Creativity in Education Essay

A school with creativity at the heart of the learning process will benefit by increasing the motivation of staff and pupils, says former head, Dave Weston. In this article and case study, he shows the way to more imaginative approaches to curriculum planning ‘Creativity is the defeat of habit by originality’ Arthur Koestler Many school leaders and teachers realise that is now time to take more control over the curriculum and to include a greater emphasis on creativity in the learning and teaching process. During the last five years, headteachers have developed the confidence to take innovative and imaginative approaches to curriculum planning and school organisation. This is due to some encouragement from central government in the light of recent perceived improvements in primary literacy and numeracy standards and to the realisation that a wider and more exciting curriculum can lead to greater levels of motivation for all pupils and staff. Creativity and innovation have now been legitimised by the DfES and primary schools are actively encouraged to develop creative ideas and actions: ‘promoting creativity is a powerful way of engaging pupils with their learning’ Excellence and Enjoyment DfES 2003 (page 31) What is creativity? Creativity is often associated with the ‘creative arts’ but in reality it is certainly not unique to the arts. It can be seen and identified in all aspects of the arts, humanities, sciences, maths and technology. The National Curriculum Handbook (1999) included creativity within the section on thinking skills. It stated that: ‘Creative thinking skills†¦ enable pupils to generate and extend ideas, to suggest hypotheses, to apply imagination and to look for alternative innovative outcomes. ’ Didn’t we always teach it? Creativity was taught in the 1970s and 1980s, often through topic-based projects, but there was a lack of accountability, detailed planning and thoroughness. Much of this perceived ‘creativity’ disappeared in the 1990s as it did not fit into a strategic box and schools thought that there was not time for it and that such an approach was not valued by central government. The difficulty in measuring the success of a creative approach to primary learning and teaching gave our education system many problems. As a result headteachers, under the pressures of Ofsted inspection and statistical league tables, became reluctant to take risks with the curriculum. However, more recently this situation has started to change, especially with the development of the creative partnership schemes. The Reggio Emilia approach The success of the Reggio Emilia approach to early years education has influenced theory and practice in the area of creativity in primary education. In schools in Reggio Emilia there is an innovative staffing structure with each early years centre having an ‘atelierista’ (a specially trained art teacher) who works closely with the classroom teachers. In Italy in the primary sector there is significant teacher autonomy with no national curriculum or associated achievement tests. In Reggio Emilia the teachers become skilled observers and they routinely divide responsibilities, so that one can systematically observe and record conversations between children while the other is teaching the class. Teachers from several schools sometimes work and learn together and this contributes to the culture of teachers as learners. The learning environment is crucial in the Reggio Emilia approach and classrooms often have courtyards, wall-sized windows and easy access to stimulating outdoor areas. Each classroom has large spaces for group activities and specially designed areas for pupils and staff to interact. Display areas are large and stimulating and reflect the creativity of the children. Teachers in early years settings in Reggio often refer to the learning environment as a ‘third teacher’ as most centres are small with just two classroom teachers. The curriculum is project-based and there are numerous opportunities for creative thinking and exploration. The teachers work on topics with small groups of pupils while the rest of the class work on self-selected activities. Projects are often open-ended and therefore curriculum planning is flexible and is sometimes teacher-directed and sometimes child-initiated. This philosophy is inspiring and can be partially transferred to the different framework of the British primary school. Whole-school approach to developing ‘creativity’ For school leaders the first step in developing a creative school is the fostering of a whole-school approach. Creativity is not an add-on and it cannot be imposed by the headteacher. There needs to be discussion, involvement and ownership. The debate should be based around some of the following points: †¢taking control of the curriculum by the school. †¢the creation of a school with creativity at the heart of the learning process †¢enhancing the motivation for staff and pupils †¢fostering the professional development of all the staff, both teaching and non-teaching †¢involving governors and parents in a whole-school approach to creativity and showing how this philosophy supports school improvement and high standards of achievement †¢getting the pupils involved in school issues (regarding the curriculum and the learning, perhaps through the school council). How does your school measure up? So how far has your school got in developing a creative approach to learning and teaching? Ask yourself: †¢Have you discussed the freedoms of developing a curriculum appropriate for your school? †¢Does your school development and improvement plan take account of creativity in learning and teaching styles? †¢Is creativity a part of your staff development programme? †¢Is the governing body committed to promoting creativity throughout the school? Is there a nominated governor involved in this approach? †¢How involved are the pupils in discussing the curriculum and in a creative approach to learning and teaching? †¢Does your school carefully plan visits to galleries and projects involving artists and craftspeople? †¢Are creative successes evaluated in the SEF? †¢Does your school celebrate and promote creativity to a wider audience? Celebrating creativity Creativity should be celebrated and the school should consider looking for outside accreditation through the ‘Artsmark’ scheme. Creative successes should be carefully evaluated, highlighted in the SEF and showcased to parents and the community. Staff should be empowered to design activities within the curriculum which are exciting, motivating and relevant to their  school and pupils. Once these seeds are sown, creativity will flourish. Case study: making our school a more creative environment At the primary school where I was headteacher, we recognised that the curriculum had become unbalanced and that we were spending too much of the ‘timetabled’ day on English and maths. Staff kept saying that too little time was being devoted to the arts and humanities. This imbalance was having an effect on the motivation of some pupils, especially in Years 5 and 6 and on the job satisfaction of the staff. Like every school, we were very anxious to maintain high standards in English and maths and to ensure that our KS2 SATs results were good. However, we decided that we were fairly secure in the core curriculum and that the time had come to reclaim the curriculum. Therefore we reviewed our whole-school curriculum plan and looked at all the ways we could make our school a more creative and exciting environment. The aspects of school life we reviewed were as follows: †¢encouraging a more flexible approach to the timetable †¢developing the school grounds to link in with the outdoor curriculum. We decided that the school grounds were under-used as a learning environment. Therefore each curriculum coordinator was given the opportunity to have a part of the grounds as an outdoor curriculum area to support ‘real learning’ in that area. Staff came up with lots of imaginative ideas such as: †¢Music – developing an outdoor music trail with differing instruments hanging from trees and fences. †¢Geography – developing an orienteering trail around the edge of the field. †¢Art – developing an outdoor sculpture area with a clay model from every pupil. †¢Languages – playground signs and rules in differing languages. †¢Science – developing an environmental area with a pond, seating in the shape of different animals and insects. †¢Design and technology – one of the most successful ‘creative’ projects was the development of a courtyard on the theme of ‘containers’. Each of our 11 classes chose a different type of container (Reception chose old wellington boots while Year 6 chose a large tractor tyre) and in the summer they were decorated and planted up. †¢Supporting the Foundation Stage curriculum with exciting outdoor areas and incorporating some of the Reggio Emilia approaches to early learning. The school decided it was important to give the early years staff the confidence to develop an exciting integrated curriculum based on the needs of young pupils rather than on the formalised curriculum. †¢Bringing in artists and craft workers to give pupils to work with adults with different skills. Each year we decided to bring artists into the school so every pupil had the opportunity to work with a ‘real’ artist at some time during their primary school career. This was an expensive approach but worthwhile as often the skills of the artists inspired school staff to try new ideas and therefore provided a professional development aspect to their work. †¢Celebrating the different languages in our school. As our school was very keen on teaching MFL to all the KS2 pupils we decided to celebrate all the languages of our school by designing a mural which showed pupils from all the countries involved saying hello in their home language. Our pupils decided that on the mural the pupils from the different countries should have hats showing the flag of their country. The large mural was painted by the pupils with the support of a professional artist and is now proudly on display by the entrance to the school office. †¢Developing the confidence and role of the art coordinator. †¢Enhancing the motivation of some pupils and giving greater ownership of the learning process to the staff. †¢Getting involved in the ‘Creative Partnerships’ scheme to get access to support and resources. Introduction 1. The HMIE report Emerging Good Practice in Promoting Creativity published in March 2006 gathered evidence from inspections of pre-school centres, primary and secondary schools and community learning and development to: †¢identify and analyse emerging good practice in promoting creativity, and †¢provide advice on a range of issues related to creativity including learning and teaching, assessment, and current practice in evaluating success in promoting creativity. 2. The Scottish Executive Education Department has agreed to supplement the HMIE report by providing a brief overview of some key national policy developments and other initiatives across the UK promoting creativity in education. The aim is to help educators and policy makers by highlighting some important advice and other support to encourage good practice. The paper is not however a comprehensive review. The bibliography is intended to assist those who wish to explore further the issues discussed. Creativity, Culture and Education (Developments in England) 3. Although focusing on England, the National Advisory Committee on Creative and Cultural Education’s (NACCCE) report All Our Futures: Creativity Culture and Education has proved influential on subsequent efforts to promote creativity in education elsewhere in the UK. 4. The NACCCE was established in 1998 to make recommendations to the then Secretary of State for Education and Employment and Secretary of State for Culture, Media and Sport â€Å"on the creative and cultural development of young people through formal and informal education: to take stock of current provision and to make proposals for principles, policies and practice. † The Committee was chaired by Professor Ken Robinson and its report was published in 1999. 5. The report emphasised that all children and young people can benefit from developing their creative abilities and this should be seen as a general function of education. Creativity can be developed in all areas of the school curriculum: including the sciences as well as the expressive arts. As discussed later in this paper, the NACCE’s definition of creativity was adopted as part of subsequent initiatives in Northern Ireland and Scotland. (A summary of the report’s general advice on teaching for creativity is contained in the annex to this paper.) The NACCE’s report was welcomed by the Department for Education and Skills (DfES) and Department for Culture Media and Sport. Although the Government did not implement all of the report’s recommendations with regard to the National Curriculum in England, many elements were taken forward. For instance, the report led directly or indirectly to important initiatives such as Creative Partnerships and Artsmark. 6. Creative Partnerships is a government-funded national initiative operating in 36 of the most disadvantaged areas in England and designed to build sustainable relationships between schools, creative individuals and organisations. It aims to transform: †¢the aspirations and achievements of young people †¢the approaches and attitudes of teachers and schools †¢the practices of creative practitioners and organisations who wish to work in schools. 7. Starting with the needs of schools and young people, creative practitioners work across and beyond the curriculum, animating the classroom and finding new ways for teachers to teach and young people to learn. Through the development of projects of varying scales, creative practitioners, teachers and young people work together as equal partners to place creativity at the heart of learning. 8. Artsmark is a recognition scheme for schools’ arts provision run by Arts Council for England and supported by DCMS. The scheme encourages schools to increase the range of arts that are provided to children in schools and raises the profile of arts education. (Further information on Creative Partnerships and Artsmark can be accessed through the links provided in the bibliography. ) 9. The educational debate has moved forward considerably since the NACCCE report was published and there is now a much wider acceptance that a broad and enriching curriculum goes hand in hand with high standards. Since September 2000, schools have been working with a more flexible National Curriculum with greater emphasis on the need for creative and cultural education. There are explicit references to the importance of creative and cultural education in the aims for the curriculum and there are explicit references to creativity – encouraging pupils to use their imagination and look for innovative outcomes. The Schools White Paper, â€Å"Schools: Achieving Success†, launched in September 2001 raised the status of creativity and the arts by pledging to provide a range of additional opportunities for creativity and curriculum enrichment. 10. DfES also hosted the Creativity and Cultural Enrichment Working Group (CACE) from May 2001 to Oct 2003. This working group was set up in response to the NACCCE report as a cross-agency reference group with a clear focus on creativity and cultural enrichment. The idea was to share information across various agencies and departments, to provide updates on key policy initiatives and projects and act as a source of new ideas. 11. CACE has now been superseded by subsequent work such as the Qualifications and Curriculum Authority’s (QCA) initiative ‘Creativity: Find it, Promote it’ and Creative Partnerships which have built up the knowledge base of creativity in education and helped spread good practice. QCA promotes creativity as an integral part of all National Curriculum subjects and identified the characteristics of creative thinking and behaviour including: †¢Questioning and challenging conventions and assumptions †¢Making inventive connections and associating things that are not usually related †¢Envisaging what might be: imagining — seeing things in the mind’s eye. †¢Trying alternatives and fresh approaches, keeping options open †¢Reflecting critically on ideas, actions and outcomes QCA advises that, with minimal changes to their planning and practice, teachers can promote pupils’ creativity. 