Pros And Cons Of Capital Budgeting Measures Finance Essay

Pros And Cons Of Capital Budgeting Measures Finance Essay Capital budgeting refers to the process in which a firm determines whether a project or investment is worth pursuing. More often than not, the process involves a long term assessment of the cash inflow and outflows to determine if the returns generated meet the investment appraisal. The most common methods used are the net present value (NPV) where evaluation of the project is based on the amount by which its value is maximized. Other measures or tools used in decision making include: the internal rate of return (IRR), a version of the IRR known as the modified internal rate of return (MIRR), the discounted payback period (DPB), a profitability index method (PI) and the traditional payback method. Regardless of the demerits presented by each, most firms or financial managers tend to stick to a certain method of capital budgeting. This discourse explores each of the measure as they apply to real world process of project approval. The discourse comprehensively reviews and evaluates the advantages and disadvantages of each of these measures with regards to their effectiveness, project size and long term/ future returns. Based on review of recent literature in business related journals, the discussion primarily sought to determine which version of capital budgeting method is most suitable for big and small businesses. The findings of the discourse indicate that capital budgeting decision is a unique investment decision making tool to macro or micro enterprises and there is no one size fits all solution. As a matter of fact, certain methods of capital budgeting are identified with the level of project, size of firms and innovation levels. The discourse also established that while most chief executive officers or managers have distinct capital budgeting models, not all yield the same results for a company or even meet listed project or investment expectations. Introduction Capital budgeting involves a series of identifying, evaluating and implementing long term investment opportunities in a firm or business venture. Depending on the measure or technique employed, firms seek to identify investments that will increase their shareholder wealth. The decisions involved largely target or aim at assessing a project that demand large upfront investment coupled with a series of small cash inflows. The most commonly used measures of capital budgeting are NPV, IRR, MIRR and DPB methods. Distinct as they are in approach, each presents its strengths and weaknesses when it pertains to project evaluation or capital budgeting. Internal rate of return (IRR) According to recent budgetary surveys, the internal rate of return has received more preference for project evaluation than other techniques (Rousse, 2008, p. 2). The IRR presents analysts with an avenue through which rates of return are quantified in an investment and according to Kelleher MacCormack (2004, par. 4), managers opt to finance projects with high IRR based on their selection of the project value but at the same time destroy shareholder wealth in the investment. IRR can generate different values for the same project when future cash flows switch from negative to positive and back. More often than not, the IRR is expressed as a percentage thereby making small projects appear attractive and large ones great (Kelleher MacCormack, 2004, par. 4). As evident in most IRR projects, the general rule dictates that where the measure is greater than the opportunity cost of capital, all investments remain acceptable. Strengths and Weaknesses As one of the most commonly employed measures in capital budgeting, the IRR draws its popularity from the fact that it is based on a discounted cash flow. When used effectively, the IRR method provides viable or feasible options on a project value. On the flip side however, internal rate of return has numerous risks that outweigh its merits. The method is essentially inconsistent and exposes shareholders wealth at risks minimizing their objective (Rousse, 2008, p. 1). The IRR may exhibit multiple rates of return when cash flows shift from negative to positive multiple times (Kierulff, 2008, p. 327). If managers and analysts are to continue using IRR, then major adjustments are to be made over the measures critical assumption: that interim cash flows will be reinvested at the same high rates as the returns (Kelleher MacCormack, 2004, par. 5). Even more disturbing is the practice that practitioners frequently employ in interpreting the IRR; when computing the IRR, practitioners usuall y equate the measure with return on a given investment. Net present value (NPV) The net present value of a capital project or an investment is the aggregation of the present values of all benefits (in cash) by deducting the present value of all cash (Elumilade, Asaolu Ologunde, 2006, p. 145). The NPV basically involves evaluation of the amount by which the value of a given project is maximized. As the name suggests, the basic premise for the net present value is the assumption that monetary value of a currency today is worth more than its future value. According to Rudolf (2008, p. 1), the logic behind the premise is that present cash can be invested and generate interest. Profitability is determined by evaluating the return on the invested capital whose net present value is zero. Negative NPV implies that the project is not desirable while a positive NPV means the project is viable. Theoretically, all estimations made in the NPV involve measuring the projects future net cash flows such that they are discounted at appropriate cost of capital to procure their pr esent value (Elumilade et al., 2006, p 145). Strengths and Weaknesses The net present value method is effective for both the assessment of new investments and comparison of investment alternatives (Rudolf, 2008, p. 2); the investment with the higher NPV becomes a more viable alternative. Based on its additive process, the net present values of different investments with different discount rates can be added up. A notable strength of the NPV is that it recognizes the risks associated with future monetary value using the money concept. Another strength of the NPV method is that it is an arithmetically simple procedure that when computed presents easy interpretation as the capital value is expressed in monetary units. In addition, the NPV offers managers with the possibility of adapting the discount rates for different periods (Rudolf, 2008, p. 2). In line with the IRR, the net present value has several drawbacks much as it is popular in capital budgeting. For one thing, the NPV lacks visibility of a time frame on which a project is expected to generate positive values given the simplicity in calculations. While the NPVs basic premise is to accept all investment greater than zero, the measure is however not clear of when the positive values are achieved. In cases where