Consumer Behaviour on Social Networking Website

content 1 Background1 2 Motivation and Value2 2. 1 Attributes2 2. 2 Outcomes2 2. 3 Values3 3 Reference group3 3. 1 Aspiration reference group3 3. 2 Informal group4 4 Culture and consumption5 4. 1 Supranational culture5 4. 2 National culture5 4. 3 Subculture5 4. 3. 1 Family6 4. 3. 2 Language6 5 Conclusion6 1 Background Social networking has brought a great change in to the way people build relations with others. These sites are online platforms where users can create profiles to provide personal information, exchange individual ideas and share their interests with the others.Through social networking sites, people can keep in touch with friends despite the long distance and daily bustle. In this way, networking sites change the old communication pattern that people used to communicate face to face. In addition, more internet users accept this new way to build their social ties. According to the Pew Internet's report on social networking(2011), the number of people using social network ing sites raised from 34 of internet users in 2008 to 59% in 2010. Weibo, the second-largest social networking site in China, can be used as a good example to clearly demonstrate this huge success.It operated by SINA corporation and launched in August 2009. As a microblogging platform, Weibo enables customers publishing, broadcasting and achieving instant information based on their relationship. It does not take too much time for Weibo to get a large number of users. On the second quarter financial report released by SINA Weibo 2012 (cited in LU, 2012), there are 368 millions registered users and 36. 5m daily active users on Weibo by the end of June this year. The first driving force of Weibo to attract massive users is its ideally integrating the functions of Twitter and Facebook.Weibo require people to publish posts within 140 Chinese characters and enables people to view embedded pictures and media without leaving the original page. The second appealing feature of Weibo is its Mi cro topics page that groups up all tweets on a certain topic. Similarly, the hottest trends categorization page and the famous people collection page, named Board of Fame and Hall of Celebrity respectively, are third attributor to the success of this site. In following, the means-end chain theory, perceptual model and the self will be applied to explain the achievement of Weibo: Motivation and Value Gutman (1982) presents the Means-end chain that consumer buying behavior determines by fulfilling desired values which could be obtained from the consequence of enjoying the product or service attributes. Desire values could be obtained due to satisfaction of customers in product or services attributes. More specifically, the reason why people consume a certain product/ service is that the nature of the product/ service can generate some outcomes that can achieve individuals' values. This theory can be used to illustrate the success of Weibo. 2. 1 AttributesEach product has its own attri butes. However, as a microblogging service, the attributes of Weibo is different from that of physical products. What has been provided by the service, rather that what it looks like, is the features for Weibo. According to Sohn and kim (2012), seven features can be used to identify social networking sites: information, share, communication, interaction, entertainment, intimacy and connection. However, in this case, interaction with other users can be regarded as a two way communication and connection to their friends can be described as the result of communication.Therefore, main attributes for Weibo are information, communication and entertainment. Regards to information, each profile contains personal information like hometown, interests and schools, etc. And individuals can publish feeds about what they think and what they have seen. Users can possibly follow everyone who they are interested in, like super star, corporation CEO, organization. Then, all the new feeds will be show n once customers log on their account. Meanwhile, people can Retweet the message they like, providing such information to their friends who may not know it. By this way, Weibo provides much information for its users.The second function is communication: users can send immediate message to have chat with friends. Besides this, the opinions of customers are clearly expressed via commenting and replying upon a specific feed. With providing a two way communication among users, people can also enhance their offline social network. Lastly, Weibo provides entertainment functions for users. For instance, there is a medal reward system, where medals can be earned by some simple actions like tweet containing a certain word. Similarly, a gaming portal consisting of various mini web games is provided by this site. 2. 2 OutcomesAfter experiencing all functions of Weibo, customers can enjoy serval results. Firstly, people can widen their horizon of knowledge and expand their social network throug h information attribute. As numerous consumers from all fields of life have opened accounts in Weibo, people can get huge amount of information like business news, social issues and fashion trends. And through sharing personal information and emotions in profiles, Weibo makes it easy to find friends with the same interest. Secondly, with various ways to communicate with others, it is convenient for customers to sustain offline relationships and strength online friendships.Finally, with a variety of entertainment activities, hanging around Weibo have become a good way for recreation among netizens. 2. 3 Values As above-mentioned attributes and outcomes offer a clue, people consume this microblogging service with the hope to achieve these values: belonging, fun and entertainment, warm relations with others, being well respected, self-respect and security, based on the nine consumer values by Kahle(1989). Firstly, Maslow (1943) defines belonging as a feeling of accepted by other member s in a community. As in Weibo, individual can be recognized as a unique person by other users through personal page.Then, all new friends and old friends form a special community for that user. What the user post will receive friends' comments, serving as a indicator of acceptance. Next, people can obtain pleasure and recreation in their lives on Weibo. Having a chat with friends, sharing and viewing opinions on current affairs, playing mini online games, and seeing what their friends are doing can make consumers have a rest from their works or studies. Thirdly, people can enhance friendships by using Weibo. Viewing others' feeds can provide users information about friends' interests, happiness and sorrows.People can know clearly what to talk about with each friend. Furthermore, customers can feel respectable from friends. In Weibo, people show their concerns about what you post by viewing and commenting, even retweeting when they like it. 3 Reference group Reference group means gro ups that have influence on an individual's attitudes, behavior, beliefs, opinions and values (Thompson & Hickey, 2005). If people in reference group have a positive attitude towards a certain brand, they can use their power to attract more users for that brand.Therefore, it is essential for one brand to figure out reference groups that exert effects on its target customers and to give a good impression on those groups. In the case of Weibo, the company has successfully used two reference groups, which are aspiration group and informal group, to increase user number. 3. 1 Aspiration reference group Those people who are admired by the public, like actors, athletes, business people, make up the aspiration group (Solomon et. Al 2010). Many companies have used these celebrities in their advertisements or endorsements to promote its brand.Not surprisingly, Weibo have adopted this tactic along its development to appeal more users. At the initial testing stage, Weibo enhanced its brand awar eness by sending out exclusive registration codes to celebrities. The SINA company firstly invited notables, opinion leaders and industry leaders, who are existing customers of SINA blog, to open account in Weibo. Then, each invited celebrity would be asked to send out 20 special invitation codes to his/her friends, encouraging them to log in Weibo. Then, Weibo used those available notable accounts to attract massive fans to open accounts on Weibo.Consumers hope to get up-to-date information about their idols from following idols' Weibo profile. â€Å"I was a early adopter of Weibo. † said Iris, a Chinese girl from Management major in Leeds University, â€Å"I opened my Weibo account in November 2009. Wanting to know more about my idol–Ashin, a Taiwanese singer, is the main stimulation for me to register in Weibo. With just two or three sentences in a feed, Weibo keep me informed about the daily routines of my idol and let me feel more closer to his life. † As a nother attraction to customers, Weibo guarantees authenticity of idol accounts to customers.All those celebrity accounts would be verified through real-name system before opening, and be added â€Å"V† after their user names to distinguish with ordinary users. Furthermore, owing to facilitate users to find their idols easily, Weibo gathered all these approved accounts into one page, named Hall of Celebrity. Until March 2012, there are 165,000 celebrity accounts in Weibo. On 2nd December 2012, the number of fans for the top one celebrity is over 27 million. As can been seen from these features and data, Weibo has paid huge attention on reference groups and gained plenty of users from these groups. . 2 Informal group Besides using aspiration group, Weibo took advantage of informal group to acquire more users. Thanks to more involvement in others' everyday lives, informal group poses tremendous effects on their consumer behavior, such as whether or not using social networking si tes, which specific site to be used. Weibo, just as other social networking sites, want to enable consumers to get connected with their offline friends and meet new friends with same interests. So as to be successful, large customer database should be provided for new users to find friends.Most of Weibo users firstly know this networking sites from their friends. Another three users' experiences are used to support this statement. Juliet, a Chinese girl in Advertising and Marketing in Leeds University, said, â€Å"I knew Weibo from several friends' recommendations. They had already opened accounts. With sharing feelings and interesting news no more than 140 characters, my friends found it user-friendly and amusing. So they hoped I could join with them. After one trial, I fell in love with this site. And I have recommended this site to my friends who have not had Weibo account yet. The same with Juliet, other two users opened their accounts because of their friends' influence. They said, â€Å"It is just a habit to keep logging into Weibo to see new feeds from friends. And, if I have not used Weibo while others have, I would feel very outdated. And I also persuaded some of my friends to use Weibo. † As stated above, individual can be influenced by his/her reference group to register in Weibo, and then become one member of reference group to alter other's attitude. With this process goes on, Weibo gets an increasing number of users, which leads to its success. Culture and consumption Culture is the learned and shared beliefs and values that influence the formation of attitudes and behaviors among members of a society(). There are three different level of culture: supranational culture, national culture and subculture. The success of Weibo can be explained by these levels. (Baldwin, 2006) 4. 1 Supranational culture Supranational culture aspect can indicate that the success of Weibo is not a exception. Before the launch of Weibo, Twitter, an American micro blogging service, has be prevalent in a global scale, with over 18 million users in 009 (Wolfe, 2011). With global growth of internet usage, people have shared a cosmopolitan culture with same beliefs: time-conscious(Hongladarom, 2005). Caring more about time has a strong impact on the habit of writing and reading. People are more willing to write and read posts of daily lives within few sentences. That is a big driving force to the invention of microblogging sites, which provide people to publish feeds in just 140 characters. 4. 2 National culture In this level, because of its Chinese interface, Weibo is exclusively popular in China.The alteration of national values has led to the success of Weibo. With the affection by western culture, Chinese are becoming increasingly emphasis on liberalism. Freedom has been highly valued in every aspects of life, especially freedom of speech. In the past, only the people with strong power can make their voices heard and it is unable for the publ ic to talk about the government. But Weibo changed this situation by giving the discourse power to common people. In this site, everyone can speak out his/her opinions on trending news and more people can read those ideas with the function of forward.Also, people can become ‘we media' to spread out the news around them, which is known by few people but of importance on the society. 4. 3 Subculture Subculture is the same culture shared barely by a small group in a nation/society. It is largely influenced by the personalities of members in that group. In this level, the characteristics of new netizen generation could explain the widespread usage of Weibo. Weibo has designed its website tailoring to characteristics in this subculture. According to the Enfodesk report, customers aged from 20~34 accounted for 76. 52 percent for the Weibo users.It means that major customers of Weibo are born in 1980s and 1990s, which is a new generation in China after the â€Å"only one child† policy. There are there typical elements affecting this culture group. 4. 3. 1 Family In oriental culture, like in China, people put more emphasis on relationships with other. And family is the most important relation that plays a vital role in the formation of personalities. And Child tend to be more self conscious in small families than large families. In China, the structure of family experienced huge changes after the ‘one child' policy.The ‘China Population Statistics Yearbook 2000'stated that the family size gradually reduced in scale since the policy and the average number of each family dropped from 4. 51 in 1982 to 3. 58 in 1999. Having only child in their family among the generation of 80s and 90s, parents putted all attention and family resources on their child, which lead to a certain degree of doting on that child. As a result, the new generation is more self-centered, revealing a era of self. And, people in this group wanted to be different from their par ents' generation and tend to more emphasis on the self expression.The customization feature of Weibo satisfies this value by provide a stage for people to show themselves. Individual can differentiate with others by showing own ideas towards fashion and current affairs, display his/her interests and create personalize profile. 4. 3. 2 Language Special language is other component to form the subculture. In culture among the generation of 80s and 90s, people usually use the internet catchword in their daily conversation. This words can be defined as a peculiar way of saying something which has become established after long use in netizens.Because of their simplification and humorous, many youth use these special phrases in their feeds in social networking sites. As a result, more users know these catchphrases and spread them out to create even larger influence. Moreover, people need to frequently surf the internet to keep up with the newest famous words because of its time-sensitive. For Weibo, it provide a free place to enhance the popularity of pop words online and vice verse the pop words would attract more users for Weibo. According to Baidao website, Weibo fueled the prevalence of Internet catchwords in 2011. 5 ConclusionIn brief, this essay has discussed three consumer behavior theories, that are the means-end chain, the power of reference group and the three levels of subjective cultures, to explain the success of Weibo. Firstly, Weibo clearly created its major features catering to the desired values of its target customers. With functions of information, communication and entertainment,this site enables people to build self image, get friends' up-to-date information, enhance social network and have a recreation. Consequently, consumers can fulfill their values of self expression, sense of belonging, entertainment life and self-esteem.Then, this site have used the reference power of celebrities and friends to attract more users along its development. By f irstly encouraging important people to open accounts, Weibo induced thousands of their fans. Similarly, these early users influence their friends to use this service. Finally, supranational culture, national culture and subculture lays a foundation to the achievement of Weibo. The widespread presence of social networking sites could be used to indicate the success of Weibo. And the Chinese national culture and youth culture have speeded up the popularity of Weibo.Though Weibo is successful in certain degree, there are still some measures which could be taken to enhance its publicity. On one hand, Weibo should provide a internal version for foreigners. Only using Chinese as the instructional language is big problem that leads to the limitation of global users. The fact is that there are increasing number of foreign users who access the website in recent time, such as Boris Johnson–the mayor of London, David Mitchell–the author of Cloud Atlas. However, they can not use t he website efficiently because they are not familiar with Chinese language.So it would be beneficial for Weibo to have another vision using global language. On the other hand, Weibo should try to create some culture based features to allure and keep customers. As can be seen from many famous products, people ReferenceBOYD, D. M. , N. B. ELLISON. 2007. 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Outsourcing and Rampant Corruption

