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It is not surprising that the consumer products industry is one of the largest, diverse and fastest growing in the world. Anthony, Dearden and…
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Applied or practicing anthropology
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TABLE OF CONTENTS INTRODUCTION 1.1Background to the study 1.2 ment of the problem 4 3Purpose of the study 8 4Aim and objectives 10 5Significance of the study 11
1.6Research questions 14
1.7Scope and Delimitation 15
1.8Structure of the Study 16
2.1Introduction 19
2.2Retail industry in China 19
2.3Consumer behavior within retail industry in China 21
2.4Management development skills to develop competitive retailing 30
2.5Strategic options within the retailing sector 33
2.6Developing employee readiness for lifestyle retailing 35
2.7Theoretical Framework 38
2.8Summary of the Review 43
3.1Research Method 46
3.2Research philosophy 48
3.3Research approach 49
3.4Time horizon 50
3.5Research Strategy 51
3.6Population 52
3.7Sample and Sampling Technique 54
3.8Research instrument 57
3.9Data Collection process 59
3.10Validity and Reliability 62
3.11Ethical Consideration 63
3.12Data Analysis Plan 64
4.1Level of penetration of lifestyle supermarkets in Shenzhen 66
4.2Success of traditional retailing in sales 71
4.3Consumer behavior trends between traditional and lifestyle retail 74
4.4Level of loyalty for traditional and lifestyle supermarkets 79
4.5Employee readiness for lifestyle retiling 81
4.6Customer education 83
4.7Intrinsic motivation 84
4.8Employee attitude 86
5.1Level of penetration of lifestyle retailing in Shenzhen 88
5.2Success of traditional and lifestyle retail 89
5.3Consumer behavior trends between traditional and lifestyle retail 91
5.4Level of management developments in response to consumer behavior 93
5.5Strategic option in response to lifestyle retailing 94
5.6Employee readiness for a lifestyle center in Shenzhen 96
6.1Summary of major findings 98
6.2Conclusions 102
6.3Suggestions and Recommendation for Professional Practice 106
6.4Limitations and Recommendations for future work 109
References 111
Figure 1: Agreement to competition from lifestyle retailing 72
Figure 2: Level of adaptation of sale of FMCGs 73
Figure 3: Higher export spending on FMCGs 75
Question on the level on the export spending 75
What is the level of export spending? 75
Has it increased or decreased the expenditure and the level of sales? 75
Figure 4: Experience in sales decline in traditional products 77
Figure 5: FMCGs having shorter shelf life 78
Figure 6: Changes in consumer behavior due to lifestyle center 80
Figure 7: Changes to consumer spending on FMCGs 81
Figure 8: Changes to consumer spending on traditional products 83
Question on the loyalty level 83
Are there consumers who are loyal to specific goods and what goods are mainly preferred? What could be the reason? 83
Has purchasing behavior of consumers been influenced by lifestyle retailing experience? 83
Figure 9: Loyalty levels of supermarkets 85
Figure 10: Level of skills development among employees 87
Question on the level customer education 87
To what extend are employees trained with regard to customer relations and retention. How do proper customer relations improve the consumers’ loyalty to lifestyle retailing? 87
Figure 11: Level of customer education 88
Question on the level of intrinsic needs 88
Is there any form of motivations available to employees in retail trade? 89
What forms of intrinsic motivation are available to the employees in traditional supermarkets? Are they effective? 89
Figure 12: Level of intrinsic motivation 90
Question on the level of employees attitude. 90
What is the employees’ attitude towards work in traditional supermarkets? 90
Are there any mitigating factors to improve the attitude towards work by employees? 90
Figure 13: Nature of employee attitude 92
1.1 Background to the study
In any typical human society, there are different and varying consumer needs, making the consumer product industry a very important one. It is not surprising that the consumer products industry is one of the largest, diverse and fastest growing in the world. Anthony, Dearden and Govindarajan noted that the consumer product industry is so large that it embodies and affects almost every other industry that can be thought about (45). Rutner, Waller and Mentzer also observed a situation where the consumer product industry is so diverse that it comprises both the manufacturing sector and the sales sectors (34). Within each of these two sectors, there is also much diversity when it comes to what is really being produced or sold by them. On the whole, the annual rate of growth of the consumer product industry for manufacturing has been estimated to be 11.5% whiles that of the sales sectors has been pegged at 18% (Domingos 66). This shows a very strong and formidable industry in consumer products. Writing on the differences in the growth rate of these two sectors of the same industry, Cho indicated the sales sector experiences higher growth rate because of the level of involvement in this sector (51). This is to say that there are so many people involved in the sale of consumer products than can be said of those involved in the manufacturing of consumer products. Certainly, it is common to find a person engaged in the sale of one form of one form of consumer product or the other, wherever a person may be found.
The visibility with the consumer sales sector has been attributed as a response to the rapid needs of consumers for these products (Case and Shiller 33). In a typical market, the sales sector of consumer product industry can be subdivided into wholesale and retail, where the growth within the retail division has also been said to be ahead of the wholesale division (Hatzi and Otto 97). Again, this situation has been attributed to the extent of proximity between retailers and consumers. This is because whereas wholesalers sell consumer products to retailers and other professional businesses, the retailers sell directly to customers or consumers (Gwartney, Stroup and Sobel 121). For this reason, whenever there is discussion on consumer demand, the first point of call is the retail, who receives the pressure from consumers. As far as China and for that matter Shenzhen is concerned, the retail division of the consumer product sales sector can be widely divided into traditional retailers and lifestyle retailers. Traditional retailers operate stores and supermarkets that deal basically in durable goods and major appliances (Hatzi and Otto 100). These traditional products have been noted to have longer shelf life meaning that they could be in the shelves at the shop or supermarket for long. The longevity is attributed to several factors including the fact that they are mostly slow on sale and the fact that they have longer expiration time, given the fact that they are durable (Womack, Jones and Roos 9). Lifestyle products on the other hand are generally fast-moving consumer goods (FMCG) which are sold very quickly, less durable and having a shorter shelf life (Deaton and Muellbauer 77).
