Pharm assignment Example | Topics and Well Written Essays - 500 words

Pharm - Assignment Example This type of disorder results to hyperglycemia, a state where the body glucose level rises above normal. According to (Derrick, 2010) the past five years researches have been conducted on how to control hyperglycemia in T2DM. He argued, Pharmacotherapeutic agents that were previously used were proving to be inefficient e.g. Sulfonylurea. In the late 2009 a new pharmacotherapeutic agent, Bromocriptine mesylat was approved after a series of research to verify its efficiency. Example of drug that has Bromocriptine mesylat as active ingredient is Parlodel. Bromocriptine lowers the level of glucose concentration in the blood. Researchers had a thought the Pharmacotherapeutic agent uses a mechanism that resets the body’s circadian clock through enhancing dopaminergic. This agent’s dosage is unique from other T2DM dosages. For a start a T2DM patients are advised to take 0.8mg of the drug containing the agent with food once per day, taken along with food it will enhance bioavailability. The dosage should be taken during bedtime. The dose can be increased at a weekly interval. For instance, if a T2DM patient takes a dose of 0.8mg per day this week next he/she can increase it to 1.6mg per day. However, this can only be increased up to a limit of 4.8mg per day (â€Å"Bromocriptine mesylate†, 2009). Increasing the dose will increase the efficiency of the agent in controlling hyperglycemia. Precaution should be taken when using Pharmacotherapeutic agent. A T2DB patient, who is breastfeeding, should not use it because it suppresses lactation process. If you happen to experience uncontrolled high blood pressure, this agent is not advisable for you since this will make it to be inefficient. While using this agent you will experience some side-effects as a result of your body reacting to the introduction of a â€Å"foreign agent†. Some of the side-effects include nausea, vomiting, dizziness, headache, diarrhea, vision, and chest

MGT A7 Essay Example | Topics and Well Written Essays - 500 words

MGT A7 - Essay Example Leadership and management are two distinctive functions that an organization should have. They are the Conner stones of success and growth of an organization. There should be a balance between management and leadership of an organization. Kotter article has explained that most companies in United States of America do not have equilibrium the two different functions. A number of corporations within US put more emphasis and attention on management with little attention on leadership. More successful corporations in US seek qualified personnel who posses leadership qualities and employ them to take on crucial roles that require ability to lead well. Such companies balance strong leadership with strong management propelling them to success (Kotter, 2001). Basing on the functions that this article has given to leaders and managers, a successful corporation should have more leaders as compared to managers. This article has cited an example a military setup to explain how leadership is more important than management in an organization. In this example, a peacetime army can succeed with good leadership at the highest ranks. In addition, good leadership at all levels is important to ensure success. This example explains that good leadership at the top hierarchies of an organization determines the success of that organization. All levels of a corporation need to have good leadership to ensure success. An organization should go through with variations in time many changes. Changes within an organization or external changes are unavoidable. A crucial function of leadership is coping with changes within and outside an organization. This is a key function because in the past years there has been a rapid increase in market competition between organizations. Organizations should adopt a number of changes in order to compete successfully with its competitors. Failure to cope up with market changes can lead to collapse of a company due to

Teen Eating Disorders Essay Example for Free

Teen Eating Disorders Essay The teenage community today is based on the views and opinions of society. Though this may seem harmless on the outside, these opinions have become the poison apple of today’s culture, tearing teenagers lives apart. Specifically, teenagers are falling to eating disorders due to the pictures and habits in the everyday community. Large billboards of flawless models, magazines with dieting tips and get-skinny schemes flood the minds of teenage girls and boys, imprinting the thought that they are obligated to look perfect. Eating disorders have very serious health risks, which can be aided by extensive treatment. Specific habits and signs can identify each disorder. The signs of anorexia nervosa and bulimia are vastly different. Girls that suffer from Anorexia tend to be perfectionists who want to control the amount of food consumed, where Bulimics tend to eat large amounts of food and purge the calories consumed. In anorexia, girls will start â€Å"Wearing baggy clothing, or clothing inappropriate for the season (long sleeves on a hot day)† (Is Your Child Showing Signs of an Eating Disorder?, PR Newswire). This is due to their need to hide the extreme amount of weight loss. Bulimics will hide their purges by spending a lot of time in the bathroom and running the water to cover the sound. Girls with these disorders are sneaky and manipulative. They will go great lengths to hide what they are doing. Although the person that is affected will be in denial these signs are easy to spot and more noticeable then they think. Some times these signs are what can save a persons life. Anorexia Nervosa and Bulimia are detrimental to the human body. Anorexia can lead to dizzy spells, irregular menstrual cycles, hair loss and breakage and eventually death. Bulimia can lead to damaged teeth, rips in esophagus, sores in the mouth and eventually death as well. The health risks are beyond physical but mental as well. Girls with eating disorders almost always have another psychiatric disorder. Some can suffer from depression and anxiety. Eating disorders are often classified as a â€Å"Dual Diagnosis†. With the correct treatment, both disorders can be reversed. It is important for the patient to recognize their symptoms and realize that they are not alone in their situation. Parental support is normally the most important factor in recovery â€Å"The most important thing a parent can do is listen, says Susan McClanahan, Ph.D., a clinical psychologist who specializes in the treatment of anorexia and bulimia.† Treatment is the best answer and is an important step to recovery. Recovery is a slow process that needs a lot of understanding and patience. If the treatment is rushed the patient is more likely to fall back into old habits and relapse. These disorders should been taken seriously watched for in girls of all ages. The ages of teenagers affected by the disorders varies greatly. â€Å"In the United States, as many as 10 in 100 young women suffer from an eating disorder.† (The American Academy of Child and Adolescent Psychiatry.) Due to societies pressure for perfection, the battle with each disorder is in many cases deadly. With the right treatment, severe health risks can be reversed and the disorder will begin to fade, as the signs of a healthy individual will shine through. PR Newswire (2012). Is Your Child Showing Signs of an Eating Disorder? Journal of Business and Economics. http://aacap.org/page.ww?name=Teenagers+with+Eating+Disorders §ion=Facts+for+Families

Standardisation Vs Customisation

Standardisation Vs Customisation A spectacular globalisation has been observed in the international business due to regional economic integration, advances in transportation, communication, technology and liberalization of worldwide trade policies (Czinkota Ronkainen, 2004; Keegan, 1999).ÂÂ   With the growing international business, international marketing has become more complex and diverse, (Terpstra, 2000; Cateora Ghauri, 2006) environment that is uncontrollable, unpredictable resulting uncertainty in business environment. International business is not only sending goods and services to foreign market but also to deal with different issues that make international marketing more complex, in particular geographical borders, different political systems, business regulations, currency conversions and cultural variety (Keegan, 2002; Geri Ian, 2009). Convincing cases can be put forward for both a standardisation or customisation approach to global marketing practice. These arguments are keenly explored; drawing from examples of Coca-Colas international marketing programme to reveal key points. This report discusses the contemporary issue facing by the global companies in marketing their products. Part One Issue: Global Marketing Standardisation Vs Customisation Global versus local marketing strategy have been a major debate in cross-national business development over decades for global brands (Levitt, 1983; Solber, 2002). The issue here is if the companies should follow a standardized marketing program to different consumer groups in different countries or a customised one by adapting their strategy according to the needs and habits of the specific country. The explanation for this confusion can be supported with two variables, awareness of local market condition at the headquarters and the level of headquarters influence in decision making of local marketing. This dilemma of standardising and customised marketing is mainly due to key factors like cost, ethical issues, legal restrictions, media, culture, and markets. For example taking the leading beverage company Coca-Cola (2003) into consideration it global campaign Life tastes good has been backed just after 2 years after its launch. Now the companies advertising headquarters operates ac cording to the local market needs rather than the draft developed at central headquarters. In