1. Should Children Be Encouraged to Think for Themselves? Should children be encouraged to think for themselves? This is one of those questions that seems to invite an immediate and emphatic, almost dismissive answer. â€Å"Of course children should be encouraged to think for themselves. We’re not raising robots, after all. What’s wrong with you? How dare you ask such a silly question! † Well, my personal defects aside, the question is far more difficult than it first appears. For one thing, we should all learn to be particularly cautious when our response to a question is too strong.The tone of an answer like the one just given is often an indicator of two rather unpleasant truths. First, the person is far less sure of his answer than he would like to be, but he covers this uncertainty over with emotional emphasis. He is scared that he might be wrong, and he doesn’t want to entertain the possibility of investigating a weak point in his thinking, so he rai ses his voice in psychological self-defense. Second, and closely related, we often become emotional in resisting ideas which expose our own flaws.We seek to deflect even our own eyes from looking at our actual practices by more loudly using our voice to proclaim our â€Å"true† values. See, no parent in America today would likely affirm the idea that children should not be encouraged to think for themselves. But a closer look at the way they treat their children would reveal the clear fact that they do not practice what they yell. Children are told to do things â€Å"because I said so,† â€Å"because I’m the parent,† or even, in a Christian home, â€Å"because God says. Personally, I think all these phrases serve the quite useful purpose of teaching a child about authority, as long as they’re not used exclusively in situations where the parents really have no idea why the thing they’re commanding is correct. Yet, even though we all know tha t children should sometimes be told to think as we do, it’s still not something we’re supposed to say out loud. So we practice wisdom privately and proclaim submission to a foolish social standard. This disconnect explains the indignant voice. â€Å"How dare you make me contemplate my inconsistency! † But this is not the entire story.Many parents, and particularly Christian ones, are scared by the idea of individual thinking. â€Å"God provides the answers in His Book, and who are you to even consider questioning them? † Well, true. But how does memorizing a set of answers cultivate the capacity to form conclusions in new situations which do not come prepackaged with ready solutions? It does not. And if we are supposed to use the brain God gave us for something, that something probably includes the art of thinking effectively for ourselves. For my own part, I think God wired children to remind us of this important developmental feature.They seem almost wi nd-up doll like in their use of the question, â€Å"Why? † And it’s plausible that one purpose of this tendency is to encourage parents to impart not merely a set of answers by rote, but also the ability to comprehend those answers and form new ones as well. But the real challenge for parents who understand both the need for honoring parental and Godly authority in good answers as well as independent thinking is obvious. What do we do when children come to self-formulated ideas which are at odds with what the Bible or we teach them?You might wish for a simple solution for this conundrum. I do not possess it. Nor, I think, does anyone else. I’ve tried their wares, and the proof is not in the intellectual pudding. It is not possible to fully affirm both a process and a result at the same time. Fair competition means you may not win. Free markets will often produce inequality. Electoral politics will often yield officials we do not prefer. And teaching a child to t hink for himself may well produce an adult who does not think like you. So here’s my encouragement.It’s tempting to just propagandize children. Tempting because we fear the real danger they may, if taught to think for themselves and ask questions, come to conclusions we abhor. But God gave them brains, and we must honor the gift as good stewards. So the key here, as with so many things, is to trust the Maker that honoring His gift will work out alright in the end. God gave children their brains. And the real question at the end of each parenting day is whether you are more interested in shaping that child in the Image of the God who made him †¦ or in your own image?Then, we must acknowledge that picking the right answer to that question will require from us more than just loud lip service to the idea that children should be encouraged to think for themselves †¦ most of the time †¦ especially when the scariest thing to imagine is the possibility that they might actually learn the lesson. 2. Essay on Corruption in India Corruption is rampant in India. It is like a cancer that is eating away at the innards of the country. Government employees are some of the most corrupt people in India.Of course not all of them are corrupt but a good percentage of them take bribes from those who approach them to get something done. One reason for this is that government employees in most states are not paid good salaries and wages remain stagnant in public sector companies for years. As the cost of living increases, people find it hard to make ends meet and they resort to corruption to make extra income. If you want to get a driving license or a ration card or a marriage certificate or a birth or death certificate, most probably you may have to grease someone’s palm in the concerned office.There is corruption in every field. Political and electoral institutions are largely responsible for India being perceived as one of the most corrupt countr ies in the world. Corruption among the police force and judiciary has serious consequences for criminals go scot – free endangering society. Corruption in the academic field means that merit is ignored and mediocrity exalted. Politicians embezzle public funds and take kickbacks. Corruption reigns even within the hallowed precincts of religious institutions. It makes a mockery of medical ethics in hospitals.The Satyam scandal blew the lid off the myth that India’s IT sector is immune to such things. In short, nothing is sacrosanct when it comes to this evil practice. If left unchecked, corruption spreads rapidly. It also makes people resigned to it and saps their will to fight it. They become pessimistic and soon they also begin to ignore the law. Corruption causes inefficiencies and diverts resources. The poor are most affected by corruption. Even PDS rations meant for the poor find their way into the open market. India’s rank slipped from 72 to 85 (out of 179 c ountries) in Transparency International’s Corruption Perceptions Index.TI is the global barometer of corruption. In India, corruption exists in the form of bribes, tax evasion and exchange controls, embezzlement, etc. Corruption has many economic consequences. It causes great loss to the exchequer, creates an unhealthy climate for investment and increases the cost of government-subsidized services. It is not very easy to do business in India. Compared to China and other prosperous Asian nations, the average time taken to secure the clearances for a startup or to invoke bankruptcy is much greater in India.Recently, the Right to Information Act was enacted by the UPA government. A UN development report termed it the most progressive legislation in the developed world. This Act has enabled the public to demand accountability from government institutions regarding processes. But the power of the Act has not been fully utilized because of low awareness. One way to diminish corrupt ion would be to increase pay scales of lower grade government employees. Also, there should be a carrot and stick policy to reward efficient people and punish corrupt ones.Increased transparency and vigilance is the need of the hour. 3. Impact of Corruption on India's Policy The Impact of Corruption on India's Policy and Administrative Service over the last 25 years Assessing the impact of corruption on India's polity and administrative service over the last quarter century has enabled me to gauge the progress made by India's politicians in tackling one of the country's biggest problems. In analyzing the impact of corruption on India's polity over the last 25 years, I highlight corrupt practices by Indian governments during the time-frame in question.I conjecture that the problem of corruption in India's polity is a ubiquitous one, and that corruption has carved out a niche in India's polity. Additionally, I elicit the criminalization of India's politicians by discussing the impact that money has on the functioning of contemporary Indian democracy. I also link corruption in India's polity with increasing levels of corruption in the country's private sector. I use this to conjecture that the usurpation of the country's economic wealth by a privileged minority is part of a corrupt businessman-politician nexus, which is detrimental to Indian society.I gauge the impact of corruption on India's administrative service by incorporating the views of several Indian and international experts. These opinions collate to describe the ineptitude of India's bloated administrative service, providing explanations for the service's inefficiency. My research highlights the impact that corruption has brought to bear â€Å"nepotism among administrative officials, a â€Å"license-permit-quota Raj's system and professional ineptitude† on India's administrative service. Finally, I linked corruption in India's bureaucracy with the country's underachieving economy.While much of the essay is critical of India's politicians, I juxtapose criticisms of India's politicians with corrective measures being undertaken in my conclusion. In doing so, the reader is left to decide whether or not India is any closer to dealing with the issue of corruption within its polity and administrative service, and whether India's aspirations of being an economically developed country can ever be realised. Independent India's Chequered Beginning In a charismatic speech delivered to India's Constituent Assembly on the eve of the country's independence, Jawaharlal Nehru proclaimed ? A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation long suppressed finds utterance† . On 15 August 1947, Indian citizens were, for the first time, given the opportunity to independently chart the course their lives would take. While India made remarkable strides during the formative years of its independence towards achieving societal equity, political turmoil enveloped the country following Indira Gandhi's declaration of a state of emergency in 1975 .In many respects, that event marked a shift in the development of India's democratic institutions. Over the last 25 years, there has been a sharp decline in the public conduct and moral values of India's politicians. Interestingly, the rise in the levels of corruption among India's decision makers has been juxtaposed by the country's rapid economic growth. Over the last 23 years, India's economy has grown at an average rate of six percent per annum, making it one of the world's fastest growing economies .Unfortunately, ubiquitous corruption among members of India's business community has prevented the percolation of India's newfound economic wealth to the common man. Consequently, India's recent economic successes have had a minimal impact on the lives of the millions of Indians living below the poverty line. The evident gap between the ha ves and have-nots in Indian society will be discussed in this essay. The usurping of India's economic wealth by a select few has been further exacerbated by the incompetence and corrupt nature of India's administrative service.For India to have realistic aspirations of becoming an economically developed nation, it is imperative for the country to have a fully functional, transparent civil service. Despite the negative impacts of corruption on India's polity and administrative service, the country has made significant progress towards becoming a fully fledged democracy. With the world's largest electorate, the Indian Republic has successfully conducted 14 general elections , all of which have been found to be free and fair, predicating compliance with international standards.An independent judiciary has ensured that India's democratic constitution has been upheld and that the fundamental rights of Indian citizens have been maintained. An apolitical, independent media has brought corr upt malpractices by Indian government officials and business leaders to the public's attention, ensuring that a certain degree of accountability is maintained. More importantly, the division of power between the civilian government, judiciary and the armed forces has been consistently adhered to throughout independent India's history.While democratic constitutions were drafted in Bangladesh, Burma and Pakistan, they were all nullified by military takeovers. The highest echelons of India's armed forces have ensured that the army's role has been limited to substantiating, and not over-shadowing, the civilian administration's functioning. Additionally, the responsiveness and vitality of India's 600 million-strong electorate cannot be underestimated; the resounding 1977 election defeat of Indira Gandhi's Congress (I) Party and the 2004 election defeat of A. B.Vajpayee's National Democratic Alliance are two such cases in point. On both occasions, the incumbent governments† aspirati ons of securing a further five year mandate from the Indian electorate were dashed. Their deluded impressions were nullified by effective opposition campaigning, who, by promising to address the issues that directly affected the common Indian, scored upset victories. While there are several positive aspects of India's democracy, intrinsic problems remain. Apart from rampant corruption in many aspects of India's public administration, stark economic disparities persist.There are, in many respects, two Indias; one made up of 300 million educated, affluent middle- and upper-class Indians, and another with 800 million economically deprived and socially shunned people, still awaiting their share of India's economic prosperity. Almost 60 years after independence, the perpetuation of such a discernible gap between the rich and poor is indicative of the lack of progression in the lives of many ordinary Indians. Such a clear economic differentiation between Indians is a direct result of the endemic corruption that has firmly taken root in India's polity and administrative service during the last 25 years.The Plague of Corruption Besetting India's Polity Of the 159 countries surveyed, the NGO â€Å"Transparency International† found India to be the world's 88th most corrupt country in its 2005 â€Å"Corruption Perceptions Index† . The survey, relying on work carried out by reputable research institutions, gauges the degree to which corruption is believed to influence a country's polity (i. e. its governmental administration). It is notable that lesser developed