Sony Case 1991-2003

Exploring Corporate Strategy CLASSIC CASE STUDIES Restructuring Sony Vivek Gupta and Konakanchi Prashanth The electronics and media giant Sony was struggling through the late 1990s and early part of the 21st century. With each disappointment, it seemed that Sony’s management launched another restructuring of the company. By 2003, commentators were beginning to ask whether restructuring was part of the solution or part of the problem. How should Sony be managing its strategic renewal? G G GAs conditions change, Sony has to change accordingly, because their conventional strategy won’t transcend to the Internet-enabled model. 1 Mitchell Levy, author of The Value Framework INTRODUCTION For the first quarter ending 30 June 2003, Japan-based Sony Corporation (Sony)2 stunned the corporate world by reporting a decline in net profit of 98 per cent. Sony reported a net profit of ? 9. 3 million compared to ? 1. 1 billion for the same quarter in 2002. Sony’s revenues fell by 6. 9 per cent to ? 1. 6 trillion for the corresponding period.Analysts were of the opinion that Sony’s expenditure on its restructuring initiatives had caused a significant dent in its profitability. In the financial year 2002–03, Sony had spent a massive ? 100bn on restructuring (? ?500m; ? a750m). Moreover, the company had already announced in April 2003 about its plans to spend another ? 1 trillion on a major restructuring initiative in the next three years. Analysts criticised Sony’s management for spending a huge amount on frequent restructuring of its consumer electronics business, which accounted for nearly two-thirds of Sony’s revenues.In 2003, the sales of the consumer electronics division fell by 6. 5 per cent. Notably, Sony’s business operations were restructured five times in the past nine years. Analysts opined that Sony’s excessive focus on the maturing consumer electronics business (profit margin below 1 per cent in 2002†“03), coupled with increasing competition in the consumer electronics industry was severely affecting its profitability. 1 2 ‘Sony Analyzed via the Value Framework’, Mitchell Levy, posted on www. ecmgt. com, October 2002. Sony was established in 1946.The company invented the video recorder, walkman and mini-disc recorder. It is a leading manufacturer of audio, video, communications and information technology products. Sony has also forayed into diverse fields like music, television, computer entertainment and motion pictures. The company is engaged in five main lines of business – electronics, games, music, pictures and financial services. This case was prepared by Vivek Gupta and Konakanchi Prashanth of the ICFAI Center for Management Research, Hyderabad, India.It is intended as a basis for class discussion and not as an illustration of either good or bad management practice.  © V. Gupta and K. Prashanth, 2004. Not to be reproduced or quoted without permissi on. Exploring Corporate Strategy by Johnson, Scholes & Whittington 1 Restructuring Sony Table 1 Sony’s financials (1991–2003) Year ended March 31 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 * ? 100 = approx. A0. 75. Source: Annual Reports 1991–2003, www. sony. net. Sales & Operating Revenue (? bn)* 3695. 51 3928. 67 3992. 92 3744. 8 3990. 58 4592. 56 5663. 13 6755. 49 6804. 18 6686. 66 7314. 82 7578. 26 7473. 63 Operating Income/loss (? bn) 302. 18 179. 55 126. 46 106. 96 ? 166. 64 235. 32 370. 33 520. 21 338. 06 223. 20 225. 35 134. 63 185. 44 Net Income/loss (? bn) 116. 92 120. 12 36. 26 15. 30 ? 293. 36 54. 25 139. 46 222. 07 179. 00 121. 83 16. 75 15. 31 115. 52 However, Sony’s officials felt that the restructuring measures were delivering the desired results. According to them, the company had shown a significant jump in its profitability in the financial year 2002–03.Sony reported a net income of ? 115. 52bn in the fiscal 2002–03 compared to ? 15. 31bn in 2001–02. (See Table 1 for Sony’s key financials in the past 13 years. ) A statement issued by Sony said, ‘The improvement in the results was partly due to the restructuring of its electronics business, especially in the components units. ’3 At the beginning of the new millennium, Sony faced increased competition from domestic and foreign players (Korean companies like Samsung and LG) in its electronics and entertainment businesses.The domestic rivals Matsushita and NEC were able to capture a substantial market share in the internet-ready cell phones market. Analysts felt that the US-based software giants like Microsoft and Sun Microsystems and the networking major Cisco Systems posed a serious threat to Sony’s home entertainment business. BACKGROUND On 7 May 1946, Masaru Ibuka (Ibuka) and Akio Morita (Morita)4 co-founded a company called Tokyo Tsushin Kogyo Kabushiki Kaisha (Tokyo Telecommunications Engineer ing Corporation) with an initial capital of ? 190,000 in the city of Nagoya, Japan.They gave importance to product innovation and decided to offer innovative, high-quality products to their consumers. The founders introduced many new products like the magnetic tape recorder, the ‘pocketable radio’, and more. By the 1960s, the company had established itself in Japan and changed its name to Sony Corporation. During the 1960s, the company focused on globalisation and entered the US and European markets. In the 1970s, Sony also set up manufacturing units in the US and Europe. During this period, Sony developed and introduced the Walkman, which was a huge success.It significantly boosted Sony’s sales during the 1980s. By the mid-1980s, Sony’s consumer products were marketed in Europe through subsidiaries in the UK, Germany and France. 3 4 ‘Financial Results for the Second Quarter, FY 2002’, posted on www. sony. net, 28 October 2002. Akio Morita was a graduate in physics, while Masaru Ibuka had a degree in electronic engineering. When Morita joined the Japanese navy as a Lieutenant, he met Ibuka at the navy’s Wartime Research Committee. Exploring Corporate Strategy by Johnson, Scholes & Whittington 2 Restructuring SonyTable 2 Sony’s businesses (1994) Business Electronics Product Groups/Companies Video equipment Details Comprises 8mm, VHS, and Beta-format VTRs, laserdisc players, broadcast and industrial use video equipment, Hi-Vision-related equipment, and videotapes. Comprises CD players, Mini Disc system, headphone stereos, personal component stereos, hi-fi components, digital audio tape recorders/players, radio-cassette tape recorders, tape recorders, radios, car stereos, car navigation systems, professional-use audio equipment, audio tapes, and blank MDs.Comprises colour TVs, Hi-Vision TVs, computer displays, professional-use monitors, satellite broadcast reception systems, projector systems, and large colour video display systems. Comprises semiconductors, electronic components, cathode ray tubes (CRTs), telephone and telecommunications equipment, computers, computer peripherals (including floppy disk systems and CD-ROM systems), home video game systems, batteries, and FA systems. Includes Columbia Records Group; Epic Records Group; TriStar Music Group; Sony Music International; Sony Classical; Sony Classical Film & Video; Sony Wonder; Sony Music Entertainment (Japan) Inc.Includes the Columbia TriStar Motion Picture Companies; Sony Television Entertainment; Columbia TriStar Home Video; and Sony Pictures Studios and The Culver Studios. Sony Retail Entertainment includes Sony Theatres. Comprises the insurance business of Sony Life Insurance Company Limited and the finance operations of Sony Finance International. Audio equipment Television Others Entertainment Music Group – Sony Music Entertainment Pictures Group – Sony Pictures Entertainment Inc. (SPEI) Insurance and Finan ce Sony Life Insurance and Sony Finance InternationalSource: Sony Annual Report 1995, www. sony. net. In 1989, Norio Ohga (Ohga) took over as the chairman and CEO of Sony from Morita. Under Ohga, Sony began to place greater emphasis on process innovations that improved efficiency and controlled product costs. By 1994, Sony’s businesses were organised into three broad divisions – Electronics, Entertainment and Insurance and Finance (see Table 2). Each business division was in turn split into product groups. The electronics business division was split into four product groups, which produced a wide variety of products.The entertainment division, which consisted of the music group and the pictures group, made music videos and motion pictures. The finance division consisted of Sony’s life insurance and finance business. The company’s growth was propelled by the launch of innovative products and by its foray into the music and films business. Restructuring of electronics business (1994) Under Ohga’s leadership, Sony witnessed negligible growth in sales during 1990 and 1994. Sales and operating revenues improved by only 2 per cent during that period.However, the net income and operating income registered a drastic fall of 87 per cent and 67 per cent respectively. Analysts felt that the stagnation in the electronics industry coupled with factors such as the recession in the Japanese economy and the appreciation of the yen against the dollar led to the deterioration in the company’s performance. Exploring Corporate Strategy by Johnson, Scholes & Whittington 3 Restructuring Sony Table 3 Sales performance of the electronics business (1991–95) (in ? bn)* Year/ Business 1991 1992 1993 1994 1995 * ? 100 = approx. A0. 75. Source: Sony Annual Report 1995, www. ony. net. Video Equipment 928 896 828 669 691 Audio Equipment 882 948 928 841 899 Televisions 552 593 634 618 709 Others 619 793 772 817 909 It was noticed that in the e lectronics business (see Table 3), the revenues of the video and audio equipment businesses were coming down or were at best stagnant, while the television and ‘Others’ group were showing signs of improvement. The ‘Others’ group, which consisted of technology intensive products such as computer products, video games, semiconductors and telecom equipment, was performing very well and had a growth rate of nearly 40 per cent.In order to focus on the high growth businesses, Sony announced major changes in the structure of its electronics business in April 1994. Sony’s management felt that the ‘Group’ structure, which had fuelled the company’s growth in the 1980s, was proving to be redundant in the dynamic business environment of the 1990s. In the new structure, the product groups of the electronics businesses were regrouped into eight divisional companies. The eight companies were the Consumer Audio & Video Products Company, the Recor ding Media & Energy Company, the Broadcast Products Company, theBusiness & Industrial Systems Company, the InfoCom Products Company, the Mobile Electronics Company, the Components Company, and the Semiconductor Company. The restructuring exercise laid special focus on the products that formed the ‘Others’ group. Each divisional company had its own goals and was responsible for all its operations (production, sales and finance). The presidents of the divisional companies were authorised to decide upon the investments to be made up to a prescribed limit. They could also take decisions regarding the HR issues for all employees up to the level of divisional director.In addition, they were made responsible for the financial performance of the companies headed by them. Sony’s presidents were expected to perform a role similar to that of CEOs and were accountable to shareholders. The restructuring of Sony’s electronics business was aimed at improving the companyà ¢â‚¬â„¢s focus on high potential products and expediting the decision making process to make the company more responsive to changing market conditions. Following the restructuring, the number of layers in the decision-making process was reduced from six to a maximum of four layers.Commenting on his responsibilities within the new structure, Ohga said, ‘First of all, I would like for the divisional presidents to run their companies as if they were reporting to shareholders once a year at a shareholders’ meeting. My role will be to review their strategies, examine any points I feel should be questioned and provide advice when and where necessary. ’5 The main goals of Sony’s newly formed organisation system were explained in a memorandum entitled ‘The Introduction of the Company within a Company System’ (see Table 4).Explaining the rationale for the new system, Ohga said, ‘By revitalising its organization, Sony aims to introduce appealing p roducts in the market in a timelier fashion while further strengthening cost-competitiveness companywide. ’6 In 1995, after the implementation of the divisional company structure in the electronics business, changes were announced in Sony’s management structure. Under the new framework, Sony was to be led by a team of executives at the top management level.The team included the Chairman & CEO, Vice Chairman, President & Chief Operating Officer (COO), Chief Officers and the presidents of divisional companies. Analysts felt that Sony’s management took this measure to reduce the company’s reliance on 5 6 ‘From a Business Group System to a Divisional Company System’, posted on www. sony. net. As quoted in the 1995 annual report, posted on www. sony. net. Exploring Corporate Strategy by Johnson, Scholes & Whittington 4 Restructuring Sony Table 4 Five main goals of the new systemG To further enhance core businesses while developing new ones. G To i ntroduce an organisational structure in which sales and production work closely together and respond quickly to market changes. G To simplify the structure to clarify responsibilities and transfer authority, thus ensuring quick responses to external changes. G To reduce the levels of hierarchy in the organisation. G To encourage the entrepreneurial spirit in order to foster a dynamic management base for the 21st century. Source: ‘From a Business Group System to a Divisional Company System’, posted on www. ony. net. a single leader. In March 1995, Nobuyuki Idei (Idei) was appointed the President and Chief Operating Officer of Sony. Despite the organisational changes, the financial performance of Sony deteriorated in 1995. For the fiscal year ending March 1995, Sony reported a huge net loss of ? 293. 