Corporate Strategies to Combat with the Constantly Increasing Economic Slump - Research Paper Example

TABLE OF CONTENTS Introduction Review of Relevant Literature………………………………………….2 mentof the Problem……………………………………………….4 Significance of the Study………………………………………………..5 Aims & Objectives…………………………………………………………6 Theoretical Framework……………………………………………………6 Operationalisation………………………………………………………….7 Research Procedure……………………………………………………….10 Statistical Methods…………………………………………………………..12 Ethics Involved in the Present Research…………………………………13 Limitations of the Present Research………………………………………15 APPLIED RESEARCH METHODS Abstract: The present study aims to elaborate the corporate strategies devised by the reputed organisations of the country in response to the growing economic recession, which has captured the business activities in its awkward clutches. The continuous recession has disturbed the business volume of almost all firms and corporations to the great extent, and has resulted in profound financial losses. Consequently, the reputed organisations have articulated market research to combat with the constantly increasing economic slump. The paper suggests a comprehensive research proposal which could be implied in order to investigate the policies adopted by the organisations under unstable global economic condition. Airline industries and banks have been chosen for the present research, on the basis of which the research has been proposed. Introduction: Economic recession simply refers to the slowdown of the business activities, which leads towards the significant shrinking of markets and business volume. The world has been undergoing economic recession in the wake of 9/11, and drastically altered the entire corporate environment at global level. “ The economic recession”, Dalton (2008) argues, “thats ranging across the United States due to an absurd number of layoffs, massive quantities of homeowners defaulting on their mortgages, an inflation rate that far overpowers current adjustments to incomes and the resulting decrease in consumer spending has hit everyone hard. The bad news is that this trend doesnt show any immediate signs of coming to an end.” (Quoted in associatedcontent.com) Under such a precarious situation, the great organisations did not insist on sticking to the age-old polices, which have been in vogue for the last many decades; rather, they analysed the circumstances minutely and adopted innovative methods and techniques to meet up the latest challenges. Different organisations not only articulate different strategies during recession, but also they revise these strategies, time and again, according to the always changing economic situation. REVIEW OF RELEVANT LITERATURE: The literature relevant to the topic under study has been discussed in this section. Candice Clem (2008) has conducted her research under the title “Recession Effects on Small Business and What That Means for Franchises”, where she elaborates how recession has gradually started effecting different fields and now has got its way in every industry of the world, by hitting business plans and leaving the small and medium business owners in a sorry state of mind. “With analysts only giving more and more reasons to believe that the economy was coming to the crunch that we now, in retrospect, know was true, entrepreneurs became more pessimistic even in regard to their own business forecasts. Nearly 25% claimed they had no growth strategy for the 2008 fiscal year; 55% reported having a hard time securing credit last year;” (Clem, 2008: retrieved from EzineArticles.com) Clem suggests franchised business as an imperative remedy to escape recession particularly for the small business owners. Since devising and implementing of business plan is one of the most difficult tasks during recession, the small and medium organisations could seek relief by obtaining franchise offices of reputed products and services, so that they could not only remain active in the market, but also could perform their obligations and could earn too subsequently. James Pew (2009) has conducted his research on bank’s restricting lending in the wake of current economic recessions. The banks have applied such strategies in order to avoid insolvency, which has occurred in the USA, UAE, UK and other parts of the world. The credit and loans observe a grave setback, and the customers are in a state of perplexed situation regarding depositing their amount in the financial institutions. The profit and interest rates also find a downturn in banks, though once it got an unabated increase after the fall of the rate of investment. “In the ever uncertain financial climate, Pew (2009) observes, “that is affecting the majority of western countries, loans and credit are increasingly hard to obtain. With the United Kingdom hit especially hard and house prices falling by 30%, banks are seeing a daily increase in defaults on loans and mortgages. This is having a knock on effect that banks, building societies and other large financial corporations are now restricting their lending habits. This is a wise move on the part of these companies, as in the last twelve months alone several have been handed billions of pounds by the respected governments to avoid insolvency.” (Quoted in.free-press-release.com) Statement of the Problem: Started raising its awkward appearance by the end of the last century, the contemporary economic recession has obtained wide range of multiplication, affecting every market of the globe, and threatening the largest organisation too. It is particularly the case with oil companies, airline industry, banks and financial institutions, real estate and textile industry. On the contrary, hotel industry, mobile phone industry and immigration services have got significant boost even the bleakest days of recession. Being the most affected industries, banks and airline industries have entered into two main policies i.e. emergence and joint venture. The present study aims to discover whether innovative policies and joint ventures have helped them come out of recession or not. The investigator aims to answer the following questions: What is the level of recession in the country, and which of the companies serve as the worst sufferers in the aftermath of recession