countries like Rwanda and Burkina Faso have a higher CPI ranking than India's, despite having considerably lower standards of living and healthcare .The alarmingly high level of corruption in India's polity juxtaposes the fact that India is among the world's most rapidly emerging industrializing nations . Despite being the world's most populous democracy , corruption is a major problem among India's politicians. Over the last quarter century, this problem has been worsened by the increased criminalization of India's polity and the inability of India's political leaders to convert good intentions into effective legislation.This has resulted in a lack of accountability among India's legislative bodies. The ubiquitous problem of corruption among the highest echelons of India's polity was first brought to the public's attention by N. C. Vittal, India's Central Vigilance Commissioner from 1998 to 2002 . By publishing the names of 85 IAS (Indian Administrative Service) officers who were charged with corruption on his commission's website in 2000 , Vittal did more to highlight the issue of corruption in India than any public sector employee before him.His findings only helped highlight the reality that modern-day Indian politics has undergone a paradigm shift from what it was like even 25 years ago. The rapid industrialization of India's economy in the intervening time period predicat es that politicians stand to gain much more from their positions of influence than ever before, effectively heightening the stakes for election to political office. This has made today's Indian parliamentary elections exercises in monetary power, where the winning candidate is ostensibly the wealthiest one.While the Indian Election Commission recommends that a maximum of 150,000 Indian Rupees be spent by candidates contesting for a seat in the Lok Sabha (India's Lower House of Parliament), candidates have been known to spend upwards of 20,000,000 Rupees on election campaigns . This effectively decimates the level playing-field over which elections in a democracy should be contested; the absence of a cap on the amount that can be spent during election campaigns hands wealthier candidates an unfair dvantage over their opponents. Over the last 25 years, this added dimension to the contesting of Indian elections has resulted in the increased criminalization of India's polity. This worry ing trend was directly addressed by India's then-Prime Minister I. K. Gujral on the country's fiftieth Independence Day. He conceded that corruption was ?  °?  ­eating into the vitals of the country† , and he drew people's attention to ?  °The nexus between the corrupt and politics† as ?  °?  ­criminals are entering politics† .By juxtaposing the incumbent Indian cabinet with Rajiv Gandhi's at the time of his December 1984 election victory, the criminalization of India's polity can be elicited. Gandhi, forced into national politics by his mother, Indira, after the death of his brother Sanjay in a 1980 air-crash , donned the mantle of Prime Minister with a cabinet manned by respected statesmen, many of whom were stalwarts of his assassinated mother . Conversely, Prime Minister Manmohan Singh currently presides over a cabinet that counts six convicted criminals with charges of murder, rape, arson and embezzlement against them among its ranks.In 1984, public accountability would have rendered such an occurrence unthinkable. However, the financial clout that these criminals wield has accommodated their inclusion in India's cabinet. This effective criminalisation of the country's highest civilian decision-making body makes a mockery of Indian democracy; instead of being served by astute decision makers, Indian citizens are being governed by its most influential citizens, many of whom have clearly used illicit means to command such influence.The criminalisation of India's polity does not bode well for future generations of Indian citizens. While every Indian Prime Minister in the last 25 years has been cognizant of the threat posed by corruption, no one has passed effective legislation designed to tackle it. When asked to assess the risk posed by corruption to India's polity, Indira Gandhi dismissively countered that ?  °Corruption is a global phenomenon† . Her non-committal remark encapsulates the attention paid by her administrat ion towards thwarting corrupt practices.Her son, Rajiv, inherited a polity ridden with corruption, compounded by an ever-expanding bureaucracy that had become a â€Å"Committed civil service† during his mother's tenure. His desire to rectify India's corrupt polity was clear within a year of his tenure; in December 1985 he addressed the dangerous levels of corruption in India when he remarked ?  °Corruption is not only tolerated but even regarded as the hallmark of leadership. Flagrant contradiction between what we say and what we do has become our way of life. At every stage our private self crushes our social commitment† .Coming to power with an overwhelming majority in parliament , passing legislation designed to address the issue of corruption would not have been difficult for him to do. Unfortunately, his efforts were diverted by other matters of state, like the economy. His sobriquet of being â€Å"Mr. Clean† proved ironic; his reputation was significantly tainted by the A. E. Bofors Scandal . His failure to explain away the allegations of corruption levied against him proved to be the deciding factor in his 1989 election loss to V. P. Singh .During the 1990's, India had six Prime Ministers . Apart from P. V. Narasimha Rao, none served their full terms, and all led coalition governments. Predictably, the over-accommodating nature of their governments effectively disallowed them from tackling the omnipresent threat posed by corruption to India's polity. While Rao Prime Minister from 1991 to 1996 is best remembered for ushering in a series of economic reforms that sparked the liberalisation of India's economy, allegations of corruption enveloped his administration, eventually implicating him.By adopting a passive stance towards tackling corruption, Indian governments have failed to rectify one of the most formidable problems confronting India's democracy. Their lackadaisical attitude has dampened the impact of India's economic growth on the country's living standards. While India's economy has grown at a rapid rate over the last ten years, the fruits of this economic prosperity have not accrued to the common man, and are instead being enjoyed by a privileged minority.An effective measure of ascertaining the extent to which economic prosperity has dissipated through society is to consider a country's gross domestic product per capita . India's G. D. P. per capita is lower than Pakistan's, and almost half that of China's . A significant factor contributing to this anomaly is prevalent corruption among the highest levels of India's business community, which aids and abets corruption among India's politicians. Corruption in India's economy has undermined attempts made to upgrade the country's infrastructure.Long-term economic growth can only be sustained by having a developed infrastructural system in place, capable of maintaining increased trade. Despite the allocation of substantial amounts of money for road devel opment, India's road network continues to be underdeveloped . Moreover, India's ports, vital for the exporting and importing of goods from the country, are inefficient . The same can be said of the country's airports. These infrastructural problems point to a lack of forethought and planning by India's bureaucrats. As will be discussed, the burgeoning size of India's bureaucracy ogether with the ineptitude of the country's bureaucrats has resulted in a laborious decision-making process. Corruption and inefficiency are significant obstacles inhibiting India's attempts to realise its full economic potential. In a 2006 review conducted by the Hong-Kong think-tank ?  °Political and Economic Risk Consultancy†, international businessmen surveyed felt that corruption in India's private sector was a â€Å"major concern† . Moreover, they felt that corruption was â€Å"an average-sized deterrent†, dissuading them from investing in India .This reinforces a warning issued in a 2000 Indian Supreme Court ruling, which stated that, if unchecked, corruption could cause India's â€Å"socio-economic-political system† to disintegrate . To ensure that the rapid advances being made by India's economy are sustained and that national wealth is equally distributed among all sectors of society, it is imperative for corruption in the Indian economy to be effectively dealt with. Measures should be taken to ensure that government funds set aside for public works are not misallocated.By Rajiv Gandhi's own admission, only 15% of all government aid allotted to welfare programs reached the people the money was intended to assist . Two inferences can be drawn from this: a majority of government money is siphoned away by officials, and corruption in India's polity has been perpetuated over a considerable period of time. The corruption in India's polity can only be addressed by passing legislation that reinforces value codes among Indian politicians. Indian lawmaker s can empirically draft legislation, prescribing â€Å"Codes of Conduct† for Ministers and Members of Parliament.By holding them accountable to national legislation, more credibility will be brought towards the Indian government's fight against corruption in the polity. Additionally, seeking assistance from countries that top Global Anti-Corruption Indices can help Indian whistle-blowers incorporate international expertise in resolving the problem they confront. India's Distended Bureaucracy: A White Elephant The inability of independent India's leaders to modify the county's pre-Independence administrative system proved to be significant in the perpetuation of corruption within India's bureaucracy.While colonial India's administrative system was effective in carrying out the functions of the British Raj collecting taxes, maintaining law and order and upholding the status quo it was unable to modify itself into carrying out the task of serving, rather than subjugating indepen dent India's citizenry. While India was still newly independent, officers from the Indian Civil Service (later modified to the Indian Administrative Service) capably led India's bureaucracy, efficiently carrying out the tasks assigned to them by government.Regrettably, the last 25 years have witnessed an ebbing away in the calibre of India's administrative officers. Rampant corruption among Indian bureaucrats and the politicisation of the Civil Service has significantly contributed towards this demur, creating a situation where India's bureaucracy has become a â€Å"White Elephant†, wielding enough clout for politicians to refrain from reforming it. In 1998, the Hong-Kong think-tank ?  °Political and Economic Risk Consultancy† rated India's bureaucracy as being among the most corrupt in Asia .Several factors substantiate this assessment. The rapid rise of India's economy has led to a huge inflow of foreign investment, with an increasing number of foreign firms competi ng for permits to set up businesses in India. This increased competition for limited vacancies widens the scope for corrupt practises to occur. Moreover, the number of people working in the Indian Administrative Service has risen exponentially since independence from 1,440,000 employees to 3,870,000 today . Understandably, this substantial increase in the workforce has led to greater levels of red-tape.To undercut this inefficiency, many individuals and private companies have resorted to bribery. The extortionate nature of India's bureaucrats has been compounded by the politicisation of the I. A. S. While induction into the Service was entirely meritocratic at the time of its inception, corruption now plays a significant role in the selection of candidates. Recently, serious infringements in the morality of I. A. S. officers have been brought to the public's attention with cases of corruption in the Indian states of Uttar Pradesh, Nagaland and Maharashtra . These isolated incidents reinforce a orrying trend. The politicisation of the service has, among other things, resulted in the delegation of power to individuals who may not be the most adept in handling the responsibility delegated to them. On India's Independence Day, Dr. S. Radhakrishnan warned that ?  °?  ­when power outstrips ability, we will fall on evil days† . In many cases, the power being designated to Indian bureaucrats far out-strips their administrative ability. Like the corruption in India's polity, rampant corruption in India's bureaucracy threatens to undermine the societal workings of the country in years to come.The bloated size of India's bureaucracy is another matter needing urgent attention. With over 3,870,000 employees , it is only natural for nepotism to take root between officials at different rungs of seniority. India's Deputy Prime Minister at the time of independence, Sardar Vallabhbhai Patel , specifically cautioned against the politicisation of the civil service. In a letter dated 15 October, 1948, he warned that ?  °The Service must be above party and we should ensure that political considerations, either in its recruitment or in its discipline and control, are reduced to the minimum, if not eliminated altogether† .The idea of gaining promotion in the service through underhand means was perpetuated during the last years of Indira Gandhi's tenure, some 25 years ago . As is mentioned by Madhav Godhbole, Home Secretary during Mrs. Gandhi's Prime Minister-ship, ?  °A new breed of civil servants who were ambitious and wanted to go places fast, quickly came into prominence. â€Å"Be committed (to the ruling political party) or get omitted† was the slogan of the rat race† . While Mrs. Gandhi strenuously denied these allegations , this shift in the mindset of Indian bureacrats marked a significant turning point in the affiliations of Indian civil servants.Instead of serving India's citizenry, ambitious civil servants began servin g the interests of the ruling party to win promotion. The rot within India's bureaucracy can be traced back to Mrs. Gandhi's tenure 25 years ago. In arriving at possible solutions for resolving the rampant corruption among India's bureaucrats, the present situation must be carefully considered. The current salaries being awarded to India's politicians and bureaucrats are a pittance when compared with the salaries being awarded to their counterparts internationally .By awarding salaries to government employees that are far below what is required to survive, Indian legislators are effectively compelling members of the civil service to seek alternative ways of making money. It is therefore only natural for them to forge illicit ties with opportunistic individuals. This is an internecine relationship; the bureacrats† ability to provide good governance is inhibited by their ulterior commitments to individuals, while the polity as a whole is at a loss as it is not being efficiently served by its administrative service.Therefore, any meaningful attempt to thwart corruption in India's bureaucracy must begin by appointing a Pay Commission with the mandate of adjusting the pay scales of India's civil servants in accordance with international standards. In many East Asian countries, the policy of awarding government employees high salaries has led to an increased level of integrity among the countries† administrators . To begin fighting an effective battle against corruption in the bureaucracy, India must follow their lead. India's independence leaders were mindful of the task assigned to them at the time of independence.During his 15 August 1947 address to India's Constituent Assembly, Jawaharlal Nehru reminded his audience that ?  °Freedom and power bring responsibility† . Dr. S. Radhakrishnan, who later became India's President, talked along similar lines when he reminded Indians that ?  °A free India will be judged by the way in which it will se rve the interests of the common man† . During the last 25 years, an increase in corrupt practices by India's politicians, administrative officials and business leaders has created a situation wherein India is no longer fulfilling its full potential.Corruption in India has transcended the simple giving and receiving of bribes; it has become a part of the psyche of many people engaged in governance and business. As was mentioned in an editorial in India's â€Å"Economic Times† newspaper dated 11 March 1998, ?  °This ideology (of corruption)?  ­will have to be reshaped†, ?  °before radical changes can be implemented† . In contemporary India, the interests of the common man are no longer being met, as was alluded to by the aforementioned 2000 ruling of India's Supreme Court.Inter alia, the ruling forewarned that ?  °Corruption in a civilised society is a disease like cancer which, if not detected in time, is sure to render malignant the polity of the cou ntry (India), leading to disastrous consequences† . It is not impossible for India to rid itself off corruption. There have been historical precedents for Indians to draw inspiration from; eighteenth century Great Britain was ?  °notoriously corrupt†, but over a 50-year period metamorphosed into ?  °a regime of extraordinary public probity† .This remarkable turnaround was achieved by undertaking several reforms, including the instating of a meritocratic administrative service and the implementation of legislation guarding against corrupt practices . Though Indian politicians have many potentially effective ideas to combat corruption, they lack the political conviction necessary to covert their proposals into reality. Over the last 25 years, numerous commissions have been set up by Indian governments to assess the threat posed by corruption and to map a way forward. By many accounts, corrective measures are already being taken.Between 2005 and 2006, the think-ta nk ?  °Political and Economic Risk Consultancy† reported that the level of corruption in India had substantially decreased, from a rating of 8. 63 to 6. 76 on a scale of ten . This is the most significant fall in India's corruption rating over the last decade, and if this is anything to go by, steps in the right direction are already being taken. Apart from the aforementioned proposals put forth to combat corruption in India's polity and administrative service, another tool useful in furthering India's battle against corruption is public accountability.During the last two decades, public accountability has steadily eroded, with fewer cases of corruption against government officials being levied in courts. Furthermore, logistical problems have resulted in a massive backlogging of legal cases, causing major delays in bringing cases to court . To better ensure accountability, measures should be taken to rectify this. In the words of P. V. Srivastava, ?  °an adequately paid po litical class which is honest and independent and which is thus capable of providing clean, efficient and pro-people governance to the country (India)† will resolve India's corruption problem.However, it is important to bear in mind that, in spite of losing the incentive to be corrupt, some people continue to engage in dishonest practices. Public liability is the only viable solution for bringing such people to book for their actions. As Kofi Annan once commented; ?  °We have the means and the capacity to deal with our problems, if only we can find the political will† . The political will of Indian politicians has been in short supply over the last 25 years; yet it is the only impediment standing between India overhauling the corruption within its polity and dministrative service. 4. Outsourcing WHAT IS OUTSOURCING? The idea of outsourcing has its roots in the ‘competitive advantage' theory propagated by Adam Smith in his book ‘The Wealth of Nations' which was published in 1776. Over the years, the meaning of the term ‘outsourcing' has undergone a sea change. What started off as the shifting of manufacturing to countries providing cheap labour during the Industrial Revolution, has taken on a new connotation in today's scenario.In a world where IT has become the backbone of businesses worldwide, ‘outsourcing' is the process through which one company hands over part of its work to another company, making it responsible for the design and implementation of the business process under strict guidelines regarding requirements and specifications from the outsourcing company. The key to this definition is the aspect of transfer of control. This definition differentiates outsourcing from business relationships in which the buyer retains control of the process or, in other words, tells the supplier how to do the work.It is the transfer of ownership that defines outsourcing and often makes it such a challenging, painful process. In o utsourcing, the buyer does not instruct the supplier how to perform its task but, instead, focuses on communicating what results it wants to buy; it leaves the process of accomplishing those results to the supplier. There are two principal types of outsourcing: 1. Traditional outsourcing: – In â€Å"traditional† outsourcing, employees of an enterprise cease to perform the same jobs to the enterprise. Rather, tasks are identified that need to be performed, and the employees are normally hired by the service provider.For example, an information technology outsourcing may include a transfer of responsibility for management of data centers and networks (LAN, WAN, and telecommunications). In the field of facilities management, individuals acting as property managers might become employees of a facilities management company. 2. Greenfield outsourcing: – In â€Å"greenfield† outsourcing, the enterprise changes its business processes without any hiring of personn el by the service provider. For example, the enterprise might hire a startup company to provide a new service, such as wireless remote computing, that was not previously managed internally.This brings us to the areas of outsourcing. Outsourcing takes place in the following three main fields: * Business Process Outsourcing: – It aims at providing optimal performance in critical enterprise processes. It provides industry-specific as well as cross-industry solutions, enabling clients to focus on core competencies and move to a higher level of performance. * Application Outsourcing: – This aims at applications development, management and maintenance services that complement strategic goals and produce measurable business value.This could also encompass innovation that enables the clients to achieve high performance. * Infrastructure Outsourcing: – Our professionals collaborate with forward-thinking organizations to create low-cost, high-value solutions for the entir e enterprise. Accenture Infrastructure Outsourcing (IO) enables companies to transform business-critical applications and processes and achieve high performance. WHAT IS BUSINESS PROCESS OUTSOURCING? The BPO handles the outsourced project in a four-fold manner. * It invites companies to outsource to it by advertising its manpower efficiency and its technological advantage. The next step is achieving the desired results. The company generally has a prescribed set of SLAs (Service Level Agreements) that it has to meet. * Then it needs to assure clients that they would be able to deliver the desired results with utmost security, since a loss of data could lead to grave consequences for the parent company. * The final stage is the result stage. You deliver the results that lead to quality output at cheap rates, thus benefiting the parent company. The services offered by a BPO range from voice based processes to non-voice based processes.The non-voice based processes are termed as back o ffices wherein computations and data feeding and processing takes place. WHY OUTSOURCE? Rapidly changing and increasingly complex business forces are bringing fundamental shifts in management and organization. The steady advance of technology, the complexity of business operations and the need for constant growth are conditions that require core competence in too many functional areas. This business climate demands that companies adapt to keep up with the changes. The benefits of outsourcing of course are variable, dependent upon the nature and situation of the organization.However, the following is a list of common reasons why outsourcing is undertaken: * To improve business focus: Outsourcing lets a company focus on broader business issues while having details assumed by an outside experts. * Free management from day-to-day operations oversight * Access to world-class capabilities: By the very nature of their specialization, outsourcing providers bring extensive worldwide resource s to meeting the needs of their customers * Redirection of resources: Every organization has limits on the resources available to it.Outsourcing permits an organization to redirect its resources from non-core activities toward activities that have greater return in serving the customer. * As business practices continue to change and evolve within organizations looking to remain competitive, the nature of outsourcing is undergoing a transformation in both its use and its impact. * Lower costs due to economies of scale * Ability to concentrate on core functions * Greater flexibility and ability to define the requisite service more readily * Specific supplier benefits. For example, better security, continuity, etc. Higher quality service due to focus of the supplier * Improved internal management disciplines resulting from the exercise itself * Less dependency upon internal resources * Control of budget * Faster setup of the function or service * Lower ongoing investment required in in ternal infrastructure * Greater ability to control delivery dates (e. g. : via penalty clauses) * Lack of internal expertise * Increase flexibility to meet changing business conditions * Purchase of industry best practice * Improve risk management * Acquire innovative ideas * Increase commitment and energy in non-core areas Improve credibility and image by associating with superior providers * Generate cash by transferring assets to the provider * Gain market access and business opportunities through the supplier’s network * Turn fixed costs into variable costs ADVENT OF THE BPO INDUSTRY IN INDIA: Since the onset of globalization in India during the early 1990s, successive Indian governments have pursued programs of economic reform committed to liberalization and privatization. Till 1994, the Indian telecom sector was under direct governmental control and the state owned units enjoyed a monopoly in the market.In 1994, the government announced a policy under which the sector w as liberalized and private participation was encouraged. The New Telecom Policy of 1999 brought in further changes with the introduction of IP telephony and ended the state monopoly on international calling facilities. This brought about a drastic reduction and this heralded the golden era for the ITES/BPO industry and ushered in a slew of inbound/outbound call centers and data processing centers. Although the IT industry in India has existed since the early 1980s, it was the early and mid 1990s that saw the emergence of outsourcing.One of the first outsourced services was medical transcription, but outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries, which catered to the process off-shoring requirements of their parent companies. Some of the earliest players in the Indian market were American Express, GE Capital and British Airways. The ITES or BPO industry is a youn g and nascent sector in India and has been in existence for a little more than five years.Despite its recent arrival on the Indian scene, the industry has grown phenomenally and has now become a very important part of the export-oriented IT software and services environment. It initially began as an activity confined to multinational companies, but today it has developed into a broad based business platform backed by leading Indian IT software and services organizations and other third party service providers. The ITES/BPO market expanded its base with the entry of Indian IT companies and the ITES market of the present day is characterized by the existence of these IT giants who re able to leverage their broad skill-sets and global clientele to offer a wide spectrum of services. The spectrum of services offered by Indian companies has evolved substantially from its humble beginnings. Today, Indian companies are offering a variety of outsourced services ranging from customer care, tr anscription, billing services and database marketing, to Web sales/marketing, accounting, tax processing, transaction document management, telesales/telemarketing, HR hiring and biotech research.DEMAND-SUPPLY ANALYSIS OF THE INDUSTRY W. R. T. INDIA WHY INDIA? Robust communication infrastructure, a large English-speaking workforce, low labor costs, appropriate time-zone difference with the West and the brand equity built by the software services sector are compelling reasons for choosing India as the BPO destination. To top it all a friendly tax structure places the ITES/BPO industry on par with IT services companies.Further outsourcing to India offers significant improvements in quality and productivity for overseas companies on crucial parameters such as number of correct transactions/number of total transactions; total satisfaction factor; number of transactions/hour and average speed of answer. Some of the other key benefits of outsourcing from India are enlisted below: * Access to leading practices: external service providers give companies access to an extensive, highly specialized knowledge base–which providers must improve continuously to stay in business. Clearer strategic focus: allows a manager to focus on core competencies and strategic issues rather than on routine, time-consuming activities * Better resource allocation: can help shift the traditional focus from transactional activities and reporting to the delivery of forward-looking information and value-added business analysis. * Improving service quality and productivity. Fast turnaround times and the ability to offer 24Ãâ€"7 services based on the country's unique geographic location that allows for leveraging time zone differences. Improve performance–maximize the performance of an organization's enterprise client/server computing environment through the use of the latest technology and an outsourcer's performance management tools and expertise * Achieving cost effectiveness as well as cost Reductions * Significant cost savings, up to 80% in certain cases. * While it can be quite difficult to recruit the expected competence in Western countries, it is a completely different scenario in India, where there are lots of available programmers with a good academic background. Abundant, skilled, English-speaking manpower, which is being harnessed even by ITES hubs such as Singapore and Ireland. * Improving telecom and other infrastructure, which is at par with global standards. * Strong quality orientation among players and their focus on measuring and monitoring quality targets. * Proactive and positive policy environment, which encourages ITES/BPO investments and simplifies rules and procedures. DEMAND FOR BPOs – PRICE DETERMINANTS The Law of demand states that â€Å"higher the price, lower the demand† and vice-versa, other things remaining constant.This concept is well illustrated in the BPO industry. Since the employee costs are higher in nation s like the US and the UK, they are looker towards fresher pastures to cut costs. The breakup of a fictitious company’s expenses is given as follows. The overheads amount to around 17. 