36bn. The write off of goodwill during 1994, the poor performance of the Pictures group and the strength of the yen were regarded as major reasons for this loss. During 1994, the yen was at an all-time high against the dollar, making Sony’s exports uncompetitive.Analysts also felt that Sony’s consumer electronics business lacked new, innovative products. Given this poor financial performance, the top management of Sony decided to integrate the company’s various domestic and global business functions such as marketing, R&D, finance, and HR. The functions of its numerous divisional companies were thus brought under the direct purview of headquarters. Idei also decided to strengthen the existing eight-company structure and to lay more emphasis on R&D in the IT field. He felt that Sony needed to focus on developing IT-related businesses.Accordingly, Sony’s management reorganised the existing structure to create a new ten-company structure. THE TEN-COMPANY STRUCTURE (1996) In January 1996, a new ten-company structure was announced, replacing the previous eight-company structure (see Table 5). Under the new structure, the previous Consumer Audio & Video (A&V) company was split into three new companies – the Display Company, the Home AV Company and the Personal AV Company. A new company, the Information Technology Company, was created to focus on Sony’s business interests in the PC and IT industry.The Infocom Products Company and the Mobile Electronics Company were merged to create the Personal & Mobile Communications Company. The other companies formed were the Components & Computer Peripherals Company (formerly called the Components Company), the Recording Media & Energy Company, the Broadcast Products Company, the Image & Sound Communications Company (formerly called the Business & Industrial Systems Company) and the Semiconductor Company. Table 5 Basic features of the ten-company structure G A new company structure to promote quicker, more effective operations that better reflect market changes.G The establishment of an Executive Board to reinforce headquarters and corporate strategy and mana gement functions. G The appointment of new companies and groups for entering into the IT and telecommunications businesses. G The consolidation of marketing functions. G The establishment of Corporate Laboratories for new business development. G The training of promising young talent to foster future managers. Source: ‘Sony Announces a New Corporate Structure’, posted on www. sony. net, dated 16 January 1996.Exploring Corporate Strategy by Johnson, Scholes & Whittington 5 Restructuring Sony In order to devise and implement the corporate strategies of the Sony Group, an Executive Board was created. The board was chaired by Idei. The other members of the board included the Chief Human Resources Officer, the Chief Production Officer, the Chief Marketing Officer, the Chief Communications Officer, the Chief Technology Officer, the Chief Financial Officer, the Executive Deputy President & Representative Director and the Senior Managing Director.In an attempt to consolidate th e marketing operations of Sony, the marketing divisions that belonged to the previous organisational setup were spun off to create three new marketing groups – the Japan Marketing Group (JMG), the International Marketing & Operations Group (IM&O) and the Electronic Components & Devices Marketing Group (ECDMG). The JMG was responsible for all marketing activities in Japan for five companies – the Display Company, the Home AV Company, the Information Technology Company, the Personal AV Company and the Image & Sound Communications Company.The IM&O was responsible for supporting all overseas marketing efforts for these companies. The ECDMG oversaw the worldwide marketing operations for the Semiconductor Company and the Components & Computer Peripherals Company. Analysts felt that this consolidation was done to separate Sony’s Japanese marketing operations from its worldwide operations so that the company could operate in a focused manner. To centralise all the R&D e fforts of Sony, the previous R&D structure (in which each company had its own R&D division) was revamped and three new corporate laboratories were established.The laboratories were the Architecture Laboratory (responsible for carrying out R&D for software, network and IT-related technologies), the Product Development Laboratory (R&D for product development in AV businesses) and the System & LSI Laboratory (R&D for LSI and system design, the basic components of hardware products). In addition, a new D21 laboratory was established to conduct long-term R&D for future oriented technology intensive products. Sony also gave emphasis to grooming young, talented people to take up top management positions. The company also introduced the oncept of ‘virtual companies’ – temporary groups consisting of people from different divisions for launching hybrid products. Sony applied this idea when developing the latest generation Mini Disk players. For the financial year 1995†“96, Sony registered a 15 per cent increase in revenues and became profitable again. In April 1998, a new organisation, Corporate Information Systems Solutions (CISS), was established to realign and upgrade Sony’s information network systems and its global supply chain. The CISS comprised an advisory committee of individuals from management consultancy firms and Sony’s CISS representatives.The committee members advised the President on technological and strategic issues related to CISS. Representatives of the CISS were placed in all divisional companies to accelerate the implementation of corporate IT projects. During early 1998, Sony formed Sony Online Entertainment in the US to focus on internet-related projects. In May 1998, Sony changed the composition of its board of directors and established the new position of Co-Chief Executive Officer (Co-CEO). Idei was appointed Co-CEO. Idei reshuffled the management system to facilitate speedy decision making, improve effi ciency, and provide greater role clarity to managers.The new system separated individuals responsible for policy-making from those who were responsible for operations. Under the new system, Idei was responsible for planning and designing Sony’s strategies and supervising the growth of e-business. Along with Ohga, he had to supervise the performance of the entire Sony group. President Ando was made responsible for overseeing Sony’s core electronics business, while Chief Financial Officer (CFO) Tokunaka was made responsible for the company’s financial strategies and network businesses.In addition, the top management positions of Sony’s global subsidiaries, which were previously called Corporate Executive Officers, were redesignated Group Executive Officers. Explaining the rationale for these changes, a Sony spokesman said, ‘These changes are aimed at making Sony’s management more agile’. 7 7 ‘Sony Names Management Team’, by Yoshiko Hara, EE Times, 9 May 2000. Exploring Corporate Strategy by Johnson, Scholes & Whittington 6 Restructuring Sony Table 6 Sales performance of Sony’s businesses (1995–99) (in ? bn)* Year/Business 1995 1996 1997 1998 1999 CAGR (4 years) ? 100 = approx. A0. 75. Source: Sony Annual Report, 1999, posted on www. sony. net. Electronics 3027 3283 3930 4377 4355 8. 55% Game 35 201 408 700 760 215% Music 481 506 570 660 719 10. 5% Pictures 282 317 439 643 540 17% Insurance 113 207 228 291 339 31% Others 52 78 88 84 81 11. 7% The implications From 1995 to 1999, Sony’s electronics business (on which the restructuring efforts were focused) grew at a compounded annual growth rate (CAGR) of 8. 55 per cent (see Table 6). The music business had a CAGR of 10. 5 per cent while the pictures business had a CAGR of 17 per cent.Significant gains were, however, recorded by the games and insurance business. The games business registered a CAGR of 215 per cent, while the insurance business registered a CAGR of 31 per cent. In the late 1990s, Sony’s financial performance deteriorated. For the financial year 1998–99, its net income dropped by 19. 4 per cent. During that period, Sony was banking heavily on its PlayStation computer game machines. It was estimated that the PlayStation (Games business) accounted for nearly 42 per cent of Sony’s operating profits and 15 per cent of total sales for the quarter October–December 1998.In the late 1990s, many companies across the world were attempting to cash in on the internet boom. At that time, Sony’s management felt the need to establish a link between its electronics business (TVs, music systems, computers) and its content-related businesses (music, video games, movies and financial services) by making use of the internet. The management felt that in future, the revenues generated by internet-related businesses might even surpass those earned through the consumer electronics busin ess. It wanted to use the internet as a medium for selling its electronic products as well as its content (music, movies and so on).In order to achieve this, Sony announced another reorganisation of business operations. Analysts felt that Sony was in a good position to exploit the opportunities offered by the internet since the company already had an established position in the electronics and content-related businesses. THE UNIFIED-DISPERSED MANAGEMENT MODEL In April 1999, Sony announced changes in its organisational structure. Through the new framework, the company aimed at streamlining its business operations to better exploit the opportunities offered by the internet.Sony’s key business divisions – Consumer Electronics division, Components division, Music division and the Games division – were reorganised into network businesses. This involved the reduction of ten divisional companies into three network companies, Sony Computer Entertainment (SCE) Company an d the Broadcasting & Professional Systems (B&PS) Company (see Exhibit 1). SCE Company was responsible for the PlayStation business while the B&PS Company supplied video and audio equipment for business, broadcast, education, industrial, medical and production related markets.The restructuring aimed at achieving three objectives – strengthening the electronics business, privatising three Sony subsidiaries, and strengthening the management capabilities. The restructuring also aimed at enhancing shareholder value through ‘Value Creation Management’. 8 8 It aimed at creating value by dividing the group into networked autonomous business units such that the resources within the Sony Group complemented each other. Exploring Corporate Strategy by Johnson, Scholes & Whittington 7 Restructuring Sony Exhibit 1 The unified-dispersed management modelSource: ‘Sony Announces Organization Structure for New Network Companies’, posted on www. sony. net, 29 March 1999 . Strengthening the electronics business The three network companies created were the Home Network Company, the Personal IT Network Company and the Core Technology & Network Company. Each network company was governed by a network company management committee (NCMC) and a network committee board (NCB). The NCMC was responsible for developing management policies and strategies. Its members included the officers and presidents of the concerned network company.The NCB was responsible for managing the day-to-day operations of the network company while keeping in mind the overall corporate strategy of the entire organisation. Each NCB was chaired by the concerned company’s President & CEO, Deputy President, President and Representative Director, two Executive Deputy Presidents and Representative Directors, and Corporate Senior Vice President. The new structure aimed at decentralising the worldwide operations of the company. The corporate headquarters gave the network companies the authority to function as autonomous entities in their corresponding businesses.To facilitate more functional and operational autonomy, the corporate headquarters also transferred the required support functions and R&D labs to each network company. To give a further boost to Sony’s electronics business, the management created Digital Network Solutions (DNS) under the purview of headquarters. The role of DNS was to create a network business model by charting strategies and developing essential technologies for exploiting the opportunities offered by the internet. The basic aim of creating DNS was to develop a network base that would provide customers with digital content (such as music and movies) and financial services.Privatising Sony’s subsidiaries As part of its strategy to promote functional and operational autonomy and to devote more attention to units which contributed significantly to its revenues and profits, Sony decided to convert three of its companies â€⠀œ Sony Music Entertainment ( Japan), Sony Chemical Corporation (manufactured printed circuit boards (PCBs), recording media and automotive batteries), and Sony Precision Technology (manufactured semiconductor inspection equipment and precision measuring devices) – into wholly Exploring Corporate Strategy by Johnson, Scholes & Whittington 8 Restructuring Sony owned subsidiaries of Sony.In addition, Sony converted SCE, which was jointly owned by Sony and Sony Music Entertainment ( Japan), into a wholly owned subsidiary of Sony. Strengthening the management capability To strengthen the management capability, Sony clearly demarcated the roles of headquarters and the newly created network companies. Accordingly, distinction was made between the strategic and support functions. Sony’s headquarters was split into two separate units – Group Headquarters and Business Unit Support. The role of Group Headquarters was to oversee group operations and expedite the allocation of resources within the group.The support functions, such as accounting, human resources and general affairs, were handled by the network companies so that they could enjoy more autonomy in their operations. Significant long-term R&D projects were directly supervised by the headquarters, while the immediate and short-term R&D projects were transferred to the concerned network companies. In order to evaluate the performance of the network companies, a value based performance measurement system9 was introduced. The implications While pursuing its restructuring efforts, Sony started developing products which were compatible with the internet.Its electronic products, such as digital cameras, personal computers, music systems, and Walkman, were made web compatible. Through its website, www. sony. net, consumers could participate in popular television game shows, listen to music, and download songs and movie trailers. Sony also ventured into e-business with the acquisition of Sky Perfect Communications. 