12. QCA’s ‘Creativity: Find it Promote it’, and ‘Arts Alive’ websites shows how to maximise the impact of creativity and the arts in the curriculum, identifies best practice and provides case study examples for teachers containing practical suggestions in promoting creativity and the arts across the curriculum 13. OFSTED — the inspectorate for children and learners in England — carried out a survey identifying good practice in the promotion of creativity in schools (Expect the Unexpected: Developing Creativity in Primary and Secondary Schools published in 2003). They found that there was generally high quality in creative work. Any barriers that existed could be overcome if teachers are committed to the promotion of creativity, possess good subject knowledge and a sufficiently broad range of pedagogical skills to foster creativity in all pupils, whatever their ability. The active support of senior management is also important. OFSTED emphasised that â€Å"the creativity observed in pupils is not associated with a radical new pedagogy†¦but a willingness to observe, listen and work closely with children to help them develop their ideas in a purposeful way. † The report can be accessed here. 14. The latest development in England is an independent review on Nurturing Creativity in Young People jointly commissioned by DCMS and DfES to inform the basis of the Government’s future policy on creativity. The review was led by Paul Roberts, Director of Strategy from IdeA (Improvement and Development Agency). The review team published their report in July 2006. This provides a framework for creativity starting with Early Years, developing through mainstream education and leading to pathways into the Creative Industries. The report also set out what more the Government can do to nurture young people’s creativity. Particular issues discussed include the role of partnerships between schools and the creative and cultural sector, the development of a new Creative Portfolio to celebrate each young person’s creative achievements and creating spaces for creative activity through the Building Schools for the Future the school estate redevelopment programme. The Government will publish a response to the creativity review report and an action plan in Autumn 2006. Unlocking Creativity (Developments in Northern Ireland) 15. Following his work with the NACCE, Professor Ken Robinson chaired a Creativity in Education Working Group in Northern Ireland. The Working Group was a cross-cutting initiative by the Department of Culture, Arts and Leisure (DCAL); the Department for Education (DE); the Department of Enterprise, Trade and Investment (DETI) and the Department of Higher and Further Education, Training and Employment (DHFETE) (now known as the Department for Employment and Learning – DEL). The aim was to develop a â€Å"co-ordinated strategy for the development to the full of the creative and cultural resources of the people of Northern Ireland. † The result of this work was the consultation report Unlocking Creativity: A Strategy for Development published in 2000. 16. The report adopts the definition of creativity contained in the NACCE report – Imaginative activity fashioned so as to produce outcomes that are both original and of value. Creative processes have four characteristics. First, they always involve thinking or behaving imaginatively. Second, this imaginative activity is purposeful: that is, it is directed to achieve an objective. Third, these processes must generate something original. Fourth, the outcome must be of value in relation to the objective. 17. Unlocking Creativity: A Strategy for Development made three key recommendations for education: †¢Develop continuity and progression in creative and cultural education throughout learning, teaching and youthwork. †¢The development of methods and principles of assessment and examination that recognise and value the aims and outcomes of creative and cultural education. †¢Ensure that all professional vocational and academic qualifications positively promote the importance of creative and cultural education. 18. The results of the consultation were published in a second report, Unlocking Creativity: Making It Happen, published in 2001. The vast majority of responses supported the proposals made in the consultation document and Unlocking Creativity: Making It Happen set a wide range of objectives for future work. The key objectives for education related to a review of the curriculum being taken forward by the Council for the Curriculum, Examinations and Assessment (CCEA). The report highlighted CCEA’s proposals to include a creative component at all Key Stages. It set a wider objective of signposting clear steps towards accredited programmes of learning for people of all ages interested and inspired by creativity and sought to encourage collaboration between various agencies and departments to ensure that creativity is fully recognised in the development of assessment methods and the curriculum. The report also highlighted the establishment of a Creativity Seed Fund which invested ? 2. 8m over three years to encourage projects that would either promote creativity in education or strengthen Northern Ireland as a competitive presence in the creative industries. The Education and Training Inspectorate produced a set of quality indicators for the Creativity Seed Fund. The indicators cover outcomes and standards, ethos, assessment and review and management arrangements. 19. A third report, Unlocking Creativity: A Creative Region, was published in 2004 and set out a series of medium term strategic measures to maintain the momentum on developing creativity across education, culture and employment. The report again highlighted CCEA’s work on Curriculum Review. The Education (Northern Ireland) Order 2006 will give effect to the revised curriculum, which will be introduced on a phased basis from September 2007. 20. The revised curriculum will be more flexible, offer greater scope for creativity to meet the changing needs of pupils, society and the economy and have a greater emphasis on developing skills. One of the Thinking Skills to be developed across the curriculum is Being Creative, where children should be able to use creative approaches, to be imaginative, to take risks, to question and explore possibilities. The revised curriculum will also provide more flexibility for teachers to tailor what they teach to meet the needs of their pupils and therefore encourage more creative approaches. Assessment will be formative, as well as summative, with pupils assessed in their progress in the skills and areas of learning and pointed towards areas for future development. This Assessment for Learning (AfL) is already being piloted. One of the most important means of promoting creativity in the revised curriculum will be through Education for Employability. Pupils will look at enterprise and creativity in the modern workplace, what it takes to be an entrepreneur and they will have opportunities to demonstrate enterprise and creativity. The pilot work for this aspect of the curriculum has involved school pupils working with local businesses and artists to develop creative solutions to business issues. 21. CCEA is also developing exemplar material and other support materials to illustrate how opportunities can be developed in all curriculum areas to promote creativity. Draft versions of the support materials have been made available to pilot schools and CCEA plans to distribute them to all schools as soon as feasible in the 2006/07 year. 22. Unlocking Creativity: A Creative Region noted CCEA’s work on auditing examination specifications in order to promote creativity in the learning and assessment associated with qualifications. This audit has now been completed and enabled areas in teaching and learning to be identified that would support a more creative approach. The results will be taken into account as specifications are revised for re-accreditation. Re-accredited specifications will be available for first teaching from September 2008 (GCE A-Level) and 2009 (GCSE). CCEA is also working with the English and Welsh regulatory bodies to review accreditation criteria and this will take account of thinking skills, such as creativity. The Department of Education is also considering an incentive and accreditation scheme for teachers, principals and schools with a view to embedding creativity across the curriculum. A pilot has been arranged to test an Artmark Toolkit involving five schools and, following evaluation, will be rolled out to all schools in September 2006. 23. An important feature of Northern Ireland’s work on creativity is the emphasis on harnessing new developments in ICT. Many of the education projects funded through the Creativity Seed Fund included developing ICT skills and linking these to creativity by, for instance, producing material for radio, making documentary films or creating digital content. Unlocking Creativity: A Creative Region seeks to embed the concept of the use of ICT to enhance young people’s creativity across the curriculum. The EmPowering Schools strategy has since been published, which incorporates the development of creativity and innovation in the use of ICT. 24. Unlocking Creativity: A Creative Region included Creative Youth Partnerships (CYP), a 3 year pilot from April 2004 to March 2007 involving the Arts Council NI, the Department of Education, the Department for Culture, Arts and Leisure and the Education and Library Boards. Through a collaborative approach, CYP aims to increase participation among young people in arts activities, develop arts infrastructure in NI and develop the contribution of artists and the arts to the learning and development of young people in schools and the youth sector. A key aspect of CYP is local partnerships to develop creative projects using a variety of art forms. The Education and Training Inspectorate (ETI) is evaluating CYP and its Interim Report (September 2005, full report due October 2006) highlights the developmental nature of the evaluation of a creativity initiative. The Report pointed to some areas for development but found the project to have many strengths. Developments in Wales 25. Wales, like England and Northern Ireland, has a statutory National Curriculum. Creative skills are one of the seven common requirements in the Welsh National Curriculum. Teachers should provide opportunities, where appropriate, for pupils to develop and apply the seven common requirements through their study of all National Curriculum subjects. (The other common requirements include mathematical skills, Information Technology and problem solving skills. ) 26. The Department for Education, Lifelong Learning and Skills (DELLS) has produced a guidance note for teachers highlighting subject areas of the National Curriculum, from science to modern languages, where pupils can be given opportunities to develop and apply their creative skills, in particular the development and expression of ideas and imagination. 27. A review of the National Curriculum in Wales is currently underway for proposed implementation in September 2008. Findings from an initial consultation in 2004 were that: †¢there should be a clear focus on the needs of learners and effective learning strategies and approaches; †¢there is a need to identify and agree on the range of skills that should be acquired and on their development and application in a range of contexts; †¢there remains a concern regarding perceived overload in some National Curriculum subjects, especially at Key Stage 2 (covering ages 7-11), and the relevance of aspects of the curriculum to the 21st century; and †¢there is a need to ensure that a revised curriculum interests, engages and motivates all learners. 28. Currently DELLS has submitted proposals to their Minister for Education and Lifelong Learning for approval. Following this, the proposals will be open to public consultation. These will include a draft Skills Framework for children and young people aged 3-19. This framework contains the areas of Developing Thinking, Communication, Number and ICT. Within the Developing Thinking are strands highlighting creative thinking. Creativity in Education (Developments in Scotland ) 29. In Scotland, a Creativity in Education Advisory Group was established to consider ways in which creativity could be developed as an important feature of the provision that teachers and schools make for young people’s education. The Group was chaired by Richard Coton, Headteacher of Monifieth High School and its members included representatives from Learning and Teaching Scotland, the IDES Network, HMIE and the Scottish Executive Education Department. The Group’s discussion paper, Creativity in Education, was published in 2001. 30. The definition of creativity in Creativity in Education again reflects that in the NACCE report, All Our Futures, by emphasising imagination, pursuing a purpose, being original and making judgements of value. Creativity in Education, like the NACCE report, stresses the need to encourage experimentation and problem-solving together with reflection and critical appraisal as essential conditions for creativity to flourish in schools. Creativity in Education has a more overt emphasis on the need for schools to foster a personal disposition to be creative in their students. This involves the development of characteristics such as self-motivation, confidence, curiosity and flexibility. However, the publication notes the valuable contribution of group-working to encouraging creativity in, for instance, allowing pupils to build upon each others’ ideas. Creativity in Education also stresses the need for teachers themselves to be creative in the way they encourage and empower children and young people. Teachers need to judge carefully when to intervene and when to take a â€Å"hands-off† approach and to balance planning with improvisation. 31. Creativity in Education was accompanied by case studies providing practical examples of how creativity is being developed across the curriculum. These include the development of a whole school policy on creative learning and teaching (Gylemuir Primary School, Edinburgh); developing creativity in Mathematics (Pollock Children’s Centre, Glasgow/Borgue Primary School, Dumfries and Galloway and Inverclyde Council’s Education Advisory Service) and promoting thinking skills in the context of science education (Monifieth High School, Angus). 32. Follow-up work undertaken as a result of Creativity in Education included the Creativity Counts project. The aims of this project were: †¢To gather evidence of creativity in the classroom across all sectors and all areas of the curriculum. †¢To identify key approaches to learning and teaching, assessment and evaluation. †¢To identify what schools need to do to foster creativity. 27 schools from across Scotland (19 primary, 7 secondary and 1 special) participated in the project. A report of the findings was published in 2004. This was accompanied by Creativity Counts — Portraits of Practice – a publication of case studies drawn from the project. 33. The main findings were that developing creativity in education produced benefits in terms of pupil motivation, enthusiasm and enjoyment. The pupils became more independent in their learning: â€Å"rather than being told; they became more resourceful and reflective. They became good at knowing what worked for them and what did not† (p. 5). However, this freedom to experiment took place within a supporting structure of high expectations and clear outcomes: â€Å"They knew what they were expected to achieve and how to go about that† (p.10). Group working was a strong feature of the projects. This helped to support less confident children and encouraged realistic peer and self-assessment. The pupils responded well to dealing with failure and built confidence in using their imagination and developed a positive attitude to new ideas. 34. Teachers found that they were able to develop a repertoire of teaching skills balancing intervention, â€Å"hands-off†, planning and improvisation. They identified four main characteri.