7%, the facility maintenance is around 5. 7%, the technical and telecommunication is the major expense commanding around 47. 5% while employee costs in terms of salaries and employee benefits brings up the year with 29. 2%. Now by outsourcing to an Indian firm they cut costs to the magnitude of almost 75% on employee costs.The main drawback though is the fact that they tend to lose around 35 – 40% in terms of technical development and telecommunication costs. But technical development is a one-time investment and the rest is more than offset by the savings on employee costs. To make matters better the international bandwidth situation has improved dramatically over the last 3 years with the launch of India's first private undersea cable. Moreover, considerable bandwidth is also available to companies through state owned Videsh Sanchar Nigam Limited – VSNL.It has strategic stakes and has negotiated contracts to use parts of several international cables like SEA-ME-WE II, SEA-ME-WE III (40 GBPS capacity), FLAG (10 GBPS capacity) and SAFE (40 GBPS capacity) offering connectivity to most locations around the world. Other private operators in India also have aggressive plans to build undersea cable with considerable bandwidth over the next 2-3 years. Besides, the privatization of NLD operations within India has resulted in the emergence of new players. The privatization of the telecom Industry has resulted in significant drop in telecom rates.Continuing competition in the industry with the recent entry of newer players will see a further drop in telecom prices. As a result, the telecom costs have dropped by 85% in 3 years. This has led to decreased expenditure by the international firms that have outsourced to India. A, B and C are points upon the demand curve (de mand for cheap labour available in India). Each point upon the curve reflects a direct correlation between quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on.The demand relationship curve illustrates the negative relationship between price and quantity demanded. The higher the price the less the quantity demanded (A), and the lower the price, the more quantity will be demanded (C). This graph further highlights the reason as to why companies are looking forward to outsourcing their processes. The reasons underlying law of demand can be explained as follows: * Income effect: Fall in expenditure on employee costs is equal to an increase in the profits earned by the company as it now spends less in getting the same amount of work done. Substitution effect: Further when the total manufacturing costs drop price of commodity falls, the consumer buys more of this commodity as compared to other commodities, which are mor e expensive. NON-PRICE DETERMINANTS OF DEMAND The major non-price determinant in this case is the backlash against outsourcing or off shoring by the general American public. This is further supported by the political scenario and changing government policies and strategies. Despite these two factors being strong detractors for trade, the price payoff seems to continue to lure the big companies to outsource.It is business logic that will drive the growth in the sector. One final but major detractor after the public backlash is the issue of data security, which might be projected as a hindrance to the flow of free trade between the two nations. SUPPLY OF LABOUR TO BPOs – PRICE DETERMINANTS Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied into the market is known as the supply rela tionship. Price therefore, is a reflection of supply and demand.The law of supply demonstrates the quantities that will be sold at a certain price. Opposite to the demand relationship, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price offers greater revenues. A, B and C are points upon the supply curve (the supply here is of skilled labour, which may be cheap by US and UK standards but is profitable by Indian standards). Each point upon the curve reflects a direct correlation between quantity supplied (Q) and price (P).So, at point B, the quantity supplied will be Q2 and the price will be P2, and so on. A major factor affecting the supply curve is cost of production. The cost of production in India, where production would refer to tasks ranging from telemarketing to mere data entry, are low due to the availability of extreme ly cheap but skilled labour compared to the labour in the US. This is profitable for Indian companies as they can earn large profits despite paying god salaries to employees and so these producers undertake these processes on a large-scale.EFFECT OF SUBSTITUTES In the case of outsourcing, substitutes are of two types. The first type comprises of service providers from the same country, while the second type makes up the other countries to which processes can be outsourced. Service providers within the country that are real successful are enlisted below. Each of them specializes in single or a range of processes. * Wipro Spectramind * Daksh eServices * Office Tiger * HCL Technologies * ICICI OneSource * World Network * Exl Service. com * MsourcE * Hinduja TMT * Tracmail * ProgeonThree years since, Office Tiger is the fifth-largest third-party BPO Company in India with revenues over $25million. It has 1000 employees in two facilities. Two more Office Tiger centers will go live by the fourth quarter of2003. Besides office documentation, it now offers services as specialized as business research for the banking industry and analytics to its 20 clients in the US and Europe. Most industry observers believe the Indian BPO industry is headed skywards. A research director (off-shore BPO), Gartner India said, â€Å"India will soon have nearly a dozen $100-million third-party BPO companies.In the next 18-24 months, there will be 8 to 10 third-party operators with revenues in excess of $100 million. This is not too difficult to assess considering the over 70% growth of these players†. The $100-million mark is crucial for two reasons: First, it gives the companies a critical mass to fight multinationals like EDS, Computer Sciences Corporation (CSC), Accenture and Exult Inc. Second, it gives the prospective client enough confidence to trust them with larger contracts. Of course, business is still not pouring in, but Indian companies are beginning to graduate from $2- 4 million contracts to tens-of-millions contracts.Early this year, HCL Technologies (HCLT) BPO Services bagged the biggest-ever third-party BPO deal among Indian firms – a five-year contract from British Telecom (BT) worth $160 million. Add to that an existing contract of $15 million from BT’s Belfast unit and HCLT BPO has assured revenue of $175 million over the next five years. That’s $35 million a year from just one client. It has 23 more. Among others who are projected to pull through to the $100-million club by March 2005 are the $30-million Daksh eServices, the $41-million Wipro Spectramind and the $35-million World Network Services (WNS).Daksh has projected a revenue increase of 85-90% by March 2004 on the basis of ramp-up of its current projects from nine clients and Wipro Spectramind, India’s largest BPO Company could be there in the next 12 months based on just organic growth. Others who could hit the $50-million mark are the $20-million MsourcE and the $29-million exl Service. com. Given their current growth rates, even their targets seem well within reach. For instance, exl, which started as a Conseco (US-based insurance company), promoted venture with 95% of the work coming from the arent, now does barely 7% of Conseco work. If all these companies hit $100 million by 2005, they would have outdone their better known cousins-the IT services companies. The other type of substitution is in terms of countries other than India. They are given below with their advantages and disadvantages mentioned alongside. ECONOMIES OF SCALE When there are economies of scale, manufacturing costs per unit decline as a firm produces more of a product. Declining unit costs enable firms to earn excess profits the larger their scale of output.This creates a tendency toward concentration and imperfect competition: normally there are few producers, each one an oligopolist or monopolist, with profits commensurate to their scale of production and th e number of competitors in the market. Economies of scale are important to the political economy of trade because trade enlarges the available market, which affects plant size. For example, trade encourages firms to expand production runs, increase capacity utilization, rationalize production facilities, and pursue mergers and acquisitions.Business Process Outsourcing is generally categorized as being transactional, niche, or comprehensive. Transactions are generally sub-processes such as account payables, account receivables, journal, general ledger, order processing, medical transcription, etc. Niche support moves up to support a complete business process by specialized business services providers such as accounting, human resources, etc. Comprehensive usually thoroughly covers multiple business processes by one of the large Business Services Providers (BSPs). Business Process Outsourcing since its inception has been the turf of large business clients.Small, and many medium sized businesses do not have the staff required to develop, negotiate, and manage the contracts, service level agreements, and other overhead associated with doing business with the large Business Services Providers (BSP). As a result, business process outsourcing has been practically unavailable to small and some medium sized businesses. Major problems faced by small service vendors are: * Reckless Start-ups- a vast majority of the 310 start-ups are headed for a dead-end. Their capacity utilization is less than one of the three shifts.Many of these companies that converted their empty basements and warehouses into BPO units or firms with $10 million-20 million VC funds that ran out of cash without creating anything more than white elephants. They have driven down prices to grab business, but have failed to deliver. They were always clueless about people, processes or technologies- the three key elements of the BPO business. * Poor Infrastructure- the industry has more to worry about than just reckless start-ups. Primary among those is infrastructure. While telecom networks are state of the art, getting a connection still takes up to three months.Unreliable power supply is forcing units to create their own back-ups, which they can barely afford. Roads are bad and airports are in dire need of repairs and upgrades. * High Attrition-another major problem is the high attrition and growth aspirations of the workforce. At least 60,000 of the 171,000 workforce change jobs every year. About 80% of them look for better leaders. Team leaders want to upgrade to supervisors, quality professionals or operations heads. The HR problem threatens to soon become grave. Good agents are becoming hard to find and with tardy infrastructure, big moves to the much talked about smaller towns will take longer.This means costs will rise making it difficult for small VC-funded companies to survive. The big service vendors thus highlighting the economies of scale face neither of these problems. But then as the size of the company keeps growing the diseconomies of scale strike in a big way in the form of increase in demand for employees. The BPO sector is facing a roadblock of sorts, a human one. BPO companies are struggling to hire new employees in sufficient numbers in the metro cities. Consequently they are trawling small towns looking for †employable† graduates.For cities like Mumbai, Delhi, Hyderabad and Bangalore demand is already outstripping supply of people. The demand for fresh graduates from BPO companies in the National Capital Region (NCR) region is around 20,000 to 25,000. The colleges and the universities within the NCR are unable to supply †employable† graduates to meet this demand. This is because the total number of graduates from all colleges, diploma institute and universities is not necessarily relevant. This has led to a problem wherein despite wanting to expand and accept new processes the companies cannot do so for wan of man power.This leads to recruitment of semiskilled labour and a subsequent drop in quality. DEMAND SUPPLY EQUILIBRIUM The concepts of supply and demand bring us to an important effect that they have on price. When supply and demand are equal (i. e. when the supply function and demand function intersect) the economy is said to be in equilibrium. At this point, the allocation of goods (in this case labour) is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded.Thus, everyone (individuals, firms, or countries) is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding. With reference to the BPO industry this could be explained as follows. The demand here would be of skilled labour from international companies wishing to outsource to the service vendors in India. The supply would be of fa cilities and labour to complete the assigned process catering to the SLAs.The equilibrium price would be when the service vendors are sure of making reasonable amount of profits and the international company is assured of having excellent quality work done at lowered rates. Equilibrium occurs at the intersection of the demand and supply curve, which indicates no allocative inefficiency. At this point, the price of the goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium price and quantity. In the real market place equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply.

