept open in prime locations in Sydney, Melbourne and Brisbane.But this begs the question: can a 23-store chain be viable for the brand in the long-term? Based on the approximate numbers in Table 3, Starbucks had a 6% share of stores in Australia before the closures; this has now fallen to a share below 2%. Even before the closures, Australasia represented only 1% of company sales (Table 2) and now the ? gure is expected to be much lower. This may not make much commercial sense as it will be dif? cult to achieve econo mies of scale in terms of marketing and purchasing, and such small numbers are totally out of step with the clustering strategy adopted in its strongest markets – the US, Japan and China.However, it could also be argued that with Starbucks’ strategy of global domination, it is unlikely that it will ever close its Australian business entirely. Whilst Starbucks’ management have been keen to suggest that ‘‘this decision represents business challenges unique to the Australian market and in no way re? ects the state of the Starbucks business in countries outside of the United States†, the US market has also suffered. By September 2008, 600 stores had closed (or were due for closure), with about 12,000 workers, or 7% of Starbucks’ global workforce affected (Mintz, 2008).It should be noted that the situation in the US has only worsened as a result of the global ? nancial crisis. 6. So what went wrong? Opinions abound as to why Starbucks failed in Australia. Our research suggests there is some truth to many of these opinions. P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 45 employees, for example, meant staff and baristas had less time to engage with customers. It began to stray too far from its roots and the very values upon which the brand was built.Some of these actions were forced upon Starbucks by emerging competitors seeking to imitate the brand, and thus gain a slice of the ever growing lifestyle coffee market. Starbucks’ points of differentiation were systematically being eroded and, in a sense, the brand that taught the world that coffee is not a commodity was itself becoming one. 6. 2. Declining service quality The brand has also come under ? re for declining customer service as it continued to expand. For example, the quality of baristas is said to have declined as Starbucks widened its pool of applicants in order to meet demand at new stores.Can a 17 year old high school student really compete with a boutique trained barista with a passion for coffee? By not offering a better experience and product than emerging direct competitors, Starbucks found itself undermined by countless high street cafes and other chains that were selling stronger brews at lower prices and often offering better or equal hospitality. Whilst they may have pioneered the idea of a ‘third place’, it was an easy idea to copy, and even easier to better by offering superior coffee, ambience and service.Now, with so many coffee chains around, Starbucks have little point of differentiation, even wi-? internet access has become commonplace across all types of cafe. Furthermore, while customers were offered promotional rewards for returning to Starbucks, the card-based scheme is no more sophisticated than equivalent me-too cards at Gloria Jean’s, Coffee Club, Hudson’s and many independent cafes. And as noted earlier, one of the things that set Starbucks apart from the competition – i. e. , acknowledging customers (often by name for regulars) within a few seconds of entering the store and eriously engaging with them, began to unravel when Starbucks imposed both customer service and sales targets for its cafes. The imposition of these targets plus an ever widening range and complexity of coffees to remember and make to perfection, meant staff morale and inevitably customer service levels declined. In fact in the USA some staff were so disillusioned with the imposition of sales targets (because it meant they simply didn’t have time to engage with customers) they posted blogs openly stating that Starbucks had lost its way.Finally, it appears that Starbucks were not even delivering on their core promise of serving superior coffee in comfortable surroundings, thus justifying its premium price. By switching to vacuum packaged coffee, consumers are denied the store-? lling aroma of the coffee beans. The switching of traditional cof fee machines to automated espresso machines (which can make coffees 40% faster and move customers through the lines more quickly), has also resulted in a loss of ‘theatre’ (Grove et al. , 2000) for people wanting to see their coffee made that way and has also had implications for taste.In-store, it has been noted that there are fewer soft chairs and less carpeting, and Starbucks recently lost ground in the ‘service and surroundings’ category of the Brand Keys 2007 Customer Loyalty Engagement Index (Cebrzynski, 2008). It seems that Starbucks is now less about the quality of the coffee, and is more about the convenience of faster service and being on every corner – whilst still charging a premium. 6. 3. Starbucks ignored some golden rules of international marketing Ironically, it seems that the very thing that made Starbucks successful in the ? st place, its ability to adjust the original (European) business model and coffee tradition to local (US) con ditions, is the thing that let it down. Whilst Starbucks has made minor changes to its menu in countries such as Japan and Saudi Arabia, it generally offers the same products all around the world. When the company came to Australia, it brought its ‘American’ offering, simply bringing what worked in the US and applying it here, without really understanding the local market.But with more than 235 ethnicities speaking more than 270 languages and dialects, companies wanting to get ahead in Australia need to be aware that they are not dealing with one homogeneous market. Unfortunately what worked in the US was ‘‘bitter, weak coffee augmented by huge quantities of milk and sweet ? avoured syrups. Not so much coffee, as hot coffee-based smoothies†. For the Australian consumer raised on a diet of real espresso, this was always going to be a tough sell (Mescall, 2008) As McDonald’s Australia chief executive Peter Bush noted, US retailers that have had tr ouble making it work in Australia (e. . , Starbucks, Denny’s, Arby’s, Taco Bell) are those that have ‘‘introduced formulae developed for US palates and for the US way of doing business . . . These formulae have, at best, modest relevance in Australia†. Peter Irvine, co-founder of Gloria Jean’s, also noted that ‘‘US retailers often arrive in Australia thinking the size of their overseas chains and the strength of their brands in other markets will make it easy for them to crack the local market. Their focus is on global domination rather than the needs of the local consumers†.Further, there is a strong sense in Australia of buying local, supporting the community, having relationships with the people you buy from, and supporting ethically-minded businesses. Starbucks clashed completely with that, whereas local stores can differentiate themselves as being local and non-corporate. Furthermore, some would argue that Starbucks has b ecome a caricature of the American way of life and many Australians reject that iconography. Many are simply not interested in the ‘super-size’ culture of the extra-large cups, nor want to be associated with a product that is constantly in the hands of movie stars. . 4. Expanding too quickly and forcing themselves upon an unwilling public In the US, Starbucks started in Seattle as a single store. In a nation bereft of a genuine cafe culture, that single store captured people’s imagination, and soon became a second store, quickly followed by a third. Before long, Starbucks had become a demand-driven phenomenon, with everyone wanting a Starbucks in their local area. McDonald’s grew exactly the same way in Australia, opening just one or two stores in each city – nowhere near enough to meet demand – thus creating an almost arti? ial scarcity, which created huge buzz around the brand experience. Krispy Kreme did the same. But when Starbucks opened in Australia, they immediately tried to impose themselves with multiple store openings in every city – adopting the US-model of expansion through store clusters. Australians were not given a chance to ‘discover’ it. As Mescall (2008) points out ‘‘they took key sites, hung huge signs, made us order coffee in sizes and gave the coffees weird names. Starbucks said to us – ‘that’s not how you drink coffee. This s how you drink coffee’†. They took the Coca-Cola strategy of being available wherever people looked, but this quickly led to market saturation. Their expansion did not hurt their competitors so much as themselves, and they found themselves cannibalising their own stores. Furthermore, by becoming too common, the company violated the economic principles of cultural scarcity and the novelty wore off. By having too many outlets, becoming too commercial and too widely used, it began to lose its initial appeal of status and exclusivity.It began to have a mass brand feel, certainly not the warm feeling of a neighbourhood cafe. Furthermore, they became more reliant 46 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 on less af? uent consumers who now, with a worsening economy, are spending less, making Starbucks more vulnerable to economic ? uctuations. 6. 5. Entering late into a highly competitive market ‘‘In America, Starbucks is a state of mind. In Australia, it was simply another player. † Barry Urquhart, quoted in Delaney (2008) From Day 1, Starbucks got off on the back foot.They lacked the ? rst-mover advantage they had in the US and Asia, ? nding themselves the late entrant in an already very developed, sophisticated and competitive market. Indeed, the competitive landscape in the Australian retail coffee market is very different to that of other countries. Here, Starbucks found themselves competing with hundreds of independent cafes and special ity coffee chains (see Table 3), where the coffee was generally better and the staff knew their customers by name. Signi? cantly, they were also the last of the major chains to gain a presence in Australia. 6. 6.Failing to communicate the brand Worldwide, Starbucks rarely employs above-the-line promotion, and this was also the case in Australia. Instead, they maintained that their stores are the core of the business and that they do not need to build the brand through advertising or promotion. Howard Shultz often preached, ‘‘Build the (Starbucks’) brand one cup at a time,† that is, rely on the customer experience to generate word-of-mouth, loyalty and new business. But in a market as competitive as Australia, with a consumer whose palate is discerning and whose loyalty often lies with a speci? barista, advertising and promotion was essential to communicate the Starbucks message. The issue is not so much about building awareness – which, at 90%, is hig h – but to communicate what the brand means and to give consumers reasons for patronising Starbucks. Their lack of advertising made this branding issue even worse, with many people unable to articulate why they should be loyal to Starbucks. At the same time, competitors were communicating their messages very effectively – McDonald’s, for instance, is a heavy spending, award-winning, advertiser in the Australian market.Added to which, more subversive counter-messages were coming from those who saw in Starbucks a ‘brand bully’ riding rough shod over the nuanced tastes and preferences of local cultures (Klein, 2000; Clark, 2008). In other words, a range of strong contrary messages were undermining Starbucks’ own very limited communications. 6. 