addition to this it is also argues that product category is also a key factor in making advertising decisions (Summerfield, 2002). Kay (2002), president of Toronto consulting firm The Glasgow Group in similar fashion says technology and clothing brands tend to fit well with standard marketing but food and beverage products face difficulties with cultural mismatch, category development, brand name and local economy. Another example for customized marketing is McDonalds, a food chain, which customises its marketing strategy as well as products according to the needs and culture of the countries. The products launched in each country differ according to the cultural requirements and habits, economic development and affordability of the targeted class. This is considered to be issue because of the complexity created by the issue in the decision making process of international managers. As the main motive of the advertising is to influence the companys customers in selling their products, it is important for the company to decide if their advertising campaigns are influencing its customers globally in all regions. Thinking from a strategic point of view organisations marketing with a standardised marketing strategy implies offering standard product at standard price through standard distribution system, supported by similar promotional programmes in different counties, with different market requirement and in some cases completely opposite markets, this supports customising approach. On the other hand Cohanim (2002), Vice president of marketing and communication of IBM (Past), says IBM looks at the globe as a single market and IBM try to operate as a single global market, the company supports this by stating the solutions for their industry, customers, products and services are similar for all countries in which they are operating. Critical Analysis: Global Marketing is the strategy involving the four Ps of marketing i.e. Product, Price, Place and Promotion to deal with the markets according to the geographical and cultural adaptation. Complete Standardisation marketing strategy is to offer identical product line and features at identical prices through identical distribution channels endorsed by identical promotional programs. The other extreme of this would be Complete Customisation marketing strategy to develop distinct tailored products, pricing, promotion and distribution policies with no specific standard elements (Imad, Naresh 1995). Many writers have endorsed standardisation instead of customisation for international marketing (Britt, 1974; Clark, 1975; Obrien, 1986). This argument is pleasing as it can be estimated an outstanding sales for a standard global product. Levitt (1983) in his Globalization of Markets states that If a company forces costs and prices down and pushes quality and reliability up while maintaining reasonable concern for suitability customers will prefer its world-standardized products. Also the cost factor, which can be reduced by single marketing strategy when moved to low-cost market, helps the organisation to maintain the quality of the product (Walter, 1986; Yip, 1989). It is also observed that most of the international marketing campaigns are showing attention towards the standardised approach of advertising (Varder, 1992). Some researches conveyed that industrial products lend themselves more easily to standardisation than consumer products (Hite and Fraser, 1988) still, product categories cant be considered as great factor in standardising international marketing (Saimee Roth, 1992). In US, EU markets it is found that businesses with standardised products are well established and gain the advantage of create a standard image of their products (Bharadwrj et al, 1993; Rosen et al, 1989). The other important factor that encourages standardisation is reduce in unit cost, this gain a competitive advantage for the global companies who can easily penetrate into the price sensitive markets and drive the small competitors out of market. Walliser Usunier (1998, p. 530), in their review article, conclude that even though opportunities exist to standardize the strategic levels of international advertising, mainly on a regional basis, considerable adaptation of exceptional elements in international advertising campaign is inevitable. The standardisation or the customisation depends on the products and the notion of the consumers towards the product. Products like laptops, computers, televisions, cameras, watches, cosmetics, and clothing associated with fashion and status, etc are marketed on the basis of their world class recognition and hence a standard approach to campaign the products is used. A customised approach in such cases might not be preferred as they are advances in technology and thus the consumer demands in such cases have universal acceptance of these global products (Yvette Reisinger, 2008). This kind of globalization leads to homogenization of consumer acceptance and adaptation of such goods. But products like food and beverages, services like banking and insurance solutions depend on the habits and tastes and needs and wants of the targeted ethnicity. For example, McDonalds recipes differ from each country it operates and are accustomed to the eating habits of the locals. The pricing of such pro ducts too is done by considering the spending ability of the targeted class. A standardised approach in such case would possibly result in a failure of the product in international markets. Yvette Reisinger (2008), in his book describes the failure of the fast-food concept in France which is well admired in China. The Chinese consumers prefer faster service with low waiting time where as the French consumers seek distinctiveness and identity of the service. The study thus implies that a standardised or a customised technique of marketing products might not be feasible in all cases and depending on the influencing factors; thus, either of them or sometimes both of them might have to be considered. This is understood by a thorough research of the behaviour and adaptations of the countries while launching a product and depending on the mindset and acceptability of the consumers in those geographies (Salah Hassan, Erdener Kaynak, 1994). Philip Kotler in his Global Standardization Courting Danger (1986) describes few such failures of products belonging to renowned brands due to non-customization. Philips initially failed to make profits in Japan due to larger size of the coffeemakers and later did well after reducing the size to accommodate Japanese kitchens. Mattels Barbie doll, a famous product introduced in foreign markets, could have made positive profits with its standard western features accepted by many countries with a lower price m odel. This could also be counter argued by having a culture specific meaning of dolls and the need to have their features reflect a national look with would obviously earn better profits due to wide acceptance (Philip Kotler, 1986). Even though the Barbie sales were good with its western features in 60 countries, the sales in Japan have flourished only after the features of the doll were modified to reflect Japanese. This doesnt completely mean that Mattel has done well in those 60 other countries and leaves behind a dilemma that if there were customized features representing the nations, they could have done better. A proper and complete understanding of these two strategies i.e. standardization and customization is necessary for global marketing and thus enables us to channelize the knowledge to leverage the opportunities in international markets. The idea is not to debate on which of the both is better but to investigate potentiality and research on which of the strategies suit the product (Philip Kotler, 1986). The possibility is that, by applying each of them independently could be successful or by a combination of both the strategies is to be decided while the promotional strategy for the product is being designed. This could be realized by a primary market research in the geographies where the product is being launched and the cultural, economic, political and infrastructural adaptations and limitations of the countries. This is quite necessary for successful marketing and promotion to launch any product in the international markets and to be noticed and appreciated by the consumers of the product. A predetermined notion in this regard is dangerous and might in turn result in a disaster. Depending on the study conducted before the launch, it is then necessary to plan accordingly, the marketing strategy that needs to be implemented (Levitt, 1983). In international markets striking a balance between standardisation and customisation is vitally essential for the product to be successful globally (Amanda 2004). The element for success is an accurate assessment of market forces currently facing the specific brand and how to best take the advantage of this market environment. It is probably one of the reasons that Coca Cola is the worlds most powerful brand as stated by Interbrands Global Brand Scorecard in 2003, estimating its brand value at $70.45Bn(No. 1-0085). Part Two Organisation for Research: Coca Cola, worlds largest manufacturer and distributor of non-alcoholic beverages is the best example for the global marketing. We have considered Coke due to its global recognition and also for its efforts to remain a leader by dealing with the issues in standardisation and customisation strategies. The organisation currently operating in more than 200 countries with over 450 brands and a portfolio of more than 3000 beverage products worldwide, constantly competing with its international rivals as well as local players in the countries it is operating in, to revive its position as a leader in the domain. The vast business structure of Coca Cola has led to prologue of innumerable marketing strategies and theories which have constantly been modified to maintain the brand as a global paramount. Achieving such a position