10 While focusing on offering internet-enabled products, Sony also attempted to increase internet penetration by offering internet connection at lower cost and higher speed to consumers in urban areas. Sony’s restructuring efforts in 1999 were well received by investors.Following the announcement of the restructuring programme, Sony’s stock prices nearly tripled. This positive trend continued even in 2000. By March 2000, its stock prices were at a high of $152. Having already offered its PlayStation game console on the internet, Sony successfully launched its PlayStation 2 (PS2) video game console in Japan in March 2000. The PS2 sold 980,000 units within the first three days of its launch. However, Sony still faced problems since its other businesses, including electronics, movies, personal computers, and mobile telecommunications, were not performing well.Analysts felt that the low internet penetration rate in Japan (estimated to be 13 per cent in 199 9) was proving to be a major hurdle for Sony. Consequently, Sony’s financial performance deteriorated by the end of 1990s. For fiscal 1999 –2000, Sony’s net income fell to ? 121. 83bn compared to ? 179bn in the fiscal 1998–99. This resulted in a major fall in its stock prices. By May 2000, Sony’s stock prices fell by 40 per cent to $89. Analysts were quick to criticise Sony’s efforts towards transforming itself into a web-enabled company.They commented that the company had created more hype rather than taking a few significant steps in this regard. In response to these financial problems, Sony announced a reshuffle in its top management. Idei became the Chairman and Chief Executive Officer of Sony. Ando, who headed Sony’s PC division, was 9 A system that helps in effectively determining the cost of capital. The measurement is based on economic profit, which is calculated by subtracting the cost of debt and equity from the operating pr ofit after tax. Sony planned to use this system of measurement to set targets and evaluate business unit performance.The performance was to be linked, in future, with management compensation. 10 A popular satellite broadcasting company in Japan which owned Sky Perfect TV and had successfully ventured into the internet service provider (ISP) business by launching the website, www. so-net. This website enabled online shopping, interactive games, fortune telling as well as stockbroking. Exploring Corporate Strategy by Johnson, Scholes & Whittington 9 Restructuring Sony made the President, while Tokunaka, who previously headed the PlayStation unit, was made the Chief Financial Officer of Sony.Sony also undertook a massive cost-cutting exercise. Its global manufacturing facilities were reduced from 70 in 1999 to 65 in 2001. Sony planned to further bring down the number of manufacturing facilities to 55 by the end of 2003. This move would result in the elimination of 17,000 jobs. While im plementing these measures, the company had to deal with severe resistance from employee unions and local governments (in areas where jobs would be eliminated). Despite the above measures, Sony’s financial condition did not show any significant improvement in 2001.The company was severely affected by the slowdown in the IT industry during 2000–01, which led to a decline in the demand for its computer-related products. As a result, in spite of a 9. 4 per cent increase in revenue in the fiscal 2000–01 (mainly due to the improved sales of the PlayStation games console) Sony’s net income dropped significantly from ? 121. 83bn in the fiscal 1999–2000 to ? 16. 75bn in the fiscal 2000–01. Analysts commented that Sony required a new business model. The company had immediately to take concrete measures to increase its net income.Sony’s management also felt that with the emergence of net-compatible devices like cellular phones, audio and video g adgets and laptops, PCs were losing their charm. It felt that in the emerging age of ‘broadband’11 the demand for the above products was likely to increase in future. Sony’s management felt that in order to boost profitability and exploit the opportunities offered by the broadband era, there was a need for yet another organisational restructuring. RESTRUCTURING EFFORTS IN 2001 Sony announced another round of organisational restructuring in March 2001.The company aimed at transforming itself into a Personal Broadband Network Solutions company by launching a wide range of broadband products and services for its customers across the world. Explaining the objective of the restructuring, Idei said, ‘By capitalising on this business structure and by having businesses cooperate with each other, we aim to become the leading media and technology company in the broadband era. ’12 The restructuring involved designing a new headquarters to function as a hub for Sony’s strategy, strengthening the electronics business, and facilitating network-based content distribution.New headquarters to function as a hub for Sony’s strategy Under the new structural framework (see Exhibit 2), Sony’s headquarters was revamped into a Global Hub centred on five key businesses – electronics, entertainment, games, financial services and internet/ communication service. The primary role of the Global Hub (headed by the top management) was to devise the overall management strategy of the company. Sony’s management decided to integrate all the electronics business related activities under the newly created Electronic Headquarters (Electronics HQ).In order to achieve the convergence of Audio Video Products with IT (AV/IT convergence), Sony devised a unique strategy called ‘4 Network Gateway’. Under this strategy, the games and internet/communication service businesses were combined with the electronics hardware busine ss so that innovative products could be developed and offered for the broadband market. The three businesses were under the supervision of Ando. In order to provide support services for the entire group, a management platform was created, which consisted of key support functions in diverse fields such as accounting, finance, legal, intellectual 11An acronym for broad bandwidth, it is a high-speed, high-capacity data transmission channel that sends and receives information on coaxial cable or fibre-optic cable (which has a wider bandwidth than conventional telephone lines). This channel can carry video, voice and data simultaneously. 12 As quoted in the Annual Report 2002, www. sony. net. Exploring Corporate Strategy by Johnson, Scholes & Whittington 10 Restructuring Sony Exhibit 2 Sony organisational chart: electronics-related business (as of 1 April 2001)Source: ‘A New Group Structure for the Next Stage of Integrated, Decentralized Management’, www. sony. net, 29 March 2001. copyrights, human resources, information systems, public relations, external affairs and design. The management platform was later split into the Engineering, Management and Customer Service (EMCS) Company and the Sales Platform (which comprised the regional sales companies and region-based internet direct marketing functions). The management platform was headed by the Chief Administrative Officer, a newly created position.Sony’s management also converted the product-centric network companies into solution-oriented companies by regrouping them into seven companies. Group resources were allocated among the network companies on the basis of their growth potential. Exploring Corporate Strategy by Johnson, Scholes & Whittington 11 Restructuring Sony Strengthening electronics business To enhance the profitability of the electronics segment, Sony’s management decided to give emphasis to product development efforts. The management felt it was also essential to enhance the quality of the electronic devices manufactured.In order to achieve this, Sony’s management devised an innovative business model called the Ubiquitous Value Network,13 which connected the company’s existing hardware, content and services through an agency of networks. Sony planned to develop a wide range of products which could be connected through this network. Network-based content distribution Like the electronics, games and internet/communication service businesses, the entertainment and financial services businesses were also developed in a network compatible manner to facilitate electronic content distribution.In the entertainment business, music and movies were converted into a digital format and distributed over the internet (apart from being distributed through traditional channels such as music stores and theatres). In Japan, Sony Music Entertainment launched online music through its website. This website allowed customers to download popular songs for a f ee. In the financial services business, Sony Life Insurance Japan launched the ‘Life Planner’ consultancy system which offered personalised financial services online to its customers.Sony Life Assurance Japan also went online and started selling its insurance policies over the internet. The implications Soon after the reorganisation, Sony launched some innovative products to cater to the broadband market. For instance, in 2001, the company launched a series of internet-compatible mobile phones. However, the product was unsuccessful (owing to problems in the software used in the mobile devices) and in early 2002 Sony had to recall three batches of phones sold to Japanese companies. In consequence, Sony had to write off $110m in the quarter ending June 2002.In April 2003, Sony announced another major restructuring exercise (to be carried out in the next three years) in order to strengthen its corporate value (see Exhibit 3). Following this announcement, Sony was reorganis ed into seven business entities – four network companies and three business groups (see Exhibit 4). These business entities were given the authority to frame short-term and long-term strategies. According to analysts, the company’s financial performance did not improve in spite of the frequent restructuring by Sony’s management.For the financial year 2001–02, Sony’s operating income fell by a significant 40. 3 per cent while its revenues registered a marginal increase of 3. 6 per cent. According to a BusinessWeek report, sales of Sony’s most profitable products – the PlayStation and the PS2 game consoles – were likely to fall (see Exhibit 5). Due to Sony’s poor financial performance, the management planned to further reduce the number of manufacturing facilities and shift some production activities out of Japan.Analysts also criticised Sony for being a diversified business conglomerate engaged in several businesses from semiconductors to financial services. They felt that the company should focus on a few highly profitable businesses like games, insurance, and audio-video equipment and hive off the unprofitable businesses. Analysts felt that spending huge amounts of money on restructuring was not justified, particularly since the restructuring exercises had not yielded the expected results. In 2001, restructuring efforts had cost the company ? 100bn; and the proposed restructuring in April 2003 was expected to cost another ? 40bn. 13 The Ubiquitous Value Network is an environment in which PC and non-PC consumer electronics devices are seamlessly connected to each other and to the network, giving users access to all types of content or service, from anywhere across the globe. Exploring Corporate Strategy by Johnson, Scholes & Whittington 12 Restructuring Sony Exhibit 3 Sony organisational chart (as of 1 April 2003) Source: ‘Sony Announces Executive Appointments and Organizational Reforms Effec tive as of April 1, 2003’, www. sony. net, 31 March 2003. Exhibit 4 Responsibilities of network companies and business groups No. 2 3 Network company/ business group Home Network Company Broadband Network Company IT and Mobile Solutions Network Company 4 5 6 Micro Systems Network Company Game Business Group Entertainment Business Group Responsibility To create a new home environment with networked electronic devices centred on next-generation TV Development of next-generation electronics devices and linkages to Game devices To realise a connected world with PC and mobile devices and strengthen the B2B solutions business To enhance key devices and modules as core components of attractive set products To promote Game businesses for the broadband era To develop entertainment content businesses based on pictures and music and develop a new content business model for the network era To integrate various business units providing services based on direct contact with customers (fina nce, retail, etc). Strengthen synergies and develop attractive new business models for customers through the application of IT. 7 Personal Solutions Business Group Source: ‘Sony Announces Executive Appointments and Organizational Reforms Effective as of April 1, 2003’, www. sony. et, 31 March 2003. Analysts also felt that the convergence of consumer electronics, PCs and the internet was not only opening up new opportunities for Sony but also creating more competition for its core businesses. As Sony took steps to strengthen its networking capabilities, the company faced new forms of competition in both domestic as well as foreign markets. For instance, in the US, software giants like Microsoft and Sun Microsystems (as well as a few startups) were planning to enter the home entertainment market. Exploring Corporate Strategy by Johnson, Scholes & Whittington 13 Restructuring Sony Exhibit 5 Break-up of Sony’s businesses (31 March 2002)Business Electronics Games Insu rance Films Music Others Sales ($bn) 35. 6 7. 4 3. 7 4. 6 4. 5 0. 6 Operating profits ($m) 125 578 91 147 203 NA Source: ‘Can Sony Retain the Magic’, by Irene M. Kunii & Cliff Edward, BusinessWeek, 11 March 2002. Even Cisco Systems, which provided network solutions, had started manufacturing consumer electronics products. A BusinessWeek report said that Sony lacked any distinctive competencies in the internet-related businesses. It was neither an aggregator of content like Yahoo! , nor a limited-product vendor with an efficient distribution network such as Dell. Exploring Corporate Strategy by Johnson, Scholes & Whittington 14