7. Unsustainable business model Starbucks’ product line is limited primarily to coffee. Sometimes a new product idea will be developed, such as the Frappucino, but these tend to have limited product life cycles and/or are seasonal.For example, the Frappucino has traditionally made up 15% of (summer) sales, but recently sales have been down, suggesting that customers are already bored with it (Kiviat, 2008). Furthermore, in the instance where other products were offered, people failed to purchase them as they only really associate Starbucks with coffee and generally seek food elsewhere. This is a very different model to The Coffee Club which has much more of a cafe feel to it, or McDonald’s which has a full range of breakfast and lunch/dinner items that can be complemented by a McCafe latte.Hence the average transaction value at Starbucks is lower than its competitors, and therefore more customers must pass through its doors to reach the sales and pro? t levels of its competitors. It also creates con? ict with the Starbucks ethos of the third place (and allowing people to sit around for 30 minutes sipping lattes and reading, talking or sur? ng) versus the need to get peo ple in and out quickly and not take up valuable ‘real estate’ (which in itself means that the average Starbucks store needs to be much bigger than the average cafe).Unlike most of the other retail coffee chains, Starbucks does not use a franchise model, preferring to lease and ? t-out its own outlets. This means more cash is being spent upfront, and in Starbucks’ case, more debt accrued. But adopting a franchise model would have numerous other advantages than just minimising this. It would mean that local investors, with a good sense of the local market, put their own money into the business and take an active role in running it and shaping its direction. 7. What are the main lessons from this case study?Several key lessons emerge that should be of interest to both domestic and international marketers. 7. 1. Crossing international borders is risky and clearly Starbucks did not do their homework, or ignored their homework Well conceived market research involving b oth primary and secondary data, including qualitative and quantitative approaches, would have uncovered the extent of the ‘coffee culture’ that existed in 2000 when Starbucks entered the Australian market. It seems inconceivable that Starbucks management, or at least its Australian representatives, were not suf? iently apprised of the extent to which many consumers were already well acculturated in terms of buying and consuming European styles of coffees such as short black, lattes and cappuccinos, nor the extent to which many customers were in fact loyal to their suburban cafe or competitive brands such as Gloria Jean’s. As a late market entrant, Starbucks clearly failed to do thorough homework on the market before entry – this is a failure in terms of due diligence. Alternatively, they chose to ignore the messages that were coming from any due diligence that they had undertaken.This may or may not have been due to some arrogance on the part of Starbucks, or due to the fact that they considered they had a strong global brand which would meet with universal acceptance. An example of where Starbucks did do its homework, and act on it, was in France when it entered that market in 2006, establishing a cafe in the middle of Paris. Research had clearly shown the American way of consuming and socialising over a coffee was an anathema to many French, so Starbucks held back from entering the French market and when they ? ally entered it was with great trepidation, expanding at a very slow pace and testing the market at every step. 7. 2. ‘‘Think global but act local† This familiar maxim in international marketing should be well understood. While Starbucks had brand awareness as a major global brand, it failed to adapt the product and the customer experience to many mature coffee drinkers in Australia. As noted earlier, all the evidence suggests that it simply tried to transplant the American experience into the Australian ma rket without any adaptation.In particular, it failed to adapt either its core product or its supplementary services to create the intimacy, personalisation and familiarity that is associated with established boutique cafes in Australia. 7. 3. Establish a differential advantage and then strive to sustain it A question of strategy that Starbucks perhaps failed to address was, ‘‘Is our product differentiation sustainable in the long term P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 47 and does it continue to justify a price premium? As noted earlier, it can be argued that the core product in this case, that is the coffee itself, is essentially a commodity, and that Starbucks’ coffee, according to many consumers, was no different to the competition, and in some cases inferior. Then Starbucks’ points of difference clearly revolved around its brand image and supplementary services. It was these supplementary services, such as its unique servicescape and excellent customer service, that they used to justify a premium price. However, as competitors (e. g. , The Coffee Club) quickly imitated the ‘Starbucks experience’ (i. . , their supplementary services, ambiance, etc. ), by providing premium coffee and an intimate casual experience, Starbucks’ value proposition began to fade. In other words, their key points of difference could be easily imitated and were not sustainable. Faced with this scenario, the onus was on management to re-fresh and evolve any lingering differential advantage that Starbucks might have had or, at the very least, give customers reasons to continue patronising Starbucks through its communications. 7. 4. Don’t lose sight of what made you successful in the ? st place As more and more competitors emerged, both individual cafes and chains such as Gloria Jean’s and The Coffee Club, competitive pressures forced Starbucks to impose rigid sales targets on their frontline staff including baristas to increase store productivity. However, the imposition of these KPTs and the pressure to serve more customers more quickly meant that Starbucks forgot the very thing that made it unique in the early days, namely, to provide a customer experience in an intimate casual setting that set it aside from competitors.As more pressure was placed on staff to have higher throughput, this meant that baristas and other employees had little time to engage with customers. In other words, Starbucks forgot about the very things that made it unique in the ? rst place. This is akin to the Wheel of Retailing hypothesis (Hollander, 1960) where a no-frills retailer gradually moves upmarket in terms of variety of product, price and more services and within several years ? nds itself competing with the more established premium supermarkets that were the very competitors that they tried to distance themselves from in the ? st place. The only difference with Starbucks is t hat it reversed the direction of the Wheel – by gradually moving downmarket it brought itself into direct competition with cheaper operators and lost sight of what made it successful in the ? rst place. 7. 5. Consider the viability of the business model It has to be questioned whether the Starbucks’ business model is viable in the long term, or even the medium term. A business model that uses a premium price to justify the excessive ? or space and elaborate servicescape, and allows customers to sit in this environment for an hour sipping one latte, has to be questioned. Given that Starbucks do not have the array of products that, say, a McDonald’s might have and, as documented earlier in this case, therefore do not generate the same sales volumes and revenues, it is hard to see how the Starbucks’ model is ? nancially viable. 8. Conclusion In summary, it appears on all the evidence that Starbucks not only misjudged the Australian coffee culture but also mi sjudged the extent of the competition, and failed to adapt its offering to the local market.Furthermore, with the advent of high quality barista training, the availability of premium coffee beans and the technology to produce a high quality cup of coffee (at a modest cost), sole operators who knew their customers by name, were able to set up business as viable competitors. Starbucks may have been responsible for growing the premium coffee category, but the emergence of Gloria Jean’s and the Coffee Club (and McCafe, a premium coffee shop embedded in McDonald’s restaurants) turned out to be serious competitors.Finally, questions have to be raised about Starbucks fundamental business model in a market where many small niche players can easily replicate the ‘Starbucks Experience’. References AustralAsian Specialty Coffee Association, 2006. Australian Coffee Market: Key Facts for 2006. Australian Bureau of Statistics, 2008. Cafes, Restaurants and Catering Servi ces, Australia, Report 8655. 0 for 2006–07. Bawden, T. , 2008. Starbucks reports ? rst loss in 16 years. Times Online, 31 July. (accessed 15. 08. 08. ). BBC News, 2006. China central to Starbucks growth. BBC News, 14 February. (accessed 29. 08. 08. ). Browning, E. 2008. Starbucks hopes growth abroad will save its bottom line. ABC News, 31 July. (accessed 29. 08. 08. ). Burritt, C. , 2007. McDonald’s challenges Starbucks with cheaper lattes. Bloomberg, 11 September. (accessed 29. 08. 08. ). Cebrzynski, G. , 2008. Starbucks-dominated category wakes up and smells McD’s espresso rollout. Nation’s Restaurant News 42 (3), 1–6. Charles, E. , 2007. In the trenches: Coffee. In the Black, May, 28–31. Clark, N. , 2008. Starbucks: The brand we love to hate. Marketing, 2 April. Coleman-Lochner, L. , Stanford, D. D. , 2008. Starbucks reports ? rst loss since 1992, predicts slower growth.Bloomberg, 30 July. (accessed 29. 08. 08. ). Delaney, B. , 2008. Star bucks to go. Guardian, 30 July. (accessed 29. 08. 08. ). Edwards, V. , Sainsbury, M. , 2008. Weak coffee and large debt stir Starbucks’ troubles in Australia. The Australian, 31 July. Euromonitor, 2006. Starbucks Ups Expansion Plans. Euromonitor International. Euromonitor, 2007. Starbucks Corp – Consumer Foodservice – World. Euromonitor International. Euromonitor, 2008a. On-trade Watch: Identifying Key Growth Markets to 2012. Euromonitor International. Euromonitor, 2008b. Company Watch: Starbucks Wakes Up and Smells the Coffee.Euromonitor International. Euromonitor, 2008c. Coffee – Australia. Euromonitor International. Euromonitor, 2008d. Impulse Food and Drink Channels – Coffee – Australia. Euromonitor International. Grove, S. , Fisk, R. , John, J. , 2000. Services as theater. In: Swartz, T. , Iacobucci, D. (Eds. ), Handbook of Services Marketing and Management. Sage Publications, CA, pp. 21–35. Hollander, S. , 1960. The wheel of ret ailing. Journal of Marketing 25 (1), 37–42. Hota, M. , 2008. Starbucks: brewing more than just coffee. European Case Clearing House (ECCC), 508-025-1. Karolefski, J. , 2002.Conquering new grounds. BrandChannel, 11 February. (accessed 29. 08. 08. ). Kiviat, B. , 2008. Wake up and sell the coffee. Time South Paci? c (Australia/New Zealand edition) 7 (13), 52–56. Klein, N. , 2000. No Logo. Flamingo, London. Lee, H. , 2003. Japan: a nation of coffee lovers. Euromonitor International. Lee, H. , 2004. Coffee brews a future in China? Euromonitor International. Lindhe, J. , 2008. One skinny cap to go. Business Review Weekly, 7 August. (accessed 15. 08. 08. ). Lovelock, C. , Patterson, P. G. , Walker, R. , 2007. Services Marketing: An Asia Paci? c and Australian Perspective.Pearson Education, Singapore. Martin, S. , 2008. Starbucks: a study in liberal failure, Part II. Conservatism Today, 29 July. (accessed 29. 08. 08. ). Mescall, J. , 2008. Starbucks in Australia: where did it go wrong? Unleashed, 7 August. (accessed 29. 08. 08. ). Mintz, J. , 2008. Starbucks closing 600 stores in the US. International Business Times, 1 July. (accessed 14. 09. 08. ). Muthukumar, R. , Jain, S. , 2008. Starbucks suffers: Schultz returns. European Case Clearing House (ECCC), 308-152-1. Palmer, D. , 2008. Starbucks: what went wrong? AFN Thought for Food, 31 July. (accessed 29. 08. 08. ).Schultz, H. , Yang, D. J. , 1997. Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time. Hyperia Publishing, New York. Shoebridge, N. , 2008. Local palate bucks another US retailer. The Australian Financial Review, 4 August. (accessed 15. 08. 08. ). Uncles, M. D. , 2008. Aroma Australia Pty Ltd goes to Japan. In: Schiffman, L. , Bednall, D. , O’Cass, A. , Paladino, A. , Ward, S. , Kanuk, L. (Eds. ), Consumer Behaviour, fourth ed. Pearson Education Australia, Australia, pp. 584–588. Wailes, N. , 2008. Taste of defeat for the mugs from Starbucks. Sydney Morning Herald 31 (July).