The relationship that currently exists between the operations of traditional or chain stores in Shenzhen as against lifestyle stores can be explained through several theories, mainly the theories of retail change. These theories of retail change have been used as the focus of the study in explaining how retail businesses grow and develop throughout the retail lifecycle. The rationale for selecting these sets of theories which will be elaborated under the theoretical framework of the study was because they relate well with the ongoing changes in the retail sector that is being experienced in Shenzhen. Hatzi and Otto observed a change, though gradual and systematic, where most operators of supermarkets in Shenzhen are beginning to focus on FMCG (103). These have made many analysts questioned and wondered if there is going to be a future that will be dominated with the sale of FMCG and thus the creation of lifestyle center in Shenzhen. Another rationale for selecting the theories of retail change was because the two types of stores in question which are chain or traditional stores and lifestyle stores each have their unique dynamism with development on the retail lifecycle (Cho 8). Already, it has been explained that the FMCG have shorter shelf life while the traditional goods have longer shelf life. The differences in the shelf life and overall lifecycle of consumer products have been said to have a major impact on the sales dynamics of these, causing management to have a relevant skills and experience to manage them in a manner that avoids losses (Cho 12).
1.2 Statement of the problem
Over the years, several dynamic patterns have been associated with the retail industry in Shenzhen, where for greater part of the last three decades, the emphasis was on the sale of traditional products and thus the operation of traditional stores and supermarkets (Cho 81). Hamilton and Schwab however posits that this trend is rapidly changing even though there cannot be a claim of a practical takeover from the traditional stores yet (74). The change has been said to be directed or tilted towards the sale of lifestyle products, where the extent of penetration of FMCG has been rated to be far higher than it used to be some few decades back. Over the past three decades, Kuester noted of the Chinese consumer product market as emphasizing on the manufacturing of FMCG purposely for export reasons (6). Because of this, those who were engaged in the sale of these FMCGs did so only as part of their major operation of traditional shops. It was therefore very difficult to point to specific shops or supermarkets that were typically reserved as lifestyle stores. Today, the number of lifestyle stores that can be seen are many and even within the traditional stores, the amount of FMCGs sold have increased (Hirsh, Kang and Bodenhausen 10). This situation has made several market experts wonder if indeed China and for that matter Shenzhen is heading for a future that will be dominated by lifestyle stores with traditional stores operating only at inferior levels to the lifestyle stores. These experts have also questioned if there is going to be a future that merges lifestyle stores with traditional stores in a more even manner than is currently experienced.
General problem
How do competitiveness and readiness of Shenzhen market be evaluated and served as basis for the development of marketing strategy on lifestyle products? 
A lifestyle center  is where shopping of variety of product is done and the mixed commercial development combines the traditional retail functions of a shopping mall with leisure amenities oriented towards upscale of consumers. Lifestyle center of products was first labeled as such by developer Poag and McEwen in the 1980s and it emerged as a retailing trend in the late 1990s, where it was named boutique malls. They were located in affluent of suburban areas. While in our modern-days lifestyle centers for products are fairly new as open-air malls have been there for decades. One such mall is Friendly Shopping Centered in Shenzhen, China. In this market of Shenzhen they trade with variety of products which bring about competition. This is due to producers producing more because they are many in the market and consumers are less. Then this producer may try to apply the sale of FMCGS which may not work for them since they are many who would adapt this method leading to fail and making losses. The losses would finish the business people.
In some situation of competition between sellers in this market can be fierce with relatively low prices due to high production. This may also not increase the sale of good which is disadvantage in this market of lifestyle this could lead the life style market to have efficient outcome approaching leading to perfect competition which is better than in tradition market retailer. Consumers have variety of goods to choose from in the lifestyle market so they may decide to buy from producer who have best quality and quantity they desire and with they favoring prices creating loyalty of shopping on this seller. This seller in lifestyle market may enjoy more sales than others.
Specific problem
The ongoing dilemma for retailers in Shenzhen is the major problem that is being considered in this research. The reason this is said is that should there be a shift or move from traditional retailing to lifestyle retailing, with Shenzhen becoming a lifestyle centre, there are several implications that this could pose to industry players and stakeholders, including managers of stores and consumers alike. Using the experience of other global markets such as Norway and Sweden, Nelson noted that once Shenzhen becomes a lifestyle centre, even manufacturers will be affected as industry stakeholders due to the fact that lifestyle centers rely on high end lifestyle supermarkets with imported FMCGs (34). What this means is that, even Chinese manufacturers will face very stiff competition from nearby Hong Kong markets where the manufacturing of FMCGs have been on for several decades now. This sort of competition is likely to arise because as it has already been stated, lifestyle supermarkets have higher demands from consumers, meaning that the level of supply will be expected to increase drastically. As a response to the situation, the Shenzhen manufacturers will either have to double their efforts or deal with the external competition as the managers and operators of the lifestyle supermarkets will be under direct pressure to respond to the growing demand from consumers. Another possible situation that is associated with the ongoing dilemma which is the problem of the study has to do with the readiness of Shenzhen to become a central logistic center for online shops, given the strong reliance on electronic commerce as part of the creation of lifestyle center (Rutner, Waller and Mentzer 3).
Competition faced by traditional retailing with lifestyle retailing
Lifestyle retailing is giving traditional retailing in Shenzhen stiff competition due to its availability in the markets.
Adaptation of the sale of FMCGs
Due to high and stiff competition faced by traditional retailers there is need for them to start reselling FMCG this because all the lifestyle retailers were mainly dominated by FMCGs.
Rate of export spending on FMCGs
Though most of Chinas manufacturing sectors is dominated by production of traditional durable products most of FMCGs are exported.
Success of traditional retailing in sales
Later in conducting of the study we shall discuss on the extend of penetration of lifestyle retailing in Shenzhen and also to measure how successful traditional retailing is performing in terms of sales.
