Analysis on Burger King Worldwide Inc Essay - 1299 Words

Analysis on Burger King Worldwide Inc. (BKW) Burger King (BKW) is the second largest fast food hamburger chain in the world which was founded in 1954; it operates in over 12,600 locations serving over 11 million customers daily in 83 countries and territories worldwide. About 95 percent of Burger King Restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. This company became a publically traded company in this year June 20 2012. Therefore, only current year data will be presented in this report. Price-Earnings ratio In general, a high Price Earnings Ratio recommends that investors expect higher earnings growth in the future relative to companies†¦show more content†¦The return on Equity measures the amount of profit that a company generates through the use of shareholders’ equity. The table below shows ROE of the company that 7.06 percent which is relatively lower than average ROE in the sector. Hence, weak ability to generate cash flows internally. Moreover, ROA is low; it implies that the company is carrying high debt amount. Return on Invested Capital ratio is similar to the return on equity calculation; however, it includes long term debt as part of the leverage. As we see ROIC is greater than weighted average cost of capital (WACC), which are 5.0 percent, and 4.20 percent respectively. Thus, the company will be raising shareholders’ value. A profit margin is also useful when comparing companies in similar sectors. A higher profit margins reflect a more profitable com pany which has control over its costs compared to its competitors. According to the graphs below, net profit margin is 3.77 percent which means the company has a net income of $0.0377 for each dollar of sales. Comparing with average net profit margin, BKW has 3.43% lower than average competitors sectors. Therefore, the BKW has relatively low ROA, ROE, and Profit Margins. However, the company has higher ROIC than WACC. Probably, the company spent lots of maintenance cost to maintain the corporation. It is new to stock market; it might have potential to become a larger corporation. Regression model for BKW The usefulShow MoreRelatedBurger King : The Financial Analysis1016 Words   |  5 Pages McDonald’s V.s. Burger King: The Financial Analysis Paige Pruitt Florida Southwestern State College â€Æ' Abstract: Finances were examined in affective processing, in the context of figuring out who should the people invest in to get there profitable outcome. Both MCD and QSR are going to have their differences in what they each bring to the table, however, reviewing the cash flow, income statement and financial activities, this narrative research paper is going to explain what is going to haveRead MoreCompany Analysis On Burger King1549 Words   |  7 PagesName: M1 Consulting Inc. 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Technology Sociology and James Stacey Taylor Free Essays

Kenneth Hunter Dr. Carpenter PL401 13 November 2012 James Stacey Taylor â€Å"In Praise of Big Brother† This essay will argue the point on why we should learn to stop worrying and love (some) government surveillance. James Stacey Taylor’s idea about government surveillance monitoring each state will blow you away or open your eyes. We will write a custom essay sample on Technology: Sociology and James Stacey Taylor or any similar topic only for you Order Now I will draw attention to some good points, bad points, and my beliefs and why I think this way about his view. By the end of this essay I hope to have answered your entire question on this topic of interest. Which is government surveillance could be a positive or negative problem for people? The first inquiry to be address is how Dyson explained his pessimistic doubts that technological innovations frequently serve to increase social oppression and inequality. I will answer this in a two part answers, in which I will tell you how Dyson look at technology was used and who benefited from the changes. Dyson started addressing his pessimistic doubts with examples from history and his own life. He talked about how technology started out in the fourteenth century with printing becoming the first technology transformation in Europe. With this new invention, people all through Europe had the able to have books to read and educate themselves as well as their fellow countrymen by educating themselves. The technology of printing gave power to the reproduction of the Bible which led directly to the Protestant Reformation in Northern Europe. By using the technology the Protestant ethic carried it with perpetual striving for social justice a vision that was seldom achieved. The next things Dyson begin pointing out was the sensibleness of technology which led the way for social justice during the next two centuries. Dyson talked about how public services such as clean water, sewage treatment, antibiotics and vaccines helped with bring the gap between rich and poor closer. The reason for this as he pointed out was these technologies were effective in protecting the rich from contagion and sickness if also available to poor. So, with being said in some countries where public health technologies are in enforced by law there is no large gaps. He also talked about how technologies starting making synthetic materials to bridge the gaps by introduced fake furs, brilliant colors and silk. By doing this everyone was able to afford clothes of fashion and no was able to tell a person social class by the clothes they wore. So where does the social oppression exactly begin for people? Will I believe it start with new technology and gadgets introduce to social as new a improve way to something done. What I mean by this statement for example the IPhone or any smartphone. While everyone has a cellphone to communicate with friend and family a simple function so we think. Then technology comes along a change the game with apps, internet, and built-in cameras all in a phone that cost about $600 in the beginning. Only people that could afford this new slack technology were the people with money and then newer one hit the social world pushing the older version to be affordable for everyone. So, point is like a new toy we get at Christmas time that you didn’t want your friends to touch because we have to keep it for self. Until we are bored and no longer wanting to play with it and the newest has wears off, we are more apt to allow others to enjoy it, as long as there is something better or newer to replace the old one. So, gaps are made with each turn of new technology pushing the way. In conclusion, Dyson hope technology is used to equally by everyone rich and poor. I believe he pointed out everything that would equally shared by all people no matter their social status. Technology and Social Justice will always have some type of gaps between people because money is driving force behind new technology. Dyson never pointed this out but know these gaps were between rich and poor. At the end of his essay said there was no harm to hope. I can see your point on this because Kurzweil took you on ride on many things. From a computer storage stand point look at what we start with 250mb and now we are at 3Tb for storing information. We are growing at a rate that could way out of control or in our control that is the question? We have to understand what direction these things are taking us because it will be a limit to our growth. Kurzweil know that with growth in time bad things would follow and would have to be ready to protect our self. While reading the case against perfection by Michael Sandel he pointed out a lot of thing we do as humans to modify ourselves by technology. Things like muscles in nhancement to improve our muscle loss from old age but when technology is used for performance enhancement, running, weight lifting, and home slugger are just to name a few. The able to change person genes before even being born is wrong on so many levels. The ethics surrounding this theory wouldn’t allow humans to humans anymore. Everyone is born different for a reason and everyone is given thei r on gift at birth. By using this type of technology to change who we are would cause more chaos then good. Like Sandel pointed with the cloned sheep Dolly which died prematurely with abnormalities was unsafe. The sad truth behind all this type of technology is no matter how we try to change or improve it the cycle death in the end. Sandel point I believe is we have a right to choose our own path in life and should only everything to change our unique able to be different. In â€Å"Preventing a Brave New World† (pp. 317-329), Leon Kass concludes that reproductive and therapeutic cloning of human embryos is unethical. What are the exact steps in Kass’s argument for this conclusion? What is your assessment of the strengths and weaknesses of this argument? How to cite Technology: Sociology and James Stacey Taylor, Essay examples