Legislations, policies and procedures relating Essay

Outlines how legislations, policies and procedures relating to health safety and security influence health and social care settings. M1- describes how health and safety legislations, policies and procedures promote the safety of individuals in a health and social care setting. In this essay I am going to outline how legislation, policies and procedures relating to health, safety and security influence health and social care settings. I am also going to describe how health and safety legislation, policies and procedures promote the safety of individuals in a health or social care setting. Legislation is law which has been produce by a governing body in order to regulate, to authorise, to sanction, to grant, to declare or to restrict. In terms of events, legislation defines the governing legal principles outlining the responsibilities of even organisers and other stakeholders such as the local authority, to protect the safety of the public. Legislation can have many purposes: to regula te, authorize, provide (funds), and declare or to restrict. Legislations are important throughout any work environment and society as without them we are not protected from hazards and promoting safety in the workplace. Two of the most important pieces of health and safety across the UK are the Health and Safety at Work Act 1974 and the Management of Health and Safety at Work Regulations 1999. These set the standards that must be met to ensure the health and safety of all employees and others who may be affected by any work activity. Other legislations also exist to cover all work activities that carry risks such as Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995, Food Safety Act 1990, Care Minimum Standards 2003, Care Home Regulations 2001 and The Manual Handling Operations Regulations 1992. Policies are clear, simple statements of how your organisation intends to conduct its services, actions or business. They provide a set of guiding principles to help with decision making. Procedures describe how each policy will be put into action in your organisation. Each procedure should outline: Who will do: what steps they need to take: Which forms or documents to use. Procedures might just be a few bullet points or instructions. Sometimes they work well as forms, checklists, instructions or flowcharts. Policies and their accompanying procedures will vary between workplaces because they reflect the values, approaches and commitments of a specific organisation and its culture. But they share the same role in guiding your organisation. Health and safety at work act legislations influence in health and social care setting by making sure there are no risks and hazards which can cause the staff any harm. This is done by them making individuals in the hospital or nursing home need to be careful with the items they are working with. The hospital or care homes have to follow these guidelines and legislations because if they need to make sure the environment around them is safe and free from any danger that may cause harm to other patients. They have to follow rules which they have been assigned to such as make sure they always use hand sanitizer before dealing with patients and also keeping all the waste away from patients and disposed properly. They promote safety around hospitals or nursing home by having posters around the place promoting safety such as everyone should use hand sanitizer before they enter the hospital or signs such as having a sign up when they have just cleaned the floor, they use a wet floor sign. H ealth and safety at work act policies and procedures protect individuals because if they do not follow the rules then people will not feel safe around the hospital and feel as if they will be in danger. So following the rules would make people feel safe around the hospital, which will make sure that the patients are feeling safe around the hospital due to the security of premises which is good because it creates a safe place to be in. This promotes safety because if you have security in the premises then this means people can tell that there’s no danger in the hospital . The Health and Safety at Work act 1974 (also known as HSWA, HSW or HASAWA) is the prime piece of legislation in Great Britain. The Health and Safety executive enforces the act with other acts alongside it to make sure that a working environment is appropriate and safe to work in without causing any hazards that may affect a person’s health. It is the duty of any person that has control to said premises to make sure that the Health and Safety at Work act is followed and applied to the site. If anything is deemed unpractical or unsafe according to the Health and Safety at Work act whether it be substances, unstable furniture, storage, inadequate training of others and maintenance to the working in building and facilities, then measures must be taken to correct this issue. Any person should be able to enter the building  without risking their health or safety. The health and safety act would be enforced in the home by: †¢ Making sure furniture in the home is safe and sturdy and suitable for anyone to use without them being injured; †¢ Making sure that all wires are neat and not in open spaces or under a cable tidy where people are vulnerable to trip over them; †¢ Produce risk assessments within the home i.e. trips outside the home, events that are held within the home and general everyday procedures. In Dunstable Children’s Home, the person that is in charge of the premises, which would be a caretaker, is responsible of making sure that all furniture that is used by any employer, employee, service user or visitor, is safe and stable and that it will not cause any risks to their health. Also all substances that are deemed as dangerous to health must be locked away from the younger children because they may not know what they are doing due to them having learning disabilities.

An Introduction To The Operations Management Concepts Business Essay

An Introduction To The Operations Management Concepts Business Essay Operations Management has been defined by Krajewski, et al. (2007) as the control and direction of the processes of the organization that changes its input materials to products and/or services for its customers. This report will compare how Mercedes-Benz and Honda manage their operations. The comparison might be useful because it would help identify various ways an organisation could be run in order to meet its goals and objectives. The report will give a brief background of the two organizations mentioned above and then would move on to the comparison of their marketing strategies and competitive priorities. Finally, the importance of frameworks such as capacity planning, inventory management, supply chain design, Total quality management and performance measures, would be discussed and how they could be useful in helping an organisation function efficiently and effectively. A) COMPANY BACKGROUND OF MERCEDEZ BENZ [MERCEDEZ-BENZ U.S. INTERNATIONAL, inc. (MBUSI)] and HONDA [HONDA MA NUFACTURING OF ALABAMA, LLC. (HMA)]. MERCEDEZ-BENZ (MBUSI) Mercedes-Benz U.S. International, Inc. (http://www.mbusi.com) was established for the main purpose of manufacturing the M-Class. The M-class was such a huge success that they decided in August 2000 to expand the facility not only to manufacture more units of It, but also to include the R and GL-classes to its product list. The expansion not only doubled the plant size but also the labor force. The plant consists of a body shop, paint shop and two assembly shops. MBUSI receives orders from their 135 worldwide markets. MBUSI uses the â€Å"Just-in-Time† (JIT) philosophy which implies that they do not stockpile large amounts of the inventory they use to assemble their cars. HONDA (HMA) HMA (http://www.hondaalabama.com) manufactures the odyssey, ridgeline and pilot models for the world wide market. HMA’s investment in Alabama is over $1.4billion with the construction of a new Honda Engineering facility, on-site con solidation center and steel blanking operation. One of their goals is to be able to produce goods with high quality and sell at a reasonable price. HMA can be referred to as a Zero Landfill Facility due to the fact that they are committed to the principle of â€Å"Reduce, Reuse and Recycle†. They have made efforts in curbing energy use during their production processes, and this has earned them an energy star award from the U.S. Environmental Protection Agency (EPA). A.1) OPERATION/TRANSFORMATION PROCESS OF THE ORGANIZATIONS MERCEDEZ-BENZ (MBUSI) The manufacturing process for both models begins in the Body Shop where the components that comprise the metal body are welded together. From the body shop, they are taken to the ultra-clean Paint Shop where the cars are painted. Finally, they end up in the Assembly where it becomes a new Mercedes-Benz M, R, or GL-Class ready for shipping. From beginning to end, these vehicles are created with style, functionality, and quality in min d (http://www.mbusi.com). HONDA (HMA) Honda Manufacturing of Alabama (HMA) has the largest output for Honda light trucks. It has the capacity to create over 300,000 odyssey minivans, pilot sport utility vehicles, Ridgeline pick-up trucks and V-6 engines annually (http://www.hondaalabama.com).