A New House Readiness Essay

When making a decision to purchase a new house, one of the economic principles which one must consider will be that people face tradeoffs. If one decides to purchase a new house, he or she will need to give up things such as a holiday, new truck or what they eat which the same amount of money can purchase. In this case, one will need to weigh the priorities. For example, purchasing a new house may make travelling to school and local services more convenient, however it will require one to give up the purchase of a new car which makes travelling to work more inconvenient. Depending on what the decision maker feels is more important, he or she will decide for or against the decision to purchase the house. One of the principles of economics states that trade can make everyone better off. When trade flourishes, it results in a greater purchasing power. In such a case, marginal costs appear small owing to a better purchasing power among people. In this situation, marginal benefits exceed marginal costs and it would be a good idea to purchase the new house Another economic principle which one should consider will be to think at the margin. This will involve weighing marginal benefits and costs of the decision. In this case, marginal benefits of purchasing the house will be its close proximity which will be close to schools and local services. In addition purchasing a new house will provide cleaner, larger and newer space which will improve living conditions. However, marginal costs will include that of lowering one’s disposable income which will lower their ability to purchase other goods such as baby food necessary for the growth of the child. The marginal costs and benefits of the decision to purchase a house will depend on the other factors such as income level. When income level is low, purchasing a new house will greatly affect the disposable income and purchasing power of the decision-maker, hence it is more likely that the person make the decision against purchasing a new house.

Terrorism's Future Research Paper Example | Topics and Well Written Essays - 500 words

Terrorism's Future - Research Paper Example One of the major factors that identify nuclear weapon terrorism as the next biggest threat is preparedness against other forms of terrorism, by nations such as the United States, through defense forces. This followed the New York City attack that identified vulnerability to terrorism. The New York City attack also led to exploration of possibility of nuclear terrorism attack against the United States. Following the readiness and the knowledge that an ordinary offensive might not be successful, terrorist groups must be exploring more deadly approaches such as application of nuclear weapons and weapons of mass destructions. America’s high position in the international community also identifies it as a potential terrorist target and fears have been raised during the nation’s major events such as â€Å"the 2009 inauguration ceremony of President Barack Obama† (Richelson, 2012, P. 1). Such terrorist target may attract efforts for mega terrorist attacks such as applica tion of nuclear weapons (Richelson, 2012). Development of nuclear weapons by countries such as India and Pakistan together with fears that countries like North Korea and Iran could have accessed the weapons is another threat of possible nuclear terrorism against Nuclear Weapon Countries such as the United States. This is because the countries have a responsibility to ensure non-proliferation or non-development of nuclear weapons by countries other than the Nuclear Weapon Countries. An enemy to such a responsibility may therefore use the deadly weapons to intimidate against control nuclear weapons’ armament and proliferation (Nti, n.d; Montgomery, 2010). Trend in development of technology also raises fears that terrorist groups can secretly develop nuclear weapons in a nation or smuggle the weapons. These factors therefore identify possibility of access and transfer of nuclear weapons by terrorist groups to targets countries for

Are Multinational Corporations Free from Moral Obligation Essay

Are Multinational Corporations Free from Moral Obligation - Essay Example This work will critically analyze the issue of there being any ethical consideration in the working of international organizations. According to Velasquez (1992, 319), morality does not exist in international corporations. This is simply because these corporations are not subject to the law of any nation in the world. In this way, they cannot be held responsible for breaking any law. Velasquez argues that morality is held and maintained when there is a higher authority to monitor any aspect of immorality. International corporations do, however, operate under now authority of any nation. His explanation for lack of morality is that according to Hobbsian Theory, men are likely to behave the way they want if they are not regulated. In this respect, men are likely to behave in ways that are targeting to gratify their personal interests. Velasquez argues that those international corporations that have some aspects of morality get discouraged by various issues. One of them is that if an international corporation is working within other organizations that do not value ethical considerations, it is subjected to high competitive pressure. On another hand, any international organization that works within an environment where ethical consideration are not regarded feel guiltless when they fail to observe the morality. When an organization is working within such environment, it is considered unfair if they continue to adhere to the laws of morality, which other organizations are not following (Velasquez, 1992, 320). Fleming (1992, 324-325), argues on a different point of view. This is by considering facts of presence of chief executive officers of organizations, managers and governments of nations in which these international corporations operate as important authority to foresee ethics. According to him, these agents have power to dictate moral and ethical considerations in any organizations. This is regarding their positions as decision makers of such

The Moral High Ground of Wars in American History Essay

The Moral High Ground of Wars in American History - Essay Example The moral grounds for the Spanish American war were the support the American people had for the people and rebels in Cuba against the Spanish rule. The ideals behind the intervention of the United States in World War I were to ensure that the world would be safer for freedom and democracy to prosper. Similarly the United States had to intervene in World War II because of the aggressive expansionist policies and the atrocities of Germany. The Korean War was waged to counter the communist influence of China and Russia, however, this was eventually split Korea in the two states. The Vietnam War involved the United States as its forces had continued staying in Vietnam to replace the French forces after World War II as America perceived itself as the protector of democracy and freedom. Thereafter the Kuwait war was for the liberation of this tiny state from Iraq and finally the present war in Iraq was to free the people there from the tyranny of Saddam Hussein. The other continuous war th at the United States is involved in is against terrorism which had become a threat to world peace. (Americas Wars & The Politics of American Wars, How fascists became the "victims" in the current war, National Review Online) The General Situation in Southeast Asia and its Influence on the World In the last few decades, China has internationally become a very strong economic and military powerhouse and strongly influences the diplomatic activities the world over. China is thus a source of challenge to the United States and a threat to specifically to the Taiwan, which it claims as being a part of mainland China. Its relations in Asia, Latin America, Europe, the Middle East and specifically in African has boosted its industrial capacities and it currently is amongst the largest importers of steel, oil and other raw materials from the third world countries. Besides the advances China has made in the fields of advanced technology including space technology, China has become a fierce competitor for all products in the world market because of the edge it has in cheap manpower. On the other hand, the pariah and unpredictable state of North Korea threatens to be a source for causing further instability to the security of its neighbors because of its recently developed nuclear capabilities. (Larry M. Wortzel, Ph.D., 2006, Risks and Opportunities of a Rising China) Furthermore in South Asia with the development of nuclear technology and an arsenal of nuclear weapons the Southeast Asia neighbors of Pakistan and India continue to be a source of worry for the world community as they could be a flashpoint for a nuclear war that could eventually engulf all their neighbors and lead to consequences that might even lead to World War III. Following the 9/11 attacks, Pakistan authorities had to decisively align themselves with the United States against the war with terrorist forces by providing strategic and logistic support and prior to the invasion of Afghanistan by Russia and the consequent war, which eventually forced the Russians to