How has the world changed for hospitals Essay Example | Topics and Well Written Essays - 750 words

How has the world changed for hospitals - Essay Example Based on that, the existence of technological gadgets such as smart phones, tablets and other smart devices has had an impact in the overall running of hospitals. These gadgets not only act and/ or are used as mini computers (small computers) but they can also be used by medical staff to report immediate issues; send emails to other colleagues; chat online; communicate through instant messaging; make urgent calls and even do online research. With regard to online medical research, the dawn of the internet as well as the information age has enhanced all forms of research to be conducted online. For example, if a medical student or a registered nurse (RN) wanted to conduct online research, they could be in a very comfortable position to use their hand held gadgets to perform these tasks. A number of medical technologies have also taken the form of â€Å"smart† equipments. This means that the medical equipment being utilized by practice not only undertakes its usual tasks, but it also tends to perform computing requirements, evaluation as well as analytical operations to the data and information provided to it by the practitioner in the hospital. A good example is the implementation of electronic health records (EHR). These digital health records have the capability to capture all of patient information. In addition to that, they also have the ability to evaluate the data and information that doctors feed to their database. That is, they can be in a position to evaluate whether the prescription given to the patient is valid or not. If not valid, EHR can be in a position to notify by sending messages to the user informing them that the information provided is incorrect. Hence, the user can be in a position to correct the information provided. More to that is th e fact that each time better equipment is unleashed by medical equipment manufacturers that promises to work and perform even better and faster than the previous equipment. As