Which strategies the companies have adopted to combat with the increasing economic recession Have these policies helped the corporations mitigate their financial grievances or not Has emergence most effective method to counter the current economic recessions Have big and small industries adopted the same strategies during recession or their policies are divergent in nature and vision What short-term and long-term policies have been adopted by divergent corporations and organisations Significance of the Study: Air travelling has got an imperative boost during the contemporary era. This is predominantly the case with the European countries, which are the centre of all commercial and business activities for the last many decades. The corporate class makes frequent air travelling to various parts of the globe. Similarly, modern business methods, introduced by the banks and financial institutions, have also attracted the customers, and the credit cards, debit cards, loans against business, house loans and other financing has become the order of the day. Consequently, banking and travelling have become the most profit generating businesses. But the economic recession left devastating impacts on both these industries. It is therefore, in a European community, to discover how British Airways, Lufthansa, and Air France-KLM managed business and financial risk is the essence of research especially with the current economic downturn. The present research has been conducted keeping in view the problems faced by the airline industry and banking sector. Likewise, the researcher believed that the baseline data gathered from this study would be supportive for others in their attempt to find answers to queries that are related to the topic. Moreover, the researcher hoped that the findings of the study will guide enthusiast in the field of Corporate Finance. Aims & Objectives: The aims and objectives of the present study include: To estimate the level of recession faced by different organisations and corporations and the measures taken by these organisations in order to combat with the losses created by recession To find out strategies adopted by the corporations to ensure increase in business volume To discover whether or not downsizing has left a positive impact on the business volume of the airline industry To provide a comprehensive research proposal in an effective way so that an imperative research could be conducted on the basis of this proposal. Theoretical Framework: The present research has been supported by the Keynesian Theory of Employment. “Keynesian theory”, Dernburg states, “aims to state that rise in employment cab be achieved by causing real wages to fall.” (2003: p 268) Renowned economist theorist John Maynard Keynes has presented this theory that is extremely supportive in understanding the causes, steps and consequences of depression. His theory won great popularity during the Great Depression of 1930s as well as the economic recessions of 1970s and 1980s. Its validity is intact even during the contemporary era. It not only introduced new dimensions to the future economists and business tycoons, but also paved the way towards the articulation of new theories and hypotheses for the future years to come. “His explanations of slumps ran something like this: in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy.” (Quoted in huppi.com) Operationalisation: Hypothesis: The following hypothesis could be established in order to conduct the present research on impact of recession on the organisations: More the business magnitude and sales volume of the organisations during economic recession in jeopardy, more likely the probabilities of merging, franchising and joint ventures exercised by the corporations at global level Concepts: The concepts involved in the present research include: Concepts related to the Independent Variable: i) Business magnitude: Business magnitude refers to the level or expansion of one or more commercial activities earning profits for the entrepreneur and keeping the business transactions and activities in smooth waters. In the present research, business magnitude refers to the commercial activities of the commercial banks and airlines at domestic, national and international levels. ii) Sales Volume: Sales volume refers to the average range of sales a corporation observes during a specific period of time. Sales volume increases and decreases on daily, weekly and monthly basis, and is assessed after a particular period of time by obtaining the average. The recruitment and promotion of the staff and employees are dependent of sales volume. In addition, sales volume helps in determining the future business ventures and risk takings. iii) Economic recession: Economic depression or recession means an imperative decline in the commercial activities as well as profit range of a large number of organisations and corporate firms. “A temporary downturn in economic activity, usually indicated by two consecutive quarters of a falling GDP.” (Quoted in financial-dictionary.thefreedictionary.com) Concepts related to the Dependent Variable: iv) Merging: Merging refers to the unification of resources or services or both from two or more units into one single unit in order to work as one big organisation by surrendering the independent identity of the small unit. In business economics, the term merging means the amalgamation of two or more commercial firms or organisations; so that the combination of these falling organisations could manage the losses as well as the profit volume could be increased with the help of the intellect of the experts working separately. The world has witnessed the merging of many banks and organisations during the current economic recession, which has been proved profitable in respect of overcoming the business threats at a situation of perfect competition. The Air France-KLM merger is one of he latest examples of unification of two great corporations into one single company. v) Franchising: Franchise business refers to the operating a business under the brand name, trademark and logo of some well-reputed organisation of the world. With the advent of globalisation by the last decade of twentieth century, the international brands started offering the permission of