JGC Localizing Design Services in Saudi Arabia as an IK

Introduction Saudi Arabia’s economy continues to attract a lot of attention from foreign investors. â€Å"It is one of only a few fast-growing countries in the world with a relatively high per capita income of $24,200 in 2010† (Central Intelligence Agency, 2011). In the recent years, the country has recorder a rapid population growth. This, combined with reducing oil shortages, serves as a motivation for the nation to develop its other sectors.Advertising We will write a custom case study sample on JGC: Localizing Design Services in Saudi Arabia as an IK-EPC Company specifically for you for only $16.05 $11/page Learn More It further supports the need for the company to diversify on its sources of income. As a result of a stable and vibrant economy, Saudi Arabia has attracted a lot of interest lately as an investment destination. Managing an EPC company in such an environment is not an easy task. There is a need for a business to have clearl y set objectives. A successful business model and its management are guided by defined goals and timescale. This study explores the relocation of JGC’s Engineering services to the Kingdom of Saudi Arabia and its effect on the costs, and the development of the local expertise, through the execution of Engineering, Procurement, and Construction â€Å"EPC† major projects in the Kingdom. Moreover, it explores the conventional In-Kingdom/Out-Of-Kingdom â€Å"IK/OOK-EPC† model where the Engineering process is being executed out of the Kingdom of Saudi Arabia, and the Procurement and Construction are executed in the Kingdom of Saudi Arabia. Then compare it to the In-Kingdom Engineering Procurement and Construction â€Å"IK-EPC† model, where the three phases are being executed in the Kingdom of Saudi Arabia. Through the utilization and development of the local resources during the establishment of those new projects, such IK-EPC Companies are enhancing the local content and developing the local market. The research project is valuable in the following respects: First, it may help to understand the role IK-EPC Companies play in the economic growth of Saudi Arabia. Secondly, supporting the government’s initiatives in improving the local economy and enhancing the local content in such huge projects. Thirdly, understand the challenges those IK-EPC Companies are facing. The results will be presented through a comprehensive study of the relevant topics, as well as developed recommendations at the end of the paper.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Background Of The Company (Jgc) JGC is a leading engineering company in Japan, as well as the whole of Asia. It was established in 1928 and has since completed more than 20,000 projects in different parts of the globe. The company’s expertise is wide ranging from chemicals, hydr ocarbons, petrochemicals, pharmaceuticals and industrial field, among others. Like JGC (2011) explains, â€Å"from basic planning to commissioning and everything in between design, procurement of materials and equipment and construction, JGC’s engineering services provide a total and consistent system that has been highly evaluated by clients all over the world†. JGC Gulf International Co. Ltd was established in February 2008. It is owned by JGC Corporation and JGC Singapore Ptd in the ratio of 75% and 25% respectively. The company’s head office is located in the Kingdom of Saudi Arabia. It also has offices in the Kingdom of Bahrain. According to JGC (2011), the company has carried out various EPC projects in the field of oil and gas/refinery/petrochemical for the services throughout the project, from planning to construction, and operation and maintenance (OM). In order to maximize benefits for its customers, the business performs other roles such as being cont ractors for industrial facilities, offering consultation in the project management industry, and serving as an advisor for those who want to venture into industrial investors. Aim Of The Study Study the relocation of JGC’s engineering services to Saudi Arabia to execute oil and gas and petrochemical related projects as an IK-EPC company. Objectives Of The Study This research explores JGC’s movement from IK/OOK model and the adoption of the IK-EPC model in the Kingdom of Saudi Arabia in executing Projects in the Oil and Gas, and the Petrochemical Industries by answering the following research questions:Advertising We will write a custom case study sample on JGC: Localizing Design Services in Saudi Arabia as an IK-EPC Company specifically for you for only $16.05 $11/page Learn More Strategies used by JGC to efficiently and effectively relocate the engineering services and develop the local Engineering expertise as an IK-EPC Company. Challen ges facing JGC in localizing the Engineering Design Services. Which of the models (IK-EPC Vs. IK/OOK-EPC) is better for JGC in terms of technical, economical, and practical feasibility. Whether it is profitable to localize the design services to Saudi Arabia. How IK-EPC model affects the growth of JGC as a corporation. Whether JGC Gulf should expand and invest in growing as an IK-EPC company. Literature Review Saudi Arabia Economy Statistics by Energy Information Administration (2009) reveal that â€Å"Saudi Arabia’s economy command economy is petroleum-based; roughly 75% of budget revenues and 90% of export earnings come from the oil industry†. Comparing revenues from the oil industry and other sectors, the region’s over-dependence on oil is evident. The country’s gross domestic product further proves this. According to Central Intelligence Agency (2011) â€Å"the oil industry comprises about 45% of Saudi Arabia’s gross domestic product, compare d with 40% from the private sector†. In the recent years, the country has recorder a rapid population growth. This, combined with reducing oil shortages, serves as a motivation for the nation to develop its other sectors. The country has in the past experienced inconsistent income due to contracting oil reserves and a high rate of population growth. As Bowen (2007) records, â€Å"per capita income fell from a high of $11,700 at the height of the oil boom in 1982 to $6,300 in 1998†. Such periods reveal the need for the government to have diversified sources of income. Other sectors need to have increased contributions to the GDP. The private sector today plays a significant role in the country’s economy (Ammari, 2008). With a realization that the future of the nation relies heavily on the sector, â€Å"the government is attempting to promote growth in the private sector by privatizing industries such as power and telecommunications† (Bowen, 2007). The count ry has continued to prove its commitment to the strategy by privatizing some of the government owned businesses such as the telecommunications company. Due to the importance placed on the industry, the government invests in a diversified program to provide all the stakeholders in the industry with the required support. The industry attracts a lot of interest from the foreign investors and provides the much needed job opportunities. According to the International Finance Corporation, the Kingdom of Saudi Arabia is rated number 13 in the list of most economically competitive countries globally.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Factors That Influence Markets In Saudi Arabia Costing Costing is a significant factor to consider when investing in a new market. After all, a business would make no sense if it is not profitable. As explained by Bragg (2010), â€Å"all the costing processes documented contain three major steps, market driven costing, product-level costing, and component-level costing†. The input and desired results may vary depending on the number of factors influencing the process. The cost and complexity of achieving the desired results many further vary with the industry, level of expertise, and different market trends in the industry. A product’s characteristics further play a significant role in determining how the target will be achieved. â€Å"Each of the steps involved in costing have defined output: allowable cost, product-level target cost, and component-level target costs respectively† (Weygand, Donald and Paul, 2010). While these factors are similar in every firm t rying to implement costing, the process is more complex in some industries and may result in different outcomes. The market-driven costing portion is affected by the nature of target customer, as well as the intensity of the competition in the specific industry. Product-level costing is influenced by a product’s characteristics, and the firm’s product strategy (Bragg, 2010). Finally, the component-level target costing is affected by the company’s supplier-base strategy. Managing Intensity Of Competition The amount of attention a company is paying to competitive offerings is highly dependent on the intensity of competition a product is facing. The levels of importance a company places on its target costing process can be easily judged from the amount of importance it places on competitive offerings. A study conducted on six Japanese companies by Bragg (2010) â€Å"reveals that all the firms had adopted a confrontational strategy because they lacked the ability t o develop sustainable competitive advantages over each other†. In markets where competition is stiff, businesses are left with no alternative but to compete with each other on the basis of quality and cost. When this happens, low profit margins, less fast mover advantage, and low customer loyalty among other outcomes, become a reality to many businesses. When such a situation occurs, the benefits of costing cannot be under-estimated. The situation puts businesses in fragile position where they cannot afford to make any mistakes, especially when launching new products. By putting the competitive pressure into consideration when designing new products, a business has higher chances of ensuring that the new product is within its survival zone when it is