Sales in traditional products
Sale in traditional retailing may be either or high depending on the season. If it will be peak for lifestyle retailing then it will low season for traditional retailing and vice versa
Rate of sale
The decrease rate in the sale of traditional products has been due to availability of FMCGs in the market. The rate of sales will be assessed based on the number of items sold but not on quantum of sales.
Consumer behavior trends between traditional and lifestyle retail
In carrying out of this study consumers will be of importance because they will assist us in collecting the data.
Changes in consumer buying behavior towards FMCGs
Purchasing power of a consumer is highly affected by the change in level of penetration of lifestyle penetration.
Changes in spending on FMCGs
The level of change in consumer spending on FMCGs may either rise or lower depending on various factors like season, price and availability.
Changes in spending traditional products
Like in the case of consumer spending on FMCGs also spending of traditional products will depend also on prices, season and availability of the products.
1.3 Purpose of the study
Based on the problem of dilemma of retailers in Shenzhen as to either to go into lifestyle supermarkets or maintain traditional supermarkets, two major purposes were set to be achieved with the study. In the first place, the researcher was concerned with finding the competitive factors between lifestyle supermarkets and traditional supermarkets that may make one of these advantageous over the other. The rationale for this purpose was that the need to make profits is the major reason or factor that influences decisions made by retailers to go into business. To this end, it is important that before decision will be made on choosing one of the types of supermarkets over the other, competitive factors that makes one of the ventures more advantageous than the other will clearly be established. Writing on the competitive factors that are commonly associated with the type of retail business operated, Vargo and Lusch posited that the factors could be very varying, including cost of startup capital, demand trend, demographic factors, affection on economic situation, among others (2). At any point in time, one of the types of supermarkets may have weaknesses with some of the competitive factors whiles having weaknesses with others. This means that it will always be difficult to say from an outright position that one of the two types of supermarkets is advantageous than the other. The implication that this gives to industry players is that they will always have to consider the specific competitive factors to know the ones they would want to associate with and go after these accordingly.
There was also the purpose of finding the readiness factors of retailers to embrace the lifestyle center concept if it becomes necessary that this is adopted in the long run. As it has been indicated with the theories of retail change, each type of retail, be it traditional or lifestyle have its own dynamics and business requires. If the study’s findings reveal the need to switch to a lifestyle market, it will then be important to know how ready existing operators of traditional supermarkets are, to be part of the change. As far as readiness factors are concerned, the study looked into areas such as management development, strategic option and employee development in embracing the pending change. The background of the study given above sets the rationale for this purpose of the study, given the fact that the possibility of an era that is dominated by lifestyle supermarkets can be said to be very certain (Nelson 4). In effect, it is very important that even those who are not ready to switch from traditional supermarkets to lifestyle supermarkets will embrace themselves for competition with those who will go into lifestyle supermarkets. This means that the purpose of the study to look into the readiness factors for the creation of a possible lifestyle center in Shenzhen is something that affects all retailers whether they are willing to go into lifestyle markets, are going to combine lifestyle supermarkets with traditional supermarkets, or continue operating traditional supermarkets exclusively. It can therefore be said that the relevance of the study is transcending for the overall retail market in Shenzhen.
1.4 Aim and objectives
In order to achieve the purpose of the study defied above, it was very important that a collective aim that will serve as the motivation of the researcher for the study be set. Consequently, the researcher approached the research with the aim of finding out if lifestyle retailing is a formidable market in Shenzhen, and whether there is the need for supermarkets to develop lifestyle shops with logistic centers. This means that the study’s aim is set around two major premises. The first of these is to substantiate claims and assertions in literature that lifestyle retail is fast penetrating the Chinese market with primary collection of data from Shenzhen. The second premise is to associate the outcome with the first premise; whether lifestyle retail is a formidable market in Shenzhen, to the action and response that market players have to take in the retail business. In order to achieve the aim of the study, specific objectives were set to be tasks that the researcher pursued as part of data collection. These specific objectives have been listed below.
i. To find the competitive factors between lifestyle retail and traditional retail in Shenzhen that suggests the formidability of lifestyle retail.
a) To determine the level of penetration of traditional and lifestyle supermarkets in the past decade in Shenzhen
b) To determine the success of traditional and lifestyle retail based on sales and revenue
c) To determine the consumer behavior trends between traditional and lifestyle retail division in Shenzhen
ii. To identify the readiness of operators of traditional supermarkets in dealing with a lifestyle dominated retail market.
a) The find the level of management developments that have been put in place in respond to existing consumer behavior
b) To find the types of strategic options that best respond to emerging market dynamics with lifestyle retailing
c) To find the level of employee readiness for lifestyle retailing
1.5 Significance of the study
With the successful completion of the current study, there are several theoretical and practical significances that it would carry. From a theoretical or academic perspective, it is expected that the study will help in bridging major gaps in literature that focus on the concepts of lifestyle retailing and traditional retailing in Shenzhen. For example based on preliminary review of literature that was done, it was found that there are works of literature that clearly identify the differences with the retail lifecycle lifestyle consumer products and traditional consumer products. This notwithstanding, there were hardly any works of literature that related the effects that the differences in the retail lifecycle of the two have on the other. That is to say that in a typical open market such as Shenzhen, it is important that where there is a mixture of lifestyle supermarkets and chain supermarkets, the impact that each of these has on the other and the overall market be well understood. Since the study’s aim seeks to focus on the impact of lifestyle retailing on traditional retailing, and whether those operating traditional supermarkets now should switch to lifestyle supermarkets, it would be expected that this gap in literature will rightly be addressed. Once this gap is addressed, most future researches that will be performed in the area of retailing in Shenzhen could use the findings of the study as a conceptual framework to build on their own themes. What is more, the shortfalls of the research process shall be a basis on which recommendations will be made for further research.
