Analysis of the Daimler-Benz and Chrysler Merger

Analysis of the Daimler-Benz and Chrysler Merger ABSTRACT Globalisation has changed the appearance of the economy. Especially in the 1990s firms expanded into new markets to operate more global and to develop their business. To do so, many companies choosed to expand via corporations with other companies to make the market entry easier or simply to strenghten their market position. Mergers and acquisition became one of the most used tools for development, whereas a merger between well known and successful companies always caused a sensation. Mergers caused such a stir as the companies involved in a merger faced a complete new identitiy and innovations were about to alter the company. The research project proves the decision for a merger rather than an alliance and the synergies gathered due to this tool of development. Two companies, Daimler-Benz and Chrysler, are investigated to illustrate the academic frameworks in practice to come to a conclusion why they merged. Methodology includes analysis of secondary data which has been published on the subject area. The findings and analysis of the research conducted, concluded that synergy is the most important aspect when companies grow through mergers. Furthermore, the results show that internationalisation due to globalisation is the key driver of mergers. The paper concludes with an evaluation of the study and recommendations for further research. CHAPTER ONE 1.1. Reason for Choice of Topic Companies come and go, chief executives rise and fall, industry sectors wax and wane, but an outstanding feature of the past decade has been the rise of mergers and acquisitions (MA). Whether in times of boom or bust, MAs continue to be the preferred option for businesses seeking to grow rapidly. A company has several options to choose from when it comes to growth strategies. One option is to grow organically by increasing sales personnel, new product developments and by expanding into new geographical areas. Alternative options to achieve the desired growth, companies traditionally build, buy, merge with other companies or co-operate through alliances. However, the best example of how to grow inorganic is to merge or aquire (Sherman, 2005). MAs are mainly about growth according to Lees (2003) and Sudarsanam (2003). Internal or organic growth is in most cases a slow process and MAs is another option that will increase the growth process. By doing an MA deal, the acquiring company or the merged companies can get instant access to new markets, technology and operations can be completed more efficiently. Several reasons and motives exist why a company chooses to grow through MA. According to Gaughan (2002) the most common motive for MA is to create synergy. However, other motives play also an important role, like diversification, improved management, market power or tax motives. Johnson and Scholes (1997) state that MAs are a quick way of entering new markets or products. The company can also gain competences or resources through this way. Knowledge about the market situation is also a significant cause why companies choose to develop through MA. Another reason for companies to develop through MA is that they are actively s earching for benefits arising from synergies. The author has chosen the topic to gain further knowledge about the topic of why do companies actually merge to gain synergy. The reasons for attempting to gain further knowledge are based on the authors fascination on MA in general and to the extend why Daimler-Benz and Chrysler did actually merge. The split between those two has not been long ago and therefore the author was particularly interested in this merger. Furthermore, the author is interested what type of synergies were the most relevant in this merger of equals. 1.2. Academic Obejctives of Dissertation This research aims to point out that synergies play an important role when two companies are doing a corporation in order to grow. The author has chosen the following objectives in order to support the research hypothesis: To discover why companies select mergers instead of strategic alliances as tool for development To investigate to what extend synergies play an important role when merging To explore the importance of internationalisation in times of globalisation 1.3. Outline of Chapters Introduction: Introduces the topic of this research and explains the aims and objectives of the study. Setting the scene: This chapter is to set the scene for the study. It presents background information about the two companies and what actually did happen. Literature review: Discusses the academic literature on mergers and acquisition and synergies concentrating on several approaches to be applied to the case study. Methodology: Discusses how the research was conducted and recognizes any limitations and biases of the chosen methods. It involves a description of how the research and data was analysed. Findings: Presentaion of the case study including important information for the research Analysis: The findings from the secondary research are analysed against the earlier literature and research from chapter three. Conclusion: The research project is finally concluded, commenting on the initial objectives of the study. The limitations and recommendations for further research are also discussed in this chapter. CHAPTER TWO 2.1. Background of Daimler-Benz AG As Jurgen Schrempp became the new CEO of Daimler-Benz AG in May 1995, one of his first jobs was the promulgation of a new strategic concept containig five points to strenghten their market position and to expand further. Mercedes considered the US market to be the important and competitive automobile market in the world. They established a greenfield plant in Tuscaloosa in 1994 already to strenghten their position in the US market and were supposed to be market openers. Those were the first signs that Daimler-Benz wanted to expand. 2.2. Background of the Chrysler Corporation From 1994 to 1997 Chrysler beat one historical record after another, where even some models were selected as cars of the year. It was even crowned by Forbes as the company of the year 1996. Bad labour relations have been improved through corporatist agreements. However, most cars were sold in the home market and plans to expand to other non-american countries have been scattered more or less. Nevertheless, the frequent crises and the internationalisation deficits of the company had planted the idea of a partner in the minds of the Chrysler executives. 