all over the world is no cakewalk for any organisation and involves complex marketing strategies to deal with boundless problems encountering across the world in different countries. A detailed analysis of different strategies and theories implemented by Coca Cola in executing its marketing plan across the world could help us to understand the concepts of standardisation and customisation better, and the advantages and disadvantages of both these theories. Issue and Facts: For any company that is continuously growing it is vitally necessary that it does not contain geographical limitations and that is one theory that Coca Cola has excelled in. On July 29th when the company announced its second quarter results, a raise in profit of 43% has been observed due to overseas growth even though it suffered weak domestic volume (Source 1: NY times). Since the time Coca Cola has started its global expansion, it has either become a leading beverage brand in countries worldwide or it tried to acquire the topmost beverage seller of that country. A recent such deal that Coca Cola tried to make is in China (Source 2: NY times), which unfortunately couldnt be completed due to government restrictions. Reportedly, Coca Cola tried to acquire a Chinese juice maker Huiyuan in the $2.5Billion deal (Source 3: CBS News). The company has ensured an equal market spread across the world and that is how it still made wonderful in spite of the weak economy back home in the United States, by its overseas markets (Source 4: Barrons). Recently in the month of June, it has announced the release of Green Tea Coca Cola in Japan, which they claim is good for health and beauty (Source 5: WBST). The range of products that the brand releases in different countries differs with the local adaptations, tastes and needs of the people. The marketing strategies and ad campaigns too differ depending of the mindsets and interests of people. In the Asian Countries of India and Pakistan, the caption goes as Jo Chaho Ho Jaye Coca Cola Enjoy, by which the brand is recognized in those countries. Most of the captions and marketing plans of Coca Cola are such that they seem to the people to identify and relate themselves with the brand(Ref: 25, 25). The Colalife campaign is another example of Cokes strategy to support the social cause for the Third World countries by supplying social products like Vitamin A tablets in their crates for people who direly need them (Source 6: PFSK). In Spain, Coca-Cola withdrew its 2-liter bottle after discovering that few local refrigerators had large enough compartments (Philip Kotler, 1986). The evidences of such a global leading brand in following the strategy of customization and adaptation regionally in spite of maintaining its international brand image makes it one of the worlds most powerful brands. Literature: Issue Analysis: The Coca Cola Company mission is to expand their business by understanding the trends and forces that will help them to sustain by creating value and making difference (Coca Cola Mission Statement). In the process of achieving this mission, they believe that consumer demand drives everything they do but also brand Coca Cola will always be the core of their business(Ref: 27). The focus on market is by getting into the market to listen, observe and learn what their consumers, customers and partners need. They wish to create a brand image that would inspire creativity, passion, optimism and fun (Coca Cola Mission Statement). The point here is to observe the possibilities of sustainability, which is a key factor in a global market. One should always understand the fact that to be Global, one needs to be local. With a history of more than hundred years, the company has created a brand value for itself for its core business by the name Coca Cola or Coke and thus, is widely recognized by it . The idea now is to sustain its global model by constantly endeavoring new and innovative products that best suit the markets of the countries it is operating in. The theories of standardization and customization have been utilized constantly by this firm to maintain its core brand value as well as making the people feel it as local with its adaptive and customized brands and marketing. The emotional connection that they make with consumers while providing them with product quality and variety builds brand value and drives preference for their beverage products. The issue is, to maintain such an emotional bonding with their customers, they need to listen to their customers and respond to them according to the needs. Various ethnicities have various habits and thus different tastes. The proper control of top management and their readiness to listen to their business customers worldwide and executing marketing plans through proper research and analysis is one the main reasons that Coca Cola is an example for its business model and marketing strategies. They have dealt with the issue of varying needs of their customers by launching products that resemble the countrys ethnic habits and taste. A standardized approach in this case could prove dangerous as, if the product is not welcome by the people, no matter how best the marketing plan is and how well it was received in the home country or for that matter any other country, if people of one particular country dont like the product, it will result in a disaster in that nation thus forcing the com pany to withdraw its operation due to such failure. A proper method would be to deal with their local necessity and simultaneously promote the core brand to achieve standardization. This way, even though customized products are being offered to the people, the core brand value is always promoted. The Coca Cola Company, with its experience in serving the world for more than a century, has excelled in the art of global marketing by customizing its products according to needs and also by maintaining the core brand Coca Cola or simply Coke across the world. Conclusion: The Coca Cola Company, in their 2008 annual review, mentions that We are just getting started. The reason is because currently they are selling 570 billion servings per year which makes it 18,000 servings per second. Estimates show that over the next 12 years the population worldwide would grow by more than 800 million people. In addition, 1 billion new people would enter the middle class population and nearly 900 million people will have migrated to urban centers. That means more consumers with more money who have ability to purchase the ready-to-drink beverages to thrive business. In an attempt to understand and test the product sustainability, the company continuously launches new products with intense marketing campaigns in different countries. Depending on the consumer response and market survival, it either retains the sale of product or withdraws it from the market. In this process of satisfying their customer needs, Coca Cola is constantly gaining experience and is getting re ady for its future targets by getting closer to its customers utilizing the theories of customization and standardization simultaneously and managing their effects intelligently to eliminate any negative effects and addicting people with its adaptive fondness Read more: http://www.oxbridgewriters.com/essays/marketing/global-marketing.php#ixzz2Bwx0DLy9

Rappaccinis Daughter - Ambiguous Essay -- Rappaccinis Daughter Essay

Rappaccini’s Daughter  Ã‚  Ã‚  -   Ambiguous  Ã‚  Ã‚  Ã‚   Hawthorne’s Rappaccini’s Daughter is a Gothic romance and a thwarted, almost-allegory with a plethora of ambiguous meanings. As Hawthorne identifies in the previous quote, this story is a blatant parallel towards the story of Original Sin. The issue, then, lies in the representation. Who is playing Adam and Eve? Who is Satan and who is God? At first glance it is easy to assume that the two love birds, Giovanni and Beatrice, are Adam and Eve; while Beatrice’s black cloaked father is Satan, and God is either an omniscient overseer, represented in nature, or absent from the story all together. However, Hawthorne begins the endless possibilities of role assignments by suggesting that Beatrice’s father, the diabolic scientist, Rapaccinni, could be Adam. "It was strangely frightful to the young man’s imagination, to see this air of insecurity in a person cultivating a garden, that most simple and innocent of human toils, and which had been alike the joy and labor of the unfallen parents of the race. Was this garden, then, the Eden of the present world?---and this man, with such a perception of harm in what his own hands caused to grow, was he the Adam?" (1232) Hawthorne’s "Rappaccini’s Daughter" is a Gothic romance and a thwarted, almost-allegory with a plethora of ambiguous meanings. As Hawthorne identifies in the previous quote, this story is a blatant parallel towards the story of Original Sin. The issue, then, lies in the representation. Who is playing Adam and Eve? Who is Satan and who is God? At first glance it is easy to assume that the two love birds, Giovanni and Beatrice, are Adam and Eve; while Beatrice’s black cloaked father is Satan, and God is either an omniscient ov... ...y evil character as Iago and to simultaneously be compared to a type of Christ. "Rappaccini’s Daughter" contrasts nature to science. Rappaccini and Baglioni are scientists, Giovanni is studying it and Beatrice is a victim of it. Nature, in it’s romantic form, does not exist in this tale. Rappaccini’s garden is about as natural as walking into the plastic flower department of a craft store and commenting on the bold colors and illustrious blooms. It might look magnificent from the window of Giovanni’s abode, but it was crafted by man, not nature. Rappaccini takes "nature" a step further by making something as natural and pure as life, twisted and synthetic. Nature has become perverse and contorted by science. Works Cited: Hawthorne, Nathaniel. Rappaccini's Daughter, included in Heath Anthology of American Literature; Houghton Mifflin Co., New York, 1998.