running business under their name and slogan to the small and medium entrepreneurs, which got immediate popularity in almost all parts of the world. Consequently, it can aptly be observed that the individuals and companies purchase the franchise rights of such grand brands. “Buying a franchise is a popular choice for starting a business because the assumption is that the franchisor is selling business success; he or she has created a successful business, and therefore, the franchise business you buy will automatically be successful, too.” (Retrieved from /sbinfocanada.about.com) Many mobile phone companies have sold their rights to private owners and business personnel. vi) Joint Ventures: Joint venture refers to commercial efforts made by two or more companies without losing their individual identity. For example, world reputed organisation the Coca-Cola Company has entered into joint ventures with many food-chains including KFC, Pizza Hut and other hotels and restaurant chain. Similarly, the renowned IT accessories brand Red hat has entered into joint venture contracts with many corporations related to communications and information technology. Similarly, a UAE-based bank under the title Bank Al-Habib maintains joint venture strategy with a reputed communication company in order to make the products of both the organisations more and more popular among the masses, and their commercial activities could met more triumphs with the passage of time. RESEARCH PROCEDURE Universe: Universe refers to the total population or area out of which the sample is selected for a study or during a research process. The universe for the present study will consist of commercial banks, financial institutions, airline industries, beverage companies, food chains and computer technology corporations. The researcher aims to gather data from the websites, record books and other material of the corporations selected for this research, along with gathering the data from the web pages of the web pages managed, arranged and advertised by the governmental institutions. In addition, the researcher aims to personally interview the selected number of directors and managers of few companies under study. Sampling: The researcher looks for applying quota (non-probability) sampling for the present research. For this purpose, four companies from each industry including banks, airlines, beverages, food chains and IT have been selected. One director and one manager from each organisation have been selected for the interview. Hence, the total data will be comprised of forty respondents, which will serve as the perfect representative of the organisations as well as the topic under study. Tools for Data Collection: The researcher aims to apply interview schedule as one of the tools for the collection of data for the present research. In addition, record books and web pages of the relevant companies also serve as the data gathering tool during the research process. Construction of Interview Schedule: The interview schedule will be constructed in English and French languages, and will add other local languages i.e. Welsh and Irish too, if needed. The interview schedule will be a simple document, which will consist of twenty five questions. The researcher will divide the data collecting tool into three parts. Part I will be comprised of the introductory questions related to the firm under study. Part II of interview schedule will analyse the business volume and commercial activities of the organisations before current economic depression. Part III of this tool will examine the changes took place after and during the current wave of great recession. Pre-testing: Pre-testing is the final stage in the construction of the tool for data collection, in order to discover the flaws or draw-backs present in the tool. In the present study, the research intends to conduct pre-testing by interviewing two small entrepreneurs, so that flaws could be removed from the interview schedule. Pre-testing will give the researcher an opportunity to thoroughly examine every question existing in the interview schedule. In addition, thorough analysis of every question will help in getting rid of unnecessary questions from the interview schedule. (Expected) Field Experience: The researcher intends to enter the filed in order to collect data from the universe decided and determined in the present research. The researcher looks for first visiting the relevant websites, so that initial information could be gathered in order to interview the directors and managers of the companies. The researcher estimates that it would take nearly sixty days in the collection of data. The interview schedule will be of such a nature that it would create interest of the respondents and would surely capture their attraction. STATISTICAL METHODS: Statistical methods are an essential part of a research, which is highly supportive in respect of providing accurate measurement of the data collected after the conducting of the research process. Exact and appropriate application of the statistical tests helps in the measurement of the variation in the data as well as provides a clear picture of the findings of the study, on the basis of which result is interpreted and conclusions of the study are drawn. Descriptive, tabular and graphic presentation of the data gathered makes the entire research work in an arrayed, concise and systematic form. “Statistical analysis”, Doby states, “begins with the definition and observation of events, and the subsequent classification of them in terms of possible outcomes.” (1997: p 89) Different measures are selected for qualitative and quantitative research. In qualitative research, the number of respondents is limited one, and the research is conducted under somewhat a controlled environment. On the contrary, quantitative research encompasses a large number of respondents, where comparatively lengthy questionnaire is applied in order to obtain replies from the respondents. The researcher aims to apply t test and ANOVA tables during the present research as soon as the results are gathered. Finally, the result will be analysed and interpretation will be made on the basis of the findings, so that summary could be prepared and suggestions could be proposed for the future