2.3. The Merger When in May 1998 the CEO of Daimler Benz, Jurgen Schrempp and Robert Eaton, CEO of Chrysler signed the contract for a merger between those two companies, they made the biggest industrial merger in history. Both partners expected great value and advantages, as both companies seemed to complement well with each other. As a matter of fact, the company did not develop as good as anticipated. From the beginning on DaimlerChrysler could only announce little profits and losses, in the year 2001 it was even the biggest loss in history of all German companies. By mid 2004 the market value of the company has been less than half of what the value has been of both companies before the merger. By the same time the sales figures and business numbers of competitors increased. In May 2007, not even ten years after the merger, the dream of a super company bursted like a bubble. CHAPTER THREE 3.1. Reasons for Internationalisation As Kwon Kopona (1993) state in their theory the choice of market entry should relate to the companys corporate strategy and the extent, depth and geographical coverage of the present and intended foreign activities. Furthermore, the decision for growing should be made when there is a sufficient understanding of the different types of entry. On the one hand companies could gather experience through alliances and on the other hand fail to see that in particular cases an acquisition would be more successful (Clark, 2005). Dyer et al. (2004) state that a specific advice is needed about when to apply each strategy that is based on internal and external circumstances. Especially internally, the companies should focus on resources that are to be combined, the extent of unnecessary resources and the type of synergy which the firms seek. Externally, important factors are the degree of market uncertainty and the level of competition. As experience and interests of the company are different, t hese factors will have different degrees of importance. In Porters (1987) point of view entering a new market must be attractive for the expanding company. It needs feasibility of making profits in the target organisation. The costs of entry must be taken into account. These include direct costs as the cost of shares and advisors and indirect costs include such costs as integration costs. According to Dunning (1988) where he argues with the eclectic theory that additional costs can occur because of the failure of knowledge about market conditions, the legal and cultural diversities and the increased costs of operating at a distance. It also must be taken into consideration if the possibility of gaining synergies exists and what the opportunity of benefiting from the target companys core competences is. The local advantages of countries play an important role. The main country advantages can be classified as economic advantages, consisting of quantity and quality factors such as transportation, production, scope and the size of the market. Then there are political advantages that include government policies which have a positive influence on the market entry. And finally there are social and cultural advantages, which implicate the physical distance between the home country and the foreign country, language and cultural diversities and the general attitude towards foreigners. Dunning (1988) declared that companies have to be aware that relative attractiveness of locations can change over the year. He also declares that particular know-how and specific core abilities which count as an internalisation advantage can have a positive impact on the general business performance. 3.2. Methods of Development 3.2.1. Merger and Acquisitions As De Witt Meyer (1998) state in their thesis, mergers and acquisition are the most popular and influential form of discretionary foreign direct investment. Acquiring of another company is a takeover, be it friendly or hostile, while mergers only represent the share in a company according to Douglas Craig (1995). A non-adversarial approach benefits not only buyers but vendors as well, claimed by Beckett (2005). Mergers and acquisitions are significant alternatives to internal growth of companies as they enable companys fast penetration of new and foreign markets, acquire necessary know-how and skilled personal and obtain economies of scale and scope, according to Jackson (1995). Companies that merge gain access to supply and distribution channels through an upstream alliance. Furthermore Contractor Lorange (1998) state that enhancing their reputation and reducing competition if the integrated company is a competitor might be seen as an advantage. MAs are a well developed strategy and not a reaction to the first apparent opportunity as Simmons (1988) argued. As Coyle (2000) states, MA can be the outcome of either an aggressive or defensive strategy. Aggressive would mean that the company will seek to improve its market position to create a bigger company and finally to produce on a bigger scale and more cheaply through economies of scale. Defensive strategies on the other hand are made in order to survive in changing industry. A totally different reason for doing MA claimed Beckett (2005) as he said that companies may benefit from MAs when they acquire a company at a certain value and sell it later at a higher value. Through increasing shareholder value by providing a higher level of dividend and capital gain return and securing a higher return on the investment. This paper is mainly looking for the purposes for a merger and therefore for the realisation of potential synergy effects, as the purpose of most MAs is to achieve some kind of synergy. The belief is that two comparable companies together will achieve far better results than independently. Cost cuttings and savings will often lead to this effect. A successful MA can be classified as one where the potential synergies identified are to be utilised best as Coyle (2000) states. 3.2.2. Strategic Alliances Johnson (1999) has declared that defining strategic alliances are difficult to define as various forms exist. Clark (2005) defines it as two companies which are brought together with similar interest but with different strengths to work on particular projects, developmental approaches and marketing agreements which will offer benefits for both companies. Lorange and Ross (1992) even came to the conclusion as strategic alliances entail a very broad definition that it incorporates MA. Strategic alliances can be separated into three different types as Contractor and Lorange (1988) state: Joint ventures, Non-equity alliances and Minority equity alliances. Preece (1995) recognised 6 main reasons for strategic alliances, starting all with the letter L, therefore they can be named as the 6 Ls. Learning is the first one of them, as he argues that knowledge will be acquired. Leaning is meant as replacing the value chain activities and filling in the missing infrastructure. Leveraging will fully integrate the firms operation. Linking suggests that the links between supplier and customer should be build closer. Leaping pursues a radically new area of endeavour. And finally Locking out, which means reducing competitive pressure from non-partners. 