Google's Hotel Finder Research Paper Example | Topics and Well Written Essays - 500 words

Google's Hotel Finder - Research Paper Example However, the tool has few drawbacks as well with respect to the determination of popularity of an area where one plans to book a hotel in. On the whole, the tool has a great impact on the hotel industry by enlisting the potential winners and losers. The launching of Google hotel finder has impacted the hotel industry tremendously. Although it has created threats for numerous distributers such as travel agencies by entering into a competition with them yet it has opened new opportunities for hotels to make the most of Google hotel finder. It is made possible by allowing the users of Google hotel finder to establish a direct link with the hotel distributers on their websites instead of communicating with Google directly. It involves the role of Google hotel finder as an advertising medium for the hotel distributers that feature on Google hotel finder. Therefore, the potential winners are the hotel distributers that can do their advertising by paying a cost to Google, the most searched optimization engine. Thus it may enable them to get benefits in the form of getting increased customers that search for hotel through Google hotel finder search tool. Hence, Google has not only created a tool to increase traffic on its site in addit ion to the previous tools of Google maps and Google places, but also allowed hotel distributers to gain a lot from this new tool of Google. To sum up the analysis of a new tool by Google that enables users to search for hotels in the exact locations in which they want to travel and stay in by providing useful information about the pricing and rates of hotels. Not only the tool equips users with helpful information about the areas by highlighting the specific parts in the form of a drawing to make users decide on which areas they would like to visit but also allows them to book a room with the hotel of their

Deterrence Term Paper Example | Topics and Well Written Essays - 500 words

Deterrence - Term Paper Example Deterrence injects that fear of punishment into the minds of the people that keeps them away from committing crimes. One of the great aspects of deterrence is that it seeks to target the potential crimes before they actually happen. Deterrence theory underlies the act of crime prevention. This theory is based on the concept that a person will be deterred from committing any sort of crime, if he is aware of the consequences of committing a crime. Deterrence theory promotes the concept that every person understands the difference between a right act and a wrong act. This theory of criminology is founded on the belief that a person does not commit a crime if the consequences of the crime outweigh the crime’s benefits. Deterrence is a concept that relates to the criminal justice system and keeps the citizens safe from different kinds of crimes. Correctional sanctions have played a considerable role in reducing the crime rate in almost every country of the word. Application of correctional sanctions is an attempt to prevent the criminals from committing any sort of crime by injecting the sense of consequences into the minds of the criminals. The fear of punishment makes a person think twice before committing a crime. Correctional sanctions include such measures that have really proved to be very successful in reducing the crime rate in every part of the world. Some of the most useful measures include incarceration, punishments, and long sentences. â€Å"Punishments such as imprisonment are very useful mechanisms for deterring criminal activity† (Lynch, 1999). One of the most important tasks of the government of any country should be to create the fear of punishment in the minds of criminals in order to prevent them from carrying out a criminal activity. One of the benefits, which come from the implementation of correctional sanctions, is removal of the fear of crimes and violence

Computer Incident Response Teams Essay Example | Topics and Well Written Essays - 1000 words

Computer Incident Response Teams - Essay Example Not only these companies would suffer from information damage, but also their clientele and reputation will nosedive in the industry. Computer Incident Response Teams (short-form 'CIRT') are special teams formed for the purpose of minimizing and controlling the impact of a security breach or other computer related emergency in the company (Brussin, Cobb, & Miora, 2003). CIRT is a also known as CERT (Computer Emergency Response Teams) and CSIRT (Computer Security Incident Response Teams) in some companies, however, they all attempt to provide security to the computer systems. It depends on the company policy as well as the riskiness of information leakage or damage. In companies who don't heavily rely on computer systems, a CIRT would not be of much use. However, now with most organizations keeping important information on computer systems, the need for having a CIRT is increasingly getting popular. With the increasing number of viruses, spywares, backdoors in the systems being detected, a CIRT is a necessity for an organization keeping competitive information on the computers. Like in all business strategies before implementing them a plan needs to be created that would guide the formation of a CIRT. This plan includes all the details about the CIRT and all the information that the security team would need to know. Furthermore, this plan should be feasible in all ways and must provide a competitive business advantage. The details of the plan are given below. (RHE, 2004) 4.1 Make a Policy First of all, a policy regarding the CIRT should be created. This would have standards, rules ad regulations and instructions as to what is to be done when the security is breached. This policy document should be given to all members of the company and must be followed exactly as mentioned in the policy. (Lucas & Moeller, 2003) 4.2 Form the Team Forming the Computer Incident Response Team is the most important part in this plan. Usually the team is formed on a voluntary basis. However there are certain characteristics that need to be there in a CIRT. First of all the members of the team must be extremely responsible. Since action is required to contain the emergency, the team members should also be quick to react. Another quality that the team should have is that its members must be loyal to the company and should be heroes in their own sense as their job is to save the company from a disaster. Only trustworthy people should be made a part of this team. (RHE, 2004) After these characteristics, the team should have technical expertise to understand and resolve the situation. The team usually comprises of system and network administrators as well as information security experts. The system administrators oversee the correct response to the threat and supply the required knowledge about system resources. The network administrators are responsible for routing the network traffic though other points while closing all activity in those routes where the security has been breached. Information security officers diagnose and analyze the problem and detect the point of intrusion to try to solve it. (RHE, 2004) The team should be kept in close coordination with each of its members at all times so that in case of an emergency all members would get notified immediately. It is ideal to keep

Higher Education Curriculum Essay Example | Topics and Well Written Essays - 1250 words

Higher Education Curriculum - Essay Example As the report stresses in higher education, an academic curriculum is an academic plan that seeks to enable a learning experience as outlined in its blueprint for college and university students. The curriculum is also under a broad definition, which includes several constituents. The first is the goals for the student receiving the education; they include skills under development, knowledge gained under the curriculum and the attitude with which this knowledge is received. The second constituent in the curriculum is the content offered by the system. This is described as the subject matter which is studied in the learning experience. Sequence is also another important constituent of a curriculum. Sequence is the specific order with which information discourse to the learners. This paper discusses that the higher education curriculum has been under constant critique from its introduction due to several factors. During the 1980’s the critics were most aggressive citing lack of quality in the curriculum, poor accessibility by the learners and lack of relevance in terms of the needs of the learners. The job market and changes in tandem with the emerging challenges. This also influences the curriculum in terms of content. Therefore, there has to be constant change in order for the synchronization of students going through the higher education centers. In developing a curriculum, one has to consider the expectations of the learners from the curriculum, and the expectations of the job market from the learners.... The critiques in the 80’s were mostly managers and company heads who complained that the graduates they received had no knowledge on how to tackle problems. In developing a curriculum, one has to consider the expectations of the learners from the curriculum, and the expectations of the job market from the learners. In this way the curriculum developed is suitable for both the learner and the employer. As mentioned above, a curriculum is only effective if it molds learners to fit perfectly into the job market with less dependence on the bosses. The heads of the job fields are the main forces of change for a curriculum. No matter how much a higher learning institution feels it is providing well-educated graduates the job owners are always the final determinants of that. If they determine that a curriculum does not equip the graduates wholly, they point out where changes should be carried out and then the change is introduced to the curriculum. In changing a curriculum, the first step is identifying the problems in the already existing curriculum. In this stage, research is conducted pointing out exactly where there are limitations in the curriculum. This is done throughout the system including the knowledge provided by the institution, the method of providing it, how the learners perceive it and the sequence with which it is under provision. This step entails thorough scrutiny of the curriculum and identification of all problems. The second step is assessing what learners are available and what kind of graduates the market requires. In this stage, consideration of the learner’s expectation is important. The next step is to outline the goals and objectives of the curriculum, which help in carrying out the fourth step which is

Cross -Culture Essay Example | Topics and Well Written Essays - 500 words

Cross -Culture - Essay Example Managers therefore have to understand the cultural differences in order to operate effectively in the tough business environment. Managers are required to motivate their employees and they can only do that if they know the differences between cultures of employees. Awareness of cultural differences is a must in order to manage employees from different background. For example Japanese and Indian working together will have different needs like in Japan lunch is the main meal of the day while in India dinner is the main meal. Now a manager has to decide upon the lunch timings so that both the needs of Japanese and Indian employees can be satisfied. This is why cross cultural training is important both for employees and for managers. Hofstede’s cultural dimension theory gives six dimensions of values across which people differ with each other. One of those dimensions is the Power Distance Index or PDI. Power distance is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. PDI represents inequality in an organization or in a country. Culture that has low PDI is more democratic and people are considered equal. Culture that has high PDI is autocratic and people accept inequality. Brazil has a 69 on PDI which is very high. The world average on PDI is 55 which mean that Brazil has higher PDI as compared to the average. This means that Brazil is a relatively autocratic society with greater inequalities. Brazil’s PDI is very similar to Latin American countries. In Brazil people accept that organizational hierarchies exist and also accept lower pays relative to supervisors. A tradition of giving in to the authority exists in the country. Another dimension of Hofstede’s theory is individuality versus collectivism. It is the degree to which individuals are integrated into groups. In

One-child policy Essay Example | Topics and Well Written Essays - 1500 words - 1

One-child policy - Essay Example ture of global peace and development tend to focus on China’s economy, its defense and armaments buildup and China’s access to resources and energy. Yet, the one economic factor that is often overlooked in this analysis is China’s one child policy and it’s fast changing demography. China happens to be the world’s most populated nation. Right after the coming into existence of the People’s Republic of China, the nation experienced a propitious population growth owing to a better medical care and sanitation and this population growth was envisioned to be an advantage (Button 468). Mao Zedong believed that even if the population of China augmented manifold, the nation had the resources to cope up with it. However, a fast increasing population putting stress on the nation’s food security encouraged the government to opt for a one child policy in 1979, a measure that had both favorable and bad consequences for the nation’s economic g rowth, demographic configuration and socio-economic characteristics (Button 467). There is no denying the fact that in the case of underdeveloped nations, supporting and sustaining population in the light of the available scarce resources is a great challenge. In that context China had always been pursuing a very planned and systematic approach towards its population growth in a contemporary scenario. In the light of this fact, the nation introduced the one child policy in 1979, in an aggressive bid to improve its economic situation and to augment the people’s standard of living (Connor 1). The one child policy required the couples belonging to ethnic Han majority to limit themselves to a single child (Connor 1). Although, to begin with, the one child policy was intended to be a short term measure, the nation’s success in reducing the population count by 400 million motivated it to continue with a revised version of the one child policy till today (Connor 1). As per China’s one child policy the urban couples are