From a more practical professional perspective, it is expected that the outcome of the study will serve as a basis on which operators and managers of both traditional and lifestyle supermarkets will take decisions on how to approach the retail market in general. It is expected that the outcome of the study, based on the use of secondary data and primary data will confirm the realities of Shenzhen market that is being dominated or invaded with lifestyle retailing. Once such confirmation is established, those who are currently operating traditional supermarkets will have the opportunity of learning from the study, ways in which they could remain competitive whiles continuing with their traditional supermarkets. At the same time, those who will be ready to switch to lifestyle retailing will be aided on understanding the dynamics and retail lifecycle of that division of the consumer product industry. Once this is done, it will be very easy for them to adapt to the lifestyle supermarkets in such a way that they do not loss out on the needed merits that should come with it.
In effect, the study carries the advantage of promoting competitiveness for those who are currently involved in traditional retailing even if the findings of the study reveal the reality behind the possible takeover of the Shenzhen market with lifestyle retailing. As far as traditional supermarket managers and operators are concerned, it is expected that the outcome of the study will either give an indication for them to continue with traditional retailing or switch to lifestyle retailing. Also on the practical professional advantages, it is expected that the outcome of the study will not only benefit those in the retail sector in Shenzhen. Rather, the overall economic outlook of Shenzhen and China in general are expected to improve. The reason this is said is that China’s economy has been noted to rely heavily on the retail sector.
It is not surprising that Fleisch, Christ and Dierkes noted that the International Monetary Fund estimated that merchandise trade in China alone ranges at about half the overall gross domestic product of that country. what is more refreshing is the fact that there has been slow exports in China, leading to an increase in the volume of domestic retail markets, meaning that China now consumes most of the products it produces internally. Relating this to the study, it will be noted that the study’s benefits that will directly be focused on the growth of the retail sector will not only benefit those in retail but the economy at large, including local manufacturers who are already enjoying the outcomes of the slow exports in that country (Fisher 1). One other significant advantage that the current research is expected to serve is the wide range of beneficiaries that will be recorded in a Chinese market that is booming with successful retailing. This is because there has been an estimated 65,921 retail companies in China, with the leading 100 retail operators dominating only 9% of the market share (The Statistics Pool). The implication here is that a lot of small and medium scale operators will benefit if there is any form of growth within the retail sector because these are the group that dominate the market value, just as they are the group that makes greater percentage of the market (Domingos 90).
1.6 Research questions
Following the specific objectives that were set, the researcher formed research questions that would define the scope of investigations that the study will be pursuing. This is like saying that by answering the research questions that were set, the researcher was aiming to directly achieve the specific objectives of the study and then the aim of the study. The research questions were therefore framed in the exact manner in which the specific objectives were formed.
i. What are the competitive factors between lifestyle retail and traditional retail in Shenzhen that confirm the formidability of lifestyle retail?
a) What is the level of penetration of traditional and lifestyle supermarkets in the past decade in Shenzhen?
b) How successful has traditional and lifestyle retail based on sales and revenue?
c) What is the consumer behavior trends between traditional and lifestyle retail division in Shenzhen?
ii. What is the level of readiness of operators of traditional supermarkets to deal with a lifestyle dominated retail market?
a) What is the level of management developments that have been put in place to respond to existing consumer behavior on the retail market in favor of lifestyle supermarkets?
b) What are the types of strategic options that best respond to emerging market dynamics with lifestyle retailing?
c) What is the level of employee readiness for lifestyle retailing in Shenzhen?
1.7 Scope and Delimitation
The scope and delimitation of the study explains the conceptual areas as well as methodological areas that the study was limited to. As far as concept is concerned, it will be noted that even though the study has a lot of background in consumer product industry, the research’s scope is limited to the area of retailing, where traditional retailing and lifestyle retailing are the two specific areas under consideration. This is being done with the acknowledgement of the fact that other areas of the consumer product industry such as manufacturing and services are very important for the overall growth of the Chinese economy. However, an attempt to cover all these areas in a single study such as this one will be extremely difficult to achieve. This is because of the fact that as an academic research, there is a time bound within which the study is expected to be completed.
Again, within the collective division of retailing, there are several stakeholders that are of primary importance to the success of the aim that the researcher wants to achieve. However, three major stakeholders shall be emphasized in the study. These are managers or operators, consumers and employees. These three are selected as the three immediate stakeholders who are affected by any changes that happen within the retail business (Urban 93). In terms of methodological delimitation, it would be said that the study’s methodology has been designed to focus on the use of both secondary data and primary data in addressing the two broad objectives and the six sub-objectives that comes with them. Under the methodology chapter, there will be detailed explanation of how this mixed research method was used.
1.8 Structure of the Study
The study is structured according to chapters. There are therefore six major chapters that make up the work. Each of these six chapters however has sections and sub-sections that help in achieving different aims and objectives with each chapter. The first chapter is named introduction, which is the chapter where the overall background to the study is given. This chapter traces the history and background behind the problem that the study seeks to address. By so it, it is possible to identify the aim that the researcher was set to achieve also from the introduction chapter. What is more, the questions that will be answered throughout the study are also presented as part of the introduction, as well as the significance that the study will achieve once it is completed. The second chapter is the literature review, where the researcher reviews existing works of literature that have been performed in the area of retailing in Shenzhen. More specifically, literature works that seek to answer the research questions are reviewed as secondary data, which are used as important source of information for the study.
In the third chapter, the methodology of the study is presented. The methodology comprises the overall approach used by the researcher in undertaking primary data research. This means that as part of the mixed research method, whiles the literature review is used for secondary data collection, the methodology will also be used for primary data collection. The primary data collection involves interaction with people who serve as respondents for the study. Because of this, the approach used in selecting the sample, as well as the instrument used in collecting data from the sample are all presented as part of the methodology. The two chapters that follow the methodology are findings and discussion. Findings chapter, all data collected in the study; particularly primary data are presented and analyzed to reflect the objectives that the researcher wanted to achieve. The discussion chapter gives the researcher the opportunity of subjecting the primary data collected to theoretical evaluation. This means that the researcher tries to relate findings made in the literature review to the primary data to find possible gaps and discoveries. The final chapter is where the researcher summaries the key findings made, whiles drawing conclusions for the study based on the findings. Limitations of the study and recommendations for future research are also made under the final chapter.