3.2.3. MA versus Alliances The main difference between MA and alliances is the power of control according to Lorange Roos (1992). A pure acquisition would mean that the brought up company is under the control of the ones who bought it. To achieve growth due to acquisition and remain in control, huge financial resources are needed. Rather than buying a whole company, a corporation can propose a joint venture with a specific division in which the corporation is interested in. In case this joint venture works well, a multi-activity alliance could be grown. Equity swaps can be conducted for long-term stabilisation. However, without full control the corporation cannot decide for its own how the alliance or the merger will develop or if it will continue. A company with two equal CEOs does not work out well due to different interest and objects as Lorange Roos (1992) state. And Clark (2005) stated earlier that companies could gather experience through alliances but fail to see later that in particular cases an acquisition would be more successful. 3.3. Mergers 3.3.1. Types of mergers In a merger, the assets of two previously separate firms are combined to establish a new legal entity. In fact, the number of mergers in mergers and acquisition is almost vanishingly small. Less than 3 percent of cross border mergers and acquisitions by number are mergers. In reality, even when the mergers are supposedly between equal partners, most are acquisitions where one company controls the other. When there is a merger between two competing firms in the same industry, it is called a horizontal merger. (Buckley and Ghauri, 2002). When there is a vertical merger, two companies merge that have a buyer-seller relationship. Then there are the three conglomerate types. Pure conglomerate will be a merger where there are different markets and different products, so totally unrelated. Then there is conglomerate market extension, where it is a merger between a company that offers the same products but in a different geographical market. The last type is the conglomerate product extensio n, where the merged company sells non-competing products, but functionally related in production and distribution. In the case of the dissertation, it focuses on horizontal mergers which operate on overlapping markets and segments. Cartwright Cooper (1996) claimed that the definitions and intentions of MAs often read like a cheesy novel with a likeness to a more or less welcomed dating or courtship. The following four approaches are made: Pillage and Plunder One-night stand Courtship/Just Friends Love and Marriage Love and Marriage would certainly best fit to the focus of this paper, as the aim is to achieve a positive long term international growth. The fourth category is aiming for long term integration through assimilation and blending. 3.3.2. Cross-Border Mergers One important aspect of understanding cross-border MA is to examine the logic driving the deals. Strategic motives for a cross-border merger involve acquisitions that improve the strength of a firms strategy. Examples would include mergers intended to create synergy, capitalize on firms core competence, increase market power, provide the firm with complimentary resources, products and strengths, or finally to take advantage of a parenting advantage. However, in a recent book by Mark Sirower (1997) he argues that synergy rarely justifies the premium paid. Sirower declares, many acquisitions premiums require performance improvements that are virtually impossible to realize even for the best managers in the best of industry conditions (p.14). In exploiting a core competence a firm takes an intangible skill, expertise, or knowledge and leverages it by expanding its use to additional industries where it may create a competitive advantage in several different businesses. One strategic reas on to acquire is to gain complimentary products, resources or strengths. Research shows that one important driver of cross-border mergers and acquisitions may be undervaluation (Gonzalez et al., 1998). A driver of cross-border mergers might be differences in the macro-economic conditions in two countries. That is, one country might have a higher growth rate and more opportunity than some other country. Thus, it would seem reasonable to expect the slower growth country to be more often home to acquirers whereas the faster growth country is likely to more often home to target firms as Hitt et al. (2001) stated. Reasons for cross-border acquisitions include market power, overcoming market entry barriers, covering the cost of new product development, increasing the speed of entry into a market, and greater diversification. Cross-border acquisitions can produce both economies of scale and economies of scope. They help a firm enter new international markets and thereby enhance their ability to complete in global markets. Of course, cross-border acquisitions are even more challenging to complete successfully than acquisitions of domestic firms according to Hitt et al. (2001). In fact, some research studies suggests that with the right strategy and the right approach to post-merger integration, cross-border acquisitions can create value for the acquiring firm according to Belcher and Nail (2000). 3.4. Motives and Objectives for Merging The literature on motives for MA has placed a significant amount of different sources and theories by several authors. The merits of using mergers to reduce costs are disputed by managers and by practitioners. For example, managers have been heard to comment that costs reductions are the merger benefit that is most likely to be achieved whereas the achievement of synergy is highly uncertain. On the other hand, Michael Porter argues that what passes for strategy today is simply improving operational effectiveness. Porter (1998) argues, In many companies, leadership has degenerated into orchestrating operational improvements and making deals (p.70). It is understandable how operational effectiveness may have come to be the driving motive for many mergers, however. Often at the same time a merger is announced, there will be an announcement of a cost reduction target. Merging in order to create synergy is probably the most often cited justification for an acquirer to pay a premium for a target company. Synergy effects can be created by redeploying assets. This can mean two different things. In the first case, the acquiring company may transfer a resource belonging to the target company to the acquiring company. Colombo et al. (2007) also found out that a strong predictor of acquisition performance was the extent of asset redeployment from the target to the bidder. Weston and Weaver (2001) stated that the first category is synergy or efficiency for a merger, in which