International Marketing (Qasim) Essay Example | Topics and Well Written Essays - 2500 words

International Marketing (Qasim) - Essay Example The key products offered in Subway include: custom sub sandwiches, salads, soft drinks and some other food items (Ibis Report 2013). Company’s rational behind internationalization The company’s strategy is based on the aggressive international expansion worldwide. Internationalization decision is mainly based on the business growth opportunities offered by rapidly growing markets. Subway will continue to expand internationally, especially in emerging economies as it is likely to be the largest source of profit and revenue growth (Ibis Report 2013). Today, these markets include markets not yet saturated with fast food brands (Russia, the United Arab Emirates, Brazil, China, India (Fertman n.d.). Mode of entry-selection of market entry strategy to enter into various countries Subway restaurants chain has chosen franchising option as a mode of entry strategy for starting business in various countries. Initially, the Subway chain did not even select new countries to expand into, as entrepreneurs from these countries contacted Subway (Welch et al, 2008). The original foreign entry in 1986 had a following typical format: individual entrepreneurs contacted the restaurants chain from a country where there were no Subway locations, and then the development team worked together with the entrepreneur, providing assistance in opening a franchise restaurant under Subway brand (Welch et al, 2008, 61). Thus, the company transferred the method of operation to the franchisee and had a much greater degree of control over its marketing efforts in a foreign market (Lecture notes). However, nowadays, Subway is also searching actively for new markets. Business Development department of Subway determines which markets would be appropriate to entry by evaluating a number of factors, including: the cost of doing business, the GDP, fast-food development and some others, etc. By operating as a franchising chain, Subway as a franchisor experiences less risks and is capable t o penetrate various markets very rapidly. Besides the obvious benefits and advantages of the franchise concept, Subway is imposed to certain risks as well. The value of the brand, either increasing or decreasing will have effect on the franchisee competitiveness. Franchisee of Subway has a number of responsibilities, including: initial franchising fee, finding locations, hiring employees and operating restaurants, leasehold improvements and equipment and paying a fee into the advertising fund and 8% royalty to the company (Subway Global Brochure 2013, 4). Subway also has certain responsibilities, such as: providing access to operational systems, guidance on store design and equipment ordering, operations manual, training program, R&D, ongoing support and periodic audits, and informative publications (Subway Global Brochure 2013, 4). The marketing mix strategies adopted by the company There are recognized several key elements of international marketing mix, including: product support , price support, promotion/selling support, inventory support, distribution support, service support, and financial support (Lecture notes). Below are briefly evaluated all these elements with a reference to Subway restaurants chain. Product support. Even though the product line and customer service are standardized among all Subway restaurants as it is common for any franchising chain, there are cultural and local eating habits in particular country that require adaptation

Paradise Lost Essay Example for Free

Paradise Lost Essay Paradise Lost is divided into twelve books. In Book I Milton explains the theme of his work, man’s disobedience to God, his expulsion from Heaven and the story of the rebel angels sent to Hell. In Book II the angels meet in council to decide what they will do. In Book III God makes a speech on man’s freedom to choose between good and evil. In Book IV Satan observes the happiness of Adam and Eve in the Garden of Eden. In Book V God sends Raphael to warn Adam. In Book VI the war in Heaven in described. Book VII and VIII tell the story of the creation of the Earth and the universe. In Book IX Satan persuades Adam and Eve to taste the forbidden fruit. In Book X God’s Son pronounces the sentence of expulsion. In the last two books Adam and Eve abandon paradise. Paradise Lost is an epic poem. Milton chose the epic genre because of the greatness of the subject. He follows the typical epic conventions in his masterpiece, such as the opening with the statement of the theme. This epic takes place in the universe, in Heaven, Hell and Eden. The main characters, God, Satan, Christ, Man and the fallen angels remind the warriors and heroes of the classical epic, even though they are more philosophical heroes. Milton knew the Copernican cosmology but he based the universe of Paradise Lost on the traditional Ptolemaic system because he thought that this conception was fixed in the minds of the people and it had limits within which it was easier for him to work. In Milton’s Heaven God created the Earth, fixed in the centre of the Universe, and he put his life and thoughts in the natural world so that the external reality reflects the divine soul. In Paradise Lost evil and good are opposed. However, Satan has many characteristics of the epic hero, courage, leadership, initiative. Milton has sympathy for his Satan because he himself was a rebel against the political and religious authority. Both Milton and Dante said that their works had divine inspiration but they had contrasting ideas about Satan’s physical appearance and meaning. Dante’s Satan becomes a means of punishment and it resembles a mythic monster, with wings and three heads. Milton’s Satan is a symbol of God’s justice and it takes several forms, first it is a fallen angel, then it has an inhuman form and finally he becomes a snake. The style of the poem is elevated, the poet used a new kind of magnificent blank-verse.

Science Fiction Can Be an Influence to the Evolution of Technology Essay Example for Free

Science Fiction Can Be an Influence to the Evolution of Technology Essay Introduction Science fiction and technology have been working hand-in-hand for years. Authors like Gene Rodenberry have influenced many inventors to create technological devices such as touch screen computers, iPads and tablets. Even Star Trek’s transporter technology and transparent aluminum are becoming a reality. Scientists, physicists, and engineers are using science fiction to gain insight to new ideas. The science fiction entertainment genre has often influenced technological development through literature, radio, television, and film. Do Inventors create their products under the Influence of science fiction? Many people see technology pop into reality from the mind of the writers of science fiction, as did inventor Martin Cooper who created the mobile phone and gave credit to where he got his idea. People credit Gene Rodenberry for tablets and Transporter Technology, as well as transparent aluminum, and Apple QuickTime, while others have shown that learning computers came from the idea of Cylons from Battlestar Galactica and Terminator, even the world of Tron. Arthur C. Clarke’s science fiction foresaw the use of Geostationary Satellite (GPS), as well as the Internet, which the world uses today. Jules Verne’s science fiction stories brought people submarines and helicopters. H.G. Wells, who people call the father of science fiction, brought the world atomic energy and rockets through his stories. George Orwell’s book 1984, written in 1948, described a monitoring device, the government spying on the people, and coined the term â€Å"Big Brother.† The government is watching you. A former astronaut, Christopher J. Ferguson, gave credit to science fiction writers for the influence of the creation of the space station. According to How Does Science Fiction Influence Scientific Research? (2011), I look at the space station and vehicles docking in space. Who would have imagined 40 years ago, other than on the pages of Buck Rogers and in the mind of Wernher von Braun, that we would be doing these things? But here we are, doing them on a regular basis. (Christopher J. Ferguson Former United States Astronaut, NASA). These are just a few instances where science fiction technology has influenced the creation of the real thing. There has been a majority of technological advancements by Star Trek, as the tablets, communicators, Bluetooth devices, and even technology in the process of development such as the transporter technology created in the minds of the writers of science fiction. †Fiction† could change an individual’s comprehension with the â€Å"relationships within developments.† (Gordon, 2009). As science fiction authors have envisioned items, some never saw them fulfilled while others have. Strauss (2012), â€Å"Martin Cooper, the director of research and development at Motorola, credited the ‘Star Trek’ communicator as his inspiration for the design of the first mobile phone in the early 1970s.† (Cellphone). Cooper gave Gene Rodenberry the credit for the communicators from the original Star Trek. The writers of science fiction show an influence on people who later develop the work, in light of the fictional idea. Even I-Robot is now in the process of becoming a reality. Creators of the science fiction genre have ideas of what they want to see, although the technology is not available now. Geordi La Forge’s Visor in the Next Generation of Star Trek’s TV show is now becoming a reality. According to GeordiS Visor Becoming A Reality? (2012), Once again, a bit of Star Trek sci-fi is on the verge of becoming reality. This time it’s Geordi La Forge’s VISOR, which enabled the blind character to ‘see’ on Star Trek: The Next Generation, that’s close to becoming a practical device.† (para. 1). The author conceives the creative idea that he or she writes in science fiction genre, which then becomes the basis for scientific realities or possibilities. As the writer’s ideas enter the mind of the inventors, through the invention the ideas become a reality. Many inventors have given credit to Gene Rodenberry for his technological devices in Star Trek. Star Wars is even becoming a reality as well as the other science fiction movies. Many use science fiction genre in the classroom. Science fiction genre came into the classrooms from general science, physics, and even engineering to inspire students. (Segall, 2002) â€Å"Although scie nce fiction has appeared in science and physics education for many years, the genre has not been widely used to augment engineering education. Considering the potential for science fiction to help illustrate many common engineering concepts, while at the same time challenging the students to think about the many possibilities of design and technology, this exclusion represents a loss of a valuable resource.† (p. 419) Albert Segall’s paper showed that science fiction could advance technology and, by not using it, could hinder the inventor. Segall’s point was that science fiction is in the science and physics classroom. It is a needed resource for people in the engineering field. As this shows, science fiction is a big part in creating technology and its devices. A physicist, Dr. Michio Kaku, even gives science fiction credit for the influence of technology. According to Transparent Aluminium Is New State Of Matter' (2009), â€Å"(PhysOrg.com) Oxford scientists have created a transparent form of aluminium by bombarding the metal with the world’s most powerful soft X-ray laser. Transparent aluminium previously only existed in science fiction, featuring in the movie Star Trek IV, but the real material is an exotic new state of matter with implications for planetary science and nuclear fusion.† (para. 1). as well as the Associated Press’s article on the data scientists gave on the transporter technology, OCONNOR (2002), CANBERRA, Australia (AP) Australian scientists said Monday they had successfully teleported a laser beam encoded with data, breaking it up and reconstructing an exact replica a yard away.† (para. 1). As inventors continue to create new inventions, promising scientists, physicists and engineers can se e the importance of the use of science fiction in a classroom. As Segall showed that science fiction could inspire engineers and inventors of the past, he demonstrated how science fiction could be helpful to students in the future. Some devices which science fiction created are still not a reality Many could say that science fiction is fantasy because time travel, shrinking or enlarging devices, and computer digitalization, as from the movie Tron, are yet to appear. Some people do not look at science fiction as a resource because of its negative aspects. H.G. Wells, the author of the book, Time Machine which foreshadowed the movie called Back to the Future, The 50-Foot Woman, and Honey, I shrunk the Kids are but a few science fiction ideas that have not happened as far as we know. There are many examples that people use to say that science fiction does not influence technology, but there is more evidence to support that it does. Although Lightsabers of Star Wars are not in the same style as the movie, they have become reality in a similar prototype. What are the positive and negative sides of science fiction becoming a reality? As science fiction becomes reality, its use can be positive or negative: but does it help or hurt humankind? Many technological devices developed from science fiction were taken from the private sector, utilized by the Military, and were altered to be used in another manner than previously intended. For instance, George Orwell’s book, called 1984, was banned by many school administrators from being read in schools because of its political outlook of surveillance devices. Conclusion Through literature, radio, television, and film, the entertainment of science fiction has influenced technology and its devices. Arthur C. Clarke has seen the things he has written about come true. Science Fiction writers like Gene Rodenberry, H.G. Wells, Jules Verne, George Lucas, and other writers have given physicists, scientists, and engineers ideas of inspiration to create technological devices. Noticeably a few areas of science fiction have not become a reality yet, such as a human being digitized into an electronic form; a human being shrunk or enlarged in size; and time travel. Yet, many things in science fiction have come to reality: for example, mobile phones, tablets, and touch screen computers. Even the term â€Å"Big Brother is watching you,† given through the thoughts of George Orwell from his book 1984, written in 1948, has seen a counterpart in modern surveillance equipment. The relationship of science fiction and technology has been working hand-in-hand for generations. Reference Segall, A. E. (2002, October). Science fiction in the engineering classroom to help teach basic concepts and promote the profession. Journal of Engineering Education, 91(4), 419-423. How does science fiction influence scientific research?. (2011). Retrieved from http://curiosity.discovery.com/question/science-fiction-influence-scientific-research Gordon, R. (2009, December). Learning From Fiction: Applications in Emerging Technologies. Bulletin of Science, Technology Society, 29(6), 470 475. Retrieved from http://bst.sagepub.com.ezproxy.apollolibrary.com/content/29/6/470 Strauss, M. (2012). Ten Inventions Inspired by Science Fiction. Retrieved from http://www.smithsonianmag.com/science-nature/Ten-Inventions-Inspired-by-ScienceFiction.html?c=ypage=7navigation=next#IMAGES Putt, S. (2011). Using science fiction to teach science facts. Minnesota State University, Mankato). ProQuest Dissertations and Theses, , 41. Retrieved from http://search.proquest.com/docview/894263497?accountid=358 12. (894263497). Transparent aluminum is new state of matter. (2009). Retrieved from http://phys.org/news167925273.html OCONNOR, P. (2002). Scientists Report Teleported Data. Retrieved from http://www.timeenoughforlove.org/saved/YahooNewsScientistsReportTeleportedDat a.htm Geordis VISOR Becoming A Reality?. (2012). Retrieved from http://www.startrek.com/article/geordis-visor-becoming-a-reality