a new project has higher risks than a companys cost of capital, its cash flow should be discounted at a higher rate to mirror that risk. But if they are, the reinvestment rate becomes detached from the cost of capital such that the investment rate for the new product introduction is way above the normal cost of capital (Kierulff, 2008, p. 323). Hypothetically, the NPV tends to generalize and assume that at any given time, the capital is always abundant and thereby no capital rationing. Supposing the resources are scarce, practitioners have to do some critical exa mination of not just the measure, but each and every available project and size of investment. Modified internal rate of return The modified internal rate of returns is a derivative of the IRR with the exclusion of the aforementioned drawbacks. Compared to the internal rate of return, it provides a more accurate percentage measure of financial attractiveness (Kierulff, 2008, p. 322). Based on existing literature, the MIRR method has not received much attention. Within a sample of 15 significant and highly respected finance textbooks, nearly all have ignored the MIRR (Kierulff, 2008, p. 322). Given the widespread use of NPV and IRR, financial institutions across the globe overlook the importance of the modified internal rate of return method. The main idea behind MIRR is simple computation that may seem challenging in practice because of the need to estimate reinvestment rates (Kierulff, 2008, p. 326). The modified IRR involves three basic procedures that when utilized effectively present the best measure of capital budgeting. The first step involves discounting investment funds committed to the project back to present at a rate that fairly reflects the investment risk. Two, with the exclusion of investment, the free cash flow is compounded forward within a time frame and a chosen reinvestment rate. It is worth noting that the reinvestment rate represents projected future opportunities with risks equal to investment risk. The final step involves calculation of the internal rate of return. Strengths and Weaknesses There are several reasons why firms should ditch the traditional IRR and embrace the modified version. While the former exudes rigidity in changing the reinvestment rate and assessing impacts, the MIRR function permits both a finance and reinvestment rate to be associated with the stream of cash outflows and inflows in investment evaluation (Block Bell, 2009, par. 14). Unlike the IRR or NPV, a company is able to tell whether an investment increases its value through MIRR. With MIRR, risks of future cash flows, time value of money and cash flows of the project are considered. Both NPV and IRR share significant drawbacks in that both of them have problems of size, timing and ranking. Moreover, NPV and IRR renders management locked into assumptions about how free cash flows will be reinvested by giving unrealistic view of investments actual potential (Kierulff, 2008, p. 328). Of the three, MIRR is the most effective considering its capability in dealing with the mentioned problems. Like the other decision tools, the modified internal rate of return has its share of weaknesses in capital budgeting. Some of the techniques in MIRR require adjustments for effective functioning in practice. For instance, the method requires an estimate of the cost of capital for one to make a decision and when used to compare mutually exclusive projects, the measure may fail to produce value-maximizing choices. Discounted payback method (DPB) The discounted payback method simply measures the period it takes to recover the initial investment using discounted cash flows. In DPB, projects with the shortest payback periods are ranked highest or considered the most viable. Unlike NPV, IRR and MIRR, the criterion used in discounted payback method centers more on profitability rather than liquidity. This method has many advantages over other measures. The discounted payback period is simple to understand and easy to compute. Additionally, the method offers a more conservative measure of the relative liquidity of an investment than the traditional payback method (Bhandari, 2009, p. 3). The DPB function allows for a better gauge of the economic breakeven point and can be interpreted as a period beyond which a project generates economic profit (Bhandari, 2009, p 3). Even so, the methods efficiency is reduced in cases where cash flows beyond it are overlooked. Another of its weakness is that it requires an estimate of the cost of ca pital for one to compute the payback and exudes a part whole bias in special cases such as assessing or valuing long term projects. Profitability Index (PI) Profitability index is also known as the cost-benefits ratio as it involves ratio of the present value of future cash benefits at the required rate of return to the initial cash outlay of an investment (Elumilade et al., 2006, p 146). The PI is another capital budgeting methods used by entrepreneurs in choosing among countless causes of action. The monetary cost of a project is ascertained and compared with its expected benefits in monetary term. The profitability index computes the present value of benefits to that of the cost such that when PI is greater than 1, the project is termed as acceptable. By comparison, the PI method is a slight modification of the NPV only that this time, the PI evaluates project using a return element. Its close relation with the net present value may lead to identical decisions in project evaluation. The PI method is easier to understand and tends to communicate more easily than the NPV. For firms initiating smaller or larger projects, the PI acts as an effective tool regardless of the project size. On the flipside however, the values obtained in profitability index may not be as accurate as the ones in IRR. Conclusion The survival, growth and development of a firm is heavily dependent on constant flow of ideas for new products and ways to make existing ones better. Capital budgeting is one of the most important factors in the process of corporate decision-making. The whole process of capital budgeting calls for a series of stages in which the project is evaluated and feasible options employed. For a firm to make rational decisions, specific objectives must be included to maximize profits with one eye on the projected long term return (Elumilade et al., 2006, p. 141). Identifying and evaluating possible projects and alternatives makes the all essence of capital budgeting and this fundamentally implies that a firm has to find a measure that is uniquely in congruence with its short term or long term objectives. The existent body of literature, primarily those included in this discourse, identify NPV and IRR as the most popularly used by firms. Whether this is a testament of their superiority in pract ice is still debatable as each of them has its own drawbacks. It is difficult to find one measure that would work for every organizations.