Self Representation for Healthcare Services - MyAssignmenthelp.com

Question: Discuss about theSelf Representation for Healthcare Services. Answer: I believe that nursing practice advocates the requirement of administering healthcare services in accordance with the ethical issues faced by the patient population in the healthcare setting (Shahriari, et al., 2013). The strategies, goals and actions that I would require executing in the healthcare settings will be based on the individualized requirements and healthcare challenges faced by the treated patients. I consider the requirement of preserving human dignity, social justice, altruism, decision-making autonomy, precision in caring, human relationships, responsibility towards healthcare-profession, trust, sympathy and individual competency while administering healthcare services to the patients in a healthcare setting. I consider the requirement of accomplishing my professional obligation in terms of administering reliable and safe healthcare services to the eligible patients (Nganga Byrne, 2015). The nurse professionals must acquire authority and control over the work environ ment in the healthcare setting and delivery of patient-care services. I think that timely sharing of significant patient information between the multidisciplinary healthcare professionals is of paramount importance for systematically resolving the patient-related issues (Nganga Byrne, 2015). The nurse professionals need to be respectful to the patients and behave politely while undertaking healthcare interventions for the systematic enhancement of wellness outcomes of the treated patients. I believe in the requirement of establishing a therapeutic relationship between nurse professionals and treated patients for the effective enhancement of patient-care outcomes in the clinical setting. The nurse professionals need to establish effective communication pattern with the treated patients with sincerity, kindness and courtesy (Kourkouta Papathanasiou, 2014). Nurse professionals need to deploy scientific methods for the successful acquisition of patient-care outcomes. They must impleme nt evidence-based nursing care strategies for reducing the treatment barriers and improving the pattern of patients trust and compliance to the recommended treatment regimen. I think that the nursing profession is occupied with many challenges that require effective mitigation with the deployment of accountable and competent nurses. The nurse professions need to exhibit transparency while serving the patient population. They should articulate facts and compare them with the findings of evidence-based medicine while undertaking several decisions for the enhancement of healthcare outcomes of the treated patients (Baumann, et al., 2014). I think that the accountable nurse professionals might require shifting their boundaries while dealing with complex medical emergencies. However, they need to remain well-aware regarding their standards and duty of care and should understand the associated legalities of the nursing profession (Cox, 2010). I think that registered nurse professionals sho uld practice the healthcare norms stipulated by Nursing and Midwifery codes of ethics in the context of reducing the burden of diseases across the community environment (Griffith, 2015). I think that the nurse professionals should actively comply with the approaches advocated by Synergy Model for effectively enhancing their performance and associated patient-satisfaction rates following the administration of nursing-care interventions. Synergy Model advocates the requirement of configuring the pattern of understanding and trust between the healthcare teams and treated patients (Khalifehzadeh, et al., 2012). The model also emphasizes the requirement of active collaboration between healthcare teams for enhancing the wellness outcomes. I believe that the nurse professionals should systematically utilize these standardized approaches while dedicatedly serving the patient population. References Baumann, A. et al., 2014. Accountability: The Challenge for Medical and Nursing Regulators. Healthcare Policy, 10(SP), pp. 121-131. Cox, C., 2010. Nursing Management. Legal responsibility and accountability, 17(3), pp. 18-20. Griffith , R., 2015. Accountability in district nursing practice: key concepts. British Journal of Community Nursing, 20(3), pp. 146-149. Khalifehzadeh, A., Jahromi, M. K. Yazdannik, A., 2012. The impact of Synergy Model on nurses performance and the satisfaction of patients with acute coronary syndrome. Iranian Journal of Nursing and Midwifery Research, 17(1). Kourkouta, L. Papathanasiou, I. V., 2014. Communication in Nursing Practice. Materia Sociomedica, 26(1), pp. 65-67. Nganga, N. Byrne, M. W., 2015. Professional practice models for nurses in low-income countries: an integrative review. BMC Nursing. Shahriari, M., Mohammadi, E., Abbaszadeh, A. Bahrami, M., 2013. Nursing ethical values and definitions: A literature review. Iraninan Journal of Nursing and Midwifery Research, 18(1), pp. 1-8. Reflection of a Healthcare Event in Nursing Practice in the Context of Rolfe Model Recently, a healthcare event highlighted in my practice setting the requirement of administering therapeutic interventions to the treated patients (in the clinical setting) while surpassing any scope of inappropriate dose administration. I consider the requirement of elaborating this healthcare event in the context of Rolfe Model (Rolfe, 1999). I believe that accuracy in configuration of clinical reports regarding diagnostic or therapeutic interventions is of paramount importance for effectively retaining the trust and confidence of the patient population of the administered clinical interventions (Hannaford, et al., 2013). The healthcare event related to in my practice setting revealed the pattern of inappropriate dosage administration by an esteemed oncologist to the treated cancer patient in the hospital setting. The hospital authorities could not clarify whether the event occurred due to inappropriate dose configuration or because of preparation of a fault report by the concerned physician. I personally believe that the concerned hospital did not acquire a systematic approach for administering appropriate therapeutic dosage to the treated patient with the engagement of qualified nurse professional. I think that the nurse professionals need to identify and understand the medication adherence guidelines stipulated by the World Health Organization for the systematic enhancement of patient-care outcomes in the clinical setting (Jimmy Jose, 2011). They need to evaluate patients behavioural patterns and the level of their compliance to the therapeutic regimen while administering therapeutic dosages in accordance with the physician recommendations. Indeed, the non-adherence of patients to the recommended treatment approaches might also facilitate medication errors and associated debilitating patient outcomes. Most importantly, miscommunication of therapeutic plans can give rise to serious treatment flaws, thereby compromising with safety and life of the treated p atients (Jimmy Jose, 2011). I believe that the absence of a collaborative approach at the prescribing level resulted in the treatment/report configuration flaw thereby leading to chemotherapy dosage report discrepancy. The inappropriate dosage administration could have resulted in life threatening condition for the patient and incorrect report formulation might have misguided the healthcare professionals while configuring nursing care goals and prospective treatment