total value from the combination is greater than the sum of the values of the component firms operating independently. Hubris is the result of the winners curse, causing bidders to overpay; it postulates that value is unchanged. Of course, in a synergistic merger, it would be possible for the bidder to overpay as well. The third class of mergers comprises those in which total value is decreased as a result of mistakes or managers who put their own preferences above the well-being of the firm, the agency problem. Economic motives are an important subcategory creating strategic logic for a merger. One example is to establish economies of scale. A second closely related reason is to be able to reduce costs due to redundant resources of two firms in the same or closely related industry. Thus if the company acquires a company that is in the same or a closely related industry and there is substantial overlap between the two businesses there may be ample opportunities to reduce costs. Another reason is that the stock of the firms from a particular country may be undervalued. A fourth reason is the macroeconomic difference between countries such as different growth rates. Finally, the exchange rates may play a role. Recent research did show that acquiring a foreign company when the home country currency has appreciated in relation to the target companys currency has great benefits for the acquiring company when the industry is highly technological (Georgopoulos, 2008). Firms engage in merger and acquisition activity for many reasons. Effective mergers and acquisitions can, for example: serve as a platform for corporate growth, lead to increased market share, provide the foundations required to generate and gain advantages from economies of scale (these are benefits that occur when the firm is able to use its resources to drive costs lower across multiple products; scale economies are acquired primarily at the operational level) and economies of scope (these are benefits realised through using one units resources in the operations of another unit), and reduce organizational expenses by eliminating duplication and transferring knowledge between and among business units and/or individual product lines (Collins and Montgomery, 1999). One of the most important motives for MA activities, as seen from the experience of the last decade, has been economies of scale and scope. Companies aim to achieve economies of scale by combining resources of two merging companies or create economies of scope by acquiring a company allowing product/market diversification. Other motives include access to each others technology or market reach, achieving a dominant position in the industry, consolidation of the industry, and manipulating rules of competition and antitrust as Buckley and Ghauri (2002) state. The question as to whether merge primarily concerns the identification of the corporate objects and which of these objects are to be pursued through organic growth and which through MA in the form of participations or a full takeover. At the same time, the consequences of the growth strategy and its economic or financial effects in the light of the competition situation and the extension of the value added chain must be carefully examined. Empirically, in approximately 85 per cent of all concentrations between undertakings and acquisitions, the question as to whether is answered with a view to the object of achieving growth in the core business (Picot, 2002). However, Buckley and Ghauri (2002) stated also that mergers and acquisition have become the most dramatic demonstration of vision and strategy in the corporate world. More than 50 percent of the mergers so far have led to a decrease in share value and another 25 percent have shown no significant increase. When coming to a conclusion what is now the main purpose to merge, the author would conclude that it depends on the companys expansion strategy and the different motivation to form alliances. However, effective mergers and acquisitions can serve as a platform for corporate growth, lead to increased market share, provide the foundations required generating and gaining advantages from economies of scale and scope as Collins and Montgomery (1999) concluded. These factors are seen as the most important motives to form a merger and to believe that it would help the effected corporations to strengthen their market position and even gain more market share. 3.4.1. Synergy According to Coyle (2000) synergy is the additional benefit that can be derived from combining the resources of the bidding and target companies. Synergy has been described as the two and two makes five effect. It can also be classified as Gaughan (2002) put it, as synergy and value creation are a synonymous and synergy is when the value of the MA exceeds the value of the two separate firms put together. According to Habeck et al. (2000) the term synergy is used as a synonym for cost cutting. However, in his book he argues that those companies that understand this definition of synergy as cost cutting need to redefine it as it also includes the positive aspects of the MA such as growth and knowledge sharing. Furthermore, he states that it is important to capture growth synergies as quickly as possible and favour those areas where cost efficiencies can be gained. Therefore synergy is an important part in a successful merger. Ansoff (1986) classified different types of synergies. Manag ement synergy occurs when the top management of one of the companies resolves problems of the other company through their experience. Investment synergy can occur from the joint use of plant and equipment, joint research and development efforts, and having common raw materials inventories. Operating synergy can arise from better utilization of facilities and personnel and bulk-order purchasing to reduce upcoming material costs. And finally sales synergy where a merged organization can benefit from common sales administration, distribution channels, warehousing and sales promotion. 