An Analysis Of Environmental Toxicology Environmental Sciences Essay

Environmental Toxicology is a quickly developing field concerned with the research how natural and semisynthetic pollutants impact the wellness of worlds, wildlife, and whole ecosystems. It involves application of a assortment of techniques to analyze the impact of toxic agents on life beings and provides powerful tools for measuring the hazards associated with the presence of these agents. It draws on a assortment of scientific subjects to depict, step, explain and predict the badness and frequence of inauspicious effects on life beings due to environmental poisonous exposure. Pollution, depletion of resources and decomposition of ecological maps are of planetary, regional and local concerns. Environmental toxicology nowadayss many practical applications to these jobs. The findings are used by authorities bureaus to put new pollution control criterions and to analyse the badness of harm in an ecosystem and develop the smartest ways to travel about cleaning it up. Land development co mpanies may besides work with environmental toxicologists to do certain that glade and building attempts are every bit environmentally-friendly as possible. It involves proving dirt, H2O, and air samples to look for the beginning pollution, and utilize their findings to better understand wellness impacts on native species. Pakistan, as developing state, is confronting challenges with a figure of serious environmental issues such as devolution of natural resources, industrial and vehicular pollution, pollution of coastal environment, impairment of human wellness. Sum uping in fiscal footings, the one-year cost of environmental disparagement in the state is about 4.3 % of GDP ( US $ 4.3 billion ) . This workshop is about the turning sum of pollution in Pakistan. Examines findings of different surveies turn outing that wellness is being adversely affected by a assortment of environmental contaminations. The above state of affairs has arisen due to a figure of factors including high pop ulation growing rate, predominating poorness, unplanned urban and industrial enlargement, deficient accent on environmental protection in the authorities policies, deficiency of public consciousness and instruction and deficiency of institutional capacity and resources for effectual environmental direction. To forestall continued environmental debasement and the diminution of human & A ; environmental wellness, interactions between human, other life beings and the environment have to be in harmoniousness. This is accomplishable through an integrated, holistic attack embracing instruction and research activities in natural scientific disciplines, socio-economic and political factors with technological, economic and socio-cultural intercessions. Increasing consciousness of environmental debasement is ensuing in proliferation of environmental statute law throughout the universe. This thrust towards greater environmental protection has created a demand for scientists skilled in measurin g environmental resources and more significantly the jobs associated with their development. Environmental appraisal may be required to measure the biological, physical or hydrological resources of any environment, and to put these resources within a wider geographical context. This workshop is an attempt to supply a wide foundation of scientific based accomplishments to germinate, fiting environmental professions, peculiarly in countries associating to environmental protection and direction. Furthermore, the national and international demands have been under concern for better environmental direction understanding the inter-relationship between sustainable economic development and environmental protection. Opening comments from Prof. Dr. Muhammad Ashraf, Chairman section of pharmacological medicine and toxicology/the Director Research UVAS, were followed by that of Prof. Dr. Mohammad Nawaz, Vice Chancellor of the Exchequer UVAS, and Prof. Dr. Mrs. Kausar Jamal Cheema, Dean Faculty of Natural Sciences, Lahore College for Women University, all of whom emphasized the importance to use the corporate wisdom in proviso of improved methods for toxicity appraisal and rational agencies for gauging wellness hazard in order to advance public wellness and to supply a better and safer environment to forestall wellness jobs before they occur. They added further it is our mission to develop new environmental toxicologists and reference pertinent environmental toxicology inquiries through instruction and research in countries such as chemical destiny, bioavailability, biological consequence, toxicokinetics, and mechanisms of action. A focal point on interdisciplinary attacks and scientific accomplishm ents is cardinal to our instruction and research activities. Dr. Sohail Ejaz ( co-author of this study ) , PhD, University of Cambridge, UK co-ordinator and workshop organiser presented on the advanced appraisal techniques for measuring impact of Air Pollution upon Neuroinflammatory diseases of Central nervous system and how these surveies could be implemented in our research labs. New dimensions have been added to the array of result steps. Medical outcomes research now recognizes that patient wellbeing should be loosely conceptualized and measured strictly, in add-on to sing the biological procedure of the disease itself. As a consequence, health-related quality of life, the perceptual experience of wellbeing, is now considered a necessary constituent of results