interventions. The hospital might also have lacked system of accurately tracking the documentation related to medical-decision making in the clinical database. The deployment of qualified nurses who acquire appropriate skills for configuring the clinical notes and registered the patient findings in medical database is highly required for avoiding the scope of errors and flaws in the process of medical-decision making. I think that absence of the pattern of compassionate care in the healthcare setting resulted in the pattern of inappropriate dosage administration and subsequent incorrect report preparation by the healthcare professional. I believe that from the nurses viewpoint, the nurse professionals need to acquire appropriate behavioural skills and adaptations with the objective of administering errors free medical interventions for the systematic enhancement of patient outcomes (Cheragi, et al., 2013). I think that the nurse professionals need to understand the adversities and profound consequences faced by the healthcare professionals following the errors in medication by healthcare professionals. Improper utilization of drugs and additional hospitalization investments increases the financial burden on the treated patients and predispose them towards acquiring co-morbid state that significantly increase their disease burden across the community environment (Cheragi, et al., 2013). I could have taken proactive steps in the presented situation for effectively reducing the deviation of healthcare professionals from standardized medical procedures. In the current situation, the oncologist deviated from acquiring ap propriate behaviour and attitude while catering to the healthcare requirements of the treated patients. I think that many factors can divert the attention of the treating physicians and nurses while delivering medication interventions to the treated patients (Choo, et al., 2013). These distractions must be systematically avoided with the objective of reducing the potential interruptions that restrain nurses and physicians while administering therapeutic dosages to the eligible subjects. I could have modified the pattern of work strategies of nurses and physicians while increasing their interdisciplinary coordination for reducing the scope of errors in the transfer of clinical information. I could have facilitated the organization of education sessions with the objective of elevating the level of awareness of patients regarding their healthcare requirements. Patient knowledge of therapeutic dosage in the presented event could have resulted in her resistance to the administration of i ncorrect dosage. Furthermore, knowledge of nursing professional regarding the recording and transfer of therapeutic information in clinical database could have reduced the scope of preparation of erroneous chemotherapy dosage report. I think that nurse professionals and physicians need to minimize potential gaps in their medication knowledge that might lead to serious flaws in patients therapeutic management (Simonsen, et al., 2014). In the presented event, probably the physician did not communicate the prescription information appropriately with the concerned nurse professional that resulted in the fatal medication error that considerably increased the risk of the treated patient in terms of acquiring clinical complications. I believe that the enhancement of staffing levels and elevation of nurses knowledge regarding clinical documentation, medication technique, route of administration, unauthorized access to medication, missing medication, dosage and timings is highly warranted for ascertaining the safe administration of treatment interventions to the eligible patients (Feleke, et al., 2015). I believe that the healthcare professionals and must attain special training for evidentially investigating the causes o f treatment errors and appropriately documenting them in the clinical database of every patient who receives treatment in the clinical setting (Keers, et al., 2013). I consider the requirement of undertaking evidence-based strategies for reducing the occurrence of preventable adverse drug events in the clinical setting. Indeed, nurse professionals need to effectively coordinate with pharmacists, nutritionists, physicians and other healthcare team members for effectively improving the quality of treatment interventions and minimizing errors in therapeutic administration. I think that healthcare professionals need to minimize the unsafe cats, lapses and slips and knowledge-based mistakes while undertaking therapeutic administration to the treated patients. I also believe that violation of the instructions provided by experienced physicians should be avoided by nursing professionals and they need to escalate clarifications in the case of medication-based discrepancies for their systema tic resolution. References Cheragi, M. A., Manoocheri, H., Mohammadnejad, E. Ehsani, S. R., 2013. Types and causes of medication errors from nurse's viewpoint. IJNMR, 18(3), pp. 228-231. Choo, J., Johnston, L. Manias, E., 2013. Nurses' medication administration practices at two Singaporean acute care hospitals. Nursing and Health Sciences, 15(1), pp. 101-108. Feleke, S. A., Mulatu, M. A. Yesmaw, Y. S., 2015. Medication administration error: magnitude and associated factors among nurses in Ethiopia. BMC Nursing. Hannaford, N. et al., 2013. Learning from incident reports in the Australian medical imaging setting: handover and communication errors. BJR, 86(1022). Jimmy, B. Jose, J., 2011. Patient Medication Adherence: Measures in Daily Practice. Oman Medical Journal, 26(3), pp. 155-159. Keers, R. N., Williams, S. D., Cooke, J. Ashcroft, D. M., 2013. Causes of Medication Administration Errors in Hospitals: a Systematic Review of Quantitative and Qualitative Evidence. Drug Safety, 36(11), pp. 1045-1067. Rolfe, G., 1999. To fill the gap between theory and practice: a model of clinical nursing. Professioni Infermieristiche, 52(2), pp. 80-83. Simonsen, B. O., Daehlin,, G. K., Johansson, I. Faru, P. G., 2014. Differences in medication knowledge and risk of errors between graduating nursing students and working registered nurses: comparative study. BMC Health Services Research. Current Media Article Addressing the Healthcare Event An article published by CBC news exposes a similar event that occurred because of a fatal medication error by the healthcare team (CBC-News, 2014). The administration of the wrong medication to an elderly patient resulted in her brain damage and cardiac attest in the clinical setting. The patient died immediately after the administration of inappropriate medicine. The patient was presented earlier in the emergency room department with several questions regarding her treatment regimen and related dosage requirements. Most probably, nurse professionals and physicians could not effectively address the patients concerns that resulted in her lack of knowledge regarding the treatment regimen. Furthermore, healthcare teams did not acquire situational awareness in relation to the healthcare quality and patient safety issues (IOM, 2010). Resultantly, nobody could track the serious flaw in the medication administration that resulted in the unexpected death of the treated patient. I believe tha t the hospital medical database did not systematically register the therapeutic adversities experienced by the treated patients. Eventually, due to lack of awareness regarding the therapeutic regimen, healthcare professionals administered inappropriate medication to the patient, thereby leading to her untimely death. Indeed, the