3.4.2. Creating Synergy through Mergers Hitt et al. (2001) states that there are four foundations in the creation of synergy which are called strategic fit, organisational fit, managerial actions and value creation. As all four foundations exist the chance of creating synergy is substantially better. Strategic fit can be defined as the match between the two companies organisational capabilities. As two companies with similar capabilities and the same strengths and weaknesses merge the chances of creating synergy is reduced. Organisational fit means that the two companies are highly compatible, meaning that these have similar management processes, cultures, systems and structures. This makes it easier for the firms to share resources, knowledge, skills and effectively communicate. Companies without organisational fit could find that the integration process will be hard to implement. Managerial actions is that creating synergy requires the active management of the acquisition process, in order to realize the different synerg ies and the benefits they convey. To create synergy an active management is needed that recognises the international issues and other problems connected with the MA process. Value creation is the last of the four synergy creation foundations. It is based on the fact that the benefits from the synergy need to exceed the cost of creating and capturing synergy. The costs that should be less than the value of the synergy that is created include those associated with a purchasing premium, financing of the transaction and the set of implementation actions required to integrate the acquired unit into the existing organisational structure. Synergy will add no value as creating it outweighs the value of the synergy. Gaughan (2002) has compiled a model of the process of realizing synergistic gains. The management needs to carefully deal with the strategic planning since the better planned MA is a better chance to succeed. Secondly the management needs to integrate the two companies into one. Finally the synergy can be separated into revenue enhancing synergies or cost cutting synergies. Ficery et al. (2007) furthermore points out that synergy created through MA, the targeted company has access to new geographic market or access to a new customer segment allowing the acquiring company to reach those new markets and segments at a faster pace and at a lower cost. CHAPTER FOUR 4.1. Introduction In this chapter, the author examines the most suitable methodology for the research area and justifies the different methods chosen. It outlines the authors main decisions on methods and data collection and considers their implications for the research findings. It also includes details for the sources used for information collection and explanations why other research methods were rejected. Furthermore, this chapter will give an insight into how secondary research has been gathered, discuss advantages and limitations of research methods and illustrate ethical issues. 4.2. Research strategy This chapter examines the most suitable methodology for the research area and justifies the methods chosen. The author explains how the linkage between the academic literature and reality was explored by using research methods. Furthermore, it will give an insight into how secondary research has been gathered, discuss advantages and limitations of research methods and illustrate ethical issues for this thesis. According to Jankowicz (2000) there are four research strategies that can be used for conducting: the archival method, the case study, the survey and the field experiment. By using the archival method, the companys present and future performance can be analysed by using past financial figures. Using the case study as a research method, a specific organisation can be analysed by researching the internal and external situation of the organisation to find conclusion for a specific subject. Through surveys, human input can be used to find representing input out of the population to a specific topic. A field experiment applies the scientific method to experimentally examine an intervention in the real world. The case study is the most suitable research method to use, as the objective of this research is to analyse and investigate the external situation within a real-life Analysis of the Daimler-Benz and Chrysler Merger Analysis of the Daimler-Benz and Chrysler Merger ABSTRACT Globalisation has changed the appearance of the economy. Especially in the 1990s firms expanded into new markets to operate more global and to develop their business. To do so, many companies choosed to expand via corporations with other companies to make the market entry easier or simply to strenghten their market position. Mergers and acquisition became one of the most used tools for development, whereas a merger between well known and successful companies always caused a sensation. Mergers caused such a stir as the companies involved in a merger faced a complete new identitiy and innovations were about to alter the company. The research project proves the decision for a merger rather than an alliance and the synergies gathered due to this tool of development. Two companies, Daimler-Benz and Chrysler, are investigated to illustrate the academic frameworks in practice to come to a conclusion why they merged. Methodology includes analysis of secondary data which has been published on the subject area. The findings and analysis of the research conducted, concluded that synergy is the most important aspect when companies grow through mergers. Furthermore, the results show that internationalisation due to globalisation is the key driver of mergers. The paper concludes with an evaluation of the study and recommendations for further research. CHAPTER ONE 1.1. Reason for Choice of Topic Companies come and go, chief executives rise and fall, industry sectors wax and wane, but an outstanding feature of the past decade has been the rise of mergers and acquisitions (MA). Whether in times of boom or bust, MAs continue to be the preferred option for businesses seeking to grow rapidly. A company has several options to choose from when it comes to growth strategies. One option is to grow organically by increasing sales personnel, new product developments and by expanding into new geographical areas. Alternative options to achieve the desired growth, companies traditionally build, buy, merge with other companies or co-operate through alliances. However, the best example of how to grow inorganic is to merge or aquire (Sherman, 2005). MAs are mainly about growth according to Lees (2003) and Sudarsanam (2003). Internal or organic growth is in most cases a slow process and MAs is another option that will increase the growth process. By doing an MA deal, the acquiring company or the merged companies can get instant access to new markets, technology and operations can be completed more efficiently. Several reasons and motives exist why a company chooses to grow through MA. According to Gaughan (2002) the most common motive for MA is to create synergy. However, other motives play also an important role, like diversification, improved management, market power or tax motives. Johnson and Scholes (1997) state that MAs are a quick way of entering new markets or products. The company can also gain competences or resources through this way. Knowledge about the market situation is also a significant cause why companies choose to develop through MA. Another reason for companies to develop through MA is that they are actively s earching for benefits arising from synergies. The author has chosen the topic to gain further knowledge about the topic of why do companies actually merge to gain synergy. The reasons for attempting to gain further knowledge are based on the authors fascination on MA in general and to the extend why Daimler-Benz and Chrysler did actually merge. The split between those two has not been long ago and therefore the author was particularly interested in this merger. Furthermore, the author is interested what type of synergies were the most relevant in this merger of equals. 