Ferrari Swot

Ferrari SWOT Analysis What is SWOT analysis? SWOT stands for strengths, weaknesses, opportunities, and threats. SWOT analysis involves identifying your business’s strengths and weaknesses, and examining the opportunities and threats which may affect you. SWOT analysis can be used to analyse your organisation and its environment. Carrying out a SWOT analysis can help you identify changes that can be made to improve your business. Strengths Strengths are those features of the business which allow you to operate more effectively than your competitors. Ferrari is by far the worlds most famous racing car producer that surprised the motor industry in terms of speed, performance and reliability. Ferrari stands out as the leader of Italian auto manufacturers industry, and till today represents the finest of Italian craft in the mechanics of auto propulsion. Ferrari is claimed to be a purpose-built race car which features exceptional performance. Weaknesses Weaknesses are areas capable of improvement. It helps a Company identify if its lacking skills or new products? Whether it has a higher cost base or lower productivity than your competitors? Or if there are any unpleasant truths about the business that need to be faced. Ferrari has emerged superbly as a very strong Brand with least flaws. The only factor which probably acts to its disadvantage is that, the strategy of catering to the very elite class of millionaires has no doubt added to the brand value of the product but also restricts the sales. Having already notched out a mark for itself, probably the time is right to introduce a more economically viable category, to fulfill the millions of dreams of owning a Ferrari. The other drawback is that since its such a high-end brand, and no two Ferrari’s are known to be alike, it makes it clients want and wait for their dream car. It takes a minimum of 6 months advance booking before the client can eventually be the proud owner of this priced possession. Opportunities Opportunities refers to any interesting trends which one can take advantage of Examples of opportunities include: Changes in technology and markets, eg the Internet Changes in government policy or regulations / legislation Local and global events Potential new uses of products and / or services Use of marketing or promotional techniques to boost the business Social factors, eg population fluctuation, lifestyle changes, etc. With Ferrari having already established a very strong hold over the Asia Pacific region and Shanghai as its recent headquarters, its time for it to extend into a highly progressive and lucrative market- India. With a large number of Indians making it to the Forbes list of the richest, India is bound to be an easy market with millionaires who are capable of affording a Ferrari. Furthermore, ever since Ferrari has been introduced in China, its sales have seen a sudden boost with Shanghai becoming the new headquarters of Asia Pacific. Once Ferrari enters the Indian market it is bound to capture a wider and more lucrative audience. Banking on the brand name that Ferrari has notched for itself, I would really like to see Ferrari also reaching out to the high and upper middle masses instead of just the very high classes. Indian market is very much in line with the Chinese market with a lot more scope for flexibility, hence all the key strategies adopted by the company in China is bound to reveal an even more astounding result. Alike China India is also a very densely populated country with a lot of western influence. The past 5 years census has also seen a remarkable lift in the living standards and lifestyle of people. A majority of the population no longer aspires for just comfort but is ready to go that extra mile to be in the lap of luxury. And what speaks of luxury better than Ferrari. Furthermore, Formula 1 is expected to reach Indiaby 2011 hence, it would serve as major promotional strategy for the Company Threats Threats can be external or internal, and are anything which can adversely affect your business. External threats could be inflation, new legislation, or a new competitor in your market. Internal threats could include a skill or staff shortage within your organisation. Indian market seems to be risk free market for Ferrari with only increased opportunities. The only possible difficulty that Ferrari might counter would be in terms of modifying their designs to cope up with the infrastructure of the country, I terms of roads. Ferrari is known for its low body which might hinder movement in case of speed breakers and puddles during rainy season. Other factor which should be taken into consideration would be the government policies and legislation regarding the high import duties. This regulation on the part of the government will inflate the service cost and prices of spare parts. Personal swot analysis : Strength : Passion is the key virtue . Looks at things in a different light . Experimentative in nature . Believes in hard work. Quick at learning new things Makes friends easily Loves to interact with different people Weakness :

Final Exam Ec315

PART I. HYPOTHESIS TESTING PROBLEM 1 A certain brand of fluorescent light tube was advertised as having an effective life span before burning out of 4000 hours. A random sample of 84 bulbs was burned out with a mean illumination life span of 1870 hours and with a sample standard deviation of 90 hours. Construct a 95 confidence interval based on this sample and be sure to interpret this interval. Answer Since population standard deviation is unknown, t distribution can be used construct the confidence interval. ? The 95% confidence interval is given by ? X ? t? / 2,n ? 1 ? S S? , X ? ? /2,n ? 1 ? n n? Details Confidence Interval Estimate for the Mean Data Sample Standard Deviation Sample Mean Sample Size Confidence Level 90 1870 84 95% Intermediate Calculations Standard Error of the Mean 9. 819805061 Degrees of Freedom 83 t Value 1. 988959743 Interval Half Width 19. 53119695 Confidence Interval Interval Lower Limit 1850. 47 Interval Upper Limit 1889. 53 2 PROBLEM 2 Given the following data from two independent data sets, conduct a one -tail hypothesis test to determine if the means are statistically equal using alpha=0. 05. Do NOT do a confidence interval. 1 = 35 n2 = 30 xbar1= 32 xbar2 = 25 s1=7 s2 = 6 Answer H0:Â µ1=Â µ2 H1: Â µ1>Â µ2 Test statistics used is t ? X1 ? X 2 S 2 (n1 ? 1) S12 ? (n2 ? 1) S2 n1n2 ~ tn1 ? n1 ? 2 where S ? n1 ? n2 ? 2 n1 ? n2 Decision rule : Reject the null hypothesis, if the calculated value of test statistic is greater than the critical value. Details t Test for Differences in Two Means Data Hypothesized Difference Level of Significance Population 1 Sample Sample Size Sample Mean Sample Standard Deviation Population 2 Sample Sample Size Sample Mean Sample Standard Deviation 0 0. 05 35 32 7 30 25 6Intermediate Calculations Population 1 Sample Degrees of Freedom 34 Population 2 Sample Degrees of Freedom 29 Total Degrees of Freedom 63 Pooled Variance 43. 01587 Difference in Sample Means 7 t Test Statistic 4. 289648 Upper-Tail Test U pper Critical Value p-Value Reject the null hypothesis 1. 669402 3. 14E-05 Conclusion: Reject the null hypothesis. The sample provides enough evidence to support the claim that means are different. 3 PROBLEM 3. A test was conducted to determine whether gender of a display model af fected the likelihood that consumers would prefer a new product.A survey of consumers at a trade show which used a female spokesperson determined that 120 of 300 customers preferred the product while 92 of 280 customers preferred the product when it was shown by a female spokesperson. Do the samples provide sufficient evidence to indicate that the gender of the salesperson affect the likelihood of the product being favorably regarded by consumers? Evaluate with a two-tail, alpha =. 01 test. Do NOT do a confidence interval. Answer H0: There no significant gender wise difference in the proportion customers who preferred the product.H1: There significant gender wise difference in the proportion customers who preferred the product. P ? P2 n p ? n p 1 The test Statistic used is Z test Z ? where p= 1 1 2 2 n1 ? n2 ?1 1? P(1 ? P) ? ? ? ? n1 n2 ? Decision rule : Reject the null hypothesis, if the calculated value of test statistic is greater than the critical value. Details Z Test for Differences in Two Proportions Data Hypothesized Difference Level of Significance Group 1 Number of Successes Sample Size Group 2 Number of Successes Sample Size 0 0. 01 Male 120 300 Female 92 80 Intermediate Calculations Group 1 Proportion 0. 4 Group 2 Proportion 0. 328571429 Difference in Two Proportions 0. 071428571 Average Proportion 0. 365517241 Z Test Statistic 1. 784981685 Two-Tail Test Lower Critical Value -2. 575829304 Upper Critical Value 2. 575829304 p-Value 0. 074264288 Do not reject the null hypothesis Conclusion: Fails to reject the null hypothesis. The sample does not provide enough evidence to support the claim that there significant gender wise difference in the proportion customers who preferr ed the product. 4PROBLEM 4 Assuming that the population variances are equal for Male and Female GPA’s, test the following sample data to see if Male and Female PhD candidate GPA’s (Means) are equal. Conduct a two-tail hypothesis test at ? =. 01 to determine whether the sample means are different. Do NOT do a confidence interval. Male GPA’s Female GPA’s Sample Size 12 13 Sample Mean 2. 8 4. 95 Sample Standard Dev .25 .8 Answer H0: There is no significant difference in the mean GPA of males and Females H1: There is significant difference in the mean GPA of males and Females. Test Statistic used is independent sample t test. ? X1 ? X 2 S 2 (n1 ? 1) S12 ? (n2 ? 1) S2 n1n2 ~ tn1 ? n1 ? 2 where S ? n1 ? n2 ? 2 n1 ? n2 Decision rule: Reject the null hypotheses, if the calculated value of test statistic is greater than the critical value. Details t Test for Differences in Two Means Data Hypothesized Difference Level of Significance Population 1 Sample Sample Size Sample Mean Sample Standard Deviation Population 2 Sample Sample Size Sample Mean Sample Standard Deviation Intermediate Calculations Population 1 Sample Degrees of Freedom Population 2 Sample Degrees of Freedom Total Degrees of Freedom Pooled Variance 0. 05 12 2. 8 0. 25 13 4. 95 0. 8 11 12 23 0. 363804 5 Difference in Sample Means t Test Statistic -2. 15 -8. 90424 Two-Tail Test Lower Critical Value Upper Critical Value p-Value Reject the null hypothesis -2. 80734 2. 807336 0. 0000 Conclusion: Reject the null hypotheses. The sample provides enough evidence to support the claim that there is significant difference in the mean GP A score among the males and females. 6 PART II REGRESSION ANALYSIS Problem 5 You wish to run the regression model (less Intercept and coefficients) shown below: VOTE = URBAN + INCOME + EDUCATEGiven the Excel spreadsheet below for annual data from1970 to 2006 (with the data for row 5 thru row 35 not shown), complete all necessary entries in the Excel Regress ion Window shown below the data. 1 2 3 4 A YEAR 1970 1971 1972 B VOTE C URBAN D INCOME E EDUCATE 49. 0 58. 3 45. 2 62. 0 65. 2 75. 0 7488 7635 7879 4. 3 8. 3 4. 5 36 37 38 2004 2005 2006 50. 1 92. 1 94. 0 95. 6 15321 15643 16001 4. 9 4. 7 5. 1 67. 7 54. 2 Regression Input OK Input Y Range: A1:A38 Input X Range: B1:E38 Cancel Help ? Labels Confidence Level: x X X Output options X Constant is Zero 95 % Output Range: New Worksheet Ply:New W orkbook Residuals Residuals Residual Plots Standardized Residuals Line Fit Plots Normal Probabilit y Normal Probability Plots 7 PROBLEM 6. Use the following regression output to determine the following: A real estate investor has devised a model to estimate home prices in a new suburban development. Data for a random sample of 100 homes were gathered on the selling price of the home ($ thousands), the home size (square feet), the lot size (thousands of square feet), and the number of bedrooms. The following multiple regression output was generated: Regression Statistics Multiple R 0. 8647 R Square . 7222 Adjusted R Square 0. 6888 Standard Error 16. 0389 Observations 100 Intercept X1 (Square Feet) X2 (Lot Size) X3 (Bedrooms) Coefficients -24. 888 0. 2323 11. 2589 15. 2356 Standard Error 38. 3735 0. 0184 1. 7120 6. 8905 t Stat -0. 7021 9. 3122 4. 3256 3. 2158 P-value 0. 2154 0. 0000 0. 0001 0. 1589 a. Why is the coefficient for BEDROOMS a positive number? The selling price increase when the number of rooms increases. Thus the relationship is positive. b. Which is the most statistically significant variable? What evidence shows this? Most statistically significant variable is one with least p value.Here most statistically significant variable is Square feet. c. Which is the least statistically significant variable? What evidence shows this? Least statistically significant variable is one with high p value. Here least statistically significant variable is bedrooms d. For a 0. 05 level of significance, should any variable be droppe d from this model? Why or why not? The variable bed rooms can be dropped from the model as the p value is greater than 0. 05. e. Interpret the value of R squared? How does this value from the adjusted R squared? The R2 gives the model adequacy. Here R2 suggest that 72. 22% variability can e explained by the model. Adjusted R2 is a modification of R2 that adjusts for the number of explanatory terms in a model. Unlike R2, the adjusted R2 increases only if the new term improves the model more than would be expected by chance. f. Predict the sales price of a 1134-square-foot home with a lot size of 15,400 square feet and 2 bedrooms. Selling Price =-24. 888+0. 02323*1134+11. 2589*15400+15. 2356*2=173419 8 PART III SPECIFIC KNOWLEDGE SHORT-ANSWER QUESTIONS. Problem 7 Define Autocorrelation in the following terms: a. In what type of regression is it likely to occur? Regressions involving time series data . What is bad about autocorrelation in a regression? The standard error of the estimat es will high. c. What method is used to determine if it exists? (Think of statistical test to be used) Durbin Watson Statistic is used determine auto correlation in a regression. d. If found in a regression how is it eliminated? Appropriate transformations can be adopted to eliminate auto correlation. Problem 8 Define Multicollinearity in the following terms: a) In what type of regression is it likely to occur? Multicollinearity occurs in multiple regressions when two or more independent variables are highly correlated. ) Why is multicollinearity in a regression a difficulty to be resolved? Multicollinearity in Regression Models is an unacceptably high level of intercorrelation among the independents, such that the effects of the independents cannot be separated. Under multicollinearity, estimates are unbiased but assessments of the relative strength of the explanatory variables and their joint effect are unreliable. c) How can multicollinearity be determined in a regression? Multic ollinearity refers to excessive correlation of the predictor variables. When correlation is excessive (some use the rule of thumb of r > 0. 90), tandard errors of the b and beta coefficients become large, making it difficult or impossible to assess the relative importance of the predictor variables. The measures Tolerance and VIF are commonly used to measure multicollinearity. Tolerance is 1 – R2 for the regression of that independent variable on all the other independents, ignoring the dependent. There will be as many tolerance coefficients as there are independents. The higher the inter-correlation of the independents, the more the tolerance will approach zero. As a rule of thumb, if tolerance is less than . 20, a problem with multicollinearity is indicated.When tolerance is close to 0 there is high multicollinearity of that variable with other independents and the b and beta coefficients will be unstable. The more the multicollinearity, the lower the tolerance, the more th e standard error of the regression coefficients. d) If multicollinearity is found in a regression, how is it eliminated? Multicollinearity occurs because two (or more) variables are related – they measure essentially the same thing. If one of the variables doesn’t seem logically essential to your model, removing it may reduce or eliminate multicollinearity.