introduced to the market (Bragg, 2010). The results are increased profits for a product, and increased customer loyalty for a product. When the level of competition is low, Weygand, Donald and Paul (2010) explain that strategies t hat are less confrontational strategies can be used. The Degree To Which Customers Understand Their Future Product Requirement The more customers understand their needs, the easier to become for a business to rely on their preferences and feedback. Survey of what they expect can be trusted and results used to locate future survival zones. In contrast, when customers are not certain of their needs and preferences in future, businesses have to spend a lot of money and resources to locate future survival zones. Many times this is hard and they are forced to launch products that eventually fail due to poor approximation of survival zones. Customers have a varying understanding of their future needs for different industries. For example, customers are more aware of what they want in future for food products, but thus may not be so in the electronic industry. As a result, when using customers’ feedback on what they need in future, a business must put this factor into consideration. A business would be in a safer zone if they can exceed their expectations. When this happens, target costing becomes easier since business saves money by being ahead of what customers expect. Benefits Of Ik-Epc Compared To Ook-Epc A Stable And Healthy Economy Saudi Arabia’s economy is considered among the most vibrant in the world today. â€Å"These favorable economic conditions are matched by positive demographic drivers. The kingdom of Saudi Arabia is the world’s fastest growing large country with a current population in excess of 25 million, 40% higher than the combined population of the rest of the GCC† (Central Intelligence Agency, 2011). Unlike other economies in the world, Saudi Arabia has been able to recover from the global crisis more soon than others did. This is attributed to the fact that the country’s main source of income is oil, whose demand was not very much affected during the crisis. Furthermore, the oil industry has been on an upward trend for the last two years, a trend that is expected to continue. The country’s GDP indicates healthy economy, which would offer a business the much-needed stability. â€Å"Saudi Arabia is the region’s largest economy with a nominal GDP of $608 billion, over 20% greater than the total combined GDP of the other GCC countries† (EDC, 2011). This gives it an advantage over its neighbors. Investing in Saudi Arabia therefore offers business opportunities in the country and its neighboring countries. Saudi Arabia is considered a strategic location for any business with intentions of reaching the whole of the Middle East for business. â€Å"The country has delivered five years of continued economic growth, with GDP increasing by an average of 15% per annum since 2002† (Central Intelligence Agency, 2011). It also remains the central point for foreign direct investors in the region. It is estimated that in 2007 alone, Saudi Arabia received over $17 billion as dir ect foreign investment. Demographics Even though there is still a deficiency in the labor markets for some professional fields, Saudi Arabia offers a good environment for any business that want to set up base in the country. The country’s demographics offer a big population of vibrant and energetic citizens to work in engineering, procurement and construction firms. 67.6% of the country’s population is aged between the age of 15 and 64. Its population growth rate stands at 1.5%. 82% of the total population is in the urban areas. Its literacy level stands at 78.8% (Central Intelligence Agency, 2011). JGC Gulf has largely benefited from availability of casual laborers. This makes it easy to accomplish projects, especially in an industry that is very dependent of casual and manual labor. Increased rates of urbanization further means that more people will access to better education. A more learned population will then provide the much needed professional skills for busines ses such as JGC. Improved Country’s Economy In-Kingdom businesses not only benefit the investors, but also the nation of Saudi Arabia. The country’s over-dependence on oil as explained before is risky. This is evident from the amount of instability experienced in the country every time oil markets are not consistent. IK-EPC Company such as JGC brings in revenue for the country through taxes and funds invested in the business by foreigners. Furthermore, having all the aspects of the business carried out in the country creates the much needed job opportunities for the locals. When such businesses are developed in Saudi Arabia, the country realized the need to develop skills in the country, and invests more in education and training. JGC Gulf has had to import a big percentage of its human resources, a situation that offers the much-needed motivation for locals to invest in developing their skills. Challenges Information Technology IT has been the heart of every subsidiar y of JGC. This is the same for JGC in Saudi Arabia. Gas and petrochemical plants are built in remote areas where there is minimum infrastructure. The role of IT is evident in the level of sophistication of some of the projects. Logistics involved in most of the projects are also immense and require high level of technology. It is for this reason that Saudi Arabia must encourage more in-kingdom business to help create independence in every industry. Currently, JGC Gulf has to rely on JGC Japan to supply most of the IT requirements of its design and construction projects. The company needs to compute infrastructure to allow for more of automated management systems. Communication Style Quoting Bowen (2007), â€Å"differences in communication styles can often be a cultural challenge and as a result, international organizations doing business in Saudi Arabia without adequate briefing may often find themselves feeling confused and frustrated†. JGC has to import most of its human re sources, especially in the engineering division. A majority of its engineers are Japanese and depending on the technicalities of a project, the company gets experts from America and Europe. Since the majority of Saudi Arabians speak Arabic, communication is a significant challenge for the company. The country’s communication style is different from that in most parts of the world. It tends to be quite indirect and may make it hard for a foreigner to understand. People in Saudi Arabia tend to use body language and change of tone to communicate. In a professional setting, this may make it hard to communicate details or lead to mis-communication. Religion Religion plays a significant role in every area of life in Saudi Arabia. It influences the way people relate, the way business deals are made, and the way employees are treated. The country’s regulations and policies are based on the Sharia law. As a result, businesses are expected to adhere to specific customs and socia l duties as dictated by the Islam. It is important for an investor in the country to take time and reach to Islam to ensure a proper co-existence between the business and the people. Ignorance to the Islamic way of life could damage a business’ relationship with employees, suppliers and its clients. Labor Engineering, Procurement and Construction are all areas that are heavily dependent on the availability of casual and manual labor. The size of projects being set up in Saudi Arabia requires a large number of employees for timely completion. Most Mega projects in the region have had their completion dates delayed due to a number of factors, the most common being a shortage of labor. This situation is expected to ease with increased population rate, but this could take a while. The country has put in place measures to attract foreigners that work in different fields, but this has not totally eased the situation. JGC Gulf’s costs of operation are still high due to the ne ed to import most of their professional labor. Most foreigners working for the company have to be paid in foreign currency, a situation that could make it hard to predict labor costs due to fluctuating currencies. Competition Competition in the region could lead to a saturated market. Operating fully in Saudi Arabia makes it hard for the business to diverse to other markets due to logistical and transportation challenges. The business is put under pressure to perform and maintain profitability in one region when they set up full operations in a country. JGC gulf, currently, still faces competition from Korean and Chinese contractors. The Chinese make it particularly hard since they are able to source materials from their country for cheaper prices. IK/OOK-EPC business model would allow JGC to diversify its markets more easily without having to incur the costs of relocating some of the resources from the region. JGC Gulf’s strategy JGC has a good reputation in the Middle East dating back to the 1960. The company has in the past been awarded some of the biggest oil projects to be completed in Saudi Arabia. In 2004, the company was awarded the engineering, procurement, and construction contract for one of the biggest styrene plants in the region. The integrated facility was completed at Al Jubail in just three years. The project which is owned by Saudi Industrial Investment and Chevron Philips Petrochemical Company Limited exposed JGC to other major projects since the owners are big stakeholders in the oil and petrochemical industry in Saudi Arabia. JGC was responsible for handling the fractionating columns, crackers, process units and associated infrastructure and utilities. â€Å"JGC Arabia has a strong background in lump-sum tunkey operations of both hydrocarbon and non-hydrocarbon related projects with annual sales of approximately US$billion† (JGC, 2011). The company has earned itself a reputation as a reliable, consistent company, with the abi lity to manage extremely