researches on the similar or relevant topics. ETHICS INVOLVED IN THE PRESENT RESEARCH Every research carries ethical obligations and moral values, observing of which extremely necessary while conducting of a study, which can be studied as under: Clarity: The researcher must be clear about the topic about which he intends to conduct his research. If he has an ambiguity regarding his topic of study, he will not be able to carry out his study in a proper way. “The first and foremost expectation from a researcher”, Kumar submits, “before (s)he undertakes research work on a given topic in an area is a clear determination of what has been done and reported in the open literature on the topic. It is desired that the researcher also undertakes a survey of closely related topics.” (2005: p 3) Command: The researcher should have command over the topic under study, as well as the steps applied during a research process. Bailey has defined five steps while conducting a research, which include choosing a research topic and stating the hypothesis, research design, determining of population, collection of data and interpretation of results. The researcher must look into all these areas before conducting his research. Impartiality: The researcher should be neutral and impartial while conducting a research. He should not display any kind of racial, ethnic, religious or any other biased behaviour towards his population, nor should any of his acts hurt the feelings of his respondents. The research should not construct his questionnaire or interview schedule in such a way that it carries any question, which is related to personal life of any respondent; nor, it would try to enquire about the confidential matters of any company. In addition, the research should not be carried out in such a way that could hurt the emotions and feelings of others. The present research will not include any question related to the race, ethnicity, gender, religious beliefs, region or nationality of the respondents, nor there even the slightest expression which may show the corporate superiority of some specific nations, states or companies over others. Privacy and Confidentiality: “Confidentiality has been defined as the principle of maintaining the security of information elicited from an individual in the privileged circumstances of a professional relationship.” (Cross & Sim, 2000: p 449) privacy and confidentiality are the keys to win the trust of respondents, which should never be violated. The researcher can seek the permission of the respondent firms in order to quote some of the facts and figures for the analyses of the progress made by the company. Compliance of Respondents: Further, no respondent will be forced to participate in the research process; on the other hand, the entire research process will be conducted on voluntary basis, so that the respondents could not consider it as the burden inflicted upon them by the researcher. Moreover, the confidentiality of the firms under study as well as regarding the information gathered from the respondents would strictly be observed as one of the most imperative social ethics. Limitations of the Present Research The present research contains the following limitations: 1. Since the grand companies and reputed brands are the target population, it is hard to penetrate into the management and seek time from them for the study. 2. The present study focuses on the companies, which have wide operational range, expanded to many continents of the globe. It is really hard to conduct a comprehensive research on one single area or region, and interpreting the results with global perspective. 3. The companies under study manage their commercial activities through the personnel belong to the divergent ethnic and racial communities. Consequently, it is hard to get the answers from the persons having different regional, racial and ethnic backgrounds. Hence, the researcher should have knowledge about the individuals of different communities and races. 4. It is fact beyond reality that directors and managers have limited time to attend and accommodate the respondents in a proper way, due to some protocol values as well as their engagements in multifarious tasks. Catching their attention and extracting their time is really hard nut to crack for the researcher. All these shortcomings and flaws can be managed by the researcher on the basis of knowledge, intellect, experience and observation. An experienced and learned researcher can overcome these hurdles by managing his research work and involving his respondents into the research topic, which will earn success and respect for him. LIST OF REFERENCES: Bailey, Kenneth D. (2007) Methods of Social Research 4th Edition Kindle Edition Free Press New York pp 34-36 Clem, Candice. (2009) Recession Effects on Small Business and What That Means for Franchises (Quoted in http://ezinearticles.com/?Recession-Effects-on-Small-Business-and-What-That-Means-For-Franchises&id=1696977) Cross, Susan and Julius Sim. (2000) Confidentiality within physiotherapy: perceptions and attitudes of clinical practitioners’, Journal of Medical Ethics, 26, pp.447-453 Dernburg, Thomas F. (2000) Macroeconomics: Concepts, Theories and Policies 7th Edition Mc-Graw Hill International Edition pp 268-269 Doby, John T. (1997) An Introduction to Social Research 7th Edition Meredith Publishing Company New York p 89 Kumar, Sanjiv. (2005) Ethical issues in Conducting Research Work and Guidelines for Preparing Report/Thesis. Department of Chemical Engineering Indian Institute of Science Bangalore 560 012 p 3 (Quoted in http://chemeng.iisc.ernet.in/chem-webpage/webpage/handbook.pdf) Thorn, George. (2008) Strategic Response to the Economic Crisis (Quoted in http://www.racc.org/resources/docs/GeorgeThornStrategicresponseFeb09.pdf) OECD Strategic Response to the Financial and Economic Crisis (Retrieved from http://www.oecd.org/dataoecd/33/57/42061463.pdf) http://www.independent.co.uk/news/business/news/easyjet-to-challenge-air-franceklm-merger-563964.html http://financial-dictionary.thefreedictionary.com/Economic+recession Keynesian Theory of Depression. (Quoted in http://www.huppi.com/kangaroo/Keynesianism.htm) http://research.curtin.edu.au/local/docs/graduate/Seminar-Ethics-NSSection1.pdf Read More