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Human immunodeficiency virus and acquired immunodeficiency syndrome - Essay Example Global statistic shows that approximately 33.4 million of people are currently live with AIDS/HIV among them are 3.3 million of children. Also, approximately 97% of all patients that have AIDS/HIV are from low and middle income countries. The first cases of AIDS/HIV were detected in 1981. Since that time HIV lead to 25 million deaths all over the world. Therefore AIDS/HIV is the most important health challenge nowadays. HIV related to the lentiviruses from Retroviridae family. This genus of viruses mainly characterizes by their ability to transmit quite huge amount of viral RNA into the DNA of the host cell. Also they can infect non-dividing cells. The main targets for HIV are cells of the immune system such as macrophages that are white blood cells and can protect our organism through phagocytosis from outer dangerous substances; dendritic cells that involve in process of antigen production and presenting on the surface of the T cells; T helper cells that play important role in adaptive immune system and immune responses. (Mayo Clinic,2014) HIV damages CD4+ cells that related to the T helper cells and the amount of such cells rapidly decreased. When level of CD4+ cells is lower than a minimal level cell-mediated immunity stops work properly and does not release phagocytes and cytokines as a response to an antigen. This is quite dangerous process that leads to the extremely high susceptibility of organism to opportunistic infections that are not that dangerous and usually do not cause disease in people with a healthy immune system. (Mayo Clinic,2014)

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Current Research Essay Example | Topics and Well Written Essays - 1000 words

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The Indian Economy Essay Example for Free

The Indian Economy Essay 1. Introduction This paper will highlight economic issues facing the Indian Government and its ability to maintain high levels of growth by outlining the current conditions of the economy. Policy dilemmas and logic to address these dilemmas will be explored. Analysis of key indicators and statistics as well historical reference and the theory behind their execution will underlay chosen policies which will be followed by a brief conclusion. 2. The Indian Economy The Indian Economy is listed as the fifth largest in the world at . 538 trillion US (CIA 2010) and has been able to continue high GDP growth despite the Global Financial Crisis. The country has also moved along a steady path of economic reform and liberalisation since 1990 including privatisation and foreign investment. India is a ‘planned’ economy which follows a series of targets for each five year period, the Eleventh Five-Year plan (Planning Commission (Government of India) 2007) ending in 2012 aimed to increase and maintain growth at 10% (to double by 2017), create new employment for 70 million people, raise real wages for unskilled workers and consider education and infrastructure. The next five year plan needs to consider economic factors below that may restrict the high levels of growth. There is also an emergence of a two-speed economy emanating between the service sectors employed middle and high income earners with those in agriculture and manufacturing (FitzGerald 2011). Figure 2.1 (TradingEconomics.com 2011) Figure 2.1 shows India’s strong trend for growth since 2002 and despite a small decrease in growth rate following the Global Financial Crisis in 2008, a major policy issue therefore is maintaining strong economic prosperity. The government has to consider several factors that are a risk to this aim such as a large budget deficit, high inflation and unemployment, all shown in figure 2.2. | Percentage| | Government Debt| 55.9| of GDP| Inflation| 11.7| Increase per Year| Unemployment| 10.8| of Labour Force| Figure 2.2 Key Indicators 2010 (CIA 2010) Sustainable growth can be achieved by the Indian Government if it can address these issues both in the short and long term. Therefore the focus is to  consider reducing and stabilising inflation, restructure and increase employment and return the budget to surplus. Debt The current Government Debt in India is around 60% of GDP (TradingEconomics.com 2011; CIA 2010) which puts debt near $1 trillion US. This is an important consideration as it affects the ability of government to embark on public spending necessary to address improvements in infrastructure, education and manufacturing which can help maintain the high growth levels in the long run. High debt and exchange rates can also affect foreign investment which is rich in the services sector, attributing 55.3% of GDP and only 34% of the Labour market (The World Bank 2009; CIA 2010), a focus on improving education and shifting employment into the services sector therefore becomes an important direction for both reduction of unemployment and maintaining supply of labour. Wage prices would be kept at a competitive level compared with other outsourcing countries and overall GDP levels. Debt can also create a lower credit rating and the ability to pay back loans, defaulting on a loan can have widespread negative implications to sustaining growth in the economy. Inflation Inflation is the reduction in the value of money and is 11.7% in India(CIA 2010). High Inflation is a concern because it breads uncertainty in the economy for business, consumers and other investors. This is explained as money being the scale by which an economy can be measured, if the metric of the measurement is uncertain different ideas are formed about how and where money is spent or even if it is spent at all. It also affects the distribution of money across society which is an economic concern in India, high levels of inflation are notable in Food, Manufacturing Prices and Fuel(BBC 2011). Unemployment Unemployment estimates in 2010 of around 10% (TradingEconomics.com 2011; CIA 2010) become an important policy consideration. Indirectly the economy is burdened with the costs such as health and crime however more direct issues include social welfare, loss of production and therefore taxable income. India has one of the world’s largest labour forces of around 480 million (CIA 2010) full employment would assist the ability to match aggregate  demand increases with aggregate supply in the long terms. India could continue growth and manage sustainable inflation in the long term to reach the potential GDP levels. Figure 2.3 shows the overall break down of employment sector with its contribution to GDP. | % Labour Force| % GDP| Agriculture| 52| 16.1| Industry| 14| 28.6| Services| 34| 53.3| Figure 2.3 Economic Sectors Labour/GDP (The World Bank 2009) The policy consideration for Government should be to increase the efficiency of the agriculture sector and move employment into the Industry and Services sector in the long run, including a focus on self-employment which is becoming an unattractive option for younger generations (AZAD India Foundation 2010). 3. Policy Direction Policy recommendations for the Government of India have one overall aim, to maintain strong growth. Three major economic conditions for this focus on, reduction of Government Debt, stability of inflation and addressing high unemployment. 4.1 Monetary Policy Monetary Policy has recently been engaged by the Central Bank and Government in a contractionary manor in an attempt to slow down the inflation growth that has been gripping India. The long term effect of increase to interest rates is to reduce aggregate demand. Figure 3.1 highlights an inflationary hike trend since 2008 which peaked in January 2010. Figure 3.1 India Inflation (TradingEconomics.com 2011) Identifying the cause of inflation is a primary agenda before deciding how effective Monetary will be. While India is experiencing increased AD, interest rates are aligned to but not an overall effect of price increases and in the long run reduce the sustained high growth levels. As seen in Figure 3.2, Interest rate increases are not correlating directly with long term inflationary decreases. Figure 3.3 Interest Rates (TradingEconomics.com 2011) There are three cost-push inflation causes that could explain the peaks and sustained recent high inflation levels of around 11% (CIA 2010). Brent Crude Oil Index Oil is a highly utilised commodity for India and its price can directly affect aggregate supply figure 3.2 Shows a correlation to hikes in Oil price compared with inflation. In January 2008 oil prices began to climb however as the GFC began to take hold, global demand for reduced and prices fell. As India was maintaining strong local Aggregate Demand however inflation was still high. Figure 3.3 Brent Crude Oil (TradingEconomics.com 2011) Domestic Food and Manufacturing Prices Secondary inflation hikes noticed in 2010 do not directly correlate to oil prices. During a poor Food harvest in 2009 as a result of a poor monsoon season (The Economic Times 2009) compounded by international food supply contractions and price rises in the manufacturing sector (BBC 2011) supply side shocks and marginal rise in oil prices can attribute to high inflationary levels. The effects of the supply shocks would be noted in the shift from AS1 to AS2 with prices rising in the short term. However as India GDP has continued to increase year on year, this can only be explained by an increase in Aggregate Demand from AD1 to AD2 shown in Figure 3.3 of a dynamic AS/AD model for India. Point C is India’s potential GDP in 2009 and Point D for 2010, the economic policy should be aimed towards reaching these targets. Monetary policy, in the short run would assist the reduction of AD to curve inflation however to reach LRAS2, other policies must be considered. Interest rate rises should be put on hold and decreased if the economy can recover from supply shocks allowing AS/AD to shift towards potential GDP. Figure 3.3 Dynamic AS/AD for India (figures from (TradingEconomics.com 2011))(McTaggart, Findlay, and Parkin 2010; Hubbard et al. 2011; Misistry of Statistics and Progamme Implementation 2011) 4.2 Fiscal Policy Understanding the complexities of the supply side issues for India is a must for Government to address long term inflation and employment. Investment in agriculture, manufacturing and infrastructure will most likely form the basis of the Twelfth Five-Year plan (2point6billion.com 2011). Agriculture can increase and sustain output by advancements in farming practise and technology which is also true of the manufacturing sector. In order for the government investment not to compound Aggregate Demand and multiply into further inflation, taxation of the middle and higher income tax brackets is an option. Already highlighted is the disparity between the size of each sector and the share of its GDP, these expenditures would therefore shift demand from the higher earning service sector into agriculture and industry, with a positive knock on effect of an increase in employment in these areas. | % Labour Force| % GDP| Agriculture| 52| 16.1| Industry| 14| 28.6| Services| 34| 53.3| Figure 3.4 Economic Sectors Labour/GDP (The World Bank 2009) Investment in education, fundable by higher taxation levels can also be aimed to assist the long term shift away from agriculture and into the industry and services sector. Infrastructure is also a key investment consideration to reduce costs of production to all sectors of the economy and sustain ever increasing energy needs. This is also required to avoid the widening of the ‘two-speed’ economy and should be avoided as not to become reliant on one sector of the economy, addressing the balance and disparity can help create a diverse, shock absorbent Indian future. Why would this help stabilise inflation and reduce unemployment? * Cost push inflation and supply side shock impacts would be reduced in the long term * Investment in agricultural and manufacturing practice would allow for a closer match of Aggregate Supply with Aggregate demand * Shifting employment from Agriculture into Industry and Services sector would reduce unemployment * Long term government can divert funds from unemployment resource and taxation into reduction of the Government Debt 4.3 Exchange Rate – Exports and Imports The balance of trade is in deficit of 7.2% (see figure 3.5) however this may not be a major issue for the economic growth of India. The difficulty in policy decision remains the valuation of the Rupee and its impact on a number of variables. High rupee value impacts exports and is approximately 44.6 rupee to $1 US; a primary focus area is industry which could become a viable source of employment for the 10.8% of people not in work. Continuing to increase interest rates will have two impacts; direct foreign investment will be more attractive. Such things as new iron ore and petroleum mining ventures would become possible, however if the Rupee value is too high the export of this and other exportable goods becomes less attractive. Figure 3.5 Components of GDP as a Percentage (Misistry of Statistics and Progamme Implementation 2011) Focused on the aim of sustained high growth, export of services is only 6.6% of GDP however as the Services sector accounts for 55% of industry composition and consumption accounts for 58.3% of GDP, decrease of the ability to export services would reduce private consumption, a direct impact on growth. Export of Goods would also increase if the Rupee were to weaken and address the balance of trade. The government is strongly advised to allow mining and large manufacturing projects to begin and allow the export of these commodities to economies like China. Comparative cost of labour and production would give India a very competitive selling price in the global market and shift employment from agriculture (and the unemployed) into the manufacturing industry. 4. Conclusion The economy of India is very strong in the current global climate of uncertainty and the challenge for the Government is to maintain that level of growth. Managing economic uncertainties that can cause the economy to fail in its aims are extremely important. Understanding the supply side causes of inflation and the possible negative effect of monetary policy to combat it should be realised. Therefore fiscal policy to increase investment in the agriculture and manufacturing industries is recommended to remove disparity and level the ‘two-speed’ economy. High levels of inflation and unemployment do not align to the Phillps principle of inflation (McTaggart, Findlay, and Parkin 2010) however at present there may be a need to absorb these pressures in the short term. To some degree the economy may be experiencing stagflation as it has a much higher potential GDP threshold. In conclusion, there are other factors such as corruption and economic management that if resolved could drastically reduce debt and disparity between all sectors of society. 5. References 2point6billion.com. 2011. India’s 12th Five Year Plan to Focus on ‘Inclusive Growth’. http://www.2point6billion.com/news/2011/04/25/indias-12th-five-year-plan-to-focus-on-inclusive-growth-9151.html (accessed 02/07/2011). AZAD India Foundation. 2010. Unemployment in India. http://azadindia.org/social-issues/Unemployment-in-India.html (accessed 10/04/2011). BBC. 2011. India wholesale inflation rate rises more than expected. http://www.bbc.co.uk/news/business-13761784 (accessed 26/06/2011). CIA. 2010. India. https://www.cia.gov/library/publications/the-world-factbook/geos/in.html (accessed 22/06/2011). FitzGerald, B. 2011. Two-speed economy killing industry, warns steel maker. http://www.theage.com.au/business/twospeed-economy-killing-industry-warns-steel-maker-20110221-1b2k1.html (accessed 29/06/2011). Hubbard, G., A. M. Garnett, P. Lewis, and A. P. OBrien. 2011. Essentials of economics. McTaggart, D., C. Findlay, and M. Parkin. 2010. Economics. 6 ed. 6 vols. Vol. 6. Misistry of Statistics and Progamme Implementation. 2011. National Accounts Statistics.