Literature Review on Audits and Auditing

Literature Review on Audits and Auditing 2.1 Introduction This chapter reviewed the detail literature on important keys in this research such as the audit, audit firm tenure, audit firm size, fraudulent financial reporting and relevant past research findings on (i) the relationship between audit-firm tenure and fraudulent financial reporting and (ii) the relationship between audit-firm size and fraudulent financial reporting. 2.2 Audit Definition of audit is different among many scholars. Audit function is defined by Nagny et al. (2002) to the function that an independent, objective assurance and also consulting activity that designed to add value and improve an organizations operations. In the other study, Kathleen M. Jackson (2010) has further explained that an auditor can perform the two types of audits namely limited-scope or full-scope. It was proven in past studies that some clients opt to choose in receiving a limited scope audit in order to reduce audit costs. In fact, the impact of limited scope exemptions is decreased in audit procedures and as a result it can lead to lower in audit fees. In addition, a long list of audit procedure for investments is needed in the full-scope audit. 2.2.1 Quality of Audit firm The audit services as proposed by Watts (1977) is required as the monitoring methods due to the conflicts that may arise between managers and owners, and also for them who come from different classes of security holders. In addition, in past studies conducted, it was showed that audited statements provision is the least cost contractual response to intra-owner and owner- managers conflict of interest, as an example agency costs. The agency costs is different from different firms and also for over time to some clients. Besides, a heterogeneous demand required by clients for the audit services is resulted from different agency cost for some firms such as when the levels of auditing that requested is not as usual. Moreover, Watts (1977) also argued that the audit services quality is mentioned as the market-assessed joint probability where the auditor is able to find out a breach in the clients accounting system and report the breach. On the other side, the specified audits may enhance t he financial informations credibility as the result of the independent verification of management-provided financing reports, thus may minimize the investors information risk as proposed in the study conducted by Watts and Zimmerman (1986); Mansi et al.(2004), Dye (1993) and Johnson et al. (2002). On the other side, many past studies has proven that bad financial reportings quality resulted from short audit-firm tenure as indicated in the study by Johnson et al., (2002); Myers et al., (2003) and Ghosh and Moon, (2005). The above mentioned past studies conducted revealed that low level of knowledge in the early years of an audit and also on the mandatory auditor rotation between audit firms has lead to low quality of earnings owned by a short audit-firm tenure. Based on the result from the past studies, it was known about the mandatory auditors rotations potential weaknesses of audit firms. But, it also revealed that if the rotation requirement is targeted at auditors within an audit firm, the loss of learning will not happen. Besides that, based on the past studies conducted by Mautz and Sharaf (1961); Shockley (1981) and Lyer and Rama (2004), there are a lot of arguments on the issue of client and auditors relationships duration might affect the audit quality. One of the studied has proven that audit quality is affected as auditor tenor increases, while on the other study, auditor tenure increase in line with audit quality. 2.2.2 Issues in mandatory audit firm In order to improve the quality in financial reporting, it shown that mandatory audit firm rotation is a solution. Carey (2006) has been argued that in order to improve audit quality, there is a need of policy in the mandatory rotation of audit for particular clients besides able to increase of quality for financial purpose in financial statements. Among countries that practised the policy of mandatory rotation includes: Austria, Australia, Brazil, Greece, India, Italy, Israel, Singapore, South Korea, Taiwan and the USA as mentioned in the past researched conducted by Cameran et al., (2005); Catanach and Walker (1999); Kim et al., (2004); Chi and Huang, (2005); Chi et al., (2005) and Carey and Simnett (2006). Audit partner rotation such as audit firm rotation can lead to decrease in audit quality as based on the past study, audit partners knowledge of a clients business increases with his/her tenure on the audit. However, it was revealed that there are a few differences between audit partner and firm rotation which have impact on the tenure on audit quality. Chi et al (2005) has mentioned that audit quality is improved by the audit partner rotation during the first year of the relationship while on the other parts, audit firm rotation lead to decreases audit quality. Meanwhile, the audit firm rotation is occurs around the world, and even in Malaysia where the issue of audit firms or partners was not specified in detail of Malaysiaan official documents, for example in Companies Act 1965, the Security Commission regulations, approved auditing standards, and so on. It was found that rejection of such rotation idea by the business community is because of lack in official pronouncements on this issue. Even in findings of one study conducted by Jaffar and Alias (2002) showed that only 35 per cent of the audit firms partners and only 32.4 per cent of the chief finance officers surveyed favored audit firm rotation every three years of engagement. Meanwhile, the Edge (2002) has revelaed that in light of the Enron case, the Chairman of the Malaysian Accounting Standard Board announced the intention of the board to make it mandatory to rotate the audit firm once every five years. 2.3 Audit firm tenure In the definition of audit firm tenure, Johnson et al. (2002) has clarified that the audit firm tenure is the number of consecutive years that the audit firm has audited the client (computed by counting backward from the year the fraud began). The definition of short auditor tenure is explained by Carcello et al. (2004) by the meaning of three years or less and long auditor tenure as nine years or more. Based on the previous studies conducted by other academician, the other researches on this term revealed that imposing mandatory limits on auditor tenure is expected to improve audit quality by reducing client firms influence over auditors as proposed by Turner (2002); Brody and Moscove (1998); SEC 1994; AICPA 1978; U.S. Senate (1977) and Mautz and Sharaf (1961). 2.3.1 Short audit- firm tenure From the previous study conducted by Aminada and Paz-Ares (1997), the scholars has suggested that in order to replace client-specific assets, it will involves a technological limit, if not most, of them cannot be replaced immediately. Due to this, the financial-reporting quality is projected to increase as client-specific knowledge also increases in the early years of an audit engagement. Meanwhile, a client-specific asset (such as knowledge) that in line with transactions costs may allow the incumbent auditor to earn quasi rents from maintaining existing client relationships as specified by DeAngelo (1981). It was further suggested that if the existence of quasi rents skews the auditors incentives toward maintaining the client relationship, financial-reporting quality could be reduced in early engagement years. 2.3.2 Long audit- firm tenure As proposed by Shockley (1981), it was mentioned that the impact of the long relationship audit firm is by having a learned confidence in the client besides the scholars also suggests that the above mentioned learned confidence may result in the audit firm using less strenuous and less innovative audit procedures. Another author, Knapp (1991) in his past study on audit firm tenure has further defined that different audit tenure in an experimental setting besides able to gather that experienced audit committee members perceived that auditors with 5-year tenure were more likely to detect errors than auditors in the first year of an engagement or auditors with audit tenure of 20 years. On a part of it, Geiger and Raghunandan (2002) found that short-tenure auditors to issue going-concern opinions for clients that subsequently declared bankruptcy as compared with long-tenure auditors that is still on the preference in this study. 2.4 Audit firm size In term of the audit firm size, it was revealed that smaller audit firms have justified proposed wealth transfers from clients and from larger audit firms, where in general the audit quality is independent of auditor size as supported by Deangelo (1981) in his study. Moreover, in some of the audit quality term, where it was found in the study done by previous researchers, the term of quasi-rents, it might serve as collateral against such opportunistic behavior in the subject to loss from discovery of a lower-than promised audit quality. This finding can be proven on the theory of ceteris paribus, where the less incentive the auditor has to behave opportunistically and the higher the perceived quality of the audit when the larger the auditor as measured by the number of current clients and the smaller the client as a fraction of the auditors total quasi-rents is exist. The famous author on the theory and study done, namely DeAngelo (1981) also argues no single client is important to larger accounting firms as accounting firm size is a proxy for auditor quality, and beside, larger accounting firms are less likely than smaller accounting firms to compromise their independence. In fact, theory supported by the research taken by Dopuch and Simunic (1980) who further proposed that larger accounting firms provide higher quality services because they have greater reputations to protect. It finally defined that quality is not independent of auditor firm size when incumbent auditors earn client specific quasi-rents. Moreover, audit fees do not meant to be adjusted in full term to the incumbent auditors, with the view to the extent that the bilateral monopoly between client and incumbent auditor implies a sharing of these costs mentioned, whereby in the above mentioned case, a successful prevention of discrimination which refer to the competition from large audit firms that definitely represents a windfall gain to smaller auditors at client expense. Therefore, it can serves as an excuse to justification of the wealth transfer results from a wealth transfer from clients to smaller audit firms which under this scenario of voluntary contracts might become unfair and discriminate smaller firms. 