2.1 Introduction
The specific objectives and research questions have helped in defining exactly what the researcher wants to achieve by the end of the study. As a mixed research, the study attempted to use both secondary data and primary data to achieve the purpose of the study. In this chapter, the researcher performs secondary data collection by reviewing works of literature related and relevant to the areas that have been set to be achieved as either research questions or specific objectives. The essence of the literature review is to find out what other authorities in the area of retailing have said about the core themes that can be built from the research’s aim. Some of these themes include the overview of the retail industry in China, consumer behavior within the retail industry, management skills needed to develop competitiveness in retailing, strategic options used within the retailing sector, and how to develop employee skills to cater for the lifestyle center in Shenzhen. The literature review also has a part that forms the theoretical framework for the study, where various theories that have been used in previous researches on retailing are reviewed. How they were used by their originators and how they are relevant for this study are all outlined under the theoretical framework.
2.2 Retail industry in China
The International Monetary Fund (IMF) considers the retail industry in China as one of the most promising fields of business for the near future (Bohn 33). This is largely because of the type of prospects and performance that the industry has showed in the past and in current times. Retailing has been explained to be the business of selling goods and services to consumers through the use of multiple channels of distribution with the aim of gaining a profit (Webster 88). In the context of the current study, much emphasis will be placed on the channels of distribution, as well as the types of goods and services sold. This is because as far as the channel of distribution is concerned, Kuester noted that one of the most prominent and dominant channels of distribution used in China is supermarkets (55). Cooke argued that in the most traditional form, supermarkets in China have been comprised of chain of stores where durable products are sold (70).
Even though the concept of supermarket operation remains very relevant in China today, Kulp, Lee and Ofek saw a slight change in the types of products sold, where there is an increasing preference for FMCGs among retailers (60). With an understanding on the relationship between consumers and retailers, one would easily understand that the rationale behind the change is because consumers have started demanding more for FMCGs. Based on this situation, Womack, Jones and Roos argued that the retail industry in China and for that matter in Shenzhen is now shifting to favor lifestyle retailing more (43). This is because lifestyle retailing basically involves the sale of FMCGs with the use of logistic centers (Minton and Lynn 8). FMCGs can also be explained to be products with short shelf life, which are sold quickly and at lower prices than durable traditional products (Engel, Kollat and Blackwell 77). Examples of FMCGs that dominate the Shenzhen market now include soft drinks, toiletries, over-the-counter drugs, toys, processed foods and many other consumables (Blackwell and Engel 3).
China’s GDP at current prices has been valued at $10,027.56bn, out of which retail sales alone in China has been valued at $3,086.5bn, with a year-on-year change in China’s consumer goods trade revenue as of December 2014 being 11.9% (The Statistics Pool). Of this, the market structure of the retail market has been noted to be such that the number of retail companies registered and recognized in China are 65,921 (The Statistics Pool). Based on annual revenue and operating income, there are 100 companies recognized as the leading retailers in China. Of the number, 14 are in Shenzhen alone (Apte and S. Viswanathan 635). the IMF estimates that the market share of the leading 100 retail chain operators in China make up only 9% of the overall market share (Kuester 82). What this means is that other retailers not considered as leading retailers also have a very massive dominance on the Chinese retail market, a reason for which they must not be neglected in any meaningful academic and professional discourse.
2.3 Consumer behavior within retail industry in China
1.1.1 Definition of consumer behavior
Different researchers have attempted to use various theoretical bases to define the concept of consumer behavior. This makes it difficult to have a single premise from which consumer behavior may be defined. Using a number of explanations given in literature however, consumer behavior can be said to be the study of consumers and the processes they undergo in selecting, securing, using, and disposing products and services within the retail industry (Foxall 132; Sainsbury 8; Rutner, Waller and Mentzer 213). Verhoef and Leeflang stressed further that consumer behavior may not only be limited to how individuals take decisions on buying but also how groups and organizations do same (7). As far as consumer behavior explains the factors that affect decisions on buying, many have regarded the concept as being exclusively qualitative in nature (Sainsbury 37). Hirsh, Kang and Bodenhausen however said that as much as consumer behavior may be dominated by qualitative paradigms, it has quantitative components especially when it comes to the methods used by retailers in determining consumer behavior (73). Based on this, consumer behavior have been said to comprise elements from psychology, sociology, social anthropology, marketing, and economics (Anthony, Dearden and Govindarajan 32).
1.1.2 Stages of consumer buying process
There are several stages of consumer buying behavior, which have been noted to affect how consumers decide on purchases in the retail sector (Bergen, Antia and Dutta 231). Understanding these stages is important to know how consumer behavior can affect consumer choices for either lifestyle products or durable products. Bohn stated that when complex decisions are to be made by consumers, there are normally six stages that will be processed (164). The first stage is the problem recognition stage, where consumers develop an awareness of need (Lampe, Flörkemeier and Haller 4). This is to say that the need for the consumer buying process will start only after the consumer has recognized a need or want that is lacking. For example, when the problem of hunger is recognized, the need for food will be idealized by the consumer. Having said this, it could be understood that the more frequent the problem of a consumer is directed towards a certain direction, the more likely it is that products in those areas will eventually be bought (Urban 48). Meanwhile, Unruh stressed that most problems and need deficits that are experienced by consumers are those that are responded to by the use of FMCGs (43).
The second stage of consumer buying process has been explained to be the information search stage, where consumers search for information that can be used to solve the problem they have already recognized. The search for information has been noted to take two major forms which are internal search and external search. As far as internal search is concerned, Jurvetson noted that consumers may easily refer to their memories and previous experiences to gather information on how specifically recognized problems may be solved (4). In most cases however, external search has been used where consumers fall on other sources other themselves. Some of these external sources of information include information gained from friends, relatives, marketers, public sources, and through the comparison of shops (Cooke 324). Writing on the importance of the information search stage, Womack, Jones and Roos indicated that this stage helps buyers to gather several alternatives, which forms an evoked set (3). Among retailers however, they have to ensure that they are as visible as possible so that they can always be part of the evoked set that is formed because it is out of this evoked set that final selections are often made.