1.2. Academic Obejctives of Dissertation This research aims to point out that synergies play an important role when two companies are doing a corporation in order to grow. The author has chosen the following objectives in order to support the research hypothesis: To discover why companies select mergers instead of strategic alliances as tool for development To investigate to what extend synergies play an important role when merging To explore the importance of internationalisation in times of globalisation 1.3. Outline of Chapters Introduction: Introduces the topic of this research and explains the aims and objectives of the study. Setting the scene: This chapter is to set the scene for the study. It presents background information about the two companies and what actually did happen. Literature review: Discusses the academic literature on mergers and acquisition and synergies concentrating on several approaches to be applied to the case study. Methodology: Discusses how the research was conducted and recognizes any limitations and biases of the chosen methods. It involves a description of how the research and data was analysed. Findings: Presentaion of the case study including important information for the research Analysis: The findings from the secondary research are analysed against the earlier literature and research from chapter three. Conclusion: The research project is finally concluded, commenting on the initial objectives of the study. The limitations and recommendations for further research are also discussed in this chapter. CHAPTER TWO 2.1. Background of Daimler-Benz AG As Jurgen Schrempp became the new CEO of Daimler-Benz AG in May 1995, one of his first jobs was the promulgation of a new strategic concept containig five points to strenghten their market position and to expand further. Mercedes considered the US market to be the important and competitive automobile market in the world. They established a greenfield plant in Tuscaloosa in 1994 already to strenghten their position in the US market and were supposed to be market openers. Those were the first signs that Daimler-Benz wanted to expand. 2.2. Background of the Chrysler Corporation From 1994 to 1997 Chrysler beat one historical record after another, where even some models were selected as cars of the year. It was even crowned by Forbes as the company of the year 1996. Bad labour relations have been improved through corporatist agreements. However, most cars were sold in the home market and plans to expand to other non-american countries have been scattered more or less. Nevertheless, the frequent crises and the internationalisation deficits of the company had planted the idea of a partner in the minds of the Chrysler executives. 2.3. The Merger When in May 1998 the CEO of Daimler Benz, Jurgen Schrempp and Robert Eaton, CEO of Chrysler signed the contract for a merger between those two companies, they made the biggest industrial merger in history. Both partners expected great value and advantages, as both companies seemed to complement well with each other. As a matter of fact, the company did not develop as good as anticipated. From the beginning on DaimlerChrysler could only announce little profits and losses, in the year 2001 it was even the biggest loss in history of all German companies. By mid 2004 the market value of the company has been less than half of what the value has been of both companies before the merger. By the same time the sales figures and business numbers of competitors increased. In May 2007, not even ten years after the merger, the dream of a super company bursted like a bubble. CHAPTER THREE 3.1. Reasons for Internationalisation As Kwon Kopona (1993) state in their theory the choice of market entry should relate to the companys corporate strategy and the extent, depth and geographical coverage of the present and intended foreign activities. Furthermore, the decision for growing should be made when there is a sufficient understanding of the different types of entry. On the one hand companies could gather experience through alliances and on the other hand fail to see that in particular cases an acquisition would be more successful (Clark, 2005). Dyer et al. (2004) state that a specific advice is needed about when to apply each strategy that is based on internal and external circumstances. Especially internally, the companies should focus on resources that are to be combined, the extent of unnecessary resources and the type of synergy which the firms seek. Externally, important factors are the degree of market uncertainty and the level of competition. As experience and interests of the company are different, t hese factors will have different degrees of importance. In Porters (1987) point of view entering a new market must be attractive for the expanding company. It needs feasibility of making profits in the target organisation. The costs of entry must be taken into account. These include direct costs as the cost of shares and advisors and indirect costs include such costs as integration costs. According to Dunning (1988) where he argues with the eclectic theory that additional costs can occur because of the failure of knowledge about market conditions, the legal and cultural diversities and the increased costs of operating at a distance. It also must be taken into consideration if the possibility of gaining synergies exists and what the opportunity of benefiting from the target companys core competences is. The local advantages of countries play an important role. The main country advantages can be classified as economic advantages, consisting of quantity and quality factors such as transportation, production, scope and the size of the market. Then there are political advantages that include government policies which have a positive influence on the market entry. And finally there are social and cultural advantages, which implicate the physical distance between the home country and the foreign country, language and cultural diversities and the general attitude towards foreigners. Dunning (1988) declared that companies have to be aware that relative attractiveness of locations can change over the year. He also declares that particular know-how and specific core abilities which count as an internalisation advantage can have a positive impact on the general business performance. 