Processes of Mergers and Acquisitions

Processes of Mergers and Acquisitions CHAPTER ONE: INTRODUCTION 1.1 Background Mergers and acquisitions (MAs) have become the dominant mode of growth for firms seeking competitive advantage in an increasingly complex and global business economy (Adler, 1997). According to (Schuler et al, 2003) a merger happens when two companies agree to join their operations together to form a new company in which they participate as equal partners. On the other hand, in an acquisition, one firm buys a controlling or full interest in another firm with the understanding that the buyer will determine how the combined operations will be managed. ultimately, wealth increases for shareholders in the acquiring company. In practice, however, acquisitions often produce disappointing results. An example to illustrate this is a study by Mercer Management Consulting who looked at 150 acquisitions worth more than 500 million dollars. The Mercer study concluded that 50 percent of the acquisitions eroded shareholder value, while another 33 percent created only marginal returns. (Hill, C.W. L, 2007, pg.504).Another study by a stream of empirical researchers examined the post-acquisition performance of companies and has generally failed to find consistent evidence of improvements in shareholder wealth after post acquisition stage. These findings appear to hold both in the short run (Firth 1980; Franks and Harris 1989; Higson and Elliot 1998:16-20) and in the long run (Gregory 1997; Kennedy and Limmak 1996; Sudarsanam and Mahate 2003:13-50).These findings reveal that mergers and acquisitions may not yield successful results relative to th e sought advantages. This is indeed worrying and raises questions about the value creation of mergers and acquisitions. An important factor affecting the performance of mergers and acquisitions is the transfer of knowledge between the two units. Knowledge transfer is critical to the performance of knowledge creation and in leveraging knowledge for greater organisational performance (Von Krough et al., 2000). Therefore, there is a need for efficient knowledge transfer in mergers and acquisitions. In international mergers and acquisitions, two cultures are combined, and also two systems of knowledge and insights are integrated. In order to develop and sustain competitive advantages for the knowledge-intensive firm, strategic management should enable the development and sharing of new knowledge and other resources. It is believed today by numerous researchers and managers that knowledge is one of the strongest sources of sustainable competitive advantage for Multi National Corporations (MNCs). The importance of developing and sharing knowledge in order to stay competitive for the future has been underlined by many. (Grant, 1996). There are two forms of knowledge which are tacit and explicit knowledge. Tacit knowledge is not easily expressible and therefore difficult to communicate to others. Explicit knowledge on the other hand, is formal and systematic so can therefore be easily communicated. (Nonaka and Takeuchi, 1995, pg.98). Tacit knowledge is non-linguistic, as it deals with the processes of the mind that is interested in reasoning and analysis. The data it renders is non-numeric, and is codified as personal or biased. From the above-mentioned definition of tacit knowledge, it can be seen as something that is rooted on experiences, deeply attached or related to emotions, is connected with the ideals, ethics and emotions of the subject. Explicit knowledge on the other hand is being codified when it is interpreted, used, and shared. These forms of knowledge transfer can be affected by various factors which can be catogorised as organisational and individual factors. These can become barriers if not managed properly because they have a significant impact on knowledge transfer. This dissertation would therefore focus on the key organisational factors that affect the transfer of knowledge. The paper will establish the relationship between these factors and knowledge transfer in international mergers and acquisitions. These factors are flexible structures, organisational culture, communication and Information technology. (Ives et al., 2003 and Spender, 1996) 1.2 ?ignifi?ance of the Study Over the last few years there has been an upsurge in interest among scholars on the importance of knowledge management in firms. This is because in successful organizations, their main advantage comes from the knowledge of their employees. In the past mergers and acquisitions were mainly conducted to obtain wealth. However, in recent years multinational corporations (MNCs) emphasize on the knowledge assets that can be gained from mergers and acquisitions. Thus, techniques for archiving, transferring, and increasing knowledge are fundamental factors for the high quality performance of organizations (Maurer, 1999). When companies undertake acquisitions in an international setting the challenge to transfer knowledge becomes more crucial therefore tacit and coded knowledge must be managed and developed in order to obtain an efficient transfer process. This dissertation will therefore examine the organisational factors that influence the transfer of both tacit and explicit knowledge in acquisitions and the role the organisational factors play in the knowledge transfer process. This paper will begin by reviewing relevant literature on knowledge, knowledge management, transfer of knowledge in acquisitions and the organisational factors that influence the process, Chapter 3 will discuss a summary of the methodology. The results of the abovementioned objectives will be presented in Chapter 4 and a critical and analytical discussion of all results is presented in Chapter 5. Conclusions are then made from the analysis and discussion in the previous sections in Chapter 6. To conduct this study, a semi structured interview will be conducted on two financial institutions engaged in an acquisition. The study will identify the key organisational factors that influence the transfer of both tacit and explicit knowledge in the acquisition, the effect of the organisational factors in the transfer process and the factor that has the greatest impact on transfer of knowledge. The focus of the case study will take place in the banking sector .This is because it is part of the global financial sector, which pursues a high level of International mergers and acquisitions.(IMAs). The findings of this study will benefit employees as well by giving light to the actions taken by their respective organizations to aid them cope with the changes brought about by the relationship between knowledge transfer and organisational factors. 1.3 Aims and Objectives The aims and objectives are to answer the main research question and to propose a strategic and effective way of managing the factors that affect transfer of knowledge in order to obtain efficiency. The main research question is : What are the effects of the key organisational factors that influence knowledge transfer in international mergers and acquisitions? Following from the research question, the main objectives will be to establish: Key Organisational factors that influence the transfer of both tacit and explicit knowledge in the acquisition. The effect of the organisational factors in the transfer process. The factor that has the greatest impact on transfer of knowledge ?HA?TER 2: LITERATURE REVIEW To answer the research question this chapter starts with a brief insight into the nature of knowledge, and then proceed to provide a critical review of transfer of knowledge in mergers and acquisitions and then focus on the key organisational factors that affect the transfer of this knowledge. 2.1 The Nature of Knowledge Knowledge can be experience, concepts, values or beliefs that increase an individuals capability to take effective actions (Alavi Leidner 1999).Knowledge can be categorized according to its form and content. With regard to this, a number of typologies have been used, such as embodied versus embedded knowledge (Granovetter, 1985), knowledge as intrinsically versus instrumentally valuable (Degenhardt, 1982), scientific versus practical knowledge (Hayek, 1945), and know-what versus know-how (Gupta and Govindarajan, 2000).ref Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organisations, it often becomes embedded not only in documents or repositories but also in organisational routines, processes, practices, and norms. (Davenport and Prusak, 2000) In the literature on Knowledge Management (KM), there is much debate about what constitutes knowledge, what is data and what is information. Most literature on Knowledge Management classifies knowledge into two main categories: explicit knowledge and tacit knowledge. Explicit knowledge can be defined as things that are clearly stated or defined, while tacit knowledge can be defined as things that are not expressed openly, but implied (Choo 2000, Herschel et al., 2001). This section will make a distinction between the two forms of knowledge tacit and explicit knowledge which was proposed by (Polyani 1962). Explicit knowledge is codifiable and objective and therefore easily transmitted, conceptualized and stored, with little cost. Codes can be differentiated by taking into account the number of elements and combination rules a code consists of, as well as the degree of ambiguity allowed. (Jorna, 2001). (Davenport and ?ru?ak, 1998, pg.41) say: the aim of c?difi?ation is to put organisational knowledge into a form that makes it accessible to those who need it. It literally turns knowledge into code to make it organised, explicit, portable, and as easy to understand as possible. New technologies play an important role in the knowledge codification and make the prospect for those activities increasingly promising. Knowledge managers and users can categorise knowledge, describe it, map and model it, simulate it, and embed it in rules and recipes. Each of these approaches has its own set of values and limitations. Knowledge is being codified when it is interpreted, used, and shared. Codified knowledge comes in the form of organization of thoughts that matter to the individual and can be used for common decisions. Tacit knowledge is converted to explicit or codified knowledge, a form of knowledge that is used by company and/or organisation members. Codified knowledge is essential in the diagnosis, performance, training, and planning of the events in the company or in the life of an individual. Tacit knowledge on the other hand, resides within individuals and is non-codifiable, acquired through experience, personal and subjective. These features make tacit knowledge difficult to formalise and transmit, leading to loss of organisational knowledge. Much of organisational knowledge is tacit (Cook and Yanow, 1993.) This form of knowledge is non-linguistic, as it deals with the processes of the mind that is interested in reasoning and analysis. The data it renders is non-numeric, and is codified as personal or biased. From the above-mentioned definition of tacit knowledge, it can be seen as something that is rooted on experiences, deeply attached or related to emotions, is connected with the ideals, ethics and emotions of the subject. It is this type of knowledge that has strong potential to be a source of competitive advantage, because it is difficult to assess from the outside and not readily available. The focus of this dissertation will be on these two types of knowledge. According to (Nonaka and Takeuchi, 1995), knowledge is created through interactions amongst individuals with different types and contents of knowledge. Through this social conversion process, tacit and explicit knowledge expands in terms of both quality and quantity. (Nonaka, 1990, 1991, 1994: Nonaka and Takeuchi, 1995) .This process goes through four modes of conversion between tacit and explicit knowledge which are Socialization (from tacit to tacit) Externalization (from tacit to explicit). Combination (from explicit to explicit) and finally Internalization (from explicit to tacit). 2.2 Knowledge Management Knowledge management has been an important topic in organizations for years. Companies have hugely emphasized the importance of knowledge as the basis for competitive advantage (Teece, 1998). According to (Zack,1999), there is an obvious difference among knowledge, data and information. Data correspond to observations or facts that are not meaningful. Information results from the placement of data within a meaningful context. Knowledge, on the other hand, is more intricate because it can be both implicit and explicit. Implicit knowledge is understood and applied, and developed from experience. It is shared through interactive conversations and narration of shared experiences. Companies have implemented knowledge management strategies to promote organizational learning. According to (Sarvary,1999), a knowledge management system is the infrastructure necessary for the organization to implement the Knowledge Management process. This comprises IT and organizational communications. Organizational culture, internal governance mechanisms and appropriate incentive schemes are also required. (Zack,1999) stated that effective knowledge creation, sharing, and leveraging requires an organizational climate and reward system that values and encourages cooperation, trust, learning, and innovation and provides incentives for engaging in those knowledge-based roles, activities, and processes. I have consistently observed this aspect to be a major obstacle to effective knowledge management. The success of these strategies is contingent upon the battle between organizational roles and formal and informal structure with socio-cultural factors affecting knowledge management. Culture, power relations, norms, management philosophy, and reward systems are examples. Knowledge management as a task, particularly in project-based international organisations, is an evolution of cognitive processes and social interaction. As knowledge formulation moves through the stages of intuiting, interpreting, integrating, and institutionalizing the tasks become less uncertain and more tangible. A mix of control mechanisms is therefore crucial for effectively managing knowledge capture and transfer within the organization. (Crossan et al., 1999) 2.3 Knowledge Transfer in International Mergers and Acquisitions One of the most prominent contemporary trends in the business of an enterprise is the increasing internationalization of their basic activities. This trend originally started in the most developed countries of the world, where enterprises reached a level of development by economies of scale, as a basic precondition for further progress, which enable enterprises to spread rapidly into international markets. Today however, globalisation can be considered as a precondition for the survival of an organisation notwithstanding the size or the country of origin. Internationalization of business functions began with sales and marketing, continued with production, and today it covers strategic research and development as well (Kolalovic, 2004).Because the prerequisite of an economic development is the openness of the economy, globalisation of businesses has been an economic rule. Local enterprises accepted the importance of mergers and acquisitions as a great help in penetrating the internati onal market and in gaining competitiveness (Hill, 2007). International mergers and acquisitions (IMA) have ballooned in the past two decades and key drivers of this have been globalisation and technological development. These key drivers have brought rise to an easiness of reaching markets, acquiring, managing and monitoring