projects and deliver quality. After awarding the project to JGC, Chevron Phillips Company’s CEO is quoted as saying thatâ€Å" the company was selected on the basis of its project execution capabilities and due to its record of successful completion of large-scale petrochemical projects in the Middle East, especially in Saudi Arabia† (JGC, 2011). Other outstanding projects completed by the company include one for Saudi Aramco, another major stakeholder in the region, the Haradh gas plant and the Hawiyah gas plant, both among the biggest gas plants in Saudi Arabia. On-going projects in Saudi Arabia include the Hawiyah NGL and the Manifa crude oil processing plant in the oil and gas sector. In the petrochemical and chemical industry, the company has three projects to complete namely Rabigh, Jubail Chevron Phillips Petrochemicals (JCP) and Narmada Chematur Petrochemicals Ltd. (NCP). Swot Analysis and Risk Zones Industrial diversification (survival , safe zones) Strengths JGC’s experience in the EPC business is a key strength. JGC International has been in existent for the almost 100 years. JGC Gulf, which was established almost four years ago can use the mother company’s experience to gain clients’ evidence. Another strength is the company’s good reputation in the region, putting it in a more advantageous position than its competitors. A significant strength for the company is its financial status. JGC’s profitability since its establishment puts is in a better position to influence the market trends. Weaknesses The company lacks a well defined strategy to deal with stiff competition in the country today. Competition in the region could lead to a saturated market. JGC gulf, currently, still faces competition from Korean and Chinese contractors. The Chinese make it particularly hard since they are able to source materials from their country for cheaper prices. IK/OOK-EPC business model would allow JGC to diversify its markets more easily without having to incur the costs of relocating some of the resources from the region. The company also lacks a human resource development program. Easy access to experts from other countries leaves the business reluctant to develop human resources skills in the local communities. Opportunities The company has an opportunity to create new value in line with its customers’ needs while reinforcing their competitiveness as the best EPC company in Saudi Arabia. This will further allow it to create a new wave of growth in other areas of their business. The market environment in the hydrocarbon engineering, procurement and construction sector in Saudi Arabia is expected to remain positive in future. However, this will depend with the company’s ability to manage competition, which is one of its biggest threats. Among the most significant competitors include Koreans and Chinese. The other opportunity for JGC Arabia arises from the fact that the non-hydrocarbon sectors in Saudi Arabia are steadily expanding. This offers the company a more diverse market. In an effort to encourage more in-kingdom businesses in the country, the government of Saudi Arabia is growing the social infrastructure investment such as power, water and transportation into a massive market. Such development offer promising developments in the hydrocarbon EPC sector for JGC Arabia. Southeast and Central Asia have registered vibrant economies in the recent past. JGC Arabia is strategically located to benefit from any oil and petrochemical EPC in the regions. These areas are particularly focused on social infrastructure and capital investment. This further creates a more vibrant economy that would benefit JGC Arab. Threats Operating fully in Saudi Arabia makes it hard for the business to diverse to other markets due to logistical and transportation challenges. The business is put under pressure to perform and maintain profitability in one re gion when they set up full operations in a country. Increasing levels of competition further threatens the company’s future profitability trends. Strategies Some of the strategies that have worked for the company include; The mother company’s experience JGC Gulf has used the experience of the mother company to develop its business model in Saudi Arabia. Being in existent since 1928, the mother company has completed enough projects to prove its business model. When JGC gulf was established in 2008, most senior positions in the business were assigned to people who had been working in JGC Japan. This has helped the company retain high quality products and services to its clients, even as a new and young company. Furthermore, the company had enough financial support from JGC International. This has enabled the business to take a shorter period of time to settle down and develop a strong business foundation for itself. Understanding The Nature Of The Customer The intensity of customer analysis carried out by JGC is influenced by customer’s characteristics. Most of these characteristics, as identified by the company, are; degree of sophistication, degree to which they understand their future requirements, and rate at which their expectations and needs are changing. As Monden (2000) explains â€Å"these three characteristics appear to help determine the benefits that a firm can potentially derive from target costing because they deal with the width, rate of change of location, and ease of predicting the location of survival zones†. Understanding the customers is particularly beneficial to businesses whose competing environments have smaller survival zones. Locations with such zones are changing rapidly, and businesses need to stay constantly updated on the changes. Understanding customer satisfaction has enabled JGC to know how sensitive its customers are to differences in functionality, price and quality among other parameters of products in the market. The more sophisticated a customer is, the more they are likely to detect the smallest on differences in competitive products. The EPC industry requires a deep understanding of target customers through constant interaction, surveys and feedback. In the process of doing so, the business is able to satisfy its customers by having products custom made to meet their needs. â€Å"The rate at which customer requirements change defines how rapidly the location of survival zones moves over time† (Monden, 2000). The process of understanding the requirements over a long period allows JGC Gulf to develop a pattern that can be used to predict customers’ future needs. An analysis of customers’ needs is therefore a practice that can be used to develop products that keep a business ahead of others. It is also easy for JGC Gulf to schedule changes early and avoid producing products that may be considered already irrelevant in the market. When consumer expectation s and requirements are stable, businesses have a tendency to relax on innovations. However, the opposite happens, they are forced to expend significant amounts of resources and effort to understand and predict customers’ needs. It is such situations that have led to constant innovations in the market, and more profitability for the most creative companies. Companies which are able to keep up with the new developments in the market such as JGC have remained profitable, even during the recent global economic crisis. This proves how important understanding customers’ needs can be to a business. It supports JGC gulf through a need to predict the needs of their clients in order to achieve the best cost for the products before they are needed and released to the market. Opportunities The company has an opportunity to create new value in line with its customers’ needs while reinforcing their competitiveness as the best EPC Company in Saudi Arabia. This will further all ow it to create a new wave of growth in other areas of their business. The market environment in the hydrocarbon Engineering, Procurement and Construction sector in Saudi Arabia is expected to remain positive in future. However, this will depend on the company’s ability to manage competition, which is one of its biggest threats among the most significant competitors including Koreans and Chinese. The other opportunity for JGC Gulf arises from the fact that the non-hydrocarbon sectors in Saudi Arabia are steadily expanding. This offers the company a more diverse market. In an effort to encourage more in-kingdom businesses in the country, the government of Saudi Arabia is growing the social infrastructure investment such as power, water and transportation into a massive market. Such development offer promising developments in the hydrocarbon EPC sector for JGC Gulf.Southeast and Central Asia have registered vibrant economies in the recent past. JGC Gulf is strategically located to benefit from any oil and petrochemical EPC in the regions. These areas are particularly focused on social infrastructure and capital investment. This further creates a more vibrant economy that would benefit JGC Gulf. Succeeding As An Ik-Epc Company Proactive Approach To Cost Management Understanding costs and profitability allows businesses to take a proactive approach to cost management. Traditionally, businesses manage costs when a product is already finished. Direct costs, which make up more than half the cost of a product, remain a challenge to many investors. Target costing as has been evident in many Japanese businesses such JGC international can help a business manage costs by cutting on it at the design level. By having a set cost of production, a business is able to have control of their profitability. A proactive approach reduces speculation and yet makes it possible to approximate profits. Orienting A Business Towards Clients In such a competitive field, it is import ant for a business to orient itself towards its clients. The size of projects managed by JGC means that losing one client could means significant losses for the business. Furthermore, more EPC companies continue to register a presence in the country, leading to a high level