healthcare teams (including nurses, physicians, paramedics and medical students) must acquire knowledge of evidence-based medicine databases for effectively recording and tracking the therapeutic information, clinical history and history of adverse events experienced by the treated patient (Novak, et al., 2010). Eventually, this step will safeguard the health and wellness of the patient while undertaking treatment interventions in the clinical setting. I believe that the absence of knowledge regarding the mechanisms warranted for tracking the treatment barriers attributed to the administration of incorrect drug to the treated patient. The nurses and physicia ns might have encountered difficulty in understanding the personal perceptions, culture, religious approaches, beliefs, apprehensions and compliance level of the patient that resulted in difficult therapeutic management and administration of inappropriate medicine in the state of confusion. I think that in the context of the presented event, the nurses and physicians require to develop interdisciplinary communication for configuring collaborative strategies with the objective of evaluating the individualized treatment discrepancies related to the treated patient (Subramaniam, et al., 2010). I believe that the nurse professionals need to acquire knowledge regarding holistic care approaches and accordingly treat the psychosocial and spiritual manifestations of the patient while concomitantly disseminating awareness regarding therapeutic regimen and associated adverse effects. Nurse professionals need to acquire autonomy in such a manner that they remain accountable for their tasks and comply with the medication administration standards for reducing the scope of medication errors and associated patient adversities in the clinical setting. I think that the healthcare teams need to develop potential leaders for stabilizing their workload with the objective of managing the healthcare requirements in a systematic manner. I believe that the stringent compliance of patients with the professional norms, conventions and ethics assist them in managing their healthcare behaviours in the context of administering safe healthcare interventions to the patient population. Nurse professionals need to utilize motivational factors while administering healthcare interventions to the treated patients in the healthcare setting. They must utilize their prior hospital experiences in the context of evaluating the healthcare needs and treatment challenges of the admitted patients. I think that the knowledge of previous medication errors can provide a thorough insight to the nurse profess ionals in the context of configuring systematic strategies for minimizing their occurrence of treatment errors in their clinical practice. I believe that the professional environment of the clinical setting must equitably consider the accountability of each medical professional in relation to the assigned healthcare requirement (Zamanzadeh, et al., 2015). The provision of penalizing the medical professionals in cases of careless medication errors is highly required for the administration of safe therapeutic interventions to the eligible patients. I think that the nurse professionals as well as physicians need to configure therapeutic communication with the treated patients and conscientiously administer person-centred, holistic and evidence-based treatment interventions for safeguarding the pattern of health and wellness of the treated patients. I also believe that the nurse professionals as well as physicians need to develop compatibility between their healthcare-profession, behavi our and personalities with the objective administering culturally appropriate healthcare interventions to the treated patients while systematically minimizing the scope of medication errors. References CBC-News, 2014. Hospital medication error kills patient in Oregon. [Online] Available at: https://www.cbsnews.com/news/oregon-hospital-medication-error-kills-patient/ [Accessed 27 05 2017]. IOM, 2010. Creating Situational Awareness: A Systems Approach. In: Medical Surge Capacity: Workshop Summary.. s.l.:National Academies Press. Novak, K. et al., 2010. Awareness and Use of Evidence-based Medicine Databases and Cochrane Library Among Physicians in Croatia. Croatian Medical Journal, 51(2), pp. 157-164. Subramaniam , M. R. et al., 2010. Awareness and utilization of emergency medical services by limited English proficient caregivers of pediatric patients. Prehospital Emergency Care, 14(4). Zamanzadeh, V. et al., 2015. Effective Factors in Providing Holistic Care: A Qualitative Study. Indian Journal of Palliative Care, 21(2), pp. 214-224. Portfolio evaluation in Relation to the Nursing Practice I personally believe that nursing practice requires undertaking evidence-based decisions by the registered nurse professional in the context of handling difficult and complex clinical situation. The systematic management of work stress while retaining precision in the caring process in substantially required for enhancing the pattern of safety, health and wellness of the patient population. Nurse professionals need to accomplish their professional obligations while effectively configuring the pattern of a therapeutic relationship with the treated patients. Indeed, effective communications between the nurse professionals, physicians and patients are highly required with the objective of minimizing the scope of treatment flaws, medication errors and associated patient adversities(Ghiyasvandian, et al., 2015). I believe that the nurse professionals need to practice evidence-based medicine and gain through knowledge regarding the hospital databases for effectively registering medication adversities, treatment requirements and healthcare challenges experienced by the treated patients. The Nursing and Midwifery code of ethics provides substantial evidence of the healthcare pre-requisites and treatment approaches warranted for the systematic enhancement of psychosocial outcomes of the patient population. The establishment of interdisciplinary coordination is of paramount importance for systematizing the process of therapy administration to the treated patients(Lancaster , et al., 2015). The nurses must also acquire knowledge regarding the evidence-bases strategies required for investigating the fatal errors executed while administering medications to the patient population. Nurse professionals need to gain benefit from their previous clinical knowledge and experience in relation to safeguarding the health and wellness of the treated patients in the hospital setting. The equitable administration of culturally appropriate healthcare interventions to the patients of vari ous age groups, nationalities and origin is highly required in the context of reducing the scope of bias in treatment approaches. I believe that nurse professionals require utilizing person-centred and holistic healthcare approaches for effectively maintaining the continuity of care and reducing the scope of occurrence of fatalities and patient deaths following the systematic administration of the therapeutic regimen. References Ghiyasvandian, S., Zakerimoghadam, M. Peyravi, H., 2015. Nurse as a Facilitator to Professional Communication: A Qualitative Study. Global Journal of Health Science, 7(2), pp. 294-303. Lancaster , G., Kolakowsky-Hayner, S., Kovacich , J. Greer-Williams , N., 2015. Interdisciplinary communication and collaboration among physicians, nurses, and unlicensed assistive personnel. Journal of Nursing Scholarship, 47(3), pp. 275-284.