The evaluation of alternatives is the third stage of the consumer buying process, where consumers establish criteria for evaluation from among the evoked set that is formed (Bell, Davies and Howard 93). This means that the formation of evoked set is often done in a haphazard manner, requiring additional close-ended evaluation to know which is the best among the rest. To undertake the evaluation effectively, most consumers would rank or weight the options that they have in hand. At this point however, it will be expected that the available options to be evaluated will only be from shops or retail sources that helps to solve the initial problem. For example, if the problem identified was hunger, there is no way the option for evaluation at this point would include a mechanic shop. Apte and S. Viswanathan noted that in most cases, the ranking or weighting that is done by consumers at this point is done based on the type of purchase that can guarantee the best value for money (23).
Once the evaluation of alternatives has been completed, the consumer will enter into the purchase decision stage, where the final selection of best option is made (Fisher 98). It can also be expected that at the purchase decision stage, the decision to either purchase or not to purchase will be made at this point. Sainsbury noted that the decision to purchase is often made not based on the product that satisfies the identified need alone (202). Rather, there are several other factors including package, store, method of purchase, and payment options that are considered by the consumer (Fleisch, Christ and Dierkes 9). This understanding makes the issue of difference between lifestyle supermarkets and traditional chain stores very relevant. This is because these two types of stores are known to operate based on different premises when it comes to package, store, method of purchase, and payment options. For example it has already been stated that most lifestyle supermarkets rely on the use of online or electronic commerce, which is seen by most modern consumers as an important determinant for making purchase from a given source.
The fifth stage on the consumer buying process is the purchase stage, where the actual process of buying or purchasing takes place. Deaton and Muellbauer explained the purchasing stage as the most dilemma filled stage of the process as at this stage, the customer is torn between a feeling of loss of value or gain of value (15). That is, the fact that the customer is giving out money or other forms of payment to receive a product or service in return may either be seen by the consumer as a liability or a gain. The purchase is seen as a liability if the purchase made cannot be quantified or qualified by the consumer as meeting or satisfying original need. This situation often arises when there is a monopoly market where the consumer lacks the opportunity of selecting among several alternatives (Bernstein iv). But where there is an open market, the options are often many and so the likelihood that the consumer will engage in a purchase that is seen as a liability is less likely.
The final stage on the consumer buying process is the post-purchase evaluation, where the customer assesses the outcome of the purchase that was made (Bloom and Perry 74). Even though the purchase may have been completed at this stage, Mukhopadhyay, Rajiv, and Srinivasan warned that the seller or retailer must not count it all gain until the post-purchase evaluation stage produces a positive outcome (120). This is because the post-purchase evaluation can influence any future purchase decisions that the consumer may have to take. For example, if the consumer realizes that the expected value demand based on which the buying was made was not met, chances that another buying will take place from the same source is very limited. This is because the consumer always wants to avoid the pain of cognitive dissonance where there will be a feeling that the wrong decision was made with a particular purchase (Lampe, Flörkemeier and Haller 10). In effect, the customer wants to feel satisfied after each round of purchase rather than a feeling of dissatisfaction.
2.3.1 Types of consumer buying behavior
Whiles using the same consumer buying process described above, Finkenzeller noted that there may be differences in the types of consumer buying behavior, which can affect how each stage of the process is undertaken (45). Even though there are four general types of consumer buying behavior identified in literature, Vargo and Lusch debated that these four types of consumer buying behavior types are determined by two major factors (11). The first of the factors is level of involvement in purchase decision, which describes the importance and intensity of interest placed by the consumer on the product in any specific situation (Fisher 8). The second factor is the buyer’s level of motivation. This motivation has been explained to be influenced by the level of involvement by the customer, and it also affects the search for information about a particular product, brand or service (Finkenzeller 9). In another development, Kirby and Mardsen argued that the major factors that determines the type of consumer buying behavior are risks involved in buying, some of which could be identified as personal risk, social risk and economic risk (6).
As far as the types of consumer buying behavior are concerned, Gwartney, Stroup and Sobel found the first type as routine response or programmed behavior (12). As the name implies, the routine response or programmed behavior refers to the type of buying that takes place based on low involvement which is frequently made for low cost items (Kiss and Bichler 78). This behavior or response is regarded as programmed and routine because it requires very little search and decision effort, and is purchased almost automatically, given the fact that the items here form the most basic needs of life (Engel, Kollat and Blackwell 81). Indeed relating this explanation to the definition given to FMCGs, one would clearly understand that FMCGs and for that matter purchases made from lifestyle supermarkets are made with this type of consumer buying behavior. In accordance with this, soft drinks, snack foods and milk have been mentioned as examples of some of the products that are often bought based on routine response or programmed behavior (Cooper, Browne and Peters 3). Writing on routine response or programmed behavior, Jurvetson debated this type of consumer buying behavior often has the largest population base (75). This situation can explain why most supermarkets in China have started having greater endorsement for lifestyle supermarkets.
Limited decision making is the second type of consumer buying behavior, which applies to consumers who buy products only occasionally (Cooke 221). For limited decision making consumer buying behavior, the buyer fails to engage in a lot of information search ahead of the buying process. This is not because the product being bought is not important to the buyer but because the product category is in a familiar category (Bergen, Antia and Dutta 12). Basing on the familiarity with the product category, the buyer may limit his or her decision even when the brand being bought from is unfamiliar. A typical example of this is a consumer who needs to buy clothes and have generally decided to buy a cotton dress over a polyester dress depending on the need to get a dress that can absorb sweat. In a situation like this, the consumer will only require limited decision making even when a brand being bought from is not familiar because the emphasis is on the fabric type and not the source per se.