of competition. Orienting a business towards clients ensures that a business knows what to expect from the customers, as well as what is expected from them. Since the EPC industry is very much dependent on survival zones, a business is forced to understand its customers comprehensively. This includes their needs, expectations and spending trends, among others. It further forces a business to understand its competitors, strengths and weaknesses. This kind of knowledge and market understanding empowers a business to design and offer services that are needed in the market. Chances of being in the low survival zones are reduced and profitability soars. Breaks Down Barriers Between Investors And Locals For a business to succeed in any foreign country, it is important that it establishes a healthy relationship with the locals. Understanding the market can only be done through feedback. A good relationship with local employees, clients, financial institutions and even the government ensures that a business has access to genuine feedback from different stakeholders. The government of Saudi Arabia plays a significant role in ensuring that foreign investors are accorded all the support that they need. Furthermore, it is only through improved relationships that a company will be able to access the best labor in the market. Having Synchronized Departments The design and production of a product in EPC field is very dependent on the logistics, purchasing, human resource, production, and quality department (Carrillo, 2005). These departments are responsible for ensuring availability of raw materials, how they are managed, designed and how the final product looks like as well as how much it costs. Working together in the initial stages of a product keeps the department and their activities synchronized. When products are out in the market, managing them is an easier task since every department is well conversant with its strengths and weaknesses. Profitability And Feasibility According to the company’s fiscal 2011 first half results, â€Å"increasing demand for energy in emerging countries and population expansion in resource-rich nations are major drives for the business’ profitability† (JGC, 2011b). In the first half of this financial year, JGC international received orders worth over 128 billion Japanese Yens (1.65 billion US Dollars). JGC Gulf has received two major contracts this year both in Rabigh for the Joint Venture of Saudi Aramco and Sumitomo Chemical Company. The tenders have already been issued but the business still faces challenges from Korean investors. The business aims to achieve target-consolidated orders of over $300millon by receiving the ab ove projects as well as other small and mid-sized projects in the Middle East. Profitability in the company has been greatly affected by the European financial crisis as fears of global slowdown become more real. Project plans in Saudi Arabia are designed to meet domestic energy demands in the region, and other countries where it exports. The European debt crisis is expected to significantly affect projects. Another significant factor as the business works to improve profitability is democracy movements in Saudi Arabia, which has in the past more or less subsided. Nuclear energy and its development in Saudi Arabia will play as significant role in the company’s profitability. Currently in Saudi Arabia, natural gas is used as an alternative. The development of more renewable energy sources will cut, which means more projects for the company, as well as reduced costs of energy. In its recently released report, the company observes that there is a good overall progress in all its projects being carried out by JGC Gulf, there is a stable market for equipment, material and labor, and a general improvement in the company’s management capability. The company’s plan for the second year targets a continued identification of investment and infrastructure such as resource development. Conclusion â€Å"Saudi Arabia is one of only a few fast-growing countries in the world with a relatively high per capita income of $24,200 in 2010. The country will be launching six â€Å"economic cities† which are planned to be completed by 2020† (Bowen, 2007). This study was aimed at exploring the relocation of JGC’s Engineering services to the Kingdom of Saudi Arabia and its effect on the costs, and the development of the local expertise, through the execution of Engineering, Procurement, and Construction â€Å"EPC† major projects in the Kingdom. The region offers several advantages and to JGC. Urbanization offers the company a significant opportunity. It translates into more demand for petroleum and gas products. If the company is able to place itself strategically, the global markets offer a significant opportunity. The whole Middle East is expanding and offers JGC a bigger market to venture into. The expansion of the global markets results in demand increase for the company’s products and services in the petroleum industry. A stable economy offers the company a significant strength. Saudi Arabia’s economy is considered among the most vibrant the world. It was among the first to recover after the global crisis, proving its level of stability. Having an IK-EPC company further comes with more challenges. Key among them for JGC include lack of professional labor, cultural differences, communication and religion policies which an investor has to adhere to. Due to stiff competition developing in the country, costing has become a significant factor for investors. As explained by Bragg (2010), â€Å"all the costing processes documented contain three major steps, market driven costing, product-level costing, and component-level costing†. The input and desired results may vary depending with the number of factors influencing the process. The cost and complexity of achieving the desired results many further vary with the industry, level of expertise, and different market trends in the industry. A product’s characteristics further play a significant role in determining how the target will be achieved. Despite all the above explained challenges, an in-kingdom business model for JGC has major benefits to the country and the business. They include an improved economy due to increased economic activity in the country. JGC on the other hand benefits from a stable and healthy economy and demographic patterns that provide a more vibrant workforce. JGC Gulf Corporation needs to take advantage of these benefits to improve profitability, as well counter the challenges that may arise fro m being an IK-EPC company. Reccomendations EPC in the oil and petrochemical industry is getting very competitive. JGC faces stiff competition especially from the Koreans and Chinese. The Chinese have the advantage of accessing most of the products at a cheaper price from their country. Increasing competitiveness therefore has to focus on the issue of cost. The company has in the last few years drastically improved its cost competitiveness to increase its business and market base in the oil and petrochemical sector. Having competitive prices makes the company attractive to more clients including the small and upcoming players. Depending on the risks that arise from the market, the level of diversification required, and risks involved, the most suitable business model management strategy for JGC Gulf should be comprehensive and long term to ensure preparedness. Formulating a strategy should involve selection of designs after a fundamental and comprehensive analysis of parameters the c ompany’s products are interested in focusing on (Weygand, Donald and Paul, 2010). In the oil and petrochemical EPC industry, the company should focus on the reliability, durability, ease of the product’s usage and uniqueness. Execution will play a significant part of the plan. Just like any other investment management, a business model management requires constant revision and evaluation. Changes in the price of inputs automatically change the value of a product in the market (Bragg, 2010). Changes in a country’s regulations and policies affect how processes are implemented. Any possible changes in a market will affect a business and must be put into consideration. This calls for regular changes on the investment plan to take care of fluctuations. Change of the business model or implementation may be necessary. Evaluation should be done from time to time to determine what is working and what is not. Like Monden (2000) explains, â€Å"it helps the investor to re alize if the strategy’s returns are in proportion with its risk exposure†. Reference List Ammari, S.S., 2008. Saudi Arabia real estate market set to grow significantly over next years, says Jones Lang LaSalle. Web. Bowen, Wayne H. (2007). The history of Saudi Arabia. New York: Routledge Publishers. Bragg, S., 2010. Business ratios and formulas: A comprehensive guide. Hoboken, N.J.: Wiley. Carrillo, P., 2005. Lessons learned practices in the engineering, procurement and construction sector†. Engineering, Construction and Architectural Management, 12 (3), pp.236-250. Central Intelligence Agency, 2011. The world factbook: Saudi Arabia. Web. EDC. (2011). Saudi Arabia. Web. Energy Information Administration (2009). World proved reserves of oil and natural gas: Most recent estimates. Web. JGC, 2011b. Business overview: Fiscal 2011 first half results briefing. Web. JGC, 2011. Company profile. Web. Monden, Y., 2000. Japanese cost management. London: Imperial College Press . Weygand, J.J., Donald, E.K. and Paul, D.K., 2010. Managerial accounting: Tools for business decision making. Hoboken, NJ: Wiley. This case study on JGC: Localizing Design Services in Saudi Arabia as an IK-EPC Company was written and submitted by user Cailyn Lee to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Truly, Madly, Deeply essays