3.2. Methods of Development 3.2.1. Merger and Acquisitions As De Witt Meyer (1998) state in their thesis, mergers and acquisition are the most popular and influential form of discretionary foreign direct investment. Acquiring of another company is a takeover, be it friendly or hostile, while mergers only represent the share in a company according to Douglas Craig (1995). A non-adversarial approach benefits not only buyers but vendors as well, claimed by Beckett (2005). Mergers and acquisitions are significant alternatives to internal growth of companies as they enable companys fast penetration of new and foreign markets, acquire necessary know-how and skilled personal and obtain economies of scale and scope, according to Jackson (1995). Companies that merge gain access to supply and distribution channels through an upstream alliance. Furthermore Contractor Lorange (1998) state that enhancing their reputation and reducing competition if the integrated company is a competitor might be seen as an advantage. MAs are a well developed strategy and not a reaction to the first apparent opportunity as Simmons (1988) argued. As Coyle (2000) states, MA can be the outcome of either an aggressive or defensive strategy. Aggressive would mean that the company will seek to improve its market position to create a bigger company and finally to produce on a bigger scale and more cheaply through economies of scale. Defensive strategies on the other hand are made in order to survive in changing industry. A totally different reason for doing MA claimed Beckett (2005) as he said that companies may benefit from MAs when they acquire a company at a certain value and sell it later at a higher value. Through increasing shareholder value by providing a higher level of dividend and capital gain return and securing a higher return on the investment. This paper is mainly looking for the purposes for a merger and therefore for the realisation of potential synergy effects, as the purpose of most MAs is to achieve some kind of synergy. The belief is that two comparable companies together will achieve far better results than independently. Cost cuttings and savings will often lead to this effect. A successful MA can be classified as one where the potential synergies identified are to be utilised best as Coyle (2000) states. 3.2.2. Strategic Alliances Johnson (1999) has declared that defining strategic alliances are difficult to define as various forms exist. Clark (2005) defines it as two companies which are brought together with similar interest but with different strengths to work on particular projects, developmental approaches and marketing agreements which will offer benefits for both companies. Lorange and Ross (1992) even came to the conclusion as strategic alliances entail a very broad definition that it incorporates MA. Strategic alliances can be separated into three different types as Contractor and Lorange (1988) state: Joint ventures, Non-equity alliances and Minority equity alliances. Preece (1995) recognised 6 main reasons for strategic alliances, starting all with the letter L, therefore they can be named as the 6 Ls. Learning is the first one of them, as he argues that knowledge will be acquired. Leaning is meant as replacing the value chain activities and filling in the missing infrastructure. Leveraging will fully integrate the firms operation. Linking suggests that the links between supplier and customer should be build closer. Leaping pursues a radically new area of endeavour. And finally Locking out, which means reducing competitive pressure from non-partners. 3.2.3. MA versus Alliances The main difference between MA and alliances is the power of control according to Lorange Roos (1992). A pure acquisition would mean that the brought up company is under the control of the ones who bought it. To achieve growth due to acquisition and remain in control, huge financial resources are needed. Rather than buying a whole company, a corporation can propose a joint venture with a specific division in which the corporation is interested in. In case this joint venture works well, a multi-activity alliance could be grown. Equity swaps can be conducted for long-term stabilisation. However, without full control the corporation cannot decide for its own how the alliance or the merger will develop or if it will continue. A company with two equal CEOs does not work out well due to different interest and objects as Lorange Roos (1992) state. And Clark (2005) stated earlier that companies could gather experience through alliances but fail to see later that in particular cases an acquisition would be more successful. 3.3. Mergers 3.3.1. Types of mergers In a merger, the assets of two previously separate firms are combined to establish a new legal entity. In fact, the number of mergers in mergers and acquisition is almost vanishingly small. Less than 3 percent of cross border mergers and acquisitions by number are mergers. In reality, even when the mergers are supposedly between equal partners, most are acquisitions where one company controls the other. When there is a merger between two competing firms in the same industry, it is called a horizontal merger. (Buckley and Ghauri, 2002). When there is a vertical merger, two companies merge that have a buyer-seller relationship. Then there are the three conglomerate types. Pure conglomerate will be a merger where there are different markets and different products, so totally unrelated. Then there is conglomerate market extension, where it is a merger between a company that offers the same products but in a different geographical market. The last type is the conglomerate product extensio n, where the merged company sells non-competing products, but functionally related in production and distribution. In the case of the dissertation, it focuses on horizontal mergers which operate on overlapping markets and segments. Cartwright Cooper (1996) claimed that the definitions and intentions of MAs often read like a cheesy novel with a likeness to a more or less welcomed dating or courtship. The following four approaches are made: Pillage and Plunder One-night stand Courtship/Just Friends Love and Marriage Love and Marriage would certainly best fit to the focus of this paper, as the aim is to achieve a positive long term international growth. The fourth category is aiming for long term integration through assimilation and blending. 