Snap Decisions Essay Example | Topics and Well Written Essays - 250 words

Snap Decisions - Essay Example This was done without any conscious analysis of the benefits that I would get from the friendship. The other snap decision that I have made is the choice of courses to attempt in any semester year. The choice of courses is usually done after a careful analysis of the options before the final decision is made. However, I have usually made snap decisions concerning the best course before getting any other information on the course. My emotions at the moment of making these snap decisions can be best described as emotional and based on hunches. For example, the choice of friends is usually based on first impressions, and if a person looks to be of a different character from mine, I would immediately dislike them, and changing this attitude would be hard. This also applies to the choice of courses, where the snap decisions are based on a liking of the lecturers, teachers, or other students taking the same course. The snap decisions that I have made usually turn out to be the best decisions I have made, since they turn out to be positive. This means that I do not regret the decisions later, and given the information before I made the decisions, I would still make the same

Push and pull factors in Syrian migration Essay Example | Topics and Well Written Essays - 750 words - 1

Push and pull factors in Syrian migration - Essay Example Thus, the key factor that pushes Syrian citizens to migrate is a war which brings â€Å"daily violence and a dramatic deterioration in living standards† (Wolfe, 2014). â€Å"The wars raging in Syria and Iraq are clearly big drivers of migration† (Peter, 2015). For example, one Syrian citizen speaks on a subject in next terms, â€Å"We no longer have any hope in Syria, and there is nothing here except fear and death† (Hashash, 2015). The economic and infrastructure of most of the Syrian cities are ruined by the war. "In terms of infrastructure, major parts of Syria have effectively been bombed back to Ottoman times," says Ammar Abdul-Hamid, a Syrian activist (FoxNews, 2012). Therefore, there are no jobs, no appropriate health care, and generally, no good living conditions. Most of the citizens are left without even basic human rights (Wolfe, 2014). Being brutal to each other, opponents continue to keep the field on territories which once were private and public do mains, homes and schools. â€Å"A Syrian army officer moved into my house†¦ He likes my home, apparently†, says Khaled, a refrugee from Syria, ironically (Rollins, 2014). At least half a million homes have been destroyed in Syrian conflict already by 2013. According to estate expert Ammar Youssef’s study, it means that â€Å"about 700,000 families, or nearly 2.8 million people†, literally have no place to return (Haydar, 2013). Thus, Syrians are forced to seek for a shelter, for a better life. For the past three years of brutal conflict, about â€Å"9.6 million people have fled their homes for safety† (IRC, 2014). According to UNHCR, â€Å"approximately 7.2 million people have been forced to flee their homes within Syria, and 3.3 million have become refugees abroad† (Wolfe, 2014). In comparison to around 22 million population of Syria in prewar times, it’s about 50% of general population of the country. The situation is already called â€Å"the biggest humanitarian emergency of our era† (Wolfe,

Why You Should Adopt dogs and not buy them Assignment

Why You Should Adopt dogs and not buy them - Assignment Example ally many benefits that can be enjoyed by both the person in question and the dog that will be adopted if the individual chooses to acquire a pet from a shelter. For example, adopting a pet is more cost effective than buying one. Many rescue groups and city shelters tend to spend a great deal of money on aspects such as regular visits to the veterinarian, boarding costs, and grooming. Many people also do not realize that adopting a pet leaves them with many options in regards generating support groups that help them to live in harmony with their new pet. If an individual buys a dog from a store, he or she assumes all responsibilities for that pet, even with the absence of any past records on the animal. The process of adopting a pet enables the new owner to be furnished with critical information with regard to the animal’s history. Adoption centers such as rescue groups are also more likely to help the new owner with responsibilities through the familiarization period as they are as interested as the owner in ensuring that the dog finds a good home. Service enterprises, such as the Beagle Freedom Project, that deal in the sheltering of dogs are worth researching to discover the different aspects involved in adopting or purchasing dogs. Such organizations tend to keep records on each of their pets, their acclimatization to their new surroundings when they are adopted, and the extent to which they are successfully integrated into their new families. Sarah Kalnajs - Certified Dog Behavior Consultant with the International Association of Animal Behavior Consultants, who also works with shelters provided by associations such as the Beagle Freedom

Reasons for the Decline in Union Membership and Density in the 21st Research Paper

Reasons for the Decline in Union Membership and Density in the 21st Century - Research Paper Example Over the past decade, unions have used their political clout to advocate legislation and establish regulatory agencies that supersede entirely or greatly circumscribe the scope of collective bargaining on many issues of significance to employees. When deciding whether or not to form or join a union, workers balance the costs of doing so, such as union dues, against the expected benefits, such as better working conditions and pensions. While the costs of joining unions are seemingly unaffected by most labor legislation, the potential benefits of doing so decline. Because they are already buying labor protection and mandated fringe benefits with tax dollars, workers have less incentive to join unions. The political success of unions in the past has surely played some role in undermining their future prospects, as in the case of VBY union. It is no secret that labour unions have been declining in membership and influence for many years. The number of unionized workers in Europe was only 16.7 million in 1990, which is approximately 16 per cent of the workforce. This is less than one-half the per cent unionized in the mid-1950s. Some managers view the decline of unions with glee. To them unions are non-productive, combative adversaries interfering with the harmonious and efficient operation of the company. Some of them have adopted the idea that this is pay-back time for the punishment management suffered in the sixties and early seventies when rising wages, automatic cost of living adjustments, ever-increasing benefits, strikes, and Byzantine work rule arrangements seemingly were the rule.  

The Twenty Seven Amendments to the Constitution of America Assignment

The Twenty Seven Amendments to the Constitution of America - Assignment Example Amendment 2 This amendment grants the public permission to keep or bear arms with the permission of the relevant authorities concerned. This means that individuals are permitted to carry or bear weapons in cases of self defense. An example is that a civilian may be allowed to bear or use arms in cases of robberies to defend a person’s life or assets (Chalmers, 26). Amendment 3 The constitution states that soldiers should be privately contained to thwart them from being a peril to the public. This connotes that under no circumstance should civilians share the same residence or cohabit with soldiers as the impacts would be deadlier. Amendment 4 This amendment bars the government from carrying out searches and apprehensions of the public. It gives the public the right to ask for an arrest or investigative warrant from bureaucrats before consenting to arrest or searches. A breach of the amendment gives the public the right to sue the government or the officials who did the arrests or the search (Chalmers, 26). Amendment 5 This amendment states that the country’s citizen facing trials in a state institution should be given a criminal proceeding before a verdict is made on his plight. The constitution should treat such a person as suspect and should be protected from personal incriminating substantiations. This amendment implies that individuals are entitled to a right of audition in legal procedure to determine the contribution to the committed crime.

Product Costing - Traditional Methods and Activity Based Costing case Essay

Product Costing - Traditional Methods and Activity Based Costing case assignment 5 accounting - Essay Example The proposed solution will prove to be very useful for the agricultural enterprises which mainly aim at employing management accounting techniques (Hicks). Considering the fact that the total ownership is focused on a particular crop which grows for a certain amount of time in a year, it is essential that the cost and profit centres are set up as they would provide the couple with a chance to make more accurate costing as well as improved pricing. This will also help the couple improve the profitability of the farms as well as ensure better management and more informed decision making for the farm. On the whole this will lead to more effective and efficient management of the farm. It is also important to note that the schematic will provide a chance for the developer to all the activities and also recognise the drivers which can be used effectively as the input values for the activity based costing systems. It is also important to note that including the cost and profit centres solutions will prove to be very beneficial for the company and will also permit the company to very effectively and accurately conduct the costing for the produces. Also the financial statements that have been provided are very helpful and beneficial for the farm to develop and design the management accounting systems and all reports effectively and efficiently. Since the proposed scheme of the relationship between the profit and cost centres are complex, it is essential to note that the possible scheme will prove to be very effective and will also be more beneficial than the basic provides (Beaulieu and Lakra). The fact that the cost centres provide support and assistance to each other has not been considered in the scheme and this leads to unrealistic solution. In a real world scenario, the cost centres will provide support and back up to each other and also in some cases to the profit centres. According to Business Dictionary Activity Based Costing, â€Å"Cost accounting approach