Private Prisons Negativly Impact State and Local Governments Essay

Private prisons have a negative effect on states and local governments. Unfortunately, the number of private prisons has been increasing since their inception in 1983 causing further problems. For-profit prisons offer no real benefits and are bad investments for states. Furthermore, private prisons beleaguer communities with high turnover rates that hurt local economies. The demands of these institutions put an excessive burden on the local community’s infrastructure. Similarly, private prisons strain the county and city legal systems. More often than not, spin-off industries and economic benefits promised by the for-profit correction industry fail to appear. Additionally, private prisons are allowed to cherry pick the least expensive inmates, leaving the more expensive inmates for the state. A number of studies financed by the private prison industry give the misconception that they save states money. More importantly, the need to make a profit is an incentive for private pri son industry officials to engage in nefarious activities. Private prisons are correctional institutions ran by for-profit corporations. They claim to cost less than prisons ran by the state, while offering the same level of service. In fact, the Corrections Corporation of America, one of the largest for-profit prison corporations, states that their business strategy is to provide quality corrections service while offering a better value to their government partners at the same time making a profit (CCA 2010). However, opponents of private prisons say they do not save states money because of their hidden cost. At any rate, more than a few states have found private prisons to be advantageous. For one reason, many states are facing massive deficits and are l... ...e-new-american-gold-mine/>. Setti, Christopher. "Prisons and Their Effect on Local Economies: The Colorado Experience." University of Colorado, Denver 2001st ser. XLVII.3 (2001): 1-9. Print. Shapiro, David. Banking on Bondage: Private Prisons and Mass Incarceration. Rep. New York: American Civil Liberties Union, 2011. Print. Smith, Abbe. "Undue Process." The New York Times 31 Mar. 2013: BR21. Print. Urbina, Ian. "Despite Red Flags About Judges, A Kickback Scheme Flourished." The New York Times 28 Mar. 2009: A1. Print. Wilder, Forrest. "Jailbait." TexasObserver.org. 20 Oct. 2006. Web. 12 Sept. 2013. . Yeoman, Barry. "Steel Town Lockdown." Mother Jones. May-June 2000. Web. 12 Nov. 2013. .

Consulting Report of Solberri Hotel

Solberri Hotel January 20 2012 This report is in response to the request by Solberri hotel group for a review of its facing issues and identification of possible solutions. Consulting report ? STATE OF AFFAIRS Solberri is a group of resort hotels registered as a listed company with 12 resort hotels in Europe. Established in the 1980s, it had run successfully until 2003 and also incurred losses in 2005 and 2006. To improve the situation, Solberri implemented strategy changes to the hotel operating environment such as the pricing changes and a refurbishment program. With these adjustments, situation gets better with a large forecast cash surplus in this financial year. Currently the chain of hotels is faced with critical issues revolving around its operation including human resources that are better explained with the help of SWOT analysis in Appendix 1. It is important for Solberri to make use of the management tools to understand the current situation and to achieve the revenue target, increased share holder value and better customer satisfaction. ? ISSUES IN HAND Solberri is faced with multiple issues that act as a barrier to meet their goals and target. From our review and understanding of the environment we put forth the below issues and rank them as priority and other issues. Priority issues: †¢Poor customer experience that could be a result of ethical issues such as oPoor treatment of General manages and senior employees. oMisdistribution of tips oInvestment in unprofitable environmentally friendly initiatives. †¢The potential need to borrow money to enhance spas before the 2007/08 Peak season †¢The need to raise occupancy rates and earnings generated from extra charges to hit the planned revenue for the financial year ending September 2008 †¢The poor share price and vulnerability of Solberri Other issues: †¢Installation of solar panels †¢Non-participation in the international star ratings system †¢Potential problems with the quality of outsourced services †¢Upgrading website to include a virtual tour of facilities . ? ISSUE ANALYSIS In this section, the analysis is done for top priority issues. Customer service and relevant HR issues. The quality of customer service is crucial to companies’ survival in service industry. Unfortunately, the service provided by Solberri failed to meet the expected standard of its customers. The main reason for poor customer service is employees’ lack of skills and motivation. The majority of Solberri employees are temporary, with limited knowledge of the hotel industry and relevant skills. Besides, all short-term employees only receive two days introduction training which is apparently insufficient. The customer service can be improved in two aspects. In the short term, Nick Silva, customer service Director, needs to review staffing level immediately to meet the upcoming demand. Strict selection and a specific regular training program are needed to ensure the quality of its employees. In the long term, adjusting the ratio of the number of long-term employees to that of short-term ones is necessary. Too many temporary employees lead to poor customer service and low stock of talents, resulting in General managers working long hours and under high stress (more details in ethical issues). Though more long-term employees mean more costs, the benefits from improved customer service will outweigh the costs. Furthermore, because recognition of employees’ efforts can stimulate them to offer better service, some motivation measures are recommended. According to ERG theory, people in different levels have different needs. Most temporary employees are in the existence level, they need money to maintain their existence requirements, and therefore incentives such as bonus will be useful. However, most long-term employees are in relatedness and growth level, so incentives such as vocation award or decision making involvement will be suitable. With the new recruitment, training and incentives, it’s estimated that an additional employee cost of â‚ ¬7. 5 million will be incurred, a 12% increase from last year. Ethical issues Two ethical issues will be discussed in this report. a. Poor treatment of employees. General Managers and key senior employees are working under high stress over 16 hours every day. Solberri gets into ethical issue of overworking employees and paying no compensation. Due to a shortage of senior employees, their workload is unlikely to be reduced immediately. Therefore, the hotel should compensate for their overwork. To solve this problem fundamentally Soberri should reserve sufficient elites by increasing its long-term employees. b. Misdistribution of tips. When Solberri collected all the tips and evenly distributed them to employees, an ethical issue arose for the transparency and fairness of such distribution. Such controversial tips distribution should be changed back to the traditional way—employees can keep the tips for themselves. For those non-facing-customer employees who don’t get tips, Solberri is recommended to increase their bonus to make up the difference. Forecast cash surplus investment issue Before analyzing the four proposals, it’s important to know how much cash is available for investment. Since Solberri is under loan covenants and other financing alternatives such as rights issue can’t raise funds in a short time, the only source of funds is the internal capital. It’s estimated that 59 million cash will be generated from operations in this financial year. After deducting finance costs, tax, dividends and additional HR reform costs in the first issue, there’s only â‚ ¬30. 9 million cash available. (Appendix 2. 1) The total amount for the four proposals is â‚ ¬123 million (Appendix 2. 