research. Toxicologic surveies have besides gained in edification through incorporation of more sensitive indexs of consequence and the careful tracing of the relationship between exposure and biologically relevant doses to aim sites, which may now be considered at a molecular degree . He besides gave an overview of all his research activities conducted at Department of Clinical Neuroscience and how to work upon such techniques in our state with scarced resources and what marks to be achieved farther to get the better of environmental pollution issues in Pakistan. Dr. Sohail Ejaz bring to a stopping point to develop and back up research plans, outreach and other services that address critical issues in environmental wellness and toxicology. An international talker Prof. Dr. Gerry Amor Camer, Dean, College of Veterinary Medicine from University of Eastern Philippines, wide casted through picture conferencing installation. He shared his singular research work on tissue toxicology and presented a talk on â€Å" Understanding the pathology of tissues exposed to assorted toxins and pollutants † . Assessment of the environmental effects of chemicals is complicated as it depends on the beings tested and involves non merely the toxicity of single chemicals, but besides their synergistic effects, genotoxicity, mutagenecity and immunotoxicity testing. He farther elaborated that a figure of stressors affect the environment and sometimes when demoing interactive effects they become hard to quantify or foretell their single effects. Therefore, there is a demand to understand the poisonous effects at molecular degrees to foretell their effects and bing techniques to be invariably modified to supply better agencies of their qua ntification. Dr. Zulfiqar Ali, Department of wildlife and ecology, UVAS, presented on Beginnings and Health effects of different Air pollutants. The mechanisms for patterning and understanding the destiny of air pollutants through atmospheric conveyance, deposition into H2O and dirt, bioaccumulation, and ultimate consumption to receptor variety meats and systems in the human organic structure are complex. These require more experimental and theoretical developments in order to bring forth attacks for word picture and appropriate schemes and checks for testing in order to observe the harmful agents and forestall them from making sensitive end points. This seminar and workshop provided research workers from all over Pakistan a comprehensive platform where all aspects of environmental pollution as it exists in our state to be to the full explored and a forum to these professionals and research workers to discourse and present latest research tendencies and consequences in the field of Toxicology. Such enterprises help to back up the survey, analysis, and solution of environmental jobs which are finally impacting the wellness of human existences, animate beings, workss, dirts and over all eco-system unity. Prof. Dr. Muhammad Ashraf highlighted different research activities rendered by the section of Pharmacology and Toxicology in the recent old ages at his establishment. He discussed the constitution of new research labs at the section an attempt to open room accesss to many new dimensions therefore advancing the promotion and application of scientific research related to the contaminations. This included the constitution of Angioge nesis & A ; Toxicology lab ( ATRL ) and a Neuropharmacology lab in the module a progressive measure for Applied Neuropharmacology & A ; Cancer research. He elaborated further that our research aims to find how environmental pollutants interact with cellular maps and give rise to durable inauspicious wellness effects in craniates including worlds. We are peculiarly interested in toxic effects that target the endocrine system, the generative system and the early encephalon development and other systems in craniates. Enzyme-catalysed activation in mark cells and tissues and receptor-mediated responses are of import countries of research. With an debut of these research labs, it is besides an attempt in pulling really high quality pupils across Pakistan and foreign qualified and relevant module members to take lead on feasible research undertakings needed to turn to our country-specific jobs. Speakers from assorted universities and Govt. sections presented their research undertakings and research documents. Mr. Khaleeq Anwar, PhD Scholar, presented his work on â€Å" Impact of Automobile jinrikisha on Public wellness † . He presented grounds that Automobile jinrikishas are among one of the major beginnings of air pollution in Pakistan, contaminations released from them include the major pollutants Carbon Monoxide ( CO ) , Nitrogen Oxides ( NOx ) , Hydrocarbons ( HC ) and Particulate Matter ( PM ) showing their annihilating effects in deteriorating public wellness. To hold a control over contaminations realized by these two-or three stroke conventional jinrikishas CNG jinrikisha were introduced. Mr. Rizwan Ahmad, Assistant Director, Vehicular Pollution Control, Govt. of Punjab, farther extended the talk by showing on â€Å" Advantages of CNG over other fuels † . He presented his survey on the nature of the poisons wastewater by firing natural gas as fuel and a comparative analysis was made between the nature of the contaminations released by both conventional car jinrikisha and CNG jinrikisha. Statistically important information was evidenced that emphasized the usage of CNG jinrikisha to be preferred over the conventional two-or three shot