Truly, Madly, Deeply essays This paper is about the movie Truly, Madly, Deeply. It is about a grief stricken woman played by Juliet Stevenson. Juliets character has lost her long time lover who is played by Alan Rickman. Anthony Minghella directed the movie. The setting of the movie is mostly dark due to the loss that Anita has gone through. At the start of the film you notice that the character is trying to rebuild something whether that be her life or just her flat. Her flat is constantly being renovated. Her cabinets are getting refinished, her pipes are getting changed, and her entire house is full of rats. It seemed as though nothing was going right in her life after Jamie had died. The rebuilding of her flat paralleled that of her life. The people in Anitas life like her boss and sister are constantly worried about her and checking up on her. Her sister stops by without calling and then tries to clean up her house. There are always messages on her machine asking where she is and how she is doing. The only person that has somewhat of a clue is her therapist. Then one day out of the blue Jamie shows up in her flat. Although it is not really him its his ghost. She is so happy to see him but at the same time she doesnt know if she is losing her mind. But yet she indulges her self by staying home with Jamie for a week. Jamie is thier trying to help her move on with her life. She has been caught in rut since his passing. Keeping his things around like his cello, which keeps as a distraction. Now that she has Jamie back her life seems even more complicated. She has to lie to her friends and avoid phone calls. I mean what would you think if you heard that your friend was talking and hanging out with her dead lover. You would think that she was crazy. Eve in times of watching the movie you think she is going crazy. Jamie was a big part of her life but that didnt mean they always agreed. Through his com...

Jehovah's Witnesses and refusal of blood products. Describe an Essay

Jehovah's Witnesses and refusal of blood products. Describe an encounter that demonstrated the importance of diversity to you - Essay Example Or, should they respect patients’ religious beliefs and compromise on quality of healthcare? Since there is no straightforward answer to these questions, healthcare professionals will have to tread the balance between medical ethic and cultural sensitivity. Such discretion is all the more necessary in a country like the United States, where there is such diversity of race, religion and cultural background. For example, nearly a third of the population is derived from various racial minorities, while religious expression also varies from conservative to liberal. In this regard, it is a prerequisite for healthcare professionals to take into account the cultural restrictions and religious doctrines of individual patients before deciding on a course of treatment. Just like Jehovah’s Witnesses have their own code of conduct, so too do various other denominations of Christianity followed in the country. Similarly, Muslims have their own mandates to follow. Hence, understanding and accommodating diversity is important for those in the healthcare

Extreme Risks Essay Example | Topics and Well Written Essays - 750 words

Extreme Risks - Essay Example Rees notes that some experiments, say launching of single nuclear weapon, are known to render threat to life on Earth. However, the magnitude of the impact of such experiments may not be amply intense to destroy the whole world. On the contrary, the author asserts that there are some physics experiments performed mainly for the purpose of pure scientific inquiry that could possibly pose global or even cosmic threat. For instance, device known as particle accelerators have been created to aid in the study of particle composition of the world. This machine is primarily utilized to investigate about most extreme energies and temperatures. Unbeknownst to many, such experiments that entail the smashing of atoms are said to possibly have disastrous effects on the universe. The author elaborates that this type of experiments may generate unprecedented concentration of energy which may lead to different catastrophic scenarios. This first scenario entails the formation of black hole that sucks in everything around it. However, Albert Einstein disputed this claim as the energy requirement for the formation of black hole is significantly greater than the amount of energy generated with the collision experiment. The second scenario involves the formation of strangelet, which is described as reassembled quarks. A strangelet is deemed harmless in itself but it said to possess the ability to convert anything it encounters into a new strange form of matter. With this, it could transform the entire planet into an inert hyperdense sphere. The third theory concerning vacuum is considered as the most disastrous. Some have speculated that the concentrated energy when particles crash together may set off a "phase transition" that would rip the fabric of space itself. Although experts have expressed that the likelihood of these scenarios occurring is minimal, Rees asserts that we cannot be completely sure of the outcome. This is because the probabilities assigned to these scenarios are deemed subjective due to the absence of comparison to a similar occurrence in the past. According to Rees, one way of checking whether an experiment is safe would be to examine if such has occurred naturally. For example, the negligible probabilities posited by experts may be acceptable in light of the fact that particles randomly crash into other atomic nuclei in space. This shows that space is not as "breakable" as envisaged by physicist. However, the mechanics change once the accelerators become more powerful, thus, no longer replicating what naturally occurs. The same concerns are encountered with the plans of Brookhaven National Laboratory in the United States and CERN Laboratory in Geneva to crash atoms more forcefully. Issues regarding safety is raised since no adequate reassurance is established considering that the conditions are different from what occurs naturally. Even if two notable theories were asserted in relation to the improbability of strangelet formation and characteristics, many experts still question the sufficiency of such claims. In view of the above, Rees opines that it is not reasonable to conduct an experiment if the downside may entail finality and completeness of extinction. As such, experiments with "doomsday downside" should not be permitted unless the general public is assured that the risk such undertaking may entail is within

The Power Of The Mcdonalds Brand

The Power Of The Mcdonalds Brand McDonald is one of the most popular fast food brands in the world. It started business in fifties and now it is serving worldwide chain of 30,000 restaurants. McDonald restaurants undoubtedly present a very useful example of sociological artifact. Several artifacts of modern world has been very well organized as Macdonalds popular brands, promotional strategies with the famous toys and films, its involvement in the charities and its saturation advertisement. More than 75% of McDonald is owned and operated by local men and women. Its serves more than 40million people per day. It drives 80% of its revenue from 8 countries like Canada, Brazil, Germany, France, Japan, UK, Australia and USA. The greatest achievement it got was creating a image in the minds of people and introducing them to the fast food culture. Delivery speed, customer care and hygiene cautions are the main driving advantage it has which helps the Macdonald to attract many customers. They have created a corporate symbol and saturated advertisement has helped the Macdonald to make a brand image and logo in the minds of millions of people. Overall McDonald strategic plan is called plan to win. There focus is not to be the biggest fast food chain in the world but the best fast food chain. McDonald strategic thinking behind this plan is creating better experience through the execution of multiple initiatives surrounding the five factor of exceptional customer experience. (McDonald, 2009) A key element of the MacDonald strategy since the beginning has been to own all the property on which the MacDonald was built doesnt matter the property is franchised or company owned. Rental money differs from property to property but it has been estimated that McDonald generate more money from its rents of the property than the franchise fees it charges. The success of the MacDonald since its beginning can be attributed to the customers service it provides. As the restaurant wants to be known for its consistent high quality food and uniform method of preparations. Macdonald has revolutionized the restaurant industry by inventing the limited menu fast food restaurant. Some inventions it has made are the introduction of the indoor seating and drive through windows. Another invention was the introduction of the play area. MacDonald is continuing new inventions to facilitate the mass customization process. In 2001 McDonalds began standardizing its technology its existing point of sale system with the office system in more than 11,000 stores in the United States. The company is investing in a common point of sale which will be available to use all over the world in its branches. (typepad, 2009) McDonalds facilitates the exchange of value by matching the money paid by customers with quality and variety of products and services resulting to the customer feeling of having received their moneys worth and even more than what they paid for. McDonald targets the customer satisfaction by catering the preferences to make the customers feel satisfied about the value exchange. McDonald is recommend for the family or friends gathering as well. MCDONALDS VISION To be the best and leading fast food provider around the globe MISSION STATEMENT McDonalds vision is to be the worlds best quick service restaurant experience. Being the best means providing outstanding quality, service, value, and cleanliness so that we make every customer in every restaurant smile OPERATIONS AND BUSINESS STRATEGY The definition of business strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives. Strategy is managements game plan for strengthening the performance of the enterprise. It states how business should be conduct to achieve the desired goals. Without a strategy management has no roadmap to guide them. In McDonald the business strategy for the company is to make food fast available to its customers at a very low competitive price but to get profit as well by reducing the cost of the product and expanding the business world wide. Operations strategies play a very important role in achieving organizational goals. By using these strategies an organization controls and maintains all of its operations. So these should make after a comprehensive marketing analysis according to capabilities and resources of an organization. Operation management strategies in McDonald are being made by made by top management. These strategies are implemented in all the branches of the McDonald and these strategies are distributed to all its franchise branches in the written form. So there are operational managers in all the branches that control all operational activities. McDonalds has developed three strategies for its future scenarios. These customers values, customer convenience and optimal operations. Together with the digital strategies, it helps to create new ideas for the company. The stores are characterized by the operations team as miniature manufacturing facilities. With its goal to improve the manufacturing process (inventory control, production planning, financial control and point of sale order entry) that help the store. (bized, 2009) REDUCING COST WITH MORE EFFICIENT EQUIPMENT The challenge facing the global equipment suppliers when they design the fryers for our restaurants is to develop such kind of equipment that are more energy efficient and gives better taste while improving the crew efficiency and using less cooking oil. The low oil Volume Fryer is our next generation fryer. LOV improves cooking efficiency, simplifies filtering and cleaning, and provide enhanced environmental benefits. The LOVs innovative design allows restaurants to cook the same amount of product with approximately 40% less oil. It also uses approximately 4 % less energy than standard fryers. (Gallagher, 2003) In McDonald lighting represent an important role in reducing the cost of its operations. McDonald uses fluorescent low consumption lighting in the kitchen. Tests revealed that each restaurant saves 11,000kWh of electricity each year. Packaging plays an important role of McDonald brand not only for quality, integrity and safety but also in its visibility to our customers. McDonald also use its cooking oil in its transport operation which has significantly reduces the cost of operation as well. The manuals of the McDonalds employees not only emphasize the organizations motto and QSCV, it also spells out everything they need to know to perform their tasks efficiently. It includes detailed rules on cleaning, food preparation and employees grooming and hygiene. They help ensure efficiency, predictability, and control in the production and customer service. In order to achieve its business strategy goals, McDonald is emphasizing more and more on reducing its cost of operational activities. In order to reduce the cost McDonalds purchases its potatoes from corporate farmers in farming states not the commodities market. Consequently it limits its contact with price fluctuations that might have occurred by using the commodity exchange to get those goods. (typepad, 2009) Aside from offering hamburgers and fresh fries, McDonald has start serving the family treat and as a community centre for the senior citizen. It has also start giving indoor playgrounds and promotional toys to its kids as well. As this trend continue there is an extension of more service-oriented technologies is needed. They can conduct studies and surveys to better know which among the different alternatives serves the companys objectives the best. These might include robots taking orders instead of humans, automated processes of food production (typepad, 2009) McDonald has a policy to be in the market as a market leader. In order to keep its leadership it keeps low cost and gets more income by selling food at cheap price. Food made with the help of machine is considered more hygienic; however the continuous development in the technology McDonald and especially its employees as they have to serve quick services. Computers and smart cashiers are used by the employees so that they would not get confused and they are provided with customized database management system. These all operational activities are conducted in all the branches of McDonald worldwide in order to successfully implement the business strategy of the McDonald. MCDONALD LAYOUT, PROCESS TYPE AND USE OF TECHNOLOGIES MCDONALD KITCHEN LAYOUT The strategy refers to the overall working and general environment offered by the McDonald. It includes the personal level, service and product layout, interior and exterior. McDonald has a policy to serve the fresh food to it customers in a minimum time and at the same time they want to get as many as possible customers to get the more income. The most important thing on which McDonald operational department concentrate is the customers satisfaction. Customers satisfaction can only be achieved if it serves the customers with a good quality food in a quickly with minimum price. In order to perform this whole process McDonald has a very specific type of layout. This layout gives an easy access to the staff to serves the customers in a quick way. At the till when a staff serves the customer, staff has a everything in its reach required by the customer. (Gallagher, 2003) McDonald keep maximum number of tills opens to serves the customers and each staff takes average one minute to serves the customer. The chairs are arranged in such a way that it gives a minimum disruption to the people who are standing in the queue. In the kitchen department McDonald has selected high efficiency fryers which take minimum time to fry the chips. Operations manager has assigned the task to different staff members according to their ability. McDonald get most of the things in ready to serve form from its main headquarter which decrease the cost of producing the food and it also help the McDonald to keep the quality same all over its stores. Staff in McDonald only has to put the food in oil and it gets ready to serve. It also helps the McDonald to save lot of storage cost. In order to keep the system runs smoothly McDonald always keeps good relation with the suppliers. Their supplier makes sure that they deliver the goods to McDonald in the minimum possible time. (Swearingen, 2003) STRATEGIC IMPORTANCE OF LAYOUT Proper layout enables: Higher utilization of space, equipment and people Improved flow of information, materials or people Improved employee morale and safer working conditions Improved customer/client interaction Flexibility Layout design mean the overall working and general environment offered by the McDonald. It includes the personal level, service and product layout, interior and exterior etc. STRATEGIES: Exterior McDonald sets its premises in proper manner to handle any number of customers easily. The building design is standard world wide but it may be have some difference in size or in exterior according to the location. It enables them to save time, satisfy their customers, comfortable environment for both employees and customers. Ray Kroc opened the first McDonalds franchise in 1955 and today there are over 30,000 restaurants worldwide. McDonalds objectives were to modernize older McDonalds buildings with a fresh new look, while still maintaining the primary iconic sign design and exterior facade elements. The restaurant sign design had to carry the restaurants into the next decade and follow their unique Forever Young branding. Interior: Interiors are set to be depoliticized. In addition to new restaurant lighting, menu boards, artwork and graphics, new materials will offer choice when it comes to decor selection. Technology perks include Wi-Fi, programmed music, and video. (typepad, 2009) MCDONALDS USE OF TECHNOLOGIES McDonalds U.S. created a Store Technology Board to help deliver on the Plan to Win. The board is comprised of corporate and franchisee representatives and is responsible for guiding the development of technology in McDonalds U.S. restaurants. It is also responsible for ensuring timely, cost-effective delivery of high-quality technology solutions; providing effective and timely communication with McDonalds stakeholders and leveraging technology talent and resources where they exist. In 2001 McDonalds began standardizing its technology by integrating its existing point-of-sale and back-office systems in more than 11,000 restaurants in the United States. The company now is investing in a common POS system for use around the world. New-POS, a product developed by Savista, will help McDonalds improve restaurant productivity and enhance the customer experience. In addition, moving to New-POS will create a common platform across the globea move that will better allow McDonalds to leverage future technology in the restaurants. McDonalds implemented an integrated electronic payment system that could be adapted to meet future technology needs as well. He says a significant amount of time also was invested in finding a solution that would permit debit, credit and gift card transactions to be processed through the standard POS system in less than four seconds.