Employee Empowerment Essay Example | Topics and Well Written Essays - 750 words

Employee Empowerment - Essay Example Autonomous environments, decentralized working conditions are actually some of the variants of employee empowerment. However, it's actually a strategy in which an employee is allowed to take the decisions without consulting the upper management and he/she actually owns his/her job. Since employees are allowed to make decisions, therefore they feel motivated and this strategy actually boosts up their performance. Through this strategy employees can serve the customer in an effective an efficient manner. Brainstorming, decision making capability, increased level of responsibility actually results due to empowerment. Through empowerment organization can attain competitive edge and total quality management i.e. quality in every aspect and operation can be achieved through empowering the employees. Different approaches and models are followed by different organizations in order to adapt the culture of empowering employees and adapting such a culture would benefit the overall strategy of the organization. Empowering the employees is all about the autonomy and the control they have on their respective jobs. Empowering with the transformational model actually means that leading and empowering the employees are working together and these two aspects are carried together to achieve the ultimate goal of the organization. Transformational model actually improves employee motivation and its satisfaction to work. The conventional working techniques are transformed and since they have a sense of ownership in their tasks therefore production quality of the employees improves. Employees lead from the front and they actually take calculated risks in order to earn more return. All the leadership traits are indulged in an employee when he/she is following the transformational model and besides leadership empowerment plays a positive role and enhances the working of the employees and develops a scenario in which an ordinary employee considers himself/herself as an entrepreneur. In the transformational model both leader and the subordinates motivates each other and help each other out and develop a situation in which motivation and morality becomes the cure of different problems. In an organization when a project is launched then it might be possible that the responsibilities of leaders and subordinates are different. But Transactional model actually results in coordination and although both the subordinates and the superiors started the project as separate entities but in order to achieve higher goals and superior targets they actually help each other in every aspect and ultimately raise the bar of their performance. Empowerment without the Transformational Model Leadership and empowerment, both are actually addressed in the transformational model. Empowering the employees in the workplace without the transformational model is a difficult task because a sense of autonomy might be developed but when an employee doesn't know how to lead and he/she doesn't practice leadership then it would be very difficult to achieve desirable results. Therefore the ultimate goa

Maintain a General Ledger Research Paper Example | Topics and Well Written Essays - 2750 words

Maintain a General Ledger - Research Paper Example These kinds of assets are known as 'fixed assets'. Current assets represent the stock of business assets held by the company, the debtors and cash and bank balances. There are intangible assets like goodwill also. Liabilities represent the amounts payable by the company to different constituents of the business like banks, creditors or other agencies. Liabilities may be classified as 'long term liabilities' representing the loans obtained by the company from banks or other financial institutions for running the business and 'current liabilities' representing the amounts payable to The Revenues are the income being earned by any business. Revenues include sales and other earnings from investments of the business. Rental income and interests from investments are also considered as revenues. The revenues are the cash inflows for the business and determine the profits of the company. Expenses are the cash outflows from the business in connection with the running of the business. Expenses may be of capital in nature representing purchase of additional assets or machinery. Revenue expenses are those incurred on a day to day basis for running of the business. The revenue expenses are charged against the income of the business and the profits determined. In the double entry book keeping principle every accounting entry should have a corresponding debit or credit entry reflected in another account. These entries are known as contra entries. Contra entries are passed through general journal and mostly represent non-cash transaction entries like accounting for depreciation. Writing off a bad debt In the course of business sales are done on a credit basis and the parties to whom the credit sales are made sometimes may not be able to make payment for the goods or services bought or availed due to their financial difficulties or bankruptcy. In those cases the amount due to the business is termed as a 'bad debt'. Usually these bad debts are charged off against revenue of the company as expense. This is known as 'writing off a bad debt'. Debtors also known as Accounts Receivables In the process of doing business many a times sales are being made to different parties on credit terms implying that the party instead of making the payment on cash basis will make the payment after a certain agreed period of time. These parties to whom sales are made on credit terms are known as 'Debtors' also known as 'Accounts Receivable' Creditors also known as Accounts Payable Just as the sales are being made on credit terms the business may procure the goods and services on credit terms with the payment to be made within definite periods mutually agreed between the suppliers and the business. These parties who supply the goods or services are known as 'Creditors' also known as 'Accounts Payable'. General Journal General Journal Sales Journal Sales Returns and Allowances Journal Purchase Journal General Ledger - Capital Account General Ledger -

Write a Criminal Sentence Reduction Letter Term Paper

Write a Criminal Sentence Reduction Letter - Term Paper Example This letter thus pleads for leniency in his sentencing on the basis that he has no prior criminal record and his remorseful about the incident. That the jury was also convinced after a few hours of deliberations that the accused did not intentionally end the life of his victim also shows that it was actually an accident and the accused did not have any malice aforethought (Spohn 25). The defendant being my cousin, I have known him since his childhood. In this period, he has been a law-abiding citizen who has never had any encounter with the criminal justice system on account of a crime or other acts of disorderliness. I can therefore confidently vouch for his good character that has seen him go through the school system to reach college. As a college student, the defendant has been a rather productive and positive member of society, particularly in assisting and advising younger children in the family and the neighborhood on their educational endeavors and career choices. From his productivity in the community, it is thus understandable that the defendant made a mistake in his actions that led to the death of the victim. Understandably, the many instances he has served the community positively make him a worthy consideration for leniency. This letter thus requests the defendant’s sentencing to be reduced on grounds of his good character and behavior prior to the commission of the crime and his remorse for the crime committed. Additionally, while under police custody, the accused has also shown considerably good conduct by indulging in religion,-, education-, and work-related activities and responsibilities (Lawyers.com 3). Furthermore, while under custody, he has continued to engage in training activities that could be useful after his release. If his sentence is reduced and he is released early, there are many good nurtured family members and friends who will support him financially, socially, and emotional to help him recover

The Exploitation of Michael Jackson Research Paper

The Exploitation of Michael Jackson - Research Paper Example This paper will be showing how Michael Jackson has been viewed by the media and even his own fans. It will detail how he was used by other people and how media has always seen his negative side instead of his good points. It will argue that indeed, he was used and abused all his life. Then, this study will conclude with the real Michael Jackson, how he really is in the eyes of those who really knew who the person is beyond the mask. II. The Life of Michael Jackson When Michael Jackson first started his musical career, he instantly became the face of the local and international music scene, especially known for his pure vocal skills. His emotional expression when delivering his songs that were far beyond his age and experienced awed his audiences. His voice was still angelic despite puberty, unlike others whose voices change after a certain point. In fact, he went on to sell millions of records with his Off the Wall and Thriller albums. Soon after he had achieved such world class reco gnition, his name and face started to become the focus of the media. The motive for the countless fictional stories against Michael Jackson is still a mystery to date. However, a lot of people theorize that it could be an issue of power struggles, racism or simply the fact that he was famous. There were a lot of speculation regarding his sexuality and rumors spreading that he was homosexual. Naturally a private and shy individual, Jackson rarely talk about his relationships and sexuality. But the fact that he neither acknowledged nor denied the rumors about him being homosexual was enough for the media to pick on him even more. Michael Jackson loved and respected his fans so much, even those who were gay. The real reason why he did not disclose his sexual orientation was because he did not want to alienate these said fans. There were also reports that gained worldwide focus about Michael Jackson sleeping in an oxygen chamber as opposed to a normal bed. This story started when Jackson was severely injured due to an accident in the taping of his Pepsi advertisement. His hair caught on fire after one of the explosions’ spark fell on his hair. At twenty-six years old, he was practically left bald because of second and third degree burns. This sad incident required multiple skin grafts and reconstructive surgery. This sparked his empathy for victims of burns, donating the hyperbaric chamber and $1.5 million that he received on the settlement to the Brotman Medical Center. He also started the Michael Jackson Burn Center. Since them, tabloid media released images of Jackson seen â€Å"hammering around† in the chamber and came up with the story that he liked sleeping in it beca use he did not want to grow old. The press also displayed so much interest on the multimillion dollar estate of Michael Jackson located in Santa Barbara County. In here, he built a ranch equipped with a live animal zoo, trains, theaters and amusement park rides. He enjoyed going to theme parks but his fame did not permit him to do outings. Since he feared being mobbed by paparazzi and fans, he built his own amusement park, which he called the Neverland Valley Ranch (from his favorite children’s tale, Peter Pan) and made it available to sick and disadvantaged children. He can strongly relate to Mr. Barry, losing his personal childhood because of recordings, concerts and TV shows. Whimsical articles announced the oddity of the Neverland Ranch but Michael Jackson defended it

Glaser Health Products Coursework Example | Topics and Well Written Essays - 500 words

Glaser Health Products - Coursework Example In most situations, these costs are part of recurrent expenditure treated as a liability in the company’s profitability index.In as much as production costs are characterized with a multiplier effect on the overall performance of the company, their increase in efficiency is always added to the value of production and increases the profitability of the firm.In order to trace various costs to activity groupings, arbitrary allocations of overheads to products, services, and consumers will be vital. At the first stage, there will be the derivation of the activity cost pool. These will consist of costs such as; material handling, procurement, and set-up. While the second stage will be made up of; costs per material movement, costs per purchase order, and costs per set-up.In primary stage cost drivers in relation to products, one needs to employ the use of activity drivers by assigning the activity costs to outputs on the basis of the consumption and demand for the outputs. All the outputs will be identified on the performance of an activity segment which consumes resources(Barrett, 2005). It is necessary to use preliminary and primary stage cost drivers because they aid in assigning resource costs to activities.This is done in three main ways which include; direct, indirect, and general/administrative costs. Direct costs consist of such costs that are traceable directly to one output such factory painting and repairs in the factory and other coats of production.