Response to the Prince by Machiavelli Essay Sample free essay sample

Your friend insists that Machiavelli believed that deriving power was the ultimate end. regardless of human morality. Analyze the undermentioned transition from The Prince and utilize this transition to assist your friend understand Machiavelli in a different visible radiation: â€Å" Yet it can non be called art to kill fellow citizens. to bewray friends. to be unreliable. pitiless. irreligious. These ways can win a prince power but non glory† ( The Prince. 29 ) . While you must establish your rebuttal to your friend’s place on the above transition. you may cite one secondary illustration from The Prince ( non the talk ) to back up your point. Therefore. when a prince decides to prehend a province. he must find how much hurt to bring down. He needs to strike all at one time and so forbear from farther atrociousnesss. In this manner. his topics will finally bury the force and inhuman treatment. Gradually. bitterness will melt. We will write a custom essay sample on Response to the Prince by Machiavelli Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page and the people will come to appreciate the ensuing benefits of the prince’s regulation. Most of import. a prince should be consistent in the manner he treats his topics. The other manner a prince can come to power is through the favour of his fellow citizens. Princes who rise through this path are caputs of what Machiavelli calls constitutional princedoms. A prince created by the people must retain the people’s friendly relationship. a reasonably easy undertaking. A prince created by the Lords must still seek to win over the people’s fondness. because they can function as protection from hostile Lords. Benevolence is the best manner to keep the authorization of the people. If people expect ill will from a prince but alternatively receive kindness and favours. they feel a great duty to their prince. hese chapters describe how different types of princes should set up power. within a state’s environment of fluctuating power kineticss. Machiavelli makes an facile statement for the importance of a domestic power base. He does non waver to admit the necessity of inhuman treatment and offense in set uping this power and even explains how to utilize inhuman treatment most efficaciously. He does non rede moderateness in the grade of inhuman treatment used. but instead a bound on how long extreme inhuman treatment is to be employed. That is. Machiavelli does non state that princes must be barbarous but non highly barbarous. Alternatively. he argues that barbarous Acts of the Apostless must be committed as necessary. but all at one time and so ceased. so that the public will bury them. This sort of statement is highly matter-of-fact and ignores all inquiries of right and incorrect. Taking historical illustrations as the footing for his statement. Machiavelli merely describes how po wer has efficaciously been deployed and consolidated in the yesteryear. and does non presume that human nature will take a bend for the better in the hereafter. While any prince can accomplish and keep power. glorification remains a more elusive end. Although Machiavelli is chiefly concerned with how princes perform as swayers. he besides gives an appraisal of the different sorts of princes. Machiavelli’s position is that the prince who rises and survives by agencies of perfidy and the prince who succeeds by his innate art are both technically princes. But he besides admits that the two are non equal in award or glorification. and. possibly. even moral worth. 1. At this point one may observe that work forces must be either pampered or annihilated. They avenge light discourtesies ; they can non revenge terrible 1s ; hence. the injury 1 does to a adult male must be such as to rid of any fright of retaliation. Explanation for Quotation 1 gt ; gt ; This transition from Chapter III is an illustration of logical concluding conspicuously devoid of ethical considerations. A prince must recognize that he has two options: benevolence and devastation. Because the latter option will do bitterness among the people. he should take it merely if he is perfectly certain there will be no ailment consequences—that the devastation he incurs will extinguish or disenable any parties that might seek to avenge themselves against him. Feelingss of commiseration or compassion are nonmeaningful. Self-interest and self-defense are in this instance the motivation factors and are to be pursued ruthlessly. Borgia would make the most to determine Maciavelli’s sentiments about leading.Borgia was a craft. cruel. and barbarous politician and many people despised him. Machieavelli believed Borgia has the traits necessary for any leader who would seek to unite Italy. The Prince was written as a practical usher to assist Lorenzo de’ Medici stay in power during a clip of political convulsion but became a book that was criticized as being immoral. immorality. and wicked. Sir Niccolo Machiavelli.I personally understand your desire to return to political relations and I appreciate your desire for a place within my authorities. However. the desire of an ordinary citizen to rede. instruct. and act upon the heads of swayers like myself is unacceptable and will non be tolerated. When you use the metaphor. â€Å"a individual standing on a mountain is best positioned to study the landscape below. and a individual standing below is best positioned to study the mountain. ( Dedication. 1 ) you attempt to convert me you know more about the art of governing than myself. Your dealingss with the craft. cruel and barbarous politician Cesare Borgia assist me to farther understand your sentiments on leading. You hold the beliefs that Borgia had the traits necessary for any leader who would seek to unite Italy. and believe I should follow in those footfalls. I do non wish to be associated with such a swayer. Touching on your ideas of virtuousness when you quote. â€Å"of all the things he must guard against. hatred and contempt come foremost. and liberalness leads to both† ( XVI. 2 ) . I am confused by your advice to ignore the rules of virtuousness. The letters I receive on a regular basis from members of the church talk about the importance of a prince to move morally. with the ethical premiss that 1 who acts good. will regulate good. I respect my church. and happen it disturbing for you to give me advice against what they believe. My people will get down to see this book as a usher to unbelieving dictatorship. which I can see now. This work is a irreverent publicity of immorality. and I can see your purposes of self-seeking use. It is a unsafe game to play being anti-Christian. and your disdain for the pontificate and political aspirations of the Catholic Church is apparent. To reason. I will non be directing an invitation to function as an functionary in my authorities. and inquire you no longer prosecute these ideas. Work force will be geting to your place shortly after you receive this missive to take you to where you belong. Good twenty-four hours.The Medici Essay Question # 1: You are a Medici prince and you are returning the manuscript of The Prince to Machiavelli with a missive explicating why you will non engage him as your political advisor. As you will remember from Unit 4. the Medici were a powerful Florentine household. Remember to include a chief thought that guides your rejection missive and to include specific citations from The Prince ( non the talk ) that support your statement.