(swearingen, 2003) McDonald uses the best equipment to carry out the day to day operation in its outlet. MCDONALD EXPLOTATION OF VALUE CHAIN AND QUALITY PORTERS FIVE FORCES ANALYSIS Competition Restaurant industry is highly competitive industry. There are many small fast food businesses in the industry that fight each other to improve their customer base. McDonald is not exception to this. Since it establishment in 1940, MCD has excelled in this sector. Nevertheless to stay in the competition, it started with MCafe. This helped the company to stay in the business as a major fast food business. Another major step came out when McDonald started breakfast to compete with the existing businesses serving breakfast. Hence this industry is extremely competitive and the MDC should be up to date with customer taste and preferences. Quality is very important for McDonald in order to stay in the market but at the same time it has to keep the prices minimum to maintain the cost leadership. Ease of entry Although it is hard to enter in the restaurant business as it demand a lot of investment and it is hard to establish a distinct brand name as well. There is a cost of entry in the market and there is high research and development cost. Large established companies like McDonald do make it more difficult to enter and succeed within the marketplace, new entrant find that they are faced with price competition from existing chain restaurants. At the same McDonald working hard to maintain the quality same throughout the time. It is aware that if it compromise on its quality then it will make very much easier for the new entrant to attract the customers with better quality of its food products. Figure 1.1 Substitutes McDonald keeps a very close watch on its quality because it is aware that customers have many others substitutes of its food products. e.g MDC burgers, Beverages and dairy products. Strength of Suppliers The suppliers power in the fast food industry is relatively small unless the main ingredient of the product is not readily available. Strength of Buyers Relatively strength of buyers in this industry is relatively low.(Ifm, 2009) PORTERS FIVE FORCES ANALYSIS OF VALUE CHAIN The goals of these activities are to offer the customer a level of value that exceeds the cost of activities, thereby resulting in a profit margin for McDonalds. Figure 1.2 The primary value chain activities are: Inbound Logistics The receiving and warehousing of raw materials and their distribution to manufacturing as they are required. McDonald has an efficient warehousing and transporting goods to its branches. All the products are made in the warehousing and goods are distributed as per the requirement of each branch. Operations The processes of transforming inputs into finished products and services. McDonald has a very good operation system as it has trained staff for each task in the kitchen. Most of its product is already in the ready to serve form. All they have to put them in the ovens or in the oil and the product get ready to serve in the minimum possible time which normally takes from 1-5 minutes. Outbound Logistics The warehousing and distribution of finished goods. McDonald has a very well established transporting system. As all of its products are prepared at the warehouse, so in order to improve the distribution process it has applied the IT technology which inform the warehouse body that which branch is running out of the products, so before the products get finished it immediately make available the product to the branch. This process is very cost effective as branches do not need to have the stock room for the goods. Marketing Sale The identification of customer needs and the generation of sales. Service The support of customers after the products and services are sold to them. The primary activities are supported by : Technology development Technologies to support value creating activities. The value chain model is a useful analysis tool for defining a firms core competencies and the activities in which it can pursue a competitive advantage as follows: Cost advantage By better understanding costs and squeezing them out of the value adding activities. As per the porters five forces analysis McDonald deals with factors outside a industry that influence the nature of competition within it, the forces inside the McDonald influences the way in which the firms compete, and so the industrys likely profitability is conducted in the Porters five forces mode.(Ifm, 2009) Figure 1.3 Further there are Secondary support activities which directly supporting the operational activities of the business. HRM department make it possible for the business to get the energetic people to perform the operations. They always keep motivating the staff to work hard. The Management makes possible to select the technology which is cost effective together with the efficiency. CONCLUSION McDonald is a very well established organization. The success of the McDonald is completely based on the extensive research of the market internal and external forces. It has done research on the people behavior of specific country, on their culture, buying power and social issue. McDonald has paid special attention on the location of the business, its interior and exterior outlook and types of technologies it going to use to get the maximum production at short time. The most important thing which it focused on was the quality and the market forces which directly affect the business.

Basic Manufacturing Cost Categories Essay

The term direct labor is reserved for those labor costs that can be essentially traced to individual units of products. Direct labor is sometime called touch labor, since direct labor workers typically touch the product while it is being made. Manufacturing Overhead Cost: Manufacturing overhead, the third element of manufacturing cost, includes all costs of manufacturing except direct material and direct labor. Enumerate and define the different classifications of costs On the basis of Nature or Elements: One of the important classification cost is on the basis of nature or elements. Based on elements, it is classified into Material Cost, Labour Cost and Other Expenses. They can be further subdivided into Direct and Indirect Material Cost, Direct and Indirect Labour Cost and Direct and Indirect Other Expenses. 2) On the basis of Function: The classification of costs on the basis of the various functions of a concern is known as function-wise classification. Here, there are four important functional divisions in the business organization. Viz. (a) Production Cost (b) Administration Cost (c) Selling Cost and (d) Distribution Cost. 3) On the basis of Variability: On the basis of variability with the volume of production cost is classified into Fixed Cost, Variable Cost and Semi Variable Cost. Fixed Costs are those costs which remain constant with the volume of production. Rent and rates of office and factory building are some example of fixed cost. Variable costs are those costs incurred directly with the volume of output. For example, cost of materials and wages to workers are the expenses chargeable with direct proportion to the volume of production. Semi-Variable Costs are those costs incurred partly fixed and partly variable, with the volume of production. Accordingly, it has both fixed and variable features. For example, depreciations and maintenance cost of plant and machinery. 4) On the basis of Normality: Costs are classified into normal costs and abnormal costs on the basis of normality features. Normal costs are those incurred normally within the target output or fixed plan. 5) On the basis of Controllability and Decision Making: Based on the managerial decision making and controllability the classifications are as follows: (a) Controllable Cost, (b) Uncontrollable Cost, (c) Sunk Cost, (d) Opportunity Cost, (e) Replacement Cost, (f) Conversion Cost. a) Controllable Costs: Controllable Costs are the costs which can be influenced by the action of a specified number of an undertaking. Controllable Costs incurred in a particular responsibility centre which is influenced by the action of the executive heading. For example, direct materials and indirect materials. b) Uncontrollable Costs: Uncontrollable Costs are those costs which cannot be influenced by the action of a specified number of an undertaking. In fact, no cost is controllable; it is only in relation to a particular individual that may specify a particular cost to either controllable or non-controllable. For example, rent and rates. c) Sunk cost: These are historical costs which were incurred in the past and are not relevant to the particular decision making problem being considered. While considering the replacement of a plant, the depreciated book-value of the old asset is irrelevant as the amount is a sunk cost which is to be written-off at the time of replacement. Unlike incremental or decremental costs, sunk costs are not affected by increase or decrease of volume. Examples of sunk cost include dedicated fixed assets, development cost already incurred. d) Opportunity Cost: Opportunity cost means the cost of forgoing or giving up an opportunity. It is the notional value of going without the next best use of time, effort and money. These indicate the income or potential benefits sacrificed because a certain course of action has been taken. An example of opportunity costs is the market value forgone or sacrificed when an old machine is being used. e) Replacement Cost: Such expenses may be incurred due to factors like change in method of production, an addition or alteration in the factory building, change in flow of production etc. All such expenses are treated as production overheads; when amount of such expenses is large, it may be spread over a period of time. f) Conversion Cost: Conversion costs are those costs which are incurred while converting materials into semi-finished or finished goods. It is the aggregate of direct wages, direct expenses and overhead costs of converting raw materials into finished products. Differentiate variable and fixed cost Fixed costs are costs which remain constant within a certain level of output or sales. This certain limit where fixed costs remain constant regardless of the level of activity is called relevant range. Variable costs are costs which change with a change in the level of activity. Examples include direct materials, direct labor, etc.