2). Solberri has to perform a cost benefit analysis to choose the most profitable proposal as it is clear that Solberri doesn’t have enough funds to implement all of them. Proposal A is to extend the number of rooms at the four â€Å"Premier† hotels by adding each another 200 rooms and supporting facilities. It’s estimated to generate â‚ ¬10 million NPV for each hotel over a 5-year period based on an 80% occupancy level. However, this may have some negative effects since the additional rooms and facilities make the hotel more crowded and less comfortable. Therefore, the 80% occupancy level is not guaranteed. Besides, it’s just the first year that Solberri has had such high occupancy levels. Extending the number of rooms in such a large scale is too risky. Proposal B is to invest in refurbishment and extend spa facilities at the remaining hotels. The forecast cost is â‚ ¬6 million for each hotel. The high level of bookings at the 4 â€Å"Premier† hotels during the 2008 Peak season has demonstrated the success of the refurbishment plan. So this proposal contains relatively little risk. Furthermore, spa facilities have become a key selling point in resort hotels. This new trend provides great opportunity for Solberri to escape from the Red Ocean, the very competitive market of traditional resort hotels. By differentiating itself by providing exclusive spa facilities, Solberri can successfully grab the Blue-ocean market, namely the profitable and rapidly-developing market of resort hotels with exclusive spa facilities. Finally, refurbishing the hotels can improve Solberri’s profit margin. However, refurbishing all the remaining hotels simultaneously is beyond Solberri’s financial ability. It’s recommended that Solberri refurbish only three hotels—two â€Å"Superior† and one â€Å"Super Plus†. Refurbishing the â€Å"Super Plus† hotels is riskier since there is no previous experience and the refurbishment will need to close permanently 15 rooms in each hotel. But if Solberri only refurbish â€Å"Superior† hotels, in a short time, there will be a gap in middle-priced hotels, which is unfavorable to the company’s strategic development. Proposal C is to acquire an additional resort hotel costing 24 million. The expected NPV is â‚ ¬39. 2 million (Appendix 2. 3). Besides, the breakeven occupancy level is 60% (Appendix 2. 4), which is quite easy to achieve. So Proposal C seems profitable with reasonable risk. However, the initiate cost is too large as it’s for only one hotel. Compared with Proposal B, it’s too risky for Solberri in its first year with such good performance. Proposal D is to invest in environmentally friendly initiatives including the installation of solar panels costing â‚ ¬6 million and other environmental initiatives costing â‚ ¬9 million. Though investing in these initiatives cannot generate profits for the company directly, it can help establish Solberri as a socially responsible company which will be positive to its image. But funds are so limited that investing in all these in unrealistic. It’s recommended that Solberri invest in the solar panel project first since it can produce cost savings of 0. 6 million per year and defer the others. Loan covenant restriction The â‚ ¬20 million loan negotiated at the end of 2007 has loan covenants restricting the company’s further loan financing within 2 years from December 2007, resulting in a probable capital shortage for its future development. Solberri can try negotiating with the bank for removal of restriction by showing them the latest forecast figures and the high level of bookings. However, the good performance of only one year wouldn’t be convincing enough to the bank. Solberri can also try refinancing by issuing additional stocks through public offering or private placement. However, due to the relatively high standard and costly registration of public offering, private placement is preferable. With low threshold for issuing, private placement is feasible for Solberri whose business just began to pick up after slow seasons. With the good performance this year, it’s probable that the Solberri will attract strategic investment from institutional investors via private placements to ensure its future development. The poor share price and vulnerability of Solberri RECOMMENDATION Customer service and related HR issues. It is recommended that Solberri immediately work out a plan for recruitment and training, to ensure job fit and effective training among all employees. Employees who can’t provide the high standard of service will be refused or assigned to non-facing-customer positions. Moreover, Solberri should set up appropriate motivation mechanisms such as bonus and vacation rewards. It is also recommended that Solberri enlarge its long-term employee proportion by training some short-term employees to be skillful long-term ones. In this way, more employees will cultivate a sense of responsibility and can handle the previous temporary employees’ work in non-peak season. Ethical issues It’s recommended that Solberri compensate for employees’ overwork. In the long run, the company needs to enlarge its senior employee reserve. It’s recommended that Solberri abandon its controversial tips distribution and set up a bonus system for non-facing customer employees to make up their income difference. Forecast cash surplus investment issue It’s recommended that Solberri spend its forecast cash surplus on Proposal B to refurbish and extend the spa facilities at two â€Å"Superior† hotels and one â€Å"Super Plus† hotel, which costs â‚ ¬18 million in total. Since it’s just the first year Solberri has performed so well in these years, it’s better for it to be conservative towards investment. It’s also recommended that Solberri invest in the installation of solar panels at all 12 hotels costing â‚ ¬6 million and postpone other environmentally friendly initiatives due to its limited funds. These two plans will result in â‚ ¬6. 9 million cash retained Appendix 2. 5), which will help improve the liquidity of Solberri. . Loan covenant restriction It is recommended that Solberri try to negotiate with the bank for removal of the restriction. If it’s not workable, Solberri could try seasoned equity offering to refinance either by public offering or private placement, while private placement seems to be most feasible for Solberri and thus is highly recommended. If external financing doesn’t work, it is highly recommended that Solberri try all means to control its costs. The poor share price and vulnerability of Solberri ? CONCLUSION Solberri is now at a crucial time since it’s the first time it has had such good performance in these years. It is now facing several important issues. The most important ones are how to solve the poor customer service problem and which investment proposal to choose for its future development to increase the occupancy level for all the hotel rooms. It is believed that the analysis and recommendations above can serve as useful references for its decision-making. Solberri has to differentiate itself in the market through a shift by showcasing its spa facilities as its forefront in capturing holiday makers. With a change in visa regulations in Europe Solberri may opt to pay more attention to its local clients by offering the day use of the hotel’s services and facilities during non-peak seasons. To position itself as a â€Å"holiday resort hotel†, there should be a refurbishment of Solberri’s hotels to â€Å"Premier† standards ? SWOT ANALYSIS STRENGTHS †¢Good reputation with a long history; †¢Proven track record of range of spa facilities †¢Successful refurbishment program †¢Many of long-term employees have worked for Solberri for over 10 years with rich experience. †¢Stable co-operation with several travel agents. Experienced board directors. †¢High sense of Corporate Social Responsibility( 1 hotel won a bronze award in the Green Tourism business awards, 2007 †¢High level of bookings for Peak season 2008 with large cash surplus forecast WEAKNESS †¢Outdated information technology systems. †¢Restrictive loan covenan t. †¢Difficulty in enforcing agreed quality service levels. †¢Declining share price compared to 2002 †¢Poor customer service with disappointing customer feedback. †¢Low level of repeat booking. †¢Lack of motivation of short-term employees. †¢Poorly structured financial planning. †¢Resignation of Finance Director. OPPORTUNITIES High level of bookings and a forecast cash surplus of â‚ ¬59 million which can be used for further expansion, refurbishment program, paying dividends, and(or) meeting CSR by investing in environmentally friendly initiatives; †¢ Huge potential market for Spa service †¢Pricing structure changes to boost occupancy levels †¢Effective use of variety of media to generate more sales THREATS †¢ External completion from other hotel industries †¢ Understaffing and poor service to meet the high level booking that could impact reputation †¢Resistance from †¢Competitors having state of art information technology can be market eaders. †¢ Fall in spa revenues of one â€Å"premier† hotel due to a rival business operated by an ex-manager. †¢Difference of opinion amongst management staff may delay the strategy implementation. WORKINGS 2. 