jinrikishas. Lubna Shakir, PhD Scholar, discussed the public wellness jobs aroused due to dispatch of tannery wastewater effluent straight into the land in the metropolis of Kasur. The environment is under increasing force per unit area from solid and liquid wastes emanating from the leather industry. These are inevitable byproducts of the leather fabrication procedure and cause important pollution unless treated in some manner prior to dispatch. The consequence of inordinate pollutant degrees normally found in tannery wastewaters can be terrible. Water is so contaminated that drinkable H2O has high degrees of Cr and other poisons have been reported in appreciable sums unfit to be used by public. She presented a comprehensive talk entitled, â€Å" Chemical, microbiological and toxicological showing of tannery wastewater effluent † . In her work she quantified the assorted poisons and studied their hurtful effects utilizing research lab animate beings by utilizing assorted dilutions of this tannery waterwaste. She farther elaborated her talk that appraisal of the environmental effects of chemicals is complicated as it depends on the beings tested and involves non merely the toxicity of single chemicals, but multiple factors are involved in relation to wellness behaviours, which may frequently ensue in inauspicious wellness results. Zahida Umer, a immature research worker, outlined the informations demoing the Measurement of pollution degrees in different countries of Lahore by utilizing C monoxide, sulfur dioxide metres, and other available contaminant measuring metres and impacter for particulate affair in different countries of Lahore and provided a comparative analysis of these poisons at different countries. She farther lucubrated her talk by explicating different methodological analysiss for air pollution measuring. Air pollution can be straight measured as it is emitted by a beginning in mass/volume of emanation ( e.g. , grams/m3 ) or mass/process parametric quantity ( e.g. , grams/Kg fuel consumed or grams/second ) . Air pollution can besides be measured in the ambiance as a concentration ( e.g. , micrograms/m3 ) . Ambient air supervising informations is used to find air quality, set up the extent of air pollution jobs, assess whether established criterions are being met, and qualify the possible human w ellness hazard in an country. Alternatively, air pollution concentrations can be simulated utilizing computing machine theoretical accounts, and so validated utilizing informations collected from direct measurings at selected proctors or beginnings. Air pollution informations and theoretical accounts are used together to analyze the impacts of control schemes on the ambient air. Kanwal Zahra, Government College University, presented on â€Å" Effectss of industrial wastewater on the thyroid secretory organs of human population † . The human organic structure is vastly complex, and our cognition and consciousness of its complexness continues to turn. One of the most disquieting finds in recent old ages concerns the possible functions of environmental chemicals on endocrinal systems. Among the endocrines ( â€Å" chemical couriers † ) operating within the hormone system are estrogen ( a female sex endocrine produced by the ovaries ) ; thyroid endocrine ( act uponing the map of virtually every cell in the organic structure ) ; and ACTH ( produced by the pituitary secretory organ to act upon the release of epinephrine from the adrenal secretory organ ) . Endocrine systems can be affected by these pollutants by interfering with the normal communicating between the courier and the cell receptors, the chemical message is misinterpreted, bring forthing unnatural response ( s ) in the organic structure. As thyroid secretory organs let go ofing endocrines act uponing the entire metabolic rate of the organic structure, in her survey she evidenced the assorted pathological results of thyroid poisoning by these industrial wastes and could be the possible damaging effects resulted. Prof. Dr. Sharif Mughal, Government College University, discussed the impact of assorted poisons on Marine environment. Petroleum hydrocarbons are found in sea surface movie throughout the universe. The oceans have served as a depository for a battalion of wastes and receive wastewater from rivers, watercourses, and groundwater. Atmospheric deposition of polycyclic aromatic hydrocarbons ( PAHs ) and other hydrocarbons adds to the load of pollutants in the marine environment. Industrial smokestacks, incinerators, outfall pipes, cars, lawn chemicals, agricultural chemicals, places, concerns, commercial ships, and motorised pleasance trade are all beginnings of contaminations. Many of these chemicals are fat-soluble and come to shack in the fatty tissues of Marine animate beings. Some of these chemicals have been characterized as endocrinal disrupters ; some are believed to cut down generative success, to interfere with developmental procedures, and/or to stamp down immune map. Other ch emicals, such as PAHs, do non bioaccumulate in marine mammals but may hold inauspicious impacts on the wellness of Marine animate beings through repeated exposure and metabolic response. He evidenced the above scenario by showing his survey on the Serological and histological alterations in the liver of Labeo Rohita dur due to fluoride poisoning. An attempt to qualify the types of lesions produced by these chemical contaminations found in, the metabolic response to such contaminations, and the extent of tissue harm caused by