2.4.1 Big-Four Non Big-four There are many previous studies that caught on the interest of the Big-Four and Non Big Four issues, where to further understanding of the larger audit firms (Big 4) which perceived as more capable of maintaining an adequate degree of independence than their smaller counterparts because they usually provide a range of services to a large number of clients, hence reducing their dependence on certain clients as mentioned by Dopuch (1984) and Wilson and supported also by study conducted by Grimlund (1990). The past literature that has review by Lawrence et al (2011) suggested that Big 4 firms can provide a superior audit quality as their sheer size would definitely able to support more complete training programs, standardized audit methodologies, and more options for appropriate second partner reviews. In addition, Deangelo (1981) has explained that it cant be deny that larger audit firms are generally perceived as the provider of high audit quality and might enjoy a high reputation in the business environment and as such, would strive to maintain their independence to keep up their image where it also supported by Dopuch (1984) and Wilson and Grimlund (1990). To enhance further the theory (Chow and Rice, 1982) has proven that larger audit firms are also perceived to be more independent than their smaller counterparts in managing managements pressure where in the event of disputes as they normally have more clients and can afford to give up some of their more difficult clients. In the different environment as in Malaysia, Teoh and Lim (1996) has found out that the high dependence on a few clients has been found to affect perception of independence. However, to come to the true situation, this is not consider as something new as the market for audit services for public companies in Malaysia is dominated by the international Big 4 which is previously known as the Big 6 audit firms. In fact, Che-Ahmad and Derashid (1996) reported findings from their study that the Bi g 6 (and their affiliates) audited 75.9 per cent of the Bursa Malaysia which is the Main Board as listed companies in 1991. The past literature conducted by scholars based on their past researches, the length of tenure by Big 4 audit firms is longer as their clients would be less likely to switch them compared to their smaller firms who compete in the same industry. Moreover, it was also found that the choice of audit firm can be related to the size of the auditee and the type of services needed besides the possible effect of the type of audit firms on the length of tenure. In fact, it has been also argued by Watts and Zimmerman (1986) that larger auditees are demanding highly independent audit firm to reduce agency costs due to the complexity of their operations and the increase in the separation between management and ownership and also auditors self-interest threat as found from the study by Hudaib and Cooke (2005). In the different area of past research, Palmrose (1984) has further supported that the number of agency conflicts also increases and this might increase the demand for quality-differentiate d auditors such as the Big 4 audit firms as the size of the companies increases. In fact, based on the previous findings, Becker et al. (1998) further supported on the Big 4 issues whereby on the situation of 4 clients report lower absolute discretionary accruals than non-Big 4 clients. Another similar issue as revealed based on the past findings conducted by Francis et al. (1999) who has suggested that Big 4 auditors constrain opportunistic and aggressive reporting because their clients have higher total accruals but lower discretionary accruals while on the other hand, Krishnan (2003) found that there is a greater association between future earnings and discretionary accruals for Big 4 than for non-Big 4 clients. Due to the following literature, the previous researches conducted have been done by using discretionary accruals as the mentioned scholars first measure of audit quality. The reason of applying the measure is known as it reflects the auditors enforcement of accounting standards. Another consent that revealed in the past finding of research based on th e study by Guay et al. (1996) is on the limitations on the effectiveness of an audit in constraining earnings management as it only partially effective, as discretionary accruals not only reflect managements opportunism, but also managements signalling attempts and random noise. Moreover, it was seen from some of the previous study proposed by academicians that the Big 4 auditors provide more assurance to the market than non-Big 4 auditors by the fact found that Big 4 clients have more credible earnings than those of the non-Big 4 clients then, ceteris paribus, the Big 4 clients should receive a break in their cost-of-equity capital. Khurana and Raman (2004) has revealed in their studies that in the U.S , there is a lower ex ante cost of capital of Big 4 clients as compared with non-Big 4 client, but unable to find such a difference in Australia, Canada, or Great Britain. Another scholar, Behn et al. (2008) has included analyst forecast accuracy in his study as an audit-quality prox y, where they argue that if one type of auditor increases the reporting reliability of earnings in comparison to the other type, then, ceteris paribus, analysts of the superior types clients should be able to make more accurate forecasts of future earnings than those analysts of the non-superior types clients. On view of that, Behn et al. (2008) has concluded that it is definitely the analysts of Big 4 clients have higher forecast accuracy than analysts of non-Big 4 clients. In the study, the analyst forecast accuracy is used by Chi et al. (2005) as their third audit-quality measure to proxy for an enhanced level of decision making by sophisticated financial statement users where it was revealed that differences in quality between Big 4 and non-Big 4 audit firms could be a reflection of client characteristics. In fact, fromthe result showed based on the findings of each study that used the matching models or controlling for an extensive list of client and auditor variables, can be f ound that the treatment effects of Big 4 auditors are insignificantly different from those of non-Big 4 auditors with respect to discretionary accruals, the ex ante cost-of-equity capital, and analyst forecast accuracy. 2.5 Fraudulent Financial Reporting There were many standards of audits in the world, as in the specific area, namely Malaysia has stated that the Malaysian Approved Standards on Auditing, AI 240 on Fraud and Error (MIA, 1997) is requires the auditor to assess the risk of fraud and error during the audit of financial statements. Under the standard also, the auditor should design audit procedures to obtain reasonable assurance that misstatements arising from fraud and error that are material to the financial statements taken as a whole are detected that based on the risk assessment. It means that the responsibility has to be put on the external auditor shoulder whereby if he/she is unable to detect material misstatements, particularly intentional misstatements, they may be exposed to litigation. Due to the matter, Kaminski (2002) has summarized on the fraudulent financial reporting as a critical problem for external auditors because of the damage to professional reputation that results from public, especially on clients sides dissatisfaction about undetected fraud. A few literatures and findings conducted by many scholar such as the studies by Mitchell, (1997); Grant, (1999) and Spathis, (2002) on the Fraudulent financial reporting proven the fact that the scenario has occurred in many countries as in the United Kingdom (UK) and United States (US) which have reported the seriousness of fraud activities as further supported by other scholar, Tyler, (1997); Wells, (1997); Mitchell, (1997); Vanasco, (1998); and Grant, (1999). In view to this, Johnson et al (2002) has revealed in his study that a lot of response to one or more audit failures in line with critical of the public accounting profession has determined to be in long relationships between auditors and client management result in a decline in audit quality and are not in the publics interest. To overcome the situation, a possible solution that proposed is the mandatory auditor rotation whereby the findings will be on the profession which will increase audit costs and will not improve audit quality (and in fact may reduce audit quality). On the other side, in some country where the audit-firm rotation is not mandatory, usually in the current regulatory regime, long audit-firm tenures are associated not with a decline in financial reporting quality. By referring to previous researches, it can be concluded that the quality of audit services is means to be the market-assessed joint probability which a given auditor will eventually discover a breach in the clients accounting system, and may report the breach which given that probability that a given auditor will discover a breach is depends on the audit procedures, auditors technological capabilities, the extent of sampling and so on. In fact, the same literature based on the past study has determined that the conditional probability of reporting a discovered breach is a measure of an auditors independence from a given client. To enhance the understanding of this, the definition of auditor independence is used in DeAngelo (1981) and Watts and Zimmerman (1981), who has been argue on the ex ante value of an audit depends on the auditors incentives to disclose selectively ex post. To add some more, a statement proposed by Watkins et al. (2004) in his study has explained that auditor independence and competence are critical elements affecting the credibility and reliability of an auditors report and, therefore, financial reporting credibility. 2.6 Past researches 2.6.1 Audit firm tenure and fraudulent financial reporting There are a lot of findings and conclusion reviewed by previous scholars from different view, whereby according to study conducted by Carcello et al. (2004), who has stated that there was only limited research on the relation between audit firm tenure and audit quality. On the other study conducted by casterella et al. (2005), conclusion was made that audit quality is lower given longer auditor tenure besides also suggested that audit failures are less (more) likely when auditor tenure is short or (long). Meanwhile, the finding has been denied by Chi and Huang (2005) who declared that long audit partner tenure is associated with reduced earnings quality. It is further mentioned that the two aspects of auditor tenure namely the tenure of the audit firm and the tenure of individuals engaged in the audit, particularly the engagement partner which imply that even though both aspects have been tested in the literature, the emphasis has been on audit firm tenure due to difficulties in iden tifying the engagement partner in most countries. It finally has come to complicated conclusion which shown that the empirical evidence of the effects of audit firm tenure on audit quality is combined and mixed. Apart of it, Casterella et al. (2002) and Choi and Doogar (2005) mentioned that Studies report which audit quality decreases with audit firm tenure, which may includes the auditors failure to detect fraudulent financial reporting or argument by Davis et al.