The reaction between zinc and copper sulphate Essay Example for Free

The reaction between zinc and copper sulphate Essay I am going to investigate the reaction between Zinc and Copper Sulphate. Method The reaction will be exothermic; so that means heat will be given out. I will have to see the temperature difference between each amount of Zinc and store the results onto a graph. The equation for this reaction is: Zinc + Copper Sulphate Zinc Sulphate + Copper. Copper Sulphate is a blue solution, which is toxic, and the Zinc steals the Sulphate (like a bully taking sweats from someone) and that leaves Copper as a solid form. This reaction occurs because Zinc is higher up the table in the reactivity series; I know this because I referred to the textbook. Prediction My prediction is that I think that the Zinc will react quite quickly with the Copper Sulphate. It will make the temperature rise and turn into a colourless solution; the temperature will rise by about 20i. There will be no things to make the test unfair, I will make sure the same cup is used each time, the amount of Copper Sulphate stays the same (40 ml) and the amount of Zinc is correct each time. Safety For safety during the experiment I will make sure that I will wear goggles so I have eye protection. I will make sure the solution does not get poured down the sink because it kills bacteria that the sewage workers produce. Also I will make sure the laboratory rules are followed accurately. Results table Mass of Zinc Number of moler ratio Temperature Temperature Temperature Moles of Zinc At the start At the end Increase Analysis Ive analysed my results and the shape of the graph is steadily inclining except for the one anomalous result. The result depended on four things the temperature, catalyst, concentration and size of particles. The temperature was slowly rising until the zinc stopped reacting. The catalyst (zinc) made the reaction happen easier so the activation was lowered. The anomalous result had a few explanations for why it was lower than the others. Conclusion I have learned that the experiment was exothermic and the rate of reaction with zinc and copper sulphate. Also that zinc it higher in the reactivity series than copper thats why there was a reaction otherwise there would not have been no reaction at all. The zinc acted as a catalyst in the reaction by speeding up the reaction so it was less activation. Evaluation The method I used in this experiment was displacement, were the copper sulphate and zinc reacted to produce zinc sulphate plus copper, so the more reactive metal (zinc) displaced the less reactive one (copper). During the experiment I have found out that the experiment I carried out was similar to my prediction that made except for one anomalous result. The average temperature raise was 19. 5 and my prediction was 20. It probably would have been higher if the anomalous result was higher that 13. The only reasons for the anomalous result was either because I didnt let the temperature drop from the previous experiment or I didnt let it go to its maximum temperature before ending the experiment. So my prediction was nearly all correct except one result that made the average lower and the line of best fit on the graph decrease. Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Patterns of Behaviour section.

Are Juries the Most Appropriate Way of Deciding Guilt?