exposure to these contaminations. He farther elaborated his talk that animate beings are exposed to natural poisons in their native environments every bit good as to man-made chemicals and drugs. Factors that affect the toxicity include ; those related to the poisons, which influence how it A ­A ­enter and finally act upon the factors related to the host animate beings that change its ability to detoxicate or accommodate to the poison. The concluding Lecture of the workshop was presented on the subject, â€Å" Word picture of Environmental pathologies by immunohistochemistry † by Dr. Sohail Ejaz, PhD, University of Cambridge, England. He flesh out his talk that Environmental toxicity encompasses the survey of the toxic belongingss of non merely man-made chemicals but natural besides, including their effects on worlds and animate beings every bit good as their motion and destiny in the environment. It is a demand to develop research techniques for the appraisals of effects of these pollutants and supervising their deadly effects non on human wellness merely but impacting every life being and our eco-system. Therefore seting our joint attempts to supply a better and safer environment to forestall wellness jobs before they occur. Decision: This was a variegate workshop to back up and advance the survey, analysis, and solution of environmental jobs which finally impacting the wellness of human existences, animate beings, workss, dirts, harm edifices and other belongings and upheaval of awareness degree at National and International degree through research and development. We can populate a healthy life in a clean environment and it can merely be achieved by recognizing and understanding the importance of clean environment. Therefore to supply consciousness about the effects of all possible environmental pollutants and the corresponding steps to be taken to diminish contaminations exposure. Besides to promote research techniques for the appraisal of effects of these pollutants and supervising their deadly effects on human wellness and conserving and protecting our environment. Disclosures and Auxiliary Information: This workshop was organized at Department of Pharmacology & A ; Toxicology, University of Veterinary and Animal Sciences, Lahore in coaction with the Department of Clinical Neuroscience, University of Cambridge, UK This meeting was funded by Higher Education Commission, Islamabad, Pakistan.

Critical Analysis of Sustainabilty in Marketing Essay

Focus on sustainability has appeared on the face of the earth over the last ten years and a lot of books and articles are published on the topic of sustainability. Early on, John Elkington developed and promoted the concept of â€Å"Triple Bottom Line† in his book Cannibals with Forks: The Triple Bottom Line of 21st Century Business which was published in late 1999 (Creating a Sustainable Organization: Approaches for Enhancing Corporate value through Sustainability By Peter A. Soyka, Pg. 1) The concept of sustainability is transformed to cover three basic components known as the Triple Bottom Line which are complexly linked to one another: profits-it is the economical part that balances financial growth with awareness and concern for the social good and environmental stewardship; planet-it is the environmental part that safeguards and preserves the natural qualities of our ecosystem for the benefit and health of future generations; people-it is the social equity part that safe guards the benefits of opportunity and equality for every individual. See more: how to write a critical analysis essay step by step The growing importance of sustainable development establishes a significant and developing challenge for environmental economics and natural resources. This challenge is such big that if it is not measured and controlled then it will ruin the life of the future generations that’s the reason why every field now a days strive to work hard to have Sustainable Value Creation (SVC). The question arises what is sustainability, a more relevant answer is provided by The Brundtland commission (1987) which says to be sustainable is to meet the needs of the present without compromising the ability of future generations to meet their own needs. While this looks clear but if we observe it thoroughly and closely there are some complications and difficulties in it (Smart Green: How to Implement Sustainable Business Practices in Any Industry-and Make Money By Jonathan Estes page 6-8). The first problem which is a marketing problem is in the needs of the present and no one today knows of what level of needs we are talking about. The second difficulty is an ethical question that relates to the future and intergenerational justice, how we know what the needs of the future generations will be and how far do we look into the future? These two questions i.e. marketing and ethical must be explained much more clearly and  precisely than the definition of the sustainability suggests. The world economies currently face many challenges in the domain of public and commercial policy and one of the most crucial challenges they are facing is sustainable development. According to the projections of United Nations (UN) on population growth, the population of the world will most likely reach nine (9) billion people by the year 2050 with most of the growth taking place in emerging and developing countries. It is the commitment of UN to improve environmental and social performance associated with sustainable development. It seems that it is highly