businesses abroad. On a macro level, International mergers and acquisitions (IMAs) can help companies remain competitive, achieve economies of scale and scope and improve positioning in the global environment. On a micro level, gaining valuable tangible and intangible assets can give industry specific competitive advantages; enhance efficiency, market power and growth potential. Notwithstanding, the approach or strategies adopted by managers towards mergers and acquisitions (MAs), they may not yield successful results relative to the sought advantages. The risks associated with cross-border (MAs) are many and can precipitate tremendous failure. Knowledge transfer is one of these risks which will be a focus of this paper. (Galbraith and Stiles, 1984). Knowledge transfer means conveying or moving knowledge from one person or place to another. In the world of business, knowledge management would mean the manner on how we move knowledge from one point of the organisation to another (Rutkowski, 1999). However in international mergers and acquisitions, knowledge would be conveyed from one organisation to another but in a cross cultural context. Knowledge capture and transfer can be regarded as strategic issues. They benefit the organisation as a whole. The process of accumulating and documenting knowledge learned is more tactical because it involves costs attributable to a specific project and managers need to determine which type of knowledge will be useful for the organisation before they are codified. According to (Davenport ,1996) and( Halal ,1996), the most recent and widely used vessel of knowledge transfer is the modern technology. Many companies worldwide use the Web or the internet access as a channel of knowledge sharing in workgroup and company levels. The purpose of the use of modern technology networks is to distribute information and computing resources among employees within the organization, enable the sharing of knowledge and expertise, overcome knowledge transfer barriers, exchange documents, and communicate effectively. According to (Keen, 1997), modern technology in knowledge transfer has reach, range, and ease of use. Reach relates to the people who can access the companys online services and information resources. It can be possible for the organization to gather, transfer or share information from their systems through any computer linked to another computer anywhere across the globe. Range relates to the information and services that can be automatically cross-linked. The World Wide Web is a way of sharing information. Ease of Use pertains to how the system can access and navigate the use of the technologies. Web browsers are good examples of information retrieval systems. In the transfer of knowledge in international mergers and acquisitions, most individuals are reluctant to share and transfer knowledge due to various factors. The announcement of a merger or acquisition creates a highly stressful environment of uncertainty, fear and distrust (Cartwright Cooper, 1992). Even if redundancies are not planned, individuals in both the acquired and the acquiring firms may fear loss of status and changes to their established work norms (Hunt et al, 1987; Schweiger Denise, 1991:49). They may react by resisting senior managements initiatives to encourage co-operation between the combining firms and may ultimately resign (Buono Bowditch, 1989; Levinson, 1970, pg.98). These researched negative reactions are likely to be particularly problematic when knowledge transfer is an explicit merger objective. Knowledge transfer is above all an inter-personal process. Whilst codified knowledge may be shared relatively easily, the experiences and insights required to in terpret and apply this knowledge reside within individuals. Individuals cannot be forced to share this knowledge with others but can only do so willingly. When we specifically consider the international or global transfer of knowledge, then as (Bresman et al,1999,pg.17) have noted, with respect to international acquisitions, the lack of personal relationships, the absence of trust, and cultural distance all conspire to create resistance, frictions, and misunderstandings. This observation is consistent with the conviction that a significant source of dissatisfaction in organizations today is the poor structures and networks for mediating and diffusing knowledge, values and experience within the organisational environment (Claes, 1999,pg.68). Since the competitive advantage of most organisations is their knowledge, individuals from the acquired company in an acquisition refuse to share their knowledge because they might feel the acquirers will eventually find them unimportant and possibly make them redundant. Some also leave and take their knowledge with them to utilise in another company. This is the reason why it is very necessary to identify the factors that influence the transfer of knowledge and improve on these factors to facilitate the process. These factors can be either individual, knowledge based or organisational factors. This dissertation will however, focus specifically on the organisational factors. This is because when they are identified and managed efficiently they help produce a positive transfer of knowledge. 2.4 Organisational Learning (Fisher and White, 2000) defined organisational learning as a reflective process, played out by members at all levels of the organization, which involves the collection of information from both the external and internal environments. This information is filtered through a collective sense-making process, which results in shared interpretations that can be used to instigate actions resulting in enduring changes to the organizations behaviour and theories-in-use.According to Crossan et al. (1999), organizational learning entails a tension between gaining knowledge of new learning or exploration, and using what has been learned or exploitation. This includes individual, group and organizational levels of learning, which are connected by the processes of intuiting, interpreting, integrating, and institutionalizing. 2.5 Organisational factors affecting Knowledge Transfer in Mergers and Acquisitions (Hybels and Weaver, 2007) define communication as any process in which people share information, ideas and feelings. It involves not only the spoken and written word but also the body language, personal mannerisms and anything that adds meaning to the message. Communication can be verbal and non verbal. In mergers and acquisitions, effective communication is very important because it helps coordinates and improves the transfer of knowledge. Communication is a process and consists of various elements which include sending of information, receiving information and feedback. This is in a form of of a basic communication model where the sender encodes the message, uses an appropriate medium to transmit the message and the receiver decodes the message (Hollensen, 2001). Whilst every organization has a unique environment particular key organisational factors such as communication, structure, culture and technology play a crucial role in the overall performance of the organization.(Galbraith, 2002). Therefore, this dissertation will focus on these key factors: Organisational Culture, Flexible structures and support, Information Technology and Communication to determine its effect on knowledge transfer. 2.5.1 Organisational Culture (Schein, 1985) defines organizational culture as a set of implicit assumptions held by members of a group that determines how the group behaves and responds to its environment. It is reflected in the aspects of the organization such as its mission. It is reflected in the way the employees act, what they expect of each other, and how they make sense of each others actions. Most of all, it is deeply rooted in the core values of the organization. According to (Hill C, W, L, 2007) organisational culture comes from several sources. Firstly, influential leaders can have an influence on the culture of the organisation. Secondly, the social culture of a country where the company was founded also influences its corporate culture. The third influence is the history of the company and lastly decisions that yield high performance tend to become embedded in the values of the firm. Many acquisitions fail because of the differences in corporate culture that exist amongst both units. This is because; if the differences are not managed properly they cause a strain on the integration process. An example is the Daimler and Chrysler merger which experienced a clash of corporate culture. Though it is not surprising that the merging of a German company and an American company would present dissimilarity in corporate cultures, there was insufficient support or consideration for these challenges offered to staff. Ideally both Daimler and Chrysler were to benefit equally from each others strengths and capabilities and ultimately increase performance but the cultural clashes significantly affected the corporate structure and success of the merger. (Hill, C.W. L, 2007, pg.505). This caused high management turnover and eventually loss of knowledge and expertise. (Bresman et al.,1999:17) therefore ?trepoe? the importance of cultural compatibility influencing international merger and acquisition success by arguing that the similarities of both parents organisational culture play a critical role in determining the international mergers and acquisitions extent of knowledge acquisition. With the view that cultural compatibility increases the possibility to acquire knowledge and the acquired knowledge then contributes to form new corporate cultures. (De long and Fahey, 2000) identified four ways in which culture influences knowledge transfer. Firstly, culture shapes assumptions about what knowledge is and what type of knowledge is worth managing. Secondly, culture defines the relationships between individual and organisational learning by determining who can control a specific type of knowledge. Thirdly, culture creates the context for social interaction that determines how knowledge will be used in a particular situation. Lastly, culture shapes the processes by which new knowledge is created legitimated and distributed in an organisation. For (M?rpoini,2004) the high failure rates of acquisitions observed over a long period of time by researchers are often due to company manager systematically overlooking the major cultural and organisational complexities involved in integrating the merging firms operations and informal networks. As the increasing number of ?rpo?-border acquisitions brought public attention to the ?la?he? of management styles and ?hilpopohie?, many poh?lar? tried to test whether organisations pould dipolay a higher level of cultural pom?atibility for a ?upoepoful acquisitions. Many thought companies with compatible cultures would be less problematic to acquire and generate value but a research by (Schoenberg, 2000) found out that the impact of cultural compatibility on acquisition performance is revolving around the form of post acquisition integration and the relative attractiveness of the acquirers culture. When knowledge is deeply embedded in a unique culture and organisational setting, transfer of knowledge becomes very difficult and costly. Researchers have argued that a major determinant of how much knowledge a company gains from a merger or an acquisition is its ability to learn from each other. (Hamel et al, 2002,). An example is the merger between General motors (GM) and Toyota in 1985 to build the Chevrolet. Toyota achieved its objectives from the merger and transferred all the knowledge to General Motors which was never put to good use. GM focused on the explicit knowledge forgetting that the tacit knowledge was embedded in the organisation. They should have worked together as a team to transfer both types of knowledge throughout the organisation. We can therefore say that to maximize the transfer of knowledge in a merger or acquisition both units need to adopt a common knowledge sharing culture across every part of the organisation. A shared culture may help informal integrating mechanisms such as knowledge networks to operate more efficiently. As such, a common culture may be of greater value in a multinational that is pursuing a strategy that requires cooperation and coordination between globally dispersed subsidiaries. (Hill, C.W. L, 2007, pp.472-474). Organisational culture can also be maintained by effective communication, organisational culture training as part of the due diligence process, maintaining trust from the pre acquisition stage and then finally staff must be trained on the core values of both units. According to (Baker and English, 2006), aspects of the business culture that can carefully be managed and improve knowledge transfer within the organization, is the use of a common business language and codes, the creation of a shared vision, and the construction of a common company culture that promotes knowledge transfer .Human due diligence should take place more openly and managers must make use of cultural assessment tools like employee surveys and face-to-face interviews. It is therefore useful to let the managers from both companies jointly review this data and agree on the cultural elements for the new company (Harding and Rouse, 2007). Managers must also be aware that basic approaches, values, and philosophies about employment regulation vary widely from country to country around the world. 