An Illustration of how Multinationals can fail Essay Example for Free

An Illustration of how Multinationals can fail Essay In an ever-globalizing world, which is turning the world into a global village, businesses have found tremendous opportunities to expand their operations, markets and resources worldwide. Globalization has led to opening of national borders, allowing freer trade and increased exploitation of the resources located in foreign countries giving rise to the phenomena of multinational corporations. These business enterprises own and control resources located in countries other than the country where these originate from or have their head-quarters based in. After the disintegration of the Union of Soviet Socialist Republic (USSR) and creation of an sovereign Russia in 1991, thus ending the Cold War, Russians and other former USSR republics began to consider opening their borders to freer trade, and also introduce some free-market economy initiatives. It was and is still perceived that the failure of state-run economy itself was the reason. During the early 80’s the economy of Russia ceased to grow, making the government gradually deviate from communist ways of governing the economy. However this caused the USSR to break away. The reason why Russia had encouraged foreign investment on its soil is the potential for growth. Russia wishes to extract its natural resources for domestic use and export, which can help it sustain growth. Just upon creating, a number of free market reforms were introduced to improve the economy. Among those reforms, especially those that encourage foreign investment, Production Sharing Agreement was introduced in 1994 which was signed with the Sakhalin II project consortium. Sakhalin Sakhalin is an island located in the far east of Russia, close to Japan. It is now known for its oil and gas reserves. There have been two projects that include Sakhalin I and Sakhalin II. The area has grown in importance to Russia because it is has one of the unexploited oil reserves in the world. Sakhalin remained unexploited because USSR has other oil reserves in their central republics. It is estimated that the island and its surrounding have oil reserves amounting to 1. 8 billion tons of oil and gas reserves of about 2 billion cubic meters of natural gas. Such large amount of untapped resources have make Sakhalin an attraction for foreign oil companies. Sakhalin inhabitants have seen a general improvement is their life styles since the oil generation brought economic boom to their island. The inhabitants, who are traditional in outlook are becoming more modern, and now prefer to move to the central Russia, which is more developed. The Consortium The consortium consisted of Shell, Mitsui and Mitsubishi, which are multinational corporations, of which Shell had 55% of the shares. Royal Dutch Shell is a company which is jointly owned by the Dutch and Britain. Its core business is in oil and gas. It have make diversifications into many other areas of non-renewable and renewable energy generations. So it can be more appropriately defined to be in the energy sector. It was the majority shareholder of the project, which reflects the project core product. The remaining two minority shareholder, the Mitsui (25%) and Mitsubishi (20%) are corporations based in Japan and are conglomerates. Energy is not their core business. They have created small companies for some market share in the energy sector. Thus they exist in the Sakhalin II, sharing the revenues and reducing investment risk for Shell. Their exclusion from the project may not be of much concern to them because they have businesses in other products. However, for Shell, the exclusion will be a severe blow for Shell. This is because the Sakhalin II project is considered by investors and media alike as an ‘image building’ project. The Shell was planning to make further investments in the energy sector in the phase II of the project, which could have broken several records which are the largest investment of Shell itself, the largest foreign investment in Russian history and also creation of world’s largest integrated oil and gas project. Such strides would have provided great potential for Shell’s growth. Exclusion means that Shell will lose their reputation by having to leave a project. The fourth partner emerged in the Sakhalin II project consortium is Gazprom which is Russia state owned energy corporation. It entered the consortium when it bought shares from all the three companies reducing them to exactly half of what it had been. Thus Gazprom became the majority share holder with 50% and one more share, giving it a majority position in the share. Gazprom’s entry into the consortium is rather controversial. It is known that the Russian government forced Shell to sell their shares. This caused a blow to the image of Shell. The circumstances under which Gazprom’s takeover took place also controversial. The Sakhalin Energy Investment Company is the operating company of which the shares are owned by the consortium. The creation of such a company is a legal requirement that is usually done two or more company want to do a joint venture. This arrangement helps the companies to organize their resources under a common company. For the Russian government, it helped ensure liquidity of the shareholdings, which means that any part of it can be traded with any company, and it is this feature that helped the Russian government make Gazprom a major shareholder. Production Sharing Agreement The consortium made explorations in the Sakhalin Island, and also succeeded in making export revenues. Soon, the Sakhalin II wan being considered as a most important project for Shell. The only challenge that Shell or the Russians faced for in bringing Shell was the Production Sharing Agreement. This agreement is a commercial contract which allows the member of the consortium to share the profits from the project. This agreement had many legal problems because it has many clauses which are not supported by other Russian Laws such as that of taxation. This has created a controversy which had been an obstacle to Shell’s presence right from the beginning. Production Sharing Agreement is supported by Russian Law but for non- Multinational corporations, which are state run companies in Russia’s case, there is a different law. This create another issue of multi-nationals presence throughout the world; circumvention of local law. To encourage multinationals to remain in the country, new laws are created which are often are not available to local companies. (Abdelal, 2006) Production Sharing Agreement is designed to over-ride any local law. For example, in the energy sector of Russia the petroleum taxation for foreign oil companies is lesser than a local company. So, for example, they may stipulate a certain taxation rates on the profits of the foreign oil company that is party to the agreement, which is different from that of the general fiscal regime in the country as a whole. Production Sharing Agreement gives too much powers to the multinational corporations. First these contract cannot be changed without any mutual agreement. If the government want to change any clause, for example, place limits on productions or increase tax rate, it is not possible unless the multinational corporation agrees. If it implements any change without the multinational accepting, then the multinational has the right to bring international arbitrators to resolve the issue. Production Sharing Agreements remain in force for the full duration of the contract. The duration is usually a long period of time. This is favorable for the multinational because it gets the security for making any large capital investment. If would be quite risky for any foreign corporation to make a large investment without assurances. These assurances are not new to any country attracting foreign investment. However it also benefits the country because there is a limited time given to the multinationals to make explorations. If the explorations does not yield any reserves, then the multinational company cannot reclaim more than their original investment. Once the exploration succeeds, the company first covers it costs until what is left is the ‘profit oil’. As stated by the name of the agreement, the production’s profit is shared between the state oil company and the foreign oil company according to an agreed ratio which is usually 40 percent allocated to the foreign oil company. In any case, the investment made by the multinational is usually a risked investment. Recently there has been an issue with such agreement as being ineffective. The Russian Natural Resources Ministry believes that the projects should be reviewed. The ministry reported that the production-sharing agreements are ineffective and are damaging Russia’s national interests. If the agreements are taken for review and revision, this can potentially discourage the foreign investment in the future. (Buckley, 2006) Perhaps acting on national interests, the Russian government felt compelled to take over the Sakhalin II project. The project has a good estimate of ‘profit oil’ which have been realized to be of a strategic importance to the Russia. There were other issues which may have compelled the Russian government to take such a step which can potentially discourage foreign investment. Environmental Issues One issue that may have compelled the government to change the clauses of the agreement are environmental issues. The construction process has caused harm to the environment. The environmental issues is an important issue that weakened Shell’s position in Russian energy sector because it lost the financial support of the European Bank for Reconstruction and Development, a major financer of the project. There are numerous environmental violation that took place. The construction of oil tankers bay needed extraction of undersea mud and disposal on a site farther away in the sea. This had a damaging impact on marine life and ecosystem, which produces fish for local population’s consumption. The island is seismic in nature, however there are no safeguard against any major earthquake. The pipelines are not made up of an appropriate material and are vulnerable to breakdown in case of any such natural calamity. This can cause oil spill and thus are a risk to the environment. Also during the construction of some pipelines, it was found that large amount of earth was left in the open alongside the pipelines which caused the temporary revocation of the construction licenses and the contruction process had to be stopped. Such hindrances in the construction process increases the overall cost of construction and also endangers the environment. The consortium had to pay US $ 110,000 in advance to the Russian Federation for all the potential damage that can be caused to fish off-shore in the Sea of Japan, although there has not been any oil spill till date. There have been reconstruction of some pipelines and also the re-routing of pipelines to prevent any potential damage in the future. Lessons from Shell in Sakhalin It has been found that since the publication of the case, Shell came under pressure from the environmental issues as well as the economic opportunities for Russia that compelled Gazprom to take over half of the Sakhalin II. With Shell under pressure, it became increasingly possible for Russia to come under a ‘mutual’ agreement with Shell to change some clauses of the Production Sharing Agreement. Thus the intent of Russia was not to deal with the environmental issue but rather to gain control of the world gas industry as the project produces over 8 % of world’s gas and that too in the most transportable form, LPG. The goal might be to create a cartel in the future that can control the gas prices in the future. (Miriam, 2008) One lesson learnt is that in today globalizing world, multinational corporations face challenging situations where they have to know the interests of the country they are operating in. No matter what assurances have been made, it is important to consider the changing underlying economic interests behind such assurances. As we see in the case, the apparent reason for assurances made by Russia was to exploit its resources, however as it realized the economic potential of such vast reserves, they looked for an appropriate time to start the takeover program. The other lessons learnt is the multinationals should look at the social interests of the country where they have their operations. Environmental issues as we have seen in the Shell’s case were alarming social issues that went unheeded in the beginning. It is a habit of multinationals not to look after the social issues. Their motive is to exploit the market and maximize their profits in the process. In the type of industry which Shell belongs to is rather short term. After exploiting non-renewable resource until these have been exhausted, there will be no reason to stay in the country. Thus is this industry where short term interests exist, multinationals do not wish to make social investments. Another lesson that has been learnt is the approach to issues. As we have seen, Shell did not have a proactive approach let alone an interactive approach. We have seen that Shell took corrective steps towards environment only if it was prompted by the Russian government and international environmental activists. Moreover, such steps seemed to be taken in haste, without much thought to the fact that such steps are also causing pollution. Such an approach is a reactive approach and it is now being discouraged in business circles. If an interactive approach had been taken, the conditions would have been much better, showing the world that the corporation is socially responsible and knows the interests of the countries where they operate. Russian Conditions for Foreign Direct Investment If we are to rely on the case study, we can infer that Russia has been making attempts to place itself as a destination for Foreign Direct Investment in the early 90’s. That time was much different from what it is today. That time, Russians believed that free market economies can produce better results. For that reason they introduced new regulations that encourage investment by multinational corporations. However today, the government is once again centralizing its control of economy. This can change the way the Russian economy is managed. Such a step, which is unexpected and has not been favored by the multinationals, has stemmed from the local pressures. The public opposition of programs that favor the multinationals has increased. However, this has come at a time, when several opportunities are being realized. By coincidence or by intention, as we see in the case, the step was taken when the economic opportunities were on the maximum. It has been found that although Russia has become a favoured destination for FDI, other large developing countries are becoming more popular in the recent years. WTO and multinationals are urging the Russians to right against corruption, red-tapes and bureaucracy, which are known causes why foreign investment does not enter Russia. Thus it has been realized that most investors enter Russia because of its largely untapped resources and markets. This has meant that investors still give low mark on Russia’s promotional efforts. (The School of Russian and Asian Studies, 2006) Due to the reluctance of Russia to open up as investors expect it to, has caused China and India become more favored destinations for FDI, although their growth in FDI is not as high. This is because these countries have already been allowing FDI much more openly even before Russia did. China opened up in1979 while India did in 1991. However in the current global financial crisis, it has been found that FDI will fall in all these economies. So is difficult to predict which economy will get least affected by this crisis. It can be said that Russia may be least affected because its economy which is not as open as India or China, can prevent the shocks from reaching their economy. This goes with those who believe that there is a â€Å"firewall† that protects some Asian economies. References Abdelal, Rawi (2006) Journey to Sakhalin: Royal Dutch/Shell in Russia, Harvard Business School Publishing Buckley, Neil, Thomas Catan, Carola Hoyos and Arkady Osrovsky, (2006) â€Å"Russia Calls for Review of Two Foreign Oil Projects: Sakhalin Island,† The Financial Times. 26 May 2006 p. 6. Miriam Elder (2008-12-2007). Russia look to control worlds gas prices, Telegraph. Retrieved on 27 December 2008 The School of Russian and Asian Studies (2006)RUSSIA: INVESTMENT DESTINATION II, Retrieved Decemer 28, 2008, from RUSSIA: INVESTMENT DESTINATION II, http://www. sras. org/news2. phtml? m=648