The third consumer buying behavior has been noted to be extensive decision making or complex high involvement, where the consumer undertakes comprehensive information search on the product before making the purchase (Case and Shiller 91). Characters of such products and services purchased based on extensive decision making or complex high involvement include the fact that these products or services are unfamiliar, expensive and infrequently bought (Cho 75). Indeed because the product or service is an unfamiliar one, the buyer would always want to be very critical with the decision making process so as to discover or avoid any forms of hidden risks associated with the buying. Again, because the product or service is expensive, the buyer would want to be very extensive with decision making so that any feeling of making losses after the purchase can be avoided. Samuelson noted that traditional durable products often fall under the types that are bought based on extensive decision making but the problem is that these products are not bought on frequent basis (65). Bernstein countered this opinion by stating that even though the durable products are not bought very frequently, their prices are often high and so those in the traditional supermarket division cannot be thought to be doing bad business merely because purchases are not frequent (91).
The last type of consumer buying behavior has been noted to be impulse buying or buying with no conscious planning. Product characteristics that are bought based on impulse buying or no conscious planning have been noted to contrasting to those requiring extensive decision making. This is because such things are often not expensive and very familiar (Kiss and Bichler 3). Because of the level of familiarity and the fact that the price involved in buying such products is not high, consumers buy these products without making any decisions or having fore planning at all. Explaining the dynamics behind impulse buying, Lynn and Close explained that most consumers have a feeling that they have very little to loss after buying such familiar and no priced products even if the products turn out not to be the kind they really needed to solve their identified problems on the consumer buying process (2). It is therefore difficult that products and services such as cars, homes, computers, and education will be approached through impulse buying.
2.4 Management development skills to develop competitive retailing
Whether a person is operating a traditional supermarket or a lifestyle supermarket, there are some critical management development skills that have been noted to be ready in order to make the retailers competitive. Four such management development skills that were seen to be very common throughout literature have been discussed in literature. The first of these is the human capital skill of education. Writing on the need for management level education, Bloom and Perry stressed that supermarket operators and managers require to have adequate education on the whole concept of retailing (153). Bell, Davies and Howard added that even though this form of education can commonly be gained through formal education in retail related courses such as marketing or economics, other informal approaches could also be used in developing educational knowledge on retail (63). Once managers and operators have acquired the needed education on how to go about their trade, they are said to have a deeper understanding of how things work within the industry, making them respond to the industry in the right way, based on changing incidences (Unruh 23).
In the estimation of Foxall, even though education is very relevant, managers and operators require the human capital skill of capabilities in order to function properly and compete well (422). Capabilities are therefore regarded as one of the management development skills needed to develop competitive retailing. The reason capabilities are always needed in addition to education is the fact that capabilities are regarded as process-oriented and action-oriented, setting the pace for real action to be taken within the sector in which a person operates (Gerrish and Lacey 11). Gwartney, Stroup and Sobel explained that the real exhibition of capabilities has to do with a manager’s ability to handle resources in way that maximizes profits (1). Resources as referred to in this case may cut across several dimensions including human resource, time, and funds. Minton and Lynn therefore saw a model or an ideal manager as the one who can acquire, shed, integrate and recombine resources in a manner that generate new value creating strategies (6). By implication, the manager must use the resources in a way that recreates value from the resources in question.
Technological readiness, including a platform to undertake electronic commerce (e-commerce) has been identified as another important requirement at the management level. It would be noted that as part of the exclusive switch to lifestyle center, retail operators will require the use of central logistic center for online shops (Verhoef and Leeflang 12). Meanwhile, for such online shops to be created and used effectively, the managers themselves must on their own be in the capacity to understand the fundamentals that make them work (Samuelson 82). With such an understanding on how the technology works, the manager, around whom the overall operation of the supermarket revolves will be in a position to understand whatever weaknesses that come with the technology. Indeed the better the person at the top understands the problems associated with a given technology, the better the approach to solving the problems will be. Quite apart from the cognitive understanding that ought to be developed around the technology, it is also important that there will be the resource platform that can accommodate the logistic center for online shops.
Finally, managerial motivation has been noted to be a very important venture specific capital that is required to ensure that managers are able to do what they are supposed to do, and at levels that are required of them. This is because Chan saw the competitive nature of the retail industry as something that requires additional motivation to be able to stay focused with ones planned strategies and interventions (12). Within the retail industry, most forms of interventions and strategies that may be used to stay competitive are those that are based on gradual execution, guaranteeing success only on a long term basis. By extension, chances that managers will see these strategies and interventions yield the needed outcomes are very rare. In-between the waiting period and the fruitful period, it is important that managers will have an intrinsic motivation that keeps their hopes and ambitions for success very high. In the current circumstance, intrinsic motivation is preferred over extrinsic because a form of extrinsic stimuli that may be referred to by the managers to trigger the motivation may be generally lacking (Blackwell and Engel 78).
2.5 Strategic options within the retailing sector
For operators in the retail business to gain competitive advantage, Kulp, Lee, and Ofek recommended the need for them to have a strategic option which helps them to uniquely identify their market and present to this market, a form of value and pricing model that best meets the needs of the segmented market (543). To do this effectively, Porter’s generic options are often used by retailers. These generic options identify three strategic options which could be used to gain competitive advantage. The first strategic option is cost leadership, which has been associated closely with the lifestyle retail division. This is because the cost leadership strategic option generally requires retailers to produce at very low cost, allowing that the prices charged on the products and services sold are of low price (Lampe, Flörkemeier and Haller 13). Once this is done, consumers whose preference for making buying decisions based on price prefer to choose such low cost products over expensive ones on the market. Meanwhile, any factors which make one retailer preferable over others constitute a competitive advantage (Cooper, Browne and Peters 87).
Differentiation is the second strategic option, commonly used among retailers operating traditional supermarkets. The differentiation strategic option is used in such a way that the retailer seeks to offer or sell products and services that are considered as being premium in quality (Unruh 32). The emphasis for competitiveness is therefore the additional value that the consumer gets from selecting such a differentiated product or service. Explaining why the differentiation is common with durable products, Vargo and Lusch explained that these products are often purchased on the basis that they can last longer and offer the best quality outcomes (10). Hamilton and Schwab added that whenever a service provider or a supermarket operator offers differentiated products, the pricing of such products and services are relatively higher than what may generally be on the market (324). By implication, even though not many consumers may be in the position to buy such high valued products, the few who make purchase help the sellers to make up for the cost of additional production that added the value.