2.5.2 Communication (Hybels and Weaver, 2007) define communication as any process in which people share information, ideas and feelings. It involves not only the spoken and written word but also the body language, personal mannerisms and anything that adds meaning to the message. Communication can be verbal and non verbal. In mergers and acquisitions, effective communication is very important because it helps coordinates and improves the transfer of knowledge. Communication is a process and consists of various elements which include sending of information, receiving information and feedback. This is in a form of of a basic communication model where the sender encodes the message, uses an appropriate medium to transmit the message and the receiver decodes the message (Hollensen, 2001). The positive outcome of the transfer of knowledge depends on an effective communication process which begins with the sender sharing the information, structuring the message in such a way that the receiver understands, selecting the appropriate method to convey the message to the recipient and then once an appropriate channel is selected and used, the receiver receives the message. Here he/she must decode the message. Meaning is attached to the various symbols and the channel used by the sender and now the receiver must interpret the message. This interpretation involves gaining an understanding from the message and is influenced by the receivers personal experiences, relationship with the sender, knowledge, perceptions and culture. Feedback is the final step in the communication process. Feedback is the response the receiver sends to the sender. In feedback the receiver conceives, encodes and selects the channel just like the original sender did. The original sender then becomes the receiver since he decodes, interprets and responds (feedback) to the response (feedback) the original receiver sent.However, this communication process is subject to many influences that determine its successful transfer. (Welch, D Welch, L, 2007). There are different ways of communicating tacit and coded knowledge. These are face to face and electronic communication. Face to face tends to be the most influential medium of communicating. This Processes of Mergers and Acquisitions Processes of Mergers and Acquisitions CHAPTER ONE: INTRODUCTION 1.1 Background Mergers and acquisitions (MAs) have become the dominant mode of growth for firms seeking competitive advantage in an increasingly complex and global business economy (Adler, 1997). According to (Schuler et al, 2003) a merger happens when two companies agree to join their operations together to form a new company in which they participate as equal partners. On the other hand, in an acquisition, one firm buys a controlling or full interest in another firm with the understanding that the buyer will determine how the combined operations will be managed. ultimately, wealth increases for shareholders in the acquiring company. In practice, however, acquisitions often produce disappointing results. An example to illustrate this is a study by Mercer Management Consulting who looked at 150 acquisitions worth more than 500 million dollars. The Mercer study concluded that 50 percent of the acquisitions eroded shareholder value, while another 33 percent created only marginal returns. (Hill, C.W. L, 2007, pg.504).Another study by a stream of empirical researchers examined the post-acquisition performance of companies and has generally failed to find consistent evidence of improvements in shareholder wealth after post acquisition stage. These findings appear to hold both in the short run (Firth 1980; Franks and Harris 1989; Higson and Elliot 1998:16-20) and in the long run (Gregory 1997; Kennedy and Limmak 1996; Sudarsanam and Mahate 2003:13-50).These findings reveal that mergers and acquisitions may not yield successful results relative to th e sought advantages. This is indeed worrying and raises questions about the value creation of mergers and acquisitions. An important factor affecting the performance of mergers and acquisitions is the transfer of knowledge between the two units. Knowledge transfer is critical to the performance of knowledge creation and in leveraging knowledge for greater organisational performance (Von Krough et al., 2000). Therefore, there is a need for efficient knowledge transfer in mergers and acquisitions. In international mergers and acquisitions, two cultures are combined, and also two systems of knowledge and insights are integrated. In order to develop and sustain competitive advantages for the knowledge-intensive firm, strategic management should enable the development and sharing of new knowledge and other resources. It is believed today by numerous researchers and managers that knowledge is one of the strongest sources of sustainable competitive advantage for Multi National Corporations (MNCs). The importance of developing and sharing knowledge in order to stay competitive for the future has been underlined by many. (Grant, 1996). There are two forms of knowledge which are tacit and explicit knowledge. Tacit knowledge is not easily expressible and therefore difficult to communicate to others. Explicit knowledge on the other hand, is formal and systematic so can therefore be easily communicated. (Nonaka and Takeuchi, 1995, pg.98). Tacit knowledge is non-linguistic, as it deals with the processes of the mind that is interested in reasoning and analysis. The data it renders is non-numeric, and is codified as personal or biased. From the above-mentioned definition of tacit knowledge, it can be seen as something that is rooted on experiences, deeply attached or related to emotions, is connected with the ideals, ethics and emotions of the subject. Explicit knowledge on the other hand is being codified when it is interpreted, used, and shared. These forms of knowledge transfer can be affected by various factors which can be catogorised as organisational and individual factors. These can become barriers if not managed properly because they have a significant impact on knowledge transfer. This dissertation would therefore focus on the key organisational factors that affect the transfer of knowledge. The paper will establish the relationship between these factors and knowledge transfer in international mergers and acquisitions. These factors are flexible structures, organisational culture, communication and Information technology. (Ives et al., 2003 and Spender, 1996) 1.2 ?ignifi?ance of the Study Over the last few years there has been an upsurge in interest among scholars on the importance of knowledge management in firms. This is because in successful organizations, their main advantage comes from the knowledge of their employees. In the past mergers and acquisitions were mainly conducted to obtain wealth. However, in recent years multinational corporations (MNCs) emphasize on the knowledge assets that can be gained from mergers and acquisitions. Thus, techniques for archiving, transferring, and increasing knowledge are fundamental factors for the high quality performance of organizations (Maurer, 1999). When companies undertake acquisitions in an international setting the challenge to transfer knowledge becomes more crucial therefore tacit and coded knowledge must be managed and developed in order to obtain an efficient transfer process. This dissertation will therefore examine the organisational factors that influence the transfer of both tacit and explicit knowledge in acquisitions and the role the organisational factors play in the knowledge transfer process. This paper will begin by reviewing relevant literature on knowledge, knowledge management, transfer of knowledge in acquisitions and the organisational factors that influence the process, Chapter 3 will discuss a summary of the methodology. The results of the abovementioned objectives will be presented in Chapter 4 and a critical and analytical discussion of all results is presented in Chapter 5. Conclusions are then made from the analysis and discussion in the previous sections in Chapter 6. To conduct this study, a semi structured interview will be conducted on two financial institutions engaged in an acquisition. The study will identify the key organisational factors that influence the transfer of both tacit and explicit knowledge in the acquisition, the effect of the organisational factors in the transfer process and the factor that has the greatest impact on transfer of knowledge. The focus of the case study will take place in the banking sector .This is because it is part of the global financial sector, which pursues a high level of International mergers and acquisitions.(IMAs). The findings of this study will benefit employees as well by giving light to the actions taken by their respective organizations to aid them cope with the changes brought about by the relationship between knowledge transfer and organisational factors. 1.3 Aims and Objectives The aims and objectives are to answer the main research question and to propose a strategic and effective way of managing the factors that affect transfer of knowledge in order to obtain efficiency. The main research question is : What are the effects of the key organisational factors that influence knowledge transfer in international mergers and acquisitions? Following from the research question, the main objectives will be to establish: Key Organisational factors that influence the transfer of both tacit and explicit knowledge in the acquisition. The effect of the organisational factors in the transfer process. The factor that has the greatest impact on transfer of knowledge ?HA?TER 2: LITERATURE REVIEW To answer the research question this chapter starts with a brief insight into the nature of knowledge, and then proceed to provide a critical review of transfer of knowledge in mergers and acquisitions and then focus on the key organisational factors that affect the transfer of this knowledge. 2.1 The Nature of Knowledge Knowledge can be experience, concepts, values or beliefs that increase an individuals capability to take effective actions (Alavi Leidner 1999).Knowledge can be categorized according to its form and content. With regard to this, a number of typologies have been used, such as embodied versus embedded knowledge (Granovetter, 1985), knowledge as intrinsically versus instrumentally valuable (Degenhardt, 1982), scientific versus practical knowledge (Hayek, 1945), and know-what versus know-how (Gupta and Govindarajan, 2000).ref Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organisations, it often becomes embedded not only in documents or repositories but also in organisational routines, processes, practices, and norms. (Davenport and Prusak, 2000) In the literature on Knowledge Management (KM), there is much debate about what constitutes knowledge, what is data and what is information. Most literature on Knowledge Management classifies knowledge into two main categories: explicit knowledge and tacit knowledge. Explicit knowledge can be defined as things that are clearly stated or defined, while tacit knowledge can be defined as things that are not expressed openly, but implied (Choo 2000, Herschel et al., 2001). This section will make a distinction between the two forms of knowledge tacit and explicit knowledge which was proposed by (Polyani 1962). Explicit knowledge is codifiable and objective and therefore easily transmitted, conceptualized and stored, with little cost. Codes can be differentiated by taking into account the number of elements and combination rules a code consists of, as well as the degree of ambiguity allowed. (Jorna, 2001). (Davenport and ?ru?ak, 1998, pg.41) say: the aim of c?difi?ation is to put organisational knowledge into a form that makes it accessible to those who need it. It literally turns knowledge into code to make it organised, explicit, portable, and as easy to understand as possible. New technologies play an important role in the knowledge codification and make the prospect for those activities increasingly promising. Knowledge managers and users can categorise knowledge, describe it, map and model it, simulate it, and embed it in rules and recipes. Each of these approaches has its own set of values and limitations. Knowledge is being codified when it is interpreted, used, and shared. Codified knowledge comes in the form of organization of thoughts that matter to the individual and can be used for common decisions. Tacit knowledge is converted to explicit or codified knowledge, a form of knowledge that is used by company and/or organisation members. Codified knowledge is essential in the diagnosis, performance, training, and planning of the events in the company or in the life of an individual. Tacit knowledge on the other hand, resides within individuals and is non-codifiable, acquired through experience, personal and subjective. These features make tacit knowledge difficult to formalise and transmit, leading to loss of organisational knowledge. Much of organisational knowledge is tacit (Cook and Yanow, 1993.) This form of knowledge is non-linguistic, as it deals with the processes of the mind that is interested in reasoning and analysis. The data it renders is non-numeric, and is codified as personal or biased. From the above-mentioned definition of tacit knowledge, it can be seen as something that is rooted on experiences, deeply attached or related to emotions, is connected with the ideals, ethics and emotions of the subject. It is this type of knowledge that has strong potential to be a source of competitive advantage, because it is difficult to assess from the outside and not readily available. The focus of this dissertation will be on these two types of knowledge. According to (Nonaka and Takeuchi, 1995), knowledge is created through interactions amongst individuals with different types and contents of knowledge. Through this social conversion process, tacit and explicit knowledge expands in terms of both quality and quantity. (Nonaka, 1990, 1991, 1994: Nonaka and Takeuchi, 1995) .This process goes through four modes of conversion between tacit and explicit knowledge which are Socialization (from tacit to tacit) Externalization (from tacit to explicit). Combination (from explicit to explicit) and finally Internalization (from explicit to tacit). 2.2 Knowledge Management Knowledge management has been an important topic in organizations for years. Companies have hugely emphasized the importance of knowledge as the basis for competitive advantage (Teece, 1998). According to (Zack,1999), there is an obvious difference among knowledge, data and information. Data correspond to observations or facts that are not meaningful. Information results from the placement of data within a meaningful context. Knowledge, on the other hand, is more intricate because it can be both implicit and explicit. Implicit knowledge is understood and applied, and developed from experience. It is shared through interactive conversations and narration of shared experiences. Companies have implemented knowledge management strategies to promote organizational learning. According to (Sarvary,1999), a knowledge management system is the infrastructure necessary for the organization to implement the Knowledge Management process. This comprises IT and organizational communications. Organizational culture, internal governance mechanisms and appropriate incentive schemes are also required. (Zack,1999) stated that effective knowledge creation, sharing, and leveraging requires an organizational climate and reward system that values and encourages cooperation, trust, learning, and innovation and provides incentives for engaging in those knowledge-based roles, activities, and processes. I have consistently observed this aspect to be a major obstacle to effective knowledge management. The success of these strategies is contingent upon the battle between organizational roles and formal and informal structure with socio-cultural factors affecting knowledge management. Culture, power relations, norms, management philosophy, and reward systems are examples. Knowledge management as a task, particularly in project-based international organisations, is an evolution of cognitive processes and social interaction. As knowledge formulation moves through the stages of intuiting, interpreting, integrating, and institutionalizing the tasks become less uncertain and more tangible. A mix of control mechanisms is therefore crucial for effectively managing knowledge capture and transfer within the organization. (Crossan et al., 1999) 2.3 Knowledge Transfer in International Mergers and Acquisitions One of the most prominent contemporary trends in the business of an enterprise is the increasing internationalization of their basic activities. This trend originally started in the most developed countries of the world, where enterprises reached a level of development by economies of scale, as a basic precondition for further progress, which enable enterprises to spread rapidly into international markets. Today however, globalisation can be considered as a precondition for the survival of an organisation notwithstanding the size or the country of origin. Internationalization of business functions began with sales and marketing, continued with production, and today it covers strategic research and development as well (Kolalovic, 2004).Because the prerequisite of an economic development is the openness of the economy, globalisation of businesses has been an economic rule. Local enterprises accepted the importance of mergers and acquisitions as a great help in penetrating the internati onal market and in gaining competitiveness (Hill, 2007). International mergers and acquisitions (IMA) have ballooned in the past two decades and key drivers of this have been globalisation and technological development. These key drivers have brought rise to an easiness of reaching markets, acquiring, managing and monitoring