Are Juries the Most Appropriate Way of Deciding Guilt? Abigail Louise Lines   From a Psychological Perspective, Are Juries the Most Appropriate Way of Deciding a Persons Guilt? The judicial system within the United Kingdom has a perverse history, with its origins in the church influencing modern systems and the human rights we have within the court today (Brooks, 2004). Before criminal trial juries were an established concept in the United Kingdom, there were three ways in which the degree of a persons innocence was established: a Wager of Law, Trial by Battle and The Ordeals (Brooks, 2004). These tests primarily consisted of physical challenges in which God was believed to be the primary authority to pass judgement and decide a persons guilt; these trials disregarded human rights, often involved physical anguish and frequently resulted in the death of the accused (Brooks, 2004). It was not until 1219 that individuals accused of a crime were allowed to appeal to a jury, however, individuals who refused to appeal through a jury were subjected to Prison Forte et Dure, where the accused were physically and emotionally tried until they consented to this appeal procedure (Berger, 2011). Due to the influence of the church and the belief that God was involved in the decision of guilt, it was rare that jury members in the appeal procedure would have to justify their decisions and have their verdicts questioned (Berger, 2011). During the early 1300s jurors verdicts began to be doubted and those who served on a jury could be challenged as unfit, incompetent or corrupt; this later led to reforms as to who would be allowed to serve on a jury and an emphasis on mandatory guidelines to follow (Smith Wales, 2000). Modern criminal trials consist of 12-16 individuals selected at random from the electoral register to represent their peers; they discuss the factors influencing the case at hand to ultimately determine the level of guilt of the involved and to deliver an appropriate verdict (Smith Wales, 1999). Juror capabilities have been questioned in recent years due to a rising number of [G1]criticisms of competency, variances between the judges and jurys verdict, and the role of inadmissible evidence which is believed to influence jurors decisions (Smith Wales, 1999; Hans, 2008). To understand and assess whether juries are appropriate for deciding an individuals guilt, the current essay will explore psychological evidence and criticisms of the jury. It will critically evaluate factors involved in juror decision making and competency, recognising the role of current systems in place and how these systems may influence the reliability of jurors. Furthermore, it will investigate alternatives to juries, systems used in countries outside of the UK and improvements to be made to the modern jury.[G2][G3][G4][G5][G6] Juror decision making models have been a point of interest for those critiquing the jury system; several empirical studies have created and reviewed models of juror decision making to evaluate the strengths and weaknesses of having a jury (Pennington Hastie, 1981). Cognitive models of juror decision making are the more commonly accepted approaches, specifically that of the Story Model (Pennington Hastie, 1992). The Story Model assumes that jurors construct stories when deciding on a verdict; they will piece together known elements of the case, learn the appropriate verdicts for the individual and then make a decision based on the goodness of fit principle (Pennington Hastie, 1992). Although this structure recognises that individuals will use schemas to interpret the case at hand, it relies on this aspect heavily when individuals create the stories (Pennington Hastie, 1992). Due to the level of variance in individuals schemas, this may be a critique of using jurors in civil and cr iminal trials due to the differences in how they interpret events within the case; it makes it increasingly difficult to come to a unanimous decision, especially in complex cases wherein there are multiple aggravating and mitigating factors involved (Devine, Clayton, Dunford, Seying Pryce, 2001). The Story Model also takes into account the jurors previous knowledge of the legal system when applying their story to the verdict; this again uses real world knowledge court cases which may not derive from reliable sources, such as movies and television shows, which in turn may cause them to arrive at a disagreeable or incorrect verdict (Devine, Clayton, Dunford, Seying Pryce, 2001). Few meta-analyses have reviewed models of juror decision making, however, all have arrived at similar conclusions for improvements (Saks Marti, 1997; Devine, Clayton, Dunford, Seying Pryce, 2001). Variables such as knowledge of legal terms, clarification of verdict options, jury personality types, defendant criminal history and the strength of the evidence presented all affect jury decision outcomes[G7] in studies; without systematically controlling for these factors in studies, it is difficult to firmly accept the level at which jurors are a reliable means of assessing an individuals guilt (Devine, Clayton, Dunford, Seying Pryce, 2001). It is, however, possible to understand improvements to be made to the current jury system from the meta-analyses on decision making models; Saks and Marti (1997) explained that jurors express difficulty in understanding and applying instructions given by the judge. This thought to be due to the specific language used in legal settings, which indiv iduals without training may find difficult to understand; it has been suggested that instructions given by judges should be mediated for language which may confuse jurors and be re-written to allow for clarification (Saks Marti 1997; Hans, 2008). [G8][G9] Juror competency is currently monitored within the United Kingdom, through a comparison of verdicts, analysis of verdict patterns, a series of interviews or questionnaires and also through the use of mock jury studies (Hans, 2008). As previously mentioned, there are concerns that jurors may find it difficult within a court setting to understand the specific legal terminology used by judges, however, there is also evidence that jurors may express difficulty in understanding statistical and economic evidence; this is of particular concern during complex cases with industry specific language, wherein the jury may not be able to discuss the specific factors regarding the case as they are unable to fully comprehend it (ForsterLee, Horowitz, Bourgeois, 1993). There have been studies which disagree with this critique, as findings have shown that Judges and Jurors generally match in their verdicts in cases involving complex language (Eisenberg, Hannaford-Agor, Hans, Mott, Schwab Wells, 200 5). Further studies exploring individual versus group competence wield reassuring results for those in favour of the judicial system; one study exploring theorems of group confidence found that regardless of the overall individual competence, jury members in a larger group are less likely to make mistakes due to being able to deliberate on ideas (Grofman, Owen Feld, 1983). Along with larger group sizes increasing juror competence, several studies have found that note taking and engagement is the ideal way in which juror competence is enhanced; jurors that weigh in, take notes and assume an active role in deliberating the final verdict have been shown to have a higher level of engagement with the case, which leads to a higher level of competence (Heuer Penrod, 1994; Forsterlee Horowitz, 1997). Until 1967, the British court required juries to reach a unanimous verdict; modern UK courts judges will now accept a majority vote, however, in some states in the USA the unanimity rule is still applied (Sunstein, 2014). It is believed that forcing juries to reach unanimous verdicts decreases the chance that an innocent individual is convicted, and the guilty being acquitted, yet research argues that these errors may actually increase if individuals are forced to reach unanimity (Feddersen Pesendorfer, 1998). This is believed to be due to jurors attempting to apply strategic behaviour to their decision making while disregarding their intuition (Feddersen Pesendorfer, 1998). [G10] Further criticisms of the unanimity rule consider that forcing unanimous verdicts increases the time and costs of court trials, and also increases the chance of a retrial taking place (Neilson Winter, 2005; McCormick, 2012). While this supports the use of juries for deciding a persons guilt, there is conflicting research which suggests that allowing for a majority verdict may cause uncertainty in the final outcome; several studies have found that those forced to make unanimous decisions found greater satisfaction and confidence in their decisions, as they felt as though they had discussed evidence more thoroughly and delayed their voting (Diamond, Rose Murphy, 2012; Sunstein, 2014). Furthermore, OConnor (2003) argued that not having unanimity decreases confidence and reliability within the group if one juror disagrees; it is therefore contended that forcing a unanimous decision increases the principle that there is proof beyond reasonable doubt that the individual is guilty. [G11] The role of inadmissible evidence is also a concern within court cases within the United Kingdom due to the increased exposure of online materials which may sway jurors verdicts; inadmissible evidence not only includes pre-trial exposure, but also statements and information revealed in court (Lieberman Arndt, 2000). Certain safeguards are currently in place to ensure that inadmissible evidence does not affect jurors or their verdicts, such as continuance, a reliance on voir dire to remove biased jurors, deliberations, and admonitions (Lieberman Arndt, 2000). It is believed, however, that these precautions have little effect on juror prejudice and in some cases may backfire ([G12]Lieberman Sales, 1997; Lieberman Arndt, 2000; Steblay, Hosch, Culhane McWethy, 2006). This reluctance to ignore inadmissible evidence may be explained by several psychological theories such as Belief Perseverance, Hindsight Bias and Reactance Theory (Lieberman Arndt, 2000). Reactance Theory is the more commonly accepted theory behind this effect as it explains why there is a reluctance with certain forms of evidence; it occurs when individuals feel that their freedom is limited and therefore attempt to re-establish this autonomy and gain control (Torrance Brehm, 1968; Lieberman Arndt, 2000). Empirical research has been found to highlight the negative consequences of inadmissible evidence on jurors; jurors have been found to issue more guilty verdicts when strong inadmissible evidence is given, and the strength of this evidence also has the ability to influence the overall confidence in their verdict (Sue, Smith, Caldwell, 1973). Furthermore, one study conducted by Thompson, Fong and Rosenhan (1981) found that when given pro-acquittal inadmissible evidence, jurors are less likely to convict the defendant; this study also revealed that jurors were able to recognise that their decisions have been influenced by inadmissible evidence. This may be detrimental to the belief that juries are the most appropriate method of deciding an individuals guilt as it demonstrates the reluctance to follow instructions from members of authority; it further establishes that although jurors recognise that they are being influenced by inadmissible evidence, they will do little in terms of reco nsidering their final verdicts. In light of this research, several psychologists have recommended ways to lessen the impact of inadmissible evidence. One meta-analysis covering 48 studies and 8,474 participants has found that while judicial instructions do not lessen the influence of inadmissible evidence, if a rationale is given for disregarding the evidence, such as it having a negative effect on family members of those implicated, the overall influence of it is reduced (Steblay, Hosch, Culhane McWethy, 2006). Further recommendations include jurors repeatedly sworn in before deliberation begins; this allows for an emphasis on the importance of disregarding inadmissible evidence and motivation to follow the law (Lieberman Sales, 1997; Lieberman Arndt, 2000). Research regarding juror decision making has been applied to many stages in legal processes, with courts obtaining information frequently from social scientists to assist in legal battles; psychologists are commonly requested in court as expert witnesses, in cases such as eyewitness testimonies, to educate the jurors and ensure they competent when deliberating on the trial (Kassin, Ellsworth Smith, 1989; Pennington Hastie, 1990). Although the role of [G13]an expert witness calls for those of sound scientific and technical understanding to assist the jury, there are critics who argue that those who testify as an expert may hold biases; claims that researchers appearing in particularly violent or morally ambiguous cases, such as those involving rape or child molestation, may still hold personal values when issuing a statement, therefore when these personal values appear they may sway the jury in a certain direction (Loftus Monahan, 1980). In this case it is not the jurys responsibil ity to counteract this measure, however, the defence, [G14]prosecution, [G15]and judge must ensure that counterclaims are issued should bias remarks enter the court (Loftus Monahan, 1980). Nevertheless, this remains a criticism of the practicality of using juries when deciding an individuals guilt. [G16][G17] With these criticisms of the modern jury in mind, some researchers have explored alternatives to juries which include specially qualified jurors and the concept of a non-jury tribunal (Norris, 1993). There are currently few specifications when an individual is called to jury service, with exceptions including a history of mental health conditions, reduced English speaking or writing aptitude or those who have served a prison sentence in the last five years; due to the limited criteria, researchers have expressed concern that those presiding over important decisions may not possess the acumen to understand the ramifications of sentencing, therefore, minimal educational qualifications should be imposed (Norris, 1993). Norris (1993) has explained that it would be desirable that those serving on a jury hold specialist qualifications especially in complex cases, for example, a bachelors degree. [G18]Norris (1993) continues by explaining that if minimal educational qualifications are not e nough to ensure the competence of jurors, then expert non-jury tribunals may be of use in complex, industry-specific cases.   [G19][G20][G21][G22] Although juror incompetence is a concern, both of these suggestions appeal for educated jurors to be called more frequently into jury service, especially for more convoluted cases; criticisms of these improvements include the criterion in which we define a complex case, that jurors may no longer be considered peers but superiors, and that some industries are already limited in their personnel, therefore, frequently calling them to jury service may negatively affect their area of work (Hersch, 2003). Henkel (1976) explains that alternatives and improvements should be made, however, until these concerns are resolved smaller changes should be made to ensure the competence of jurors. There are several alternatives to juries which are currently used within other countries, such as the use of religious law which utilises divine doctrines to pass judgement, or a mixed system of civil and religious law which recognises cultural and lawful judgements, and full tribunals without the use of juries (Frase, 1990). Due to the mix of cultures in the United Kingdom, the reintroduction of religious law would not be advisable to improve the current judicial system. France officially abolished trial by jury in 1941 and now uses six lay judges, and three professional judges to preside over cases; in this system there are separate tribunals for how serious the offence is and the type of offence involved (Frase, 1990). While we may look to this structure to improve our own judicial system, one concern would be that they would not represent those from the community on trial, as they are more likely to come from a primarily middle class and legal background (Frase, 1990). To conclude, the criticisms offered in the current essay explain that the current judicial system is not without flaw. The structure currently used within the United Kingdom could make several improvements to increase the degree to which jurors make an appropriate decision, such as specialists which assist jurors in understanding the language used within the court system, the encouragement of note taking and taking an active role in deliberation, further precautions taken to lessen the impact of inadmissible evidence, and safeguards in place to ensure that prejudices from expert witnesses do not influence jurors in their verdicts. It is advised that policy makers take these issues into account when discussing the current regulations in place. Before we are able to implement improvements and look to other systems for advice, we must appreciate that the current judicial structure has been in the United Kingdom, and influenced other countries systems such as the United States, for a num ber of years. Although the current essay establishes that juries may not be the more appropriate method for deciding a persons guilt, until realistic alternatives are established and tested, juries will remain to be the only viable option within the United Kingdom.[G23] References Berger, B. (2011). Judges, Juries, and the History of Criminal Appeals. Law And History Review, 29(01), 297-302. doi: 10.1017/s073824801000129x. Devine, D., Clayton, L., Dunford, B., Seying, R., Pryce, J. (2001). Jury decision making: 45 years of empirical research on deliberating groups. Psychology, Public Policy, And Law, 7(3), 622-727. doi: 10.1037//1076-8971.7.3.622. Diamond, S., Murphy, B., Rose, M. (2012). The Kettleful of Law in Real Jury Deliberations: Successes and Failures. SSRN Electronic Journal, 106(4), 1537. doi: 10.2139/ssrn.1641552. Eisenberg, T., Hannaford-Agor, P., Hans, V., Waters, N., Munsterman, G., Schwab, S., Wells, M. (2005). Judge-Jury Agreement in Criminal Cases: A Partial Replication of Kalven and Zeisels The American Jury. Journal Of Empirical Legal Studies, 2(1), 171-207. doi: 10.1111/j.1740-1461.2005.00035.x. Feddersen, T. Pesendorfer, W. (1998). Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts under Strategic Voting. American Political Science Review, 92(01), 23-35. doi: 10.2307/2585926. Forsterlee, L. Horowitz, I. (1997). Enhancing Juror Competence in a Complex Trial. Applied Cognitive Psychology, 11(4), 305-319. doi: 10.1002/(sici)1099-0720(199708)11:43.0.co;2-j. ForsterLee, L., Horowitz, I., Bourgeois, M. (1993). Juror Competence In Civil Trials: Effects Of Pre-instruction And Evidence Technicality. Journal Of Applied Psychology, 78(1), 14-21. doi: 10.1037//0021-9010.78.1.14. Frase, R. (1990). Comparative Criminal Justice as a Guide to American Law Reform: How Do the French Do It, How Can We Find out, and Why Should We Care? California Law Review, 78(3), 539. doi: 10.2307/3480841. Grofman, B., Owen, G., Feld, S. (1983). Thirteen Theorems In Search Of The Truth. Theory And Decision, 15(3), 261-278. Doi: 10.1007/bf00125672. Hans, V. (2008). Jury Systems Around the World. Annual Review Of Law And Social Science, 4(1), 275-297. doi: 10.1146/annurev.lawsocsci.4.110707.172319. Henkel, J. (1976). The Civil Jury-Modification Or Abolition. American Business Law Journal, 14(1), 97-109. doi: 10.1111/j.1744-1714.1976.tb00442.x. Hersch, J. (2003). Jury Demands and Trials. SSRN Electronic Journal, 447. doi: 10.2139/ssrn.487781. Heuer, L. Penrod, S. (1994). Juror Notetaking And Question Asking During Trials: A National Field Experiment. Law And Human Behavior, 18(2), 121-150. doi: 10.1007/bf01499012. Kassin, S., Ellsworth, P., Smith, V. (1989). The General Acceptance Of Psychological Research On Eyewitness Testimony: A Survey Of The Experts. American Psychologist, 44(8), 1089-1098. doi: 10.1037//0003-066x.44.8.1089. Lieberman, J. Arndt, J. (2000). Understanding The Limits Of Limiting Instructions: Social Psychological Explanations For The Failures Of Instructions To Disregard Pretrial Publicity And Other Inadmissible Evidence. Psychology, Public Policy, And Law, 6(3), 677-711. doi: 10.1037//1076-8971.6.3.677. Lieberman, J. Sales, B. (1997). What Social Science Teaches Us About The Jury Instruction Process? Psychology, Public Policy, And Law, 3(4), 589-644. doi: 10.1037//1076-8971.3.4.589. Loftus, E. Monahan, J. (1980). Trial By Data: Psychological Research As Legal Evidence. American Psychologist, 35(3), 270-283. doi: 10.1037//0003-066x.35.3.270. McCormick, R. (2012). The Unanimous State. The Journal Of The Rutgers University Libraries, 23(1). doi: 10.14713/jrul.v23i1.1384. Neilson, W. Winter, H. (2005). The Elimination of Hung Juries: Retrials and Nonunanimous Verdicts. International Review Of Law And Economics, 25(1), 1-19. doi: 10.1016/j.irle.2005.05.004. Norris, W. (1993). Relevant Conduct: Sentencing Hearings as a Substitute for Jury Trials. Federal Sentencing Reporter, 5(4), 193-194. doi: 10.2307/20639552. OConnor, S. (2003). William Howard Taft and the Importance of Unanimity. Journal Of Supreme Court History, 28(2), 157-164. doi: 10.1111/1540-5818.00061. Pennington, N. Hastie, R. (1981). Juror Decision-Making Models: The Generalization Gap. Psychological Bulletin, 89(2), 246-287. doi: 10.1037//0033-2909.89.2.246. Pennington, N. Hastie, R. (1990). Practical Implications of Psychological Research on Juror and Jury Decision Making. Personality And Social Psychology Bulletin, 16(1), 90-105. doi: 10.1177/0146167290161007. Pennington, N. Hastie, R. (1992). Explaining the evidence: Tests of the Story Model for juror decision making. Journal Of Personality And Social Psychology, 62(2), 189-206. doi: 10.1037/0022-3514.62.2.189. Saks, M. Marti, M. (1997). A Meta-Analysis Of The Effects Of Jury Size. Law And Human Behavior, 21(5), 451-467. doi: 10.1023/a:1024819605652. Salerno, J. Diamond, S. (2010). The Promise Of A Cognitive Perspective On Jury Deliberation. Psychonomic Bulletin Review, 17(2), 174-179. doi: 10.3758/pbr.17.2.174. Smith, G. Wales, C. (1999). The Theory and Practice of Citizens Juries. Policy Politics, 27(3), 295-308. doi: 10.1332/030557399782453118. Smith, G. Wales, C. (2000). Citizens Juries and Deliberative Democracy. Political Studies, 48(1), 51-65. doi: 10.1111/1467-9248.00250. Steblay, N., Hosch, H., Culhane, S., McWethy, A. (2006). The Impact on Juror Verdicts of Judicial Instruction to Disregard Inadmissible Evidence: A Meta-Analysis. Law And Human Behavior, 30(4), 469-492. doi: 10.1007/s10979-006-9039-7. Sue, S., Smith, R., Caldwell, C. (1973). Effects of Inadmissible Evidence on the Decisions of Simulated Jurors: A Moral Dilemma. Journal Of Applied Social Psychology, 3(4), 345-353. doi: /10.1111/j.1559-1816.1973.tb02401.x. Sunstein, C. (2014). Unanimity and Disagreement on the Supreme Court. SSRN Electronic Journal, 100, 769. doi: 10.2139/ssrn.2466057. Thompson, W., Fong, G., Rosenhan, D. (1981). Inadmissible Evidence And Juror Verdicts. Journal Of Personality And Social Psychology, 40(3), 453-463. doi: 10.1037//0022-3514.40.3.453. Torrance, E. Brehm, J. (1968). A Theory of Psychological Reactance. The American Journal Of Psychology, 81(1), 133. doi: 10.2307/1420824. 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Turnkey Rental Properties Investment