Focused is another strategic option that has been used by retailers in both the lifestyle division and chain store decision, but more particularly by the latter (Engel, Kollat and Blackwell 4). To use the focused strategic option, the retailer must identify a very specific market segment; often a less utilized market segment, to which the products and services of the company is specially introduced to. Depending on the demographic dynamics of the identified market segment, the retailer may either choose to combine the focused option with cost leadership or differentiation (Bloom and Perry 79). In most cases, some of the demographic dynamics that are considered by the retailers include household income, gender, age group, and educational status of the market segment (Leskovec, Adamic and Huberman 16). Focused strategic option helps to gain competitive advantage because the group that is identified is option one that other competitors have ignored or utilized less effectively (Kulp, Lee, and Ofek 9). By giving this group attention, they are nurtured to become permanent customers of the company or supermarket that gave them the needed focus. Kiss and Bichler also advised that in order to make the focused strategic option work effectively, the supplier must ensure that whatever is being offered to this group is one that particularly addresses a unique consumer need (5).
2.6 Developing employee readiness for lifestyle retailing
Employees are considered the focal point around which the operation of any retail supermarket operates (Subramani and Rajagopalan 7). This is so because it is the employees who act as the face between the company and the consumer. By extension, whatever strategies and services that are possessed by the supermarket are directly executed by the employees. It is for this reason that employees are often referred to as human resource, signifying how important they are as assets for the organization (Bensaou 79). In order to prepare employees for the lifestyle center in Shenzhen, there are some human capital readinesses, which are needed among these employees to make them more effective as discussed below;
2.6.1 Intrinsic motivations
The first of these that was identified in literature was motivation. Just like managers and operators of the supermarkets, employees have also been identified as needing very high levels of motivation to ensure that they compete and function well in a market that is dominated by lifestyle retailing (Fleisch and Dierkes 72). Motivation has been noted to be very relevant for those currently operating in traditional retailers and must switch to lifestyle retailing (Bell, Davies and Howard 61). Specifically, Gerrish and Lacey argued that both extrinsic motivation and intrinsic motivation are needed to be given to employees to ensure that they maximize their potentials (190).
2.6.2 Customer education
Consumers opting for lifestyle products such are commonly FMCGs have been noted to have a behavior that makes them less committed to specific product and service providers. This is because most consumers buying FMCGs use impulse buying, routine response or programmed behavior (Tushman and Nadler 19). In effect, they buy from the most proximal destination without really having to worry about what the outlet they are buying from is made up of. As a result of this situation, Finkenzeller saw the need for retailers to have a very special program or mechanism that attracts the customers to them ensure that the customers become loyal to them (74). For this to happen, special customer education has been recommended as part of requirements to make retailers effective within a lifestyle center such as what is currently claimed to be experienced in Shenzhen. By customer education, reference is made to special training given to employees on the best ways they can relate to customers as a way of promoting customer satisfaction (Coughlan and Coghlan 543). Given the relationship between customer satisfaction and customer loyalty, it can be expected that customer education will indirectly help retailers achieve customer loyalty, which is needed to make supermarkets grow.
2.6.3 Skills development
Urban also pointed to skills development as one other important readiness that must be seen among employees (54). By skills development, reference is being made to develop all forms of skills needed by the employees as they encounter their managers, customers, co-workers, and products or services (Womack and Jones 99). Within the most common retail setting, it would be noted that employee skills development will be made to focus on such cognitive outcomes such as communication skills, mathematics, critical thinking, research, and evaluation (Foxall 7). By presenting employees with these skills, they are presented with the opportunity of adapting to changing opportunities and competences within the larger retail industry. It is not surprising that Samuelson posited that organizations with the best skilled employees have a major advantage over others who lack such forms of skills (2). To ensure the best outcomes with employee skills development, it is highly recommended that retail supermarkets use both internal and external training programs that are run on constant and continuous basis.
2.6.4 Employee attitude 
The last form of employee readiness that is needed to enroll an effective lifestyle center has been noted to attitude. Lampe, Flörkemeier and Haller explained that attitude is part of both cognitive and behavioral adaptation to situations by employees (31). Mukhopadhyay, Rajiv, and Srinivasan differentiated from other forms of human capital such as education and skills, explaining that even though one may have the needed education and skill in an area, attitude is required to ensure that these education and skills are prudently utilized (112). By extension, the mere fact that an employee is well vest in an area by way of education, knowledge or skill does not necessarily guarantee that such an employee will do well unless an additional attitude to control cognitive and behavioral situations are acquired. Ulrich noted that for most of the time, employees are presented with opportunities whiles they go about their roles (326). They however need the right attitude to adequately utilize the opportunities that come their way.
2.7 Theoretical Framework
The theoretical framework helps to identify a set of theories which help to explain factors accounting for the change that has been experienced on the retail market in China in the past few decades. To do this, the theories of retail change are emphasized. On the whole the theories of retail change can be set to a set of theories which attempt to explain why the dynamics of doing retail business in a given market cannot be expected to be static or the same over a very long period of time (Ulrich 85). Cooper, Browne and Peters used the theories of change in a previous study, where it was noted that the major contributing factor to change within the retail business is the type of environment in which the retail business is done (9). In line with this, Subramani and Rajagopalan indicated that the retail institution varies in types of environment based on products, scale of operation, and a mix of store attributes (32). Depending on the type of environment therefore, different forms of changes can be expected at different points in time. A major gap that Corsten and Kumar found in most researches that have previously emphasized on the use of the theories of change is that these researches generalized the theories (77). Meanwhile, the theories have been said to be diverse with each having its own dynamics that could contribute to change on the retail market. With this known, one major theory of retail change which is directly associated with the study is reviewed, and this is the cyclical theory.
According to the cyclical theory, there are different phases of every retail company (Ferguson 7). Because of the presence of the phases, change takes place in a well patternedmanner where each phase is characterized by an identifiable attributes, which trigger change (Domingos 349). The identifiable attributes have also been referred to in some studies as the primary att Read More
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