unlikely to achieve the goals set by the UN with current unbalanced consumptio n, marketing and production practices. KEY IDEAS OF SUSTAINABLE MARKETING: SUSTAINABLE CONSUMER BEHAVIOR Creating consumer demand for sustainable products and services is not an easy task because the consumers traditionally behave to maximize their own utility. Many consumers think that anything which is good for the entire society in the long term is always the best option for the individuals in the short term and unfortunately for most of the consumers the positive attitudes toward sustainable development is not shown in their actual consumer behavior and purchases. There are differences in what people say and what they actually do. Sustainable consumer behavior can be enhanced by positioning sustainable behavior with consumers’ self-interest and by making sure that this self-interest is understood and recognized thoroughly and can be acted upon (Encouraging Sustainable Behavior: Psychology and the Environment edited by Hans C.M. van Trijp page 3, 4). Consumers when they consume sustainably also behave in a way that shows or signals there superiority over others. Marketing efforts should be made to enhance sustainable consumption that leads to reduction in the trait of signaling instinct i.e. our inclination to signal to others that we hold valued traits. SUSTAINABLE MARKETING STRATEGY AND PRACTICE The objective of sustainable marketing is to include and combine the environmental concerns in the marketing effort; this means that if the consumers are given better, more complete and more concise information on the sustainable products offered to them this will drive more and more  companies to produce products and services that are good for the environment. Sustainable marketing can take the strategies of conventional marketing to promote sustainable products and services not only by labelling the green products but also from working with positioning strategies of product, promotion, price and placement and rigorously engaging in market creation by addressing a large number of customers. The company’s marketing strategy throughout the supply chain from product development to consumption should include sustainability in it. Many companies are focusing on the implementation of sustainable consumption; they are finding the ways to direct the people’s thinking to forthcoming challenges and problems by using different marketing and communication strategies that lead to sustainable consumption. Sustainable communication and marketing strategies can make the companies think of their long-term socio-economic influence and the long-term perspective of it; this will help the companies to tell the public about their future program without diminishing their present less environmental performance. EFFECTIVE SOCIAL MARKETING Effective social marketing is a community and pragmatic based approach; it brings very operative behavioral change. This approach has five steps i.e. prudently pick the behaviors to be promoted; identify the benefits and barriers which come with the selected behavior; form a strategy that uses the behavioral-change tools to understand these benefits and barriers; test the strategy on a sample of certain community; and evaluate the effect of the strategy when it is tested on a large scale (Design for Environment as a Tool for the Development of a Sustainable Supply Chain by Bevilacqua, MaurizioCiarapica,Filippo Emanuele Giacchetta, Giancarlo, pg 147). Social marketing is different from commercial marketing it takes into account the changes in behavior that contributes social gains while commercial marketing’s objective is to produce financial gains by selling products and services. There are five important areas where social marketing focuses very heavily and they are; communit y involvement, health promotion, environmental protection, financial well-being and injury prevention (Social marketing: A pathway to consumption reduction? Ken Peattie, Sue Peattie. Pg. 262-264) TRANSFORMATION OF TRADITIONAL MARKETING TO SUSTAINABLE MARKETING Marketing has now changed itself it has a sustainability feature in nearly all of the  marketing practices. It is now somewhat compulsory for the companies to consider sustainability in all of their strategic marketing practices and marketing mix. It is a very distinctive and objective task to integrate sustainability in the marketing strategy and at the same time it is not an easy task because marketing strategies are developed by taking into account the needs and wants of the costumers. Previously the companies only tried to fulfill the consumer demand whether it has an adverse effect on nature or environment but now more companies are forming sustainable marketing strategies that makes relationships with customers better by fulfilling their demands and results in good profitability of the company and have good impact on nature and environment. Paettie and Belz (2010) after years of research came up with the idea of 4C’s i.e. (Cost, Communication, Costumer cost and Costumer Solution) and tried to mold traditional marketing Mix i.e. 4P’s (Product, Price, Place and Promotion) into 4C’s (Evolution of sustainability as marketing strategy: Beginning of new era Vinod Kumar, Zillur Rahman, A. A. Kazmi and Praveen Goyal, pg 486-487). SUSTAINABLE MARKETING- CHALLENGES AND ISSUES Developing a sustainable marketing strategy is not an easy task because there are some issues and challenges that should be dealt carefully and prudently before going on with the