1. 1 Investible surplus â‚ ¬59 million is cash generated from operations before finance costs, tax and dividends, which should be deducted. Besides, the additional operation cost incurred by human resources management should also be deducted in order to get the available cash for investment. 2. 1. 2Cost of finance S. No. AmountRate of InterestDetailsDuration for CYInterest Cost a. 12 m10%Oct- Dec ‘073 monthsâ‚ ¬0. 3 m b. â‚ ¬6 m8%Repayable in Sep 20101 yrâ‚ ¬0. 48m c. â‚ ¬15 m11%June 20121 yrâ‚ ¬1. 65m d. â‚ ¬20 m10%Jan-2008 to Dec ‘149 mthsâ‚ ¬1. 5m Totalâ‚ ¬3. 93 m Notes: a. â‚ ¬12 million loan at 10% repayable in December 2007 -As its repayable date is in December 2007, the interest expens e incurred in this accounting period is only for three months (October 2007 to December 2007). â‚ ¬12 million*10%*3/12 = â‚ ¬0. 3 million b. â‚ ¬6 million loan at 8% repayable in September 2010 -â‚ ¬6 million*8% = â‚ ¬0. 48 million c. â‚ ¬15 million loan at 11% repayable in June 2012 -â‚ ¬15 million*11% = â‚ ¬1. 5 million d. â‚ ¬20 million loan at 10% beginning in January 2008 and repayable in December 2014 -As this loan began in January 2008, the interest expense incurred in this accounting period is only for nine months (January 2008 to September 2008). â‚ ¬20 million*10%*9/12 = â‚ ¬1. 5 million 2. 1. 3 Tax expense As stated in the case, the post-tax profit for the year ended September 2008 will be â‚ ¬27 million. Based on the tax rate of 32%, the taxable income = â‚ ¬27 million/(1-32%) = â‚ ¬39. 7 million . Therefore, the tax expense = â‚ ¬39. 7 million*32% = â‚ ¬12. 7 million 2. 1. 4 Dividends In 2007, Solberri made a profit of â‚ ¬5 million and paid â‚ ¬2 million for dividends, which equals a dividend per share of â‚ ¬0. 083. It’s recommended that Solberri double the DPS this year, making the total dividends expenditure as much as â‚ ¬4 million. 2. 1. 5 Additional operation cost As is mentioned before, the high occupancy level this year will incur additional operational cost due to the employee recruitment, training and motivation. It’ estimated to be around â‚ ¬7. 5 million based on an estimated 12% increase compared with 2007 when the staff costs were â‚ ¬62 million. Cash Available for Investment( in million) Investible surplus( before deduction)= â‚ ¬59. 00 Less: Interest cost –â‚ ¬3. 93 Tax expense –â‚ ¬12. 7 Dividend expense –â‚ ¬4. 00 Additional operation cost –â‚ ¬7. 5 Net surplus= â‚ ¬30. 9 2. 2. Total cost for all four investment proposals : ProposalInvestment cost per hotelNumber of hotelsTotal cost Aâ‚ ¬9 million4â‚ ¬36 million Bâ‚ ¬6 million8â‚ ¬48 million C****â‚ ¬24 million Dâ‚ ¬15 million Total costâ‚ ¬123 million **Total cost for Proposal C = acquiring cost + refurbishing cost + marketing cost = â‚ ¬5 million +â‚ ¬16 million+â‚ ¬3 million = â‚ ¬24 million Total cost for Proposal D = â‚ ¬15 million 2. . Expected NPV of Proposal C As is shown in the case, when occupancy level equals 95%, the NPV will be â‚ ¬100. 0 million. When it’s 80%, the NPV will be â‚ ¬35 million. When it’s 50%, the NPV will be –â‚ ¬25 million. And their probabilities are 25%, 60% and 15% respe ctively. Therefore, the weighted average NPV = â‚ ¬100. 0 million*25% + â‚ ¬35. 0 million*60% +(-â‚ ¬25 million)*15% = â‚ ¬42. 2 million However the marketing cost of â‚ ¬3 million is excluded in the above NPV, so the expected NPV of Proposal C = â‚ ¬42. 2 million – â‚ ¬3 million = â‚ ¬39. 2 million 2. 4. Breakeven occupancy level of Proposal C When occupancy level equals 95%, the NPV will be â‚ ¬97 million. When it’s 50%, the NPV will be -â‚ ¬28 million. Thus, when the occupancy level decreases by 1%, the NPV will decrease by â‚ ¬2. 78 million. [â‚ ¬97 million – (-â‚ ¬28 million)] / (95-50) = â‚ ¬2. 78 million In this way, when the occupancy level changes by about 35% (97/2. 78), the NPV will decrease to zero. Therefore, the breakeven occupancy level is around 60%. 2. 5 Estimated cash retained Estimated cash retained = cash available for investment – investment costs = â‚ ¬30. 9 million –â‚ ¬24 million = â‚ ¬6. 9 million Comparison between Solberri and Shangri-la Asia Limited with the DuPont Model 3. 1 DuPont Model of Solberri 2007 Return on Equity (ROE) 0. 568 Return on Assets (ROA) 0. 3086? Equity Multiplier (EM) 1. 8409 Profit Margin 0. 0314? Total Asset Turnover 0. 9815 1 /(1—Debt Ratio 0. 4568) Net Income/Net Sales Net Sales/Average Total Assets Total Liabilities/Total Assets 3. 2 DuPont Model of Shangri-la Asia Limited 200 7 Return on Equity (ROE) 0. 1046 Return on Assets (ROA) 0. 1029? Equity Multiplier (EM) 1. 016 Profit Margin 0. 3069? Total Asset Turnover 0. 3354 1 /(1—Debt Ratio 0. 0159) Net Income/Net Sales Net Sales/Average Total Assets Total Liabilities/Total Assets Comparison between Solberri and Shangri-la Asia Limited with the DuPont Model 3. DuPont Model of Solberri 2007 Return on Equity (ROE) 0. 0568 Return on Assets (ROA) 0. 3086? Equity Multiplier (EM) 1. 8409 Profit Margin 0. 0314? Total Asset Turnover 0. 9815 1 /(1—Debt Ratio 0. 4568) Net Income/Net Sales Net Sales/Average Total Assets Total Liabilities/Total Assets 3. 2 DuPont Model of Shangri-la Asia Limited 2007 Return on Equity (ROE) 0. 1046 Return on Assets (ROA) 0. 1029? Equity Multiplier (EM) 1. 016 Profit Margin 0. 3069? Total Asset Turnover 0. 3354 1 /(1—Debt Ratio 0. 0159) Net Income/Net Sales Net Sales/Average Total Assets T Solberri Hotel January 20 2012 This report is in response to the request by Solberri hotel group for a review of its facing issues and identification of possible solutions. Consulting report ? STATE OF AFFAIRS Solberri is a group of resort hotels registered as a listed company with 12 resort hotels in Europe. Established in the 1980s, it had run successfully until 2003 and also incurred losses in 2005 and 2006. To improve the situation, Solberri implemented strategy changes to the hotel operating environment such as the pricing changes and a refurbishment program. With these adjustments, situation gets better with a large forecast cash surplus in this financial year. Currently the chain of hotels is faced with critical issues revolving around its operation including human resources that are better explained with the help of SWOT analysis in Appendix 1. It is important for Solberri to make use of the management tools to understand the current situation and to achieve the revenue target, increased share holder value and better customer satisfaction. ? ISSUES IN HAND Solberri is faced with multiple issues that act as a barrier to meet their goals and target. From our review and understanding of the environment we put forth the below issues and rank them as priority and other issues. Priority issues: †¢Poor customer experience that could be a result of ethical issues such as oPoor treatment of General manages and senior employees. oMisdistribution of tips oInvestment in unprofitable environmentally friendly initiatives. †¢The potential need to borrow money to enhance spas before the 2007/08 Peak season †¢The need to raise occupancy rates and earnings generated from extra charges to hit the planned revenue for the financial year ending September 2008 †¢The poor share price and vulnerability of Solberri Other issues: †¢Installation of solar panels Non-participation in the international star ratings system †¢Potential problems with the quality of outsourced services †¢Upgrading website to include a virtual tour of facilities . ? ISSUE ANALYSIS In this section, the analysis is done for top priority issues. Customer service and relevant HR issues. The quality of customer service is crucial to companies’ survival in service ind ustry. Unfortunately, the service provided by Solberri failed to meet the expected standard of its customers. The main reason for poor customer service is employees’ lack of skills and motivation. The majority of Solberri employees are temporary, with limited knowledge of the hotel industry and relevant skills. Besides, all short-term employees only receive two days introduction training which is apparently insufficient. The customer service can be improved in two aspects. In the short term, Nick Silva, customer service Director, needs to review staffing level immediately to meet the upcoming demand. Strict selection and a specific regular training program are needed to ensure the quality of its employees. In the long term, adjusting the ratio of the number of long-term employees to that of short-term ones is necessary. Too many temporary employees lead to poor customer service and low stock of talents, resulting in General managers working long hours and under high stress (more details in ethical issues). Though more long-term employees mean more costs, the benefits from improved customer service will outweigh the costs. Furthermore, because recognition of employees’ efforts can stimulate them to offer better service, some motivation measures are recommended. According to ERG theory, people in different levels have different needs. Most temporary employees are in the existence level, they need money to maintain their existence requirements, and therefore incentives such as bonus will be useful. However, most long-term employees are in relatedness and growth level, so incentives such as vocation award or decision making involvement will be suitable. With the new recruitment, training and incentives, it’s estimated that an additional employee cost of â‚ ¬7. 