One-Dimensional Man

The introduction of Herbert Marcuse’s book, â€Å"One-dimensional Man,† shows us the problem that a democratic society creates. Though this book was written back in 1964, many can agree that what he says is true in today’s society. Different scenarios are also brought up to show us how things will be affected due to the advancements of technology. Marcuse wants us to see what will happen and what has happened to society through a series of changes. Marcuse talked a lot about the necessities and luxuries of life. He called these the â€Å"true needs† and the â€Å"repressive needs. He makes it a point to show us that the changes in society cause us to think differently. Most people are beginning to mistaken the â€Å"true needs† with the â€Å"repressive needs. † Instead of actually spending their money on things they need for themselves or their families, they splurge. Marcuse believes this to be due to the advancement of technology. Marcuse also believes that the media, in all its forms, influence what the individual believes to be â€Å"true needs. † Through social media, we are convinced that we must have something, therefore we go out and get what we want.All of the advertisements that you see are purposely developed so that you would want the product. With this the individual is blinded by what is truly needed and what is wanted. Marcuse compares this kind of behavior to a disease. He states that the individual indulges on these products so that they may satisfy their happiness within. But Marcuse says that this happiness is not a condition which has to be maintained (5). Instead, it is temporary and will go away once this person has satisfied their need. Then what is left is euphoria in unhappiness (5).Marcuse believes that an individual indulges in these â€Å"repressive needs† because they want equality. Buying these products give them a sense of equality to others in society. Marcuse believes tha t they are blinded by these products so much that they don’t even care about â€Å"true needs† anymore. They would rather have a big screen TV like their boss has rather than having health insurance. Marcuse says â€Å"Mass production and mass distribution claim the entire individual, and industrial psychology has long since ceased to be confined to the factory† (10).Anything that can be found within a household is mass produced. Most of which are machines that are used to help make everyday life easier. Society has become so accustom to having certain gadgets around that some people don’t even know how to perform simple tasks. Being able to mass produce an item is good in itself, but being able to distribute that product to an entire nation or even several nations is something else. This creates the potential of having the entire world depending on one company for a particular product. Technology has become just another part of everyone’s life.Tec hnology is constantly advancing and new products are always invented to help the daily routine of life, easier. Some examples of how certain inventions make life easier are the car, computer and internet. Being able to travel twice the distance in half the time makes the task of going to work and tending to your family much easier. Being able to send someone a document with a click of the mouse or even keeping in touch with family or friends that live far away. Since the workforce mainly consists of machines creating everything, people have begun to find things to do with their free time.Having actual free time to do things with the family or friends or even oneself is starting to become common according to Marcuse. Marcuse clearly states that technology has taken over the entire work force. Marcuse states â€Å"The very structure of human existence would be altered; the individual would be liberated from the work world’s†¦. † (2). By this he wants us to realize t hat humans will soon be replaced by technology. There would be no need for people to be around factories anymore because everything can be done much faster and much more efficient with machines.This is the type of society that we are heading into. This is all due to the people that own these factories. The uses of machines have proven to be much more efficient and much more productive. Humans just can’t perform certain tasks that are needed to mass produce products. They just may be able to but the quality of the work wouldn’t compare to that of a machine’s work. â€Å"Today political power asserts itself through its power over machine process and over the technical organization†¦. † (3). We can all agree that this statement still holds true today.The executive decisions, which are made in today’s society, are all made by those who own major companies or corporations. They have the most power because they have the most money. Their factories a re mainly machines that create their product. Though they still require some manpower to run their system, they mainly rely on their machines, These select few people utilize the full potential use of technical, scientific and mechanical productivity (3). Marcuse makes a good point in saying â€Å"†¦ economic freedom would mean freedom from the economy†¦Ã¢â‚¬â„¢ (4).Those who have utilized the full potential of machines have already found their freedom from the economy. Everyone else is struggling to earn freedom from the economy, making just enough money to support their families. We know these people as the middle class or the working class. Their jobs give them a decent amount of money to live comfortable lives. In this passage, Marcuse talks about how liberty can become something that is used for controlling the masses. The ability to be able to elect ones leader doesn’t necessarily mean that the government isn’t in control.The government is always going to have some type of influence on everything that is put on the media. For example, if the government isn’t influencing the media, why is there censorship? The truth is that the government controls most aspects of our life. Marcuse argues that the right of freedom of speech is good yet it also creates the right for censorship. Marcuse believes that the purpose of technology is to help us live easier lives. Assisting us with jobs that humans just don’t have the strength for should be the true intention of a machine. A machine is supposed to take the job of several humans.It is there to perform tasks that a normal human does not have the strength or ability to do. Instead, the capitalist government is using machines to increase their power and wealth. Instead of using technology advances as something to help the people, they instead use it to oppress the people with weapons and propaganda. Being able to determine one’s leader may sound like an ideal but Marcuse m ay disagree. He states that this system is not perfect. The idea of having a free trade system allows the government to publish people with trade sanctions.Going between countries would require one to meet all of these rules in order to proceed with the transaction. Sanctions for one country may be completely different from a neighboring country. These sanctions would not have existed before but must still be enforced. Even though this was written back in the mid 1960s, we can see that some of what Marcuse says is true in today’s society. Though the change process was gradual, there were still significant changes that we can see. The advancement in technology is one key factor in the gradual changes that we see.Everything has technology integrated into it in one way or another. Because of this people began to lose sight of what was truly needed in life to survive and live. Instead, people have been blinded by things that they want and work until they have actually gotten what they wanted. They have fed their hunger for materialistic things for the time being but will soon realize that this hunger will eventually fade away. The government also influences the society through media. Censorship is a method in which the government influences the media.