strategy. The issue is what sustainability principles demand is that we need to conserve the resources and consume less of it and at the same time marketing principles demands to sell or produce more which means consume more natural resources (jones et al 2008). The challenge is how to balance this discrepancy and which means that sustainable marketing strategies should be developed that still result in profits but not creating negative impact on the society or environment. The process of arising of a problem and solving it is an ongoing process one may come up with an idea or solution to an issue but there would be some problems with that solution too (Charter et al 2006). A good thing of sustainable marketing is not only competitive advantage but it also gives rise to innovation and reduction in costs. CONCLUSION The Marketing concept now has redefined which was acknowledged only as a functional concept and this concept is now dying and losing its grip on the  world stage. Now the redefined concept of marketing is strategic business concept that is intended to attain sustainable satisfaction for the three main players or stakeholders i.e shareholders, the costumers and people in the organization. The concept of sustainability marketing strategy started from ecological issues has now come to discuss sustainability issues. A company may have a sustainable marketing strategy if it involves sustainability in its business practices especially the marketing practices. The companies have to resolve the traditional issues and challenges which come in the way of implementing sustainability in their marketing strategies and then it will be a win-win situation for both the costumer and company. It has now becoming an informal moral obligation for a company to be sustainable. In this new era marketing and in the future, the companies have to be sustainable to compete on the world stage. REFERENCES Creating a Sustainable Organization: Approaches for Enhancing Corporate value through Sustainability by Peter A. Soyka, Pg. 1, Smart Green: How to Implement Sustainable Business Practices in Any Industry-and Make Money By Jonathan Estes page 6-8, Encouraging Sustainable Behavior: Psychology and the Environment edited by Hans C.M. van Trijp page 3-4, Design for Environment as a Tool for the Development of a Sustainable Supply Chain by Bevilacqua, MaurizioCiarapica,Filippo Emanuele Giacchetta, Giancarlo, pg 147, Social marketing: A pathway to consumption reduction? Ken Peattie, Sue Peattie. Pg. 262-264, Product, Price, Place and Promotion) into 4C’s (Evolution of sustainability as marketing strategy: Beginning of new era Vinod Kumar, Zillur Rahman, A. A. Kazmi and Praveen Goyal, pg 486-487, Jones et al 2008,

The Corporate Con Essay - 1103 Words

Courtney Newcomer Professor Poirier Acct 3040 November 2, 2011 The Corporate Con: The Internal Fraud and The Auditor In the movie the Corporate Con: The Internal Fraud and the Auditor there were several different people who seemed like your everyday Joe, but were actually criminals who committed fraud. Some of the frauds committed in this movie were: Cash Fraud, Accounts Receivable Fraud, Expense Fraud, purchasing fraud, and corruption. Focusing on two individuals Pam and John, each of these criminals committed either cash or accounts receivable fraud. Pam was a graduate from high school who found work soon after graduation. She felt she wasnt getting paid enough for her work so she started stealing cash from the†¦show more content†¦There are several methods used in detecting cash fraud which are usually included in most cash audits. Some of the methods used are: Bank reconciliations, cutt-off statements, surprise cash counts, customer complaints, altered or missing documentation, journal entry review, review and analyses of decreases in gross sales or increases in returns and allowances, and analytical reviews. The method used in detecting Pams fraud was a surprise cash count. Surprise cash counts often bring up situations of employees borrowing money or floating small loans also called swapping. It is crucial that when doing surprise cash counts that it be done often but on an irregular and unannounced basis. Also, if employee checks are included in the cash drawer or register, this may be an indicator that employees are swapping checks for cash. In the prevention of cash frauds it is important to have a segregation of duties. Cash fraud is more likely to happen if one person has control over the entire accounting transaction. Each of the following duties and responsibilities should be segregated: cash receipts, bank deposits, bank reconciliations, and cash disbursements. If one person has the ability to do all of these themselves there is a high risk that fraud can and will occur. Surprise cash counts are very useful in fraud prevention if the method is used correctly. Employees should know that cash will be counted, but that its sporadic andShow MoreRelatedThe Pros and Cons of Corporate Downsizing Essay1236 Words   |  5 PagesI.  Ã‚  Ã‚  Ã‚  Ã‚  An introduction to corporate downsizing. II.  Ã‚  Ã‚  Ã‚  Ã‚  The reasons behind a company downsizing. A.  Ã‚  Ã‚  Ã‚  Ã‚  Cash flow, profits, and profit margins. B.  Ã‚  Ã‚  Ã‚  Ã‚  Organizational structure and procedures. III.  Ã‚  Ã‚  Ã‚  Ã‚  Planning the downsizing. A.  Ã‚  Ã‚  Ã‚  Ã‚  Pro and con factors. B.  Ã‚  Ã‚  Ã‚  Ã‚  Identifying the options. IV.  Ã‚  Ã‚  Ã‚  Ã‚  Implementing the downsizing. A.  Ã‚  Ã‚  Ã‚  Ã‚  Announcing the action. 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