businesses abroad. On a macro level, International mergers and acquisitions (IMAs) can help companies remain competitive, achieve economies of scale and scope and improve positioning in the global environment. On a micro level, gaining valuable tangible and intangible assets can give industry specific competitive advantages; enhance efficiency, market power and growth potential. Notwithstanding, the approach or strategies adopted by managers towards mergers and acquisitions (MAs), they may not yield successful results relative to the sought advantages. The risks associated with cross-border (MAs) are many and can precipitate tremendous failure. Knowledge transfer is one of these risks which will be a focus of this paper. (Galbraith and Stiles, 1984). Knowledge transfer means conveying or moving knowledge from one person or place to another. In the world of business, knowledge management would mean the manner on how we move knowledge from one point of the organisation to another (Rutkowski, 1999). However in international mergers and acquisitions, knowledge would be conveyed from one organisation to another but in a cross cultural context. Knowledge capture and transfer can be regarded as strategic issues. They benefit the organisation as a whole. The process of accumulating and documenting knowledge learned is more tactical because it involves costs attributable to a specific project and managers need to determine which type of knowledge will be useful for the organisation before they are codified. According to (Davenport ,1996) and( Halal ,1996), the most recent and widely used vessel of knowledge transfer is the modern technology. Many companies worldwide use the Web or the internet access as a channel of knowledge sharing in workgroup and company levels. The purpose of the use of modern technology networks is to distribute information and computing resources among employees within the organization, enable the sharing of knowledge and expertise, overcome knowledge transfer barriers, exchange documents, and communicate effectively. According to (Keen, 1997), modern technology in knowledge transfer has reach, range, and ease of use. Reach relates to the people who can access the companys online services and information resources. It can be possible for the organization to gather, transfer or share information from their systems through any computer linked to another computer anywhere across the globe. Range relates to the information and services that can be automatically cross-linked. The World Wide Web is a way of sharing information. Ease of Use pertains to how the system can access and navigate the use of the technologies. Web browsers are good examples of information retrieval systems. In the transfer of knowledge in international mergers and acquisitions, most individuals are reluctant to share and transfer knowledge due to various factors. The announcement of a merger or acquisition creates a highly stressful environment of uncertainty, fear and distrust (Cartwright Cooper, 1992). Even if redundancies are not planned, individuals in both the acquired and the acquiring firms may fear loss of status and changes to their established work norms (Hunt et al, 1987; Schweiger Denise, 1991:49). They may react by resisting senior managements initiatives to encourage co-operation between the combining firms and may ultimately resign (Buono Bowditch, 1989; Levinson, 1970, pg.98). These researched negative reactions are likely to be particularly problematic when knowledge transfer is an explicit merger objective. Knowledge transfer is above all an inter-personal process. Whilst codified knowledge may be shared relatively easily, the experiences and insights required to in terpret and apply this knowledge reside within individuals. Individuals cannot be forced to share this knowledge with others but can only do so willingly. When we specifically consider the international or global transfer of knowledge, then as (Bresman et al,1999,pg.17) have noted, with respect to international acquisitions, the lack of personal relationships, the absence of trust, and cultural distance all conspire to create resistance, frictions, and misunderstandings. This observation is consistent with the conviction that a significant source of dissatisfaction in organizations today is the poor structures and networks for mediating and diffusing knowledge, values and experience within the organisational environment (Claes, 1999,pg.68). Since the competitive advantage of most organisations is their knowledge, individuals from the acquired company in an acquisition refuse to share their knowledge because they might feel the acquirers will eventually find them unimportant and possibly make them redundant. Some also leave and take their knowledge with them to utilise in another company. This is the reason why it is very necessary to identify the factors that influence the transfer of knowledge and improve on these factors to facilitate the process. These factors can be either individual, knowledge based or organisational factors. This dissertation will however, focus specifically on the organisational factors. This is because when they are identified and managed efficiently they help produce a positive transfer of knowledge. 2.4 Organisational Learning (Fisher and White, 2000) defined organisational learning as a reflective process, played out by members at all levels of the organization, which involves the collection of information from both the external and internal environments. This information is filtered through a collective sense-making process, which results in shared interpretations that can be used to instigate actions resulting in enduring changes to the organizations behaviour and theories-in-use.According to Crossan et al. (1999), organizational learning entails a tension between gaining knowledge of new learning or exploration, and using what has been learned or exploitation. This includes individual, group and organizational levels of learning, which are connected by the processes of intuiting, interpreting, integrating, and institutionalizing. 2.5 Organisational factors affecting Knowledge Transfer in Mergers and Acquisitions (Hybels and Weaver, 2007) define communication as any process in which people share information, ideas and feelings. It involves not only the spoken and written word but also the body language, personal mannerisms and anything that adds meaning to the message. Communication can be verbal and non verbal. In mergers and acquisitions, effective communication is very important because it helps coordinates and improves the transfer of knowledge. Communication is a process and consists of various elements which include sending of information, receiving information and feedback. This is in a form of of a basic communication model where the sender encodes the message, uses an appropriate medium to transmit the message and the receiver decodes the message (Hollensen, 2001). Whilst every organization has a unique environment particular key organisational factors such as communication, structure, culture and technology play a crucial role in the overall performance of the organization.(Galbraith, 2002). Therefore, this dissertation will focus on these key factors: Organisational Culture, Flexible structures and support, Information Technology and Communication to determine its effect on knowledge transfer. 2.5.1 Organisational Culture (Schein, 1985) defines organizational culture as a set of implicit assumptions held by members of a group that determines how the group behaves and responds to its environment. It is reflected in the aspects of the organization such as its mission. It is reflected in the way the employees act, what they expect of each other, and how they make sense of each others actions. Most of all, it is deeply rooted in the core values of the organization. According to (Hill C, W, L, 2007) organisational culture comes from several sources. Firstly, influential leaders can have an influence on the culture of the organisation. Secondly, the social culture of a country where the company was founded also influences its corporate culture. The third influence is the history of the company and lastly decisions that yield high performance tend to become embedded in the values of the firm. Many acquisitions fail because of the differences in corporate culture that exist amongst both units. This is because; if the differences are not managed properly they cause a strain on the integration process. An example is the Daimler and Chrysler merger which experienced a clash of corporate culture. Though it is not surprising that the merging of a German company and an American company would present dissimilarity in corporate cultures, there was insufficient support or consideration for these challenges offered to staff. Ideally both Daimler and Chrysler were to benefit equally from each others strengths and capabilities and ultimately increase performance but the cultural clashes significantly affected the corporate structure and success of the merger. (Hill, C.W. L, 2007, pg.505). This caused high management turnover and eventually loss of knowledge and expertise. (Bresman et al.,1999:17) therefore ?trepoe? the importance of cultural compatibility influencing international merger and acquisition success by arguing that the similarities of both parents organisational culture play a critical role in determining the international mergers and acquisitions extent of knowledge acquisition. With the view that cultural compatibility increases the possibility to acquire knowledge and the acquired knowledge then contributes to form new corporate cultures. (De long and Fahey, 2000) identified four ways in which culture influences knowledge transfer. Firstly, culture shapes assumptions about what knowledge is and what type of knowledge is worth managing. Secondly, culture defines the relationships between individual and organisational learning by determining who can control a specific type of knowledge. Thirdly, culture creates the context for social interaction that determines how knowledge will be used in a particular situation. Lastly, culture shapes the processes by which new knowledge is created legitimated and distributed in an organisation. For (M?rpoini,2004) the high failure rates of acquisitions observed over a long period of time by researchers are often due to company manager systematically overlooking the major cultural and organisational complexities involved in integrating the merging firms operations and informal networks. As the increasing number of ?rpo?-border acquisitions brought public attention to the ?la?he? of management styles and ?hilpopohie?, many poh?lar? tried to test whether organisations pould dipolay a higher level of cultural pom?atibility for a ?upoepoful acquisitions. Many thought companies with compatible cultures would be less problematic to acquire and generate value but a research by (Schoenberg, 2000) found out that the impact of cultural compatibility on acquisition performance is revolving around the form of post acquisition integration and the relative attractiveness of the acquirers culture. When knowledge is deeply embedded in a unique culture and organisational setting, transfer of knowledge becomes very difficult and costly. Researchers have argued that a major determinant of how much knowledge a company gains from a merger or an acquisition is its ability to learn from each other. (Hamel et al, 2002,). An example is the merger between General motors (GM) and Toyota in 1985 to build the Chevrolet. Toyota achieved its objectives from the merger and transferred all the knowledge to General Motors which was never put to good use. GM focused on the explicit knowledge forgetting that the tacit knowledge was embedded in the organisation. They should have worked together as a team to transfer both types of knowledge throughout the organisation. We can therefore say that to maximize the transfer of knowledge in a merger or acquisition both units need to adopt a common knowledge sharing culture across every part of the organisation. A shared culture may help informal integrating mechanisms such as knowledge networks to operate more efficiently. As such, a common culture may be of greater value in a multinational that is pursuing a strategy that requires cooperation and coordination between globally dispersed subsidiaries. (Hill, C.W. L, 2007, pp.472-474). Organisational culture can also be maintained by effective communication, organisational culture training as part of the due diligence process, maintaining trust from the pre acquisition stage and then finally staff must be trained on the core values of both units. According to (Baker and English, 2006), aspects of the business culture that can carefully be managed and improve knowledge transfer within the organization, is the use of a common business language and codes, the creation of a shared vision, and the construction of a common company culture that promotes knowledge transfer .Human due diligence should take place more openly and managers must make use of cultural assessment tools like employee surveys and face-to-face interviews. It is therefore useful to let the managers from both companies jointly review this data and agree on the cultural elements for the new company (Harding and Rouse, 2007). Managers must also be aware that basic approaches, values, and philosophies about employment regulation vary widely from country to country around the world. 2.5.2 Communication (Hybels and Weaver, 2007) define communication as any process in which people share information, ideas and feelings. It involves not only the spoken and written word but also the body language, personal mannerisms and anything that adds meaning to the message. Communication can be verbal and non verbal. In mergers and acquisitions, effective communication is very important because it helps coordinates and improves the transfer of knowledge. Communication is a process and consists of various elements which include sending of information, receiving information and feedback. This is in a form of of a basic communication model where the sender encodes the message, uses an appropriate medium to transmit the message and the receiver decodes the message (Hollensen, 2001). The positive outcome of the transfer of knowledge depends on an effective communication process which begins with the sender sharing the information, structuring the message in such a way that the receiver understands, selecting the appropriate method to convey the message to the recipient and then once an appropriate channel is selected and used, the receiver receives the message. Here he/she must decode the message. Meaning is attached to the various symbols and the channel used by the sender and now the receiver must interpret the message. This interpretation involves gaining an understanding from the message and is influenced by the receivers personal experiences, relationship with the sender, knowledge, perceptions and culture. Feedback is the final step in the communication process. Feedback is the response the receiver sends to the sender. In feedback the receiver conceives, encodes and selects the channel just like the original sender did. The original sender then becomes the receiver since he decodes, interprets and responds (feedback) to the response (feedback) the original receiver sent.However, this communication process is subject to many influences that determine its successful transfer. (Welch, D Welch, L, 2007). There are different ways of communicating tacit and coded knowledge. These are face to face and electronic communication. Face to face tends to be the most influential medium of communicating. This