(2002) is on the issuing of going concern opinions before bankruptcy and a positive relation between audit firm tenure and discretionary accruals. Different point of view and proofs from different studies, revealed that audit quality increases with audit firm tenure while another famous scholar in this study, Johnson et al. (2002) proven that the absolute value of unexpected accruals is higher in the early years of audit firm tenure in his study conducted. Recent finding on the past researches conducted and published in US as the effect of audit firm tenure (AUDTEN) on audit quality study conducted by many scholars namely Ghosh and Moon (2005); Carcello and Nagy, (2004); Myers et al., (2003); Johnson et al.,(2002); Geiger and Raghunandan, (2002) where the results proven that in the situation of audit tenure increases, audit quality also increases. Fargher et al, (2008) has shown result in his study that audit failures are most likely to occur in the first few years of tenure of an audit firm while several prior US studies have attempted to debate on the auditor tenure. In some other findings gathered include in the study conducted by Deis and Giroux (1992) who supported that audit quality decreases as auditor tenure increases, whereby in contrast, St Pierre and Andersen (1984) found firms that detected errors and experience higher legal risk than auditors with a tenure greater than three years is based on the auditors of new clients (t hree years or less on the engagement) commit. The former statement has further supported by Knapp (1991) which based on audit committee members responses to the survey, able to concludes that as auditors gain more experience with individual clients, the likelihood of discovering material errors increases while Geiger and Raghunandan (2002) has come to conclusion that short-tenured auditors is not efficient in the collection and evaluation of evidence as compared to long-tenured auditors. Obviously, based on finding gathered from different type of studies conducted, it can be concluded that their results are consistent with long-tenured auditors having a more in-depth knowledge of their clients financial status and operating systems than short-tenured auditors. However, Carcello and Nagy (2004) have concluded from their study that fraudulent financial reporting is more likely to occur in the first three years of an audit as they have not provide proofs and evidence of greater fraudul ent financial reporting by clients of long-tenured auditors. On the other study conducted by Myers et al. (2003), it was revealed that tenure and earnings can be considered as quality where the auditor-client relationship lasted for at least five years whereby they find that the magnitude of both discretionary and current ACC declines with longer auditor tenure. To further support it, Myers et al. (2003) concluded that high audit quality is determined based on the longer auditor tenure constrains managerial discretion with accounting accruals while on the other study conducted, Johnson et al. (2002) has revealed that accruals are more bigger and less persistent for firms with short auditor tenure relative to those with medium or long tenure. Finally in contrast, Davis et al. (2002) has concluded that audit quality might declines with extended tenure as the reason on tenure increases, client firms may have greater earnings forecast errors decline and alsoreporting flexibility. Another findings from studies conducted by Beck, Frecka and Soloman, (1988); Carcello and Nagy, (2004); Johnson, Khurana and Reynolds, (2002); Meyers, Meyers and Omer, (2003); Ghosh and Moon, (2005) has definitely supported the facts of auditors with long tenure have comparative advantage in this respect as they develop client-specific knowledge and deeper understanding of clients business process and risk whereby with the proofs as that fraudulent financial reporting is most likely to occur in the first three years (termed as short tenure) of auditor-client relationship. However, these studies conducted by the above mentioned scholars has failed to state any evidence that longer audit firm tenure (i.e., nine years or more) is associated with reduced financial reporting quality. Apart from that, another authors, Meyers and Omer (2003) in the study has examined on the association between audit firm tenure and earnings quality where auditor-client relationship lasted for at least five years, which lead them to come up with conclusion that longer auditor tenure constrains managerial discretions with accounting accruals, which suggests high audit quality (i.e. audit firm tenure is negatively related to both the absolute discretionary and current accruals and signed positive discretionary and current accruals, and positively related to both the signed negative discretionary and current accruals). Long-tenured auditors are more efficient as it based on the opinion view of Geiger and Raghunandan (2002) from the study conducted which based in the collecting and evaluating evidence than short-tenured auditors because long-tenured auditors have more in-depth knowledge about their clients financial status and operating systems than short-tenured auditors. The other study conducted by Nashwa George (2009) on The Relationship Between Audit Firm Tenure And Probability Of Financial Statement Fraud which has proven the long auditor tenure for a particular client which close auditor-client relationship has the potential to impair auditor objectivity in assurance functions leading to reduced financial reporting quality with the studys objective of finding out whether audit firm and client relationship is in any way related to a potential fraud risk situation in financial reporting is also determined. Another scholar, Beneish (1999) and Lundelius (2003) also has proposed on the using of five fraud indicators as the direct measure of the probability of financial statement fraud and examine whether these fraud indicators are related to audit firm tenure as used by George (2009) in this study. It shown that by using the cross-sectional multivariate regression analysis, the results in the analysis show that most fraud indicators are significantly negatively associated with audit firm tenure (expressed in terms of number of years of audit firm and client relationship). The results also supported by some previous researches which conducted by Carcello and Nagy (2004), Myers, Myers and Omer (2003) and also Johnson, Khurana and Reynolds (2002) that proven a long audit firm tenure is not related with reduced financial reporting quality, however mentioned that financial reporting problems are found to be mostly confined to the initial years of auditor engagement. Based on the review, these previous studies is very important and contribute to the audit literature by employing a direct measure of financial statement fraud and demonstrating a systematic negative association between audit firm tenure and probability of financial statement fraud. According to Casterella et al. (2002),there are two aspects of auditor tenure identified namely tenure of the audit firm and the other one is tenure of individuals engaged in the audit, which is particularly the engagement partner. The scholar has argued that even though the two mentioned aspects of tenure had been studied in past research, the audit firm tenure still need to be analyze further due to difficulties in identifying the engagement partner in most countries, since different countries are facing different rules and requirements. Besides, impacts on audit quality by the audit firm tenure are proven at the same time. Based on the past studies conducted by a few scholars namely Casterella et al. (2002) and Choi and Doogar (2005) has proven that audit quality decreases with audit firm tenure, that might includes inability of the auditor to detect fraudulent financial reporting or issuing going concern opinions before bankruptcy and a positive relation between audit firm tenure and discretionary accruals as further supported by Davis et al. (2002). In fact, the other study developed by Johnson et al. (2002) has also proved that audit quality increases with audit firm tenure. It was supported from the findings of the study which stated that the absolute value of unexpected accruals is higher in the early years of audit firm tenure. On the other side, Myers et al. (2003) has reported a negative relation between audit firms in his past research conducted. 2.6.2 Audit firm size and fraudulent financial reporting Research conducted by Sinason et al. (2001) on the length of audit tenure has come up to conclusion to be positively affected by the type of audit firm whereby it means that smaller audit firms experience shorter tenure compared to their larger counterparts who often enjoy lengthy tenure. Another finding based on the previous studies is difficulties faced by small firm in the long run in order to keep their existing clients and at the same time maintain a high degree of independence and objectivity due to increased competition and size mismatch as differences in the length of tenure between the two types of audit firms which could impair independence. It was proposed and learned from previous cases that the size of audit firm should match the size of auditee whereby when a size mismatch happened between large auditees audited by small audit firms could cause termination of the audit engagement as proven by Hudaib and Cooke (2005). From the previous literature and analysis based on previous researchers, Win the situation where client-specific quasi-rents vary across clients, auditor size is continues to serve as for the audit quality because larger auditors possess greater total collateral, but a full focus on size alone is not effective as it does not inform consumers about the relationship between the quasi-rents specific to one (potentially large) client and the auditors total quasi-rent stream. Due to this matter, it was