Differences in Culture

Differences in Culture Summary International trading activities are built on the concept of cultural differences. Culture refers to tastes, manners, and social values practiced by a certain community. Therefore, due to cultural diversity, there exist pronounced differences between local and international businesses resulted by preferential variations. For instance, the Hinduism culture respects the cow and thus do not eat beef. Successful international business relations call for the need to improve cross-cultural literacy (Hill, 2011).Advertising We will write a custom essay sample on Differences in Culture specifically for you for only $16.05 $11/page Learn More Cultural interaction brings on board different morals, beliefs, knowledge, and customs along with other managerial skills. These cultural values differentiate one community from the other and thus the need to reduce misunderstanding and conflicts in the business world. Cultural values provide a good understanding of a so ciety’s attitude toward democracy, justice, integrity, personal freedom, and role of women in collective duties. Different countries have a lot of varying practices ranging from politics and traditions to the language of communication. These variations are vital in business since they enlighten and improve cross-cultural relationships. Social stratification refers to the characteristic difference between persons of varying societies. This results mainly from benefits of healthiness, education, living standards along with opportunities available to different social strata. Religious and ethical systems are some of the guiding cultures in the business world. These include the Catholic, Protestant, Buddhist, Muslim, and Hinduism cultures. Among all, Christianity is believed to be the most influential and has the most imperative implications. Protestants stress on working hard to build up wealth for the glory of God. Language use is vital in the education system (Hill, 2011). Edu cation, in international view, is featured by the element of competitive advantage where skills are more extensive in some societies than others. Nations with a competitive advantage benefit from reduced production costs, in addition to increased revenues due to an enlarged market share. What I learned From the understanding of international business, it is clear that cross-cultural literacy is beneficial to business in that it assists business persons to treasure other cultures. Cultural interactions assist the less equipped countries to seek assistance from the most developed ones. For instance, China offers a good example of a country that can help other countries improve their technological skills and expertise. In addition, cross-cultural literacy enables firms to cut production costs as well as adoption of the capitalist way of production. Culture is affected by social structure in given perspectives. In an individual’s perspective, it is based on personal performance d ue to beliefs that warrant success. Social groups are essential in local and international business (Hill, 2011). This encourages teamwork in business activities that require varying ideas to perform and do well. Japanese are believed to work successfully through group work and hence achieve maximum results.Advertising Looking for essay on cultural studies? Let's see if we can help you! Get your first paper with 15% OFF Learn More Social mobility enables people to move from one stratum to the other in a bid to advance personal skills, as well as access prestigious jobs. Social stratification affects business operations and thus the need for class consciousness to enhance inter-class relationships. Besides, hard work advocated by some religious cultures enables people to accumulate wealth to finance new investments as well as for expansion purposes. Protestantism encourages individual freedom in an attempt to develop a personal relationship with God. The princ iples urged by Islam include honor and respect, generosity, equality, and perpetuation of other peoples’ rights. These ethical behaviors can improve inter and extra cultural relations and afterward be extended to the business world. As a result, communication could advance locally and internationally. However, it is clear that Hinduism recommends spiritual achievement over material gain (Hill, 2011). Societal change in relation to individualism and collectiveness positively impacts economic progress. Reference Hill, C. H. (2011). International business: Competing in the global marketplace. New York City: Irwin professional pub.

Causes And Effects Of The Amer

Introduction about the cause and influence of the American Civil War - The American Civil War began when Peter Bohlegard fired 50 guns at Sumter Fort on April 12, 1861. This marks the beginning of one of the longest and most frequent wars in American history. This is also the only war completely done in the American soil. The whole war lasted four years, killed more than 620,000 Americans and killed them further. Reason - Many people consider the cause of this war to be the abolition of slavery, which is one of the main catalysts of the beginning of the war, but this is not the main reason for the beginning of the war. Causal Thesis is an article explaining the cause (cause) of the event or situation and the result (influence) of the occurrence. Writing causal papers requires a lot of effort, the main idea of ​​writing such articles is to investigate the cause and effect of the phenomenon. However, regarding the structure, the outline of the causal dissertation is simpl e: introduction, body passage and conclusion. If you are assigned to write a causal dissertation, there are many causal themes listed here. Causal relations Thesis examines the cause (or cause) of something and discusses the result (or result). Therefore causal papers are sometimes called rational thesis and result papers. They are one of the most common form of organization in academic papers. Although the entire article may be causally related, it may be a part of the entire article in some cases. Particularly in short test papers, it is possible to discuss only causes and results, not two. Please see the example below A causal dissertation is another type of paper that is common as part of a larger paper, including paper type or one or more paragraphs for examining cause and effect. This page provides information on what causality is, how to organize such articles, and how to use articles like causal structure words (transition signals). There is also a causal thesis on the theme of women's work, and there are exercises useful for practice in this field. Causes And Effects Of The Amer Introduction about the cause and influence of the American Civil War - The American Civil War began when Peter Bohlegard fired 50 guns at Sumter Fort on April 12, 1861. This marks the beginning of one of the longest and most frequent wars in American history. This is also the only war completely done in the American soil. The whole war lasted four years, killed more than 620,000 Americans and killed them further. Reason - Many people consider the cause of this war to be the abolition of slavery, which is one of the main catalysts of the beginning of the war, but this is not the main reason for the beginning of the war. Causal Thesis is an article explaining the cause (cause) of the event or situation and the result (influence) of the occurrence. Writing causal papers requires a lot of effort, the main idea of ​​writing such articles is to investigate the cause and effect of the phenomenon. However, regarding the structure, the outline of the causal dissertation is simpl e: introduction, body passage and conclusion. If you are assigned to write a causal dissertation, there are many causal themes listed here. Causal relations Thesis examines the cause (or cause) of something and discusses the result (or result). Therefore causal papers are sometimes called rational thesis and result papers. They are one of the most common form of organization in academic papers. Although the entire article may be causally related, it may be a part of the entire article in some cases. Particularly in short test papers, it is possible to discuss only causes and results, not two. Please see the example below A causal dissertation is another type of paper that is common as part of a larger paper, including paper type or one or more paragraphs for examining cause and effect. This page provides information on what causality is, how to organize such articles, and how to use articles like causal structure words (transition signals). There is also a causal thesis on the theme of women's work, and there are exercises useful for practice in this field. Causes And Effects Of The Amer Introduction about the cause and influence of the American Civil War - The American Civil War began when Peter Bohlegard fired 50 guns at Sumter Fort on April 12, 1861. This marks the beginning of one of the longest and most frequent wars in American history. This is also the only war completely done in the American soil. The whole war lasted four years, killed more than 620,000 Americans and killed them further. Reason - Many people consider the cause of this war to be the abolition of slavery, which is one of the main catalysts of the beginning of the war, but this is not the main reason for the beginning of the war. Causal Thesis is an article explaining the cause (cause) of the event or situation and the result (influence) of the occurrence. Writing causal papers requires a lot of effort, the main idea of ​​writing such articles is to investigate the cause and effect of the phenomenon. However, regarding the structure, the outline of the causal dissertation is simpl e: introduction, body passage and conclusion. If you are assigned to write a causal dissertation, there are many causal themes listed here. Causal relations Thesis examines the cause (or cause) of something and discusses the result (or result). Therefore causal papers are sometimes called rational thesis and result papers. They are one of the most common form of organization in academic papers. Although the entire article may be causally related, it may be a part of the entire article in some cases. Particularly in short test papers, it is possible to discuss only causes and results, not two. Please see the example below A causal dissertation is another type of paper that is common as part of a larger paper, including paper type or one or more paragraphs for examining cause and effect. This page provides information on what causality is, how to organize such articles, and how to use articles like causal structure words (transition signals). There is also a causal thesis on the theme of women's work, and there are exercises useful for practice in this field.