5 million will be incurred, a 12% increase from last year. Ethical issues Two ethical issues will be discussed in this report. a. Poor treatment of employees. General Managers and key senior employees are working under high stress over 16 hours every day. Solberri gets into ethical issue of overworking employees and paying no compensation. Due to a shortage of senior employees, their workload is unlikely to be reduced immediately. Therefore, the hotel should compensate for their overwork. To solve this problem fundamentally Soberri should reserve sufficient elites by increasing its long-term employees. b. Misdistribution of tips. When Solberri collected all the tips and evenly distributed them to employees, an ethical issue arose for the transparency and fairness of such distribution. Such controversial tips distribution should be changed back to the traditional way—employees can keep the tips for themselves. For those non-facing-customer employees who don’t get tips, Solberri is recommended to increase their bonus to make up the difference. Forecast cash surplus investment issue Before analyzing the four proposals, it’s important to know how much cash is available for investment. Since Solberri is under loan covenants and other financing alternatives such as rights issue can’t raise funds in a short time, the only source of funds is the internal capital. It’s estimated that 59 million cash will be generated from operations in this financial year. After deducting finance costs, tax, dividends and additional HR reform costs in the first issue, there’s only â‚ ¬30. 9 million cash available. (Appendix 2. 1) The total amount for the four proposals is â‚ ¬123 million (Appendix 2. 2). Solberri has to perform a cost benefit analysis to choose the most rofitable proposal as it is clear that Solberri doesn’t have enough funds to implement all of them. Proposal A is to extend the number of rooms at the four â€Å"Premier† hotels by adding each another 200 rooms and supporting facilities. It’s estimated to generate â‚ ¬10 million NPV for each hotel over a 5-year period based on an 80% occupancy level. However, this may h ave some negative effects since the additional rooms and facilities make the hotel more crowded and less comfortable. Therefore, the 80% occupancy level is not guaranteed. Besides, it’s just the first year that Solberri has had such high occupancy levels. Extending the number of rooms in such a large scale is too risky. Proposal B is to invest in refurbishment and extend spa facilities at the remaining hotels. The forecast cost is â‚ ¬6 million for each hotel. The high level of bookings at the 4 â€Å"Premier† hotels during the 2008 Peak season has demonstrated the success of the refurbishment plan. So this proposal contains relatively little risk. Furthermore, spa facilities have become a key selling point in resort hotels. This new trend provides great opportunity for Solberri to escape from the Red Ocean, the very competitive market of traditional resort hotels. By differentiating itself by providing exclusive spa facilities, Solberri can successfully grab the Blue-ocean market, namely the profitable and rapidly-developing market of resort hotels with exclusive spa facilities. Finally, refurbishing the hotels can improve Solberri’s profit margin. However, refurbishing all the remaining hotels simultaneously is beyond Solberri’s financial ability. It’s recommended that Solberri refurbish only three hotels—two â€Å"Superior† and one â€Å"Super Plus†. Refurbishing the â€Å"Super Plus† hotels is riskier since there is no previous experience and the refurbishment will need to close permanently 15 rooms in each hotel. But if Solberri only refurbish â€Å"Superior† hotels, in a short time, there will be a gap in middle-priced hotels, which is unfavorable to the company’s strategic development. Proposal C is to acquire an additional resort hotel costing 24 million. The expected NPV is â‚ ¬39. 2 million (Appendix 2. 3). Besides, the breakeven occupancy level is 60% (Appendix 2. 4), which is quite easy to achieve. So Proposal C seems profitable with reasonable risk. However, the initiate cost is too large as it’s for only one hotel. Compared with Proposal B, it’s too risky for Solberri in its first year with such good performance. Proposal D is to invest in environmentally friendly initiatives including the installation of solar panels costing â‚ ¬6 million and other environmental initiatives costing â‚ ¬9 million. Though investing in these initiatives cannot generate profits for the company directly, it can help establish Solberri as a socially responsible company which will be positive to its image. But funds are so limited that investing in all these in unrealistic. It’s recommended that Solberri invest in the solar panel project first since it can produce cost savings of 0. 6 million per year and defer the others. Loan covenant restriction The â‚ ¬20 million loan negotiated at the end of 2007 has loan covenants restricting the company’s further loan financing within 2 years from December 2007, resulting in a probable capital shortage for its future development. Solberri can try negotiating with the bank for removal of restriction by showing them the latest forecast figures and the high level of bookings. However, the good performance of only one year wouldn’t be convincing enough to the bank. Solberri can also try refinancing by issuing additional stocks through public offering or private placement. However, due to the relatively high standard and costly registration of public offering, private placement is preferable. With low threshold for issuing, private placement is feasible for Solberri whose business just began to pick up after slow seasons. With the good performance this year, it’s probable that the Solberri will attract strategic investment from institutional investors via private placements to ensure its future development. The poor share price and vulnerability of Solberri RECOMMENDATION Customer service and related HR issues. It is recommended that Solberri immediately work out a plan for recruitment and training, to ensure job fit and effective training among all employees. Employees who can’t provide the high standard of service will be refused or assigned to non-facing-customer positions. Moreover, Solberri should set up appropriate motivation mechanisms such as bonus and vacation rewards. It is also recommended that Solberri enlarge its long-term employee proportion by training some short-term employees to be skillful long-term ones. In this way, more employees will cultivate a sense of responsibility and can handle the previous temporary employees’ work in non-peak season. Ethical issues It’s recommended that Solberri compensate for employees’ overwork. In the long run, the company needs to enlarge its senior employee reserve. It’s recommended that Solberri abandon its controversial tips distribution and set up a bonus system for non-facing customer employees to make up their income difference. Forecast cash surplus investment issue It’s recommended that Solberri spend its forecast cash surplus on Proposal B to refurbish and extend the spa facilities at two â€Å"Superior† hotels and one â€Å"Super Plus† hotel, which costs â‚ ¬18 million in total. Since it’s just the first year Solberri has performed so well in these years, it’s better for it to be conservative towards investment. It’s also recommended that Solberri invest in the installation of solar panels at all 12 hotels costing â‚ ¬6 million and postpone other environmentally friendly initiatives due to its limited funds. These two plans will result in â‚ ¬6. 