Turnkey Rental Properties Investment AÂ  type of rental property that many first-time or younger investors like to try their hand at is a turnkey rental. The term turnkey describes any product, property or otherwise, that is ready for the consumer immediately after the time of purchase. When the term is used to describe real estate investments, its meant that the investor buys, fixes up, and sells or rents the property through a third party, usually from a distance. The goal is to make the whole process as simple as possible, so all that has to be done is turning a key. Turnkey Companies There are many different turnkey real estate providers all over the country, and not all of them operate the same way. Some providers will buy a property, fix it up, rent it out, and then sell it to you. However, for the purposes of this book, thats not the kind were going to talk about. Were focused on using turnkey providers to find properties to rent. Some companies will do everything for you, while some will have you do the heavy lifting if there is rehab work that needs to be done, so its important to know going in what method your company will be using, and what will be expected of you. Benefits to turnkey investing While flipping houses and wholesaling are great options for real estate investing, some investors prefer turnkey investments because it affords them several benefits over doing it all yourself. Distance: The most obvious benefit that many investors reap from turnkey investments is the ability to invest in a property from a distance, without having to live in the area. Its not always easy to be a landlord, and the challenges that come with that are often made even more difficult when you live several thousand miles away from the property. Many people who live on either coast, or even are located outside the United States, rely on turnkey companies to invest in great markets, like the Midwest, where cash flow tends to be highest. Insight into the market: Another reason many investors prefer to use turnkey companies over doing everything themselves is that a good turnkey company will know their market, likely far better than an outsider could. As a lone investor, you might be able to do some research into the area and learn about things like crime reports, school system ratings, and price ranges, but those are all just naked numbers without knowledge of the heart of the area, something that good turnkey companies have. They know how the people of an area think and feel about that area: which blocks are popular and why, which area of town is better than another. Theyll know what kind of reputations certain businesses and neighborhoods have, and theyll be aware of shifts in the local economy. This kind of knoweldge is generally limited to long-time locals of an area, which a good turnkey company should be. Skilled marketers: Since good turnkey companies might buy, sell, and rent dozens or hundreds of homes and properties per month, they have a lot of experience in marketing those properties, and many more resources than a single investor may have on their own. As well as having many resources, their resources are also varied, and they may use things like radio ads, television ads, billboards, and more, to help drive interested and motivated tenants and sellers to their business. Because of their experience and resources, they may be able to find better deals than you could, as well as be able to get tenants faster than you could. Experience managing properties: Most people, real estate investors included, are not good managers. However, if you work with a turnkey company, you have someone to help with this. Turnkey companies are generally pretty experienced in dealing with contractors during rehab and general maintenance, as well as tenants. Their experience often allows them to make better decisions than someone lacking that experience would make, as well as cut down on the learning curve experienced by a new investor/manager. Professional, helpful staff: Unless youd like to take care of all of the rehab, maintenance and upkeep, and administrative duties that come with being a property manager, a turnkey provider can help. They usually have in-house staff to take care of things like a broken toilet, to answer the phones, and to sign leases with new tenants. If they dont have in-house staff, they will work closely with vendors to provide these services. Keeping it simple: The final benefit to turnkey investing could be said to be one of the most important: simplicity. No matter which turnkey company you invest with, they all have the same goal: to make the investment easier for you. If you invest in a property on your own, you have to take care of all of the moving parts yourself, which many investors find to be overwhelming. The ideal turnkey company seeks to make the investment simple for you, so all you have to do is receive and write checks. It is for this reason alone that many investors have turned to turnkey investing. Downsides to turnkey investing While there are many benefits to investing in turnkey rental properties, there are also downsides, and these are the reasons why many investors stay away from turnkey investments. Its important to be aware of possible downsides and pitfalls of any investment youre thinking of making, and this is no different when considering whether to invest in a turnkey rental property. Here are the two main downsides to turnkey investing: Trust is required: This is possibly the greatest risk when you choose to invest in a turnkey rental property. You must place a great deal of trust in the provider. Turnkey investors are, as I mentioned earlier in the chapter, generally located far from their investment property. Therefore they must place a great deal of trust in their turnkey company, trusting them to choose a property that will yield a profit, in a desirable location, and find a reliable tenant, as well as manage that tenant. The turnkey company will get paid regardless of whether or not you, as the investor, make any profit off of the property, so its a great deal of trust that you place in one of these companies to make you money. It is very easy for a turnkey provider to take advantage of an out-of-town investor who is unfamiliar with the area, convincing them to invest in a property in a bad location. There have been many stories told by investors where that situation happened to them, and the property ended up being whats referred to as a pig in lipstick, one that seemed fine but immediately after investing began to cost the investor a lot of money in repairs and other issues. Finances: The second downside to turnkey rentals is another great risk: that of money. A turnkey company is a business just like any other, and the driving force behind any business is to make money. They have to in order to stay operable, and they will do this several ways. Turnkey companies will often buy properties at a nice discount, and then turn around and sell the investment to you at a higher rate, essentially flipping the property to you, for a high price. After that, they make yet more money by managing the property for you. This is the catch to turnkey properties. You cant have the simplicity of this kind of investing without paying a premium for it. Either you have simplicity, or you pay less and deal with complications yourself, but either way you pay, whether its in money or your time. Turnkey companies operate on the idea that people want to simplify their investments, and make a profit off of that desire. That said, as I mentioned before, turnkey companies are very go od at marketing, and are very often able to find incredible deals in their area, so even if theyre going to make a great profit when they sell the investment to you, youre still often getting a very good deal. Keep in mind important details Turnkey investing can be a great option for investors who wish to have a more hands-free investment, those who are located in more expensive markets where they may be unable to find good investments for their budgets, and newer investors who would like some help with the particulars and complications that come along with real estate investing. Turnkey companies have great resources for investors. However, it is very important to be a smart investor. Experts suggest that, even though turnkey investing is a great option for those who are located far away from the property, prospective investors should go check out the property in person, even if that means flying across the country, so that they know what theyre investing in. Its also advisable to know your property manager well. As an investor, youll be putting a lot of trust into the turnkey company, so its important that youre on the same page. Some helpful and important things to ask your property manager are: How much experience does your company have? What fees does your company charge? How long, on average, does it take your company to find tenants for new properties? Will your company provide statements each month so I can keep track of expenses and income? What are your companys weaknesses? How well do you know the area? Generally, turnkey rental properties are a great form of real estate investing for those investors without the time, interest, or ability to personally renovate and maintain real estate investments. The most important thing to remember about turnkey investments is to do your research and know what youre getting into, and not be blinded by the possible benefits to this kind of investment.