Critical appraisal of article in operation management Essay

Critical appraisal of article in operation management - Essay Example It is due to this reason that the researchers and economist have carried out studies the study due to the significance and contribution of this industry in the country's annual GDP. Different theorist has described services in different ways which helps the management to understand the positioning and formulation of strategies to organize the resources. There conclusions can be used to get the wider view and all the dimensions of the various theorist, based on that the management can draw their own conclusions from their own understanding. These researchers covered different areas of the service industry but this paper specially discusses the implication of operation management in the Australian service industry. In order to understand the challenges faced by the management it is very important to understand the characteristics of the services. Operation management is a technique which can help to resolve the problems faced by the company. Before that there is an overview of the different researchers. Their work has helped to form the basis of understanding. Nie and Kellogg distinguished the services into some unique characteristics which makes services different from manufacturing. A service oriented business has more customer interaction due to which the entire process of delivering the service also becomes important. Services are intangible, there can be variations in the output, they are perishable, there production delivery and consumption all takes place at one time and they are more labor intensive. Schmenner has come up with one of the most useful topology of service industry which can be applied in all kinds of service oriented professions. He has defined these degrees in a simple matrix form which is indicating a high and low level of labor intensity and customer interaction. Such distinction can help the management in classifying each profession into a certain area like service factory professions have low labor intensity as well as customer interaction. Similarly professional services like doctors have high customer interaction as well as high labor intensity. Based on this the management can increase their focus and see which area needs more attention. Schmenner's theory can be connected to Wright and Mechling conclusion which explains that how these topologies can be used in the planning and controlling process. The key performance indicators are the managerial tools which help an organization in achieving its long term goals. Once the goals are set and strategies are implemented there has to be a way to measure the progress or success and KPI is one of the ways. These are measurable indicators. It can be one or many depending on the organization. For the service oriented businesses the key indicator can be the number of clients per month in an auditing firm. KPI is a useful management tool because when you know the strengths and weakness of your business and your goals are specific and clear to all then one can define a certain indicator to measure its evaluation and performance over the period of time. These can be applied in different service processes such as the framework of Armistead which had categories like delivery system and the volume of output. Such measures can be taken as as an indicator and can be used to upgrade the entire process. Service industries face many problems which can be resolved through the implication of the operational management tools. Operations

What exactly is Platos ideal of the philosophical or examined life Essay

What exactly is Platos ideal of the philosophical or examined life What does such a life entail Is it of any practical relevance for contemporary individuals - Essay Example Plato offers these musings via a number of dialogues and it has been said that some of his views were actually those of Socrates – his teacher which can be a safe assumption to make as many individuals are influenced by their mentors in their on works. Plato’s ideal of the physical life had one main theme in particular that recurred in may of his dialogues concerning the true nature of objects in existence and what an individual’s perception of this truth may be. He argues that what can be seen is not the exact reality and thus it can be stated that those who only use the sense of their surroundings to establish reality are off the mark and are only left with a vague idea of what the real truth is. Plato argues that something does not have to be tangible or visible for it to be real and those who believe so have in effect limited themselves from gaining the real truth (Plato 50). This concept is promoted in a number of his dialogues and is can be clearly seen in his allegory of the cave. In this analogy, Plato argues that the world that can not be seen is the realest of them all and likens those whose belief is governed by what they can see in their surroundings to people who are living in a cave. The people living in the cave are only able to see shadows that are caused by the real objects but since this is all that they have known their whole life, they perceive these shadows to be the true forms of the objects and thus are blinded from seeing the reality of the situation. Plato then goes on describe one who gains enlightenment as a person who leaves the cave and for the first time sees the objects that have been the cause of the shadows that others have perceived to be the real thing thus breaking the shackles of ignorance. This analogy promotes the essence of thinking outside the box instead of blindly accepting what is put before you as the gospel truth and reality of life (Plato