9 million cash retained (Appendix 2. ), which will help improve the liquidity of Solberri. . Loan covenant restriction It is recommended that Solberri try to negotiate with the bank for removal of the restriction. If it’s not workable, Solberri could try seasoned equity offering to refinance either by public offering or private placement, while private placement seems to be most feasible for Solberri and thus is highly recommended. If external financing doesn’t work, it is highly recommended that Solberri try all means to control its costs. The poor share price and vulnerability of Solberri ? CONCLUSION Solberri is now at a crucial time since it’s the first time it has had such good performance in these years. It is now facing several important issues. The most important ones are how to solve the poor customer service problem and which investment proposal to choose for its future development to increase the occupancy level for all the hotel rooms. It is believed that the analysis and recommendations above can serve as useful references for its decision-making. Solberri has to differentiate itself in the market through a shift by showcasing its spa facilities as its forefront in capturing holiday makers. With a change in visa regulations in Europe Solberri may opt to pay more attention to its local clients by offering the day use of the hotel’s services and facilities during non-peak seasons. To position itself as a â€Å"holiday resort hotel†, there should be a refurbishment of Solberri’s hotels to â€Å"Premier† standards ? SWOT ANALYSIS STRENGTHS †¢Good reputation with a long history; †¢Proven track record of range of spa facilities †¢Successful refurbishment program †¢Many of long-term employees have worked for Solberri for over 10 years with rich experience. †¢Stable co-operation with several travel agents. Experienced board directors. †¢High sense of Corporate Social Responsibility( 1 hotel won a bronze award in the Green Tourism business awards, 2007 †¢High level of bookings for Peak season 2008 with large cash surplus forecast WEAKNESS †¢Outdated information technology systems. †¢Restrictive loan covenan t. †¢Difficulty in enforcing agreed quality service levels. †¢Declining share price compared to 2002 †¢Poor customer service with disappointing customer feedback. †¢Low level of repeat booking. †¢Lack of motivation of short-term employees. †¢Poorly structured financial planning. Resignation of Finance Director. OPPORTUNITIES †¢High level of bookings and a forecast cash surplus of â‚ ¬59 million which can be used for further expansion, refurbishment program, paying dividends, and(or) meeting CSR by investing in environmentally friendly initiatives; †¢ Huge potential market for Spa service †¢Pricing structure changes to boost occupancy levels †¢Effective use of variety of media to generate more sales THREATS †¢ External completion from other hotel industries †¢ Understaffing and poor service to meet the high level booking that could impact reputation †¢Resistance from Competitors having state of art information techno logy can be market leaders. †¢ Fall in spa revenues of one â€Å"premier† hotel due to a rival business operated by an ex-manager. †¢Difference of opinion amongst management staff may delay the strategy implementation. WORKINGS 2. 1. 1 Investible surplus â‚ ¬59 million is cash generated from operations before finance costs, tax and dividends, which should be deducted. Besides, the additional operation cost incurred by human resources management should also be deducted in order to get the available cash for investment. 2. 1. 2Cost of finance S. No. AmountRate of InterestDetailsDuration for CYInterest Cost a. â‚ ¬12 m10%Oct- Dec ‘073 monthsâ‚ ¬0. 3 m b. â‚ ¬6 m8%Repayable in Sep 20101 yrâ‚ ¬0. 48m c. â‚ ¬15 m11%June 20121 yrâ‚ ¬1. 65m d. â‚ ¬20 m10%Jan-2008 to Dec ‘149 mthsâ‚ ¬1. 5m Totalâ‚ ¬3. 93 m Notes: a. â‚ ¬12 million loan at 10% repayable in December 2007 -As its repayable date is in December 2007, the interest expense incurred in this accounting period is only for three months (October 2007 to December 2007). â‚ ¬12 million*10%*3/12 = â‚ ¬0. 3 million b. â‚ ¬6 million loan at 8% repayable in September 2010 -â‚ ¬6 million*8% = â‚ ¬0. 48 million c. 15 million loan at 11% repayable in June 2012 -â‚ ¬15 million*11% = â‚ ¬1. 65 million d. â‚ ¬20 million loan at 10% beginning in January 2008 and repayable in December 2014 -As this loan began in January 2008, the interest expense incurred in this accounting period is only for nine months (January 2008 to S eptember 2008). â‚ ¬20 million*10%*9/12 = â‚ ¬1. 5 million 2. 1. 3 Tax expense As stated in the case, the post-tax profit for the year ended September 2008 will be â‚ ¬27 million. Based on the tax rate of 32%, the taxable income = â‚ ¬27 million/(1-32%) = â‚ ¬39. 7 million . Therefore, the tax expense = â‚ ¬39. 7 million*32% = â‚ ¬12. 7 million 2. . 4 Dividends In 2007, Solberri made a profit of â‚ ¬5 million and paid â‚ ¬2 million for dividends, which equals a dividend per share of â‚ ¬0. 083. It’s recommended that Solberri double the DPS this year, making the total dividends expenditure as much as â‚ ¬4 million. 2. 1. 5 Additional operation cost As is mentioned before, the high occupancy level this year will incur additional operational cost due to the employee recruitment, training and motivation. It’ estimated to be around â‚ ¬7. 5 million based on an estimated 12% increase compared with 2007 when the staff costs were â‚ ¬62 m illion. Cash Available for Investment( in million) Investible surplus( before deduction)= â‚ ¬59. 00 Less: Interest cost –â‚ ¬3. 93 Tax expense –â‚ ¬12. 7 Dividend expense –â‚ ¬4. 00 Additional operation cost –â‚ ¬7. 5 Net surplus= â‚ ¬30. 9 2. 2. Total cost for all four investment proposals : ProposalInvestment cost per hotelNumber of hotelsTotal cost Aâ‚ ¬9 million4â‚ ¬36 million Bâ‚ ¬6 million8â‚ ¬48 million C****â‚ ¬24 million Dâ‚ ¬15 million Total costâ‚ ¬123 million **Total cost for Proposal C = acquiring cost + refurbishing cost + marketing cost = â‚ ¬5 million +â‚ ¬16 million+â‚ ¬3 million = â‚ ¬24 million Total cost for Proposal D = â‚ ¬15 million . 3. Expected NPV of Proposal C As is shown in the case, when occupancy level equals 95%, the NPV will be â‚ ¬100. 0 million. When it’s 80%, the NPV will be â‚ ¬35 million. When it’s 50%, the NPV will be –â‚ ¬25 million. And their probabilities are 25%, 60% and 15% respe ctively. Therefore, the weighted average NPV = â‚ ¬100. 0 million*25% + â‚ ¬35. 0 million*60% +(-â‚ ¬25 million)*15% = â‚ ¬42. 2 million However the marketing cost of â‚ ¬3 million is excluded in the above NPV, so the expected NPV of Proposal C = â‚ ¬42. 2 million – â‚ ¬3 million = â‚ ¬39. 2 million 2. 4. Breakeven occupancy level of Proposal C When occupancy level equals 95%, the NPV will be â‚ ¬97 million. When it’s 50%, the NPV will be -â‚ ¬28 million. Thus, when the occupancy level decreases by 1%, the NPV will decrease by â‚ ¬2. 78 million. [â‚ ¬97 million – (-â‚ ¬28 million)] / (95-50) = â‚ ¬2. 78 million In this way, when the occupancy level changes by about 35% (97/2. 78), the NPV will decrease to zero. Therefore, the breakeven occupancy level is around 60%. 2. 5 Estimated cash retained Estimated cash retained = cash available for investment – investment costs = â‚ ¬30. 9 million –â‚ ¬24 million = â‚ ¬6. 9 million Comparison between Solberri and Shangri-la Asia Limited with the DuPont Model 3. DuPont Model of Solberri 2007 Return on Equity (ROE) 0. 0568 Return on Assets (ROA) 0. 3086? Equity Multiplier (EM) 1. 8409 Profit Margin 0. 0314? Total Asset Turnover 0. 9815 1 /(1—Debt Ratio 0. 4568) Net Income/Net Sales Net Sales/Average Total Assets Total Liabil ities/Total Assets 3. 2 DuPont Model of Shangri-la Asia Limited 2007 Return on Equity (ROE) 0. 1046 Return on Assets (ROA) 0. 1029? Equity Multiplier (EM) 1. 016 Profit Margin 0. 3069? Total Asset Turnover 0. 3354 1 /(1—Debt Ratio 0. 0159) Net Income/Net Sales Net Sales/Average Total Assets Total Liabilities/Total Assets Comparison between Solberri and Shangri-la Asia Limited with the DuPont Model 3. 1 DuPont Model of Solberri 2007 Return on Equity (ROE) 0. 0568 Return on Assets (ROA) 0. 3086? Equity Multiplier (EM) 1. 8409 Profit Margin 0. 0314? Total Asset Turnover 0. 9815 1 /(1—Debt Ratio 0. 4568) Net Income/Net Sales Net Sales/Average Total Assets Total Liabilities/Total Assets 3. 2 DuPont Model of Shangri-la Asia Limited 2007 Return on Equity (ROE) 0. 1046 Return on Assets (ROA) 0. 1029? Equity Multiplier (EM) 1. 016 Profit Margin 0. 3069? Total Asset Turnover 0. 3354 1 /(1—Debt Ratio 0. 0159) Net Income/Net Sales Net Sales/Average Total Assets T