Upbuilding and Awakening Essay Example for Free

Upbuilding and Awakening Essay In Herbert Marcuse’s (1955) book entitled Eros and Civilization, he provides an elaborate explanation to Sigmund Freud’s idea of unconscious and the principle behind it. Freud’s pleasure principle is the necessary factor that prevails in the realm of the unconscious. The unconscious operates mainly for the realization of pleasure and orients itself to the most profitable scenario in which it can achieve pleasurable reward that is free of pain. However, due to the environment to which any human is not capable of living without, the operation and orientation of the unconscious are impossible to realize. In this regard, Freud formulates another principle that â€Å"safeguards† and dictates moderation to the pleasure principle. Marcuse suggests that there can be found some evidences that there were varying forms of repression happened in the course of history in investigating the taboos that are locked in the unconscious. It can be viewed that Marcuse is pointing that humans are not totally free in the sense that he can literally get all the things he wishes to have or do that will definitely provide him the utmost form of gratification. In some of his passages, we could get an idea that this particular condition of humans in the civilization reveals that the culture that we have had is built by the antagonistic forces namely: the pleasure and reality principle. The unconscious is always being repressed, and safeguarded by reality. Soren Kierkegaard, on the other hand, has presented numerous accounts in relation to the unconscious. His idea of unconscious is rather incompatible with that of Marcuse and Freud. Accordingly, he states that â€Å"the unconscious that is relevant is the one which we wish not to notice, or have chosen to ignore, or perhaps made myself unable to comprehend (Conway, 2002 p. 73)†. Kierkegaard regards the unconscious as the spiritual being which must be directed towards God and not, in Freud and Marcuse’s sense, to the painless gratification. Another objection that Kierkegaard might raise against Freud’s notion of the unconscious is his argument that people have to balance the antagonistic actions of their physical and spiritual beings and not the two principles (pleasure and reality) that run against each other. The proper understanding of the unconscious makes it possible for a person to fully realize his self. This understanding is one of the necessary things that a person has to have in order to rule his own unconscious thereby making him conscious of his self and probably have a conscious relationship to God. The direction and orientation of the unconscious, contrary to that of Marcuse’s account, are toward God. Kierkegaard, in his writings, criticizes the middle class Christians because of his view that these people are not definitely having an excellent relationship with God. He considers this â€Å"flaw† of these middle class Christians as the ultimate source of problem in terms of their seemingly stagnant life. Consequently, he offers an accusation stating that these people are lacking of vision in life, that they are afraid of going out of their limitations, they are scared of change for the most gain and that they are merely conformists. It seems, at this point, that he has a high expectation of those who claim to be Christians. He so believes that if you are a child of God, and maintain an excellent relationship with Him, you must not be afraid of going beyond what is normally expect of you. Hence, Christians have to be a living example of how great God can do to His people. There must be no ordinary average religious people. People who claim to have religion must be have a genuine faith, and that, it should be manifested in all of their endeavor. Going back to Kierkegaard’s criticisms of the middle class Christians, we can see directly that he is taking it too seriously in his view of faith and its manifestation in the Christians lives. Moderation, apparently, is being relegated to the background. The idea that â€Å"Christians must have a superior living because his faith along with his actions would bring them the fortune† is like a conclusion based upon a hasty generalization and fallacious claims. If God truly blesses his children, and we regard that fortune and intelligence, for example, are considered blessings, it can also be surmised that there might be other blessings that He might give to his other children that are far more important than what Kierkegaard is arguing about. Social conformity should not be taken against anyone. Though his criticisms somehow reflect the scenario during his times, they did not provide a strong justification such that we would be able to accept them completely and have them against middle class Christians. The case that Kierkegaard has presented pertaining to those average religious people in his time can also be observed at this point in time, only that, these [criticisms] come in different situations and necessitate perspectives that may or may not contradict that of Kierkegaard’s. References: Books: Conway, D. and Gover, K. E. (Eds. ). (2002). Soren Kierkegaard: Critical Assessments of Leading Philosophers. Routledge, Kierkegaard, Soren. (1983). The Sickness Unto Death: A Christian Psychological Exposition for Upbuilding and Awakening. (H. V. Hong and E. H. Hong, Eds. ) Princeton University Press. Marcuse, Herbert. (1955). Eros and Civilization: A Philosophical Into Freud. Boston, USA: Beacon Press. Internet Sources: Banks, Robert. (n. d. ). The Middle Class and Urban Mission. December 16, 2008, from http://www. urbana. org/_articles. cfm? RecordId=370

The Immortality Pill Essay -- essays research papers

Originally when I was posed this question my immediate response was to return the Immortality pill (IP). The reason I initially responded this way, and still remain set on my belief had plenty to do with the factors involved. First, if I were to take the Immortality pill I would already know my horrific demise, such as an accident, war victim, or suicide. Secondly, just as suicide effects not only the person committing the act, but more so the family and friends in that individuals life, yet the same concept is present when making the decision to take this pill. It is just as selfish to put yourself above the values of what is morally important. Thirdly, by taking this pill it would detract from the meaning and purpose of time. Time would become meaningless if there were too much of it. Lastly, you as the individual that is now immortal would in essence be playing God, by altering destiny itself. In the process, if you’re loved ones decided not to purchase and take this pill you would eventually have to witness everyone you care about around you pass on. Although extremely deceiving, there would be many negative effects on human relationships in general. There would be no need for much of the medical industry and plenty of people would lose there careers, hurting the economy tremendously. Socially, this would impact the way people relate to each other, such as â€Å"how are you felling today?†, and â€Å"sorry to hear about your mother who is ill!† I believe as sinful human beings o...

Real Learning Takes Place Through Experiance Essay

â€Å"Not all learning takes place in the classroom. † All knowledge should not obtain from class because subject only taught by a teacher. But some lessons, which are pertaining to life, only will demonstrate by personal experiences. Every person should be learning more from real life than class room. I think real life is the best example for learning and obtaining knowledge. This is supported by various reasons. Learning takes place not only in the classroom but also in our everyday lives. This is because to learn does not mean just to gain academic knowledge. Rather, learning refers to acquisition of any kind of knowledge that can give us instructions on how we should behave. Information that we get in the classroom is, without any doubt, useful and proven and it can broaden our mind. However, school years are relatively short in terms of a life span, and, therefore, there are a lot more things that can be attained outside classroom and that are equally valuable. First of all, Personal experience is essential for obtaining indelible knowledge. For instance, in an early age the teacher would teach about animals. Is it gives sufficient knowledge for children? No, it does not. When teachers will take them in to the zoo and explain about those animals, they never forget that information. This is one type of personal experience. Which knowledge have gotten by personal experience, it will be never loss. Second, the relationship among the people as well as friendship values is not taught by teachers in the classroom. Those relationships have known only by personal experience. Further, the young age person do not realise about money value. The same person should know about money value while he starts earning of money. Finally, sometimes a new technology and new things were discovered by personal experience but not classroom knowledge. For instance, today’s popular phone was discovered by Alexander graham bell. It was discovered by accidently but not part of an educational research. Today, various popular technologies and things also discovered from their real life. In conclusion, the illiterate persons also can maintain different business successfully using their personal life experience. Unfortunately, an erudite people also will fail in business because lake of experience. So I strongly believe that â€Å"Not all learning takes place in the classroom. † Because, if we have only classroom knowledge; today, we do not have any TV, computers, and other technologies. We surely obtain more knowledge from personal life than classroom knowledge.

Porsche Changes Tack

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