3.3.2. Cross-Border Mergers One important aspect of understanding cross-border MA is to examine the logic driving the deals. Strategic motives for a cross-border merger involve acquisitions that improve the strength of a firms strategy. Examples would include mergers intended to create synergy, capitalize on firms core competence, increase market power, provide the firm with complimentary resources, products and strengths, or finally to take advantage of a parenting advantage. However, in a recent book by Mark Sirower (1997) he argues that synergy rarely justifies the premium paid. Sirower declares, many acquisitions premiums require performance improvements that are virtually impossible to realize even for the best managers in the best of industry conditions (p.14). In exploiting a core competence a firm takes an intangible skill, expertise, or knowledge and leverages it by expanding its use to additional industries where it may create a competitive advantage in several different businesses. One strategic reas on to acquire is to gain complimentary products, resources or strengths. Research shows that one important driver of cross-border mergers and acquisitions may be undervaluation (Gonzalez et al., 1998). A driver of cross-border mergers might be differences in the macro-economic conditions in two countries. That is, one country might have a higher growth rate and more opportunity than some other country. Thus, it would seem reasonable to expect the slower growth country to be more often home to acquirers whereas the faster growth country is likely to more often home to target firms as Hitt et al. (2001) stated. Reasons for cross-border acquisitions include market power, overcoming market entry barriers, covering the cost of new product development, increasing the speed of entry into a market, and greater diversification. Cross-border acquisitions can produce both economies of scale and economies of scope. They help a firm enter new international markets and thereby enhance their ability to complete in global markets. Of course, cross-border acquisitions are even more challenging to complete successfully than acquisitions of domestic firms according to Hitt et al. (2001). In fact, some research studies suggests that with the right strategy and the right approach to post-merger integration, cross-border acquisitions can create value for the acquiring firm according to Belcher and Nail (2000). 3.4. Motives and Objectives for Merging The literature on motives for MA has placed a significant amount of different sources and theories by several authors. The merits of using mergers to reduce costs are disputed by managers and by practitioners. For example, managers have been heard to comment that costs reductions are the merger benefit that is most likely to be achieved whereas the achievement of synergy is highly uncertain. On the other hand, Michael Porter argues that what passes for strategy today is simply improving operational effectiveness. Porter (1998) argues, In many companies, leadership has degenerated into orchestrating operational improvements and making deals (p.70). It is understandable how operational effectiveness may have come to be the driving motive for many mergers, however. Often at the same time a merger is announced, there will be an announcement of a cost reduction target. Merging in order to create synergy is probably the most often cited justification for an acquirer to pay a premium for a target company. Synergy effects can be created by redeploying assets. This can mean two different things. In the first case, the acquiring company may transfer a resource belonging to the target company to the acquiring company. Colombo et al. (2007) also found out that a strong predictor of acquisition performance was the extent of asset redeployment from the target to the bidder. Weston and Weaver (2001) stated that the first category is synergy or efficiency for a merger, in which total value from the combination is greater than the sum of the values of the component firms operating independently. Hubris is the result of the winners curse, causing bidders to overpay; it postulates that value is unchanged. Of course, in a synergistic merger, it would be possible for the bidder to overpay as well. The third class of mergers comprises those in which total value is decreased as a result of mistakes or managers who put their own preferences above the well-being of the firm, the agency problem. Economic motives are an important subcategory creating strategic logic for a merger. One example is to establish economies of scale. A second closely related reason is to be able to reduce costs due to redundant resources of two firms in the same or closely related industry. Thus if the company acquires a company that is in the same or a closely related industry and there is substantial overlap between the two businesses there may be ample opportunities to reduce costs. Another reason is that the stock of the firms from a particular country may be undervalued. A fourth reason is the macroeconomic difference between countries such as different growth rates. Finally, the exchange rates may play a role. Recent research did show that acquiring a foreign company when the home country currency has appreciated in relation to the target companys currency has great benefits for the acquiring company when the industry is highly technological (Georgopoulos, 2008). Firms engage in merger and acquisition activity for many reasons. Effective mergers and acquisitions can, for example: serve as a platform for corporate growth, lead to increased market share, provide the foundations required to generate and gain advantages from economies of scale (these are benefits that occur when the firm is able to use its resources to drive costs lower across multiple products; scale economies are acquired primarily at the operational level) and economies of scope (these are benefits realised through using one units resources in the operations of another unit), and reduce organizational expenses by eliminating duplication and transferring knowledge between and among business units and/or individual product lines (Collins and Montgomery, 1999). One of the most important motives for MA activities, as seen from the experience of the last decade, has been economies of scale and scope. Companies aim to achieve economies of scale by combining resources of two merging companies or create economies of scope by acquiring a company allowing product/market diversification. Other motives include access to each others technology or market reach, achieving a dominant position in the industry, consolidation of the industry, and manipulating rules of competition and antitrust as Buckley and Ghauri (2002) state. The question as to whether merge primarily concerns the identification of the corporate objects and which of these objects are to be pursued through organic growth and which through MA in the form of participations or a full takeover. At the same time, the consequences of the growth strategy and its economic or financial effects in the light of the competition situation and the extension of the value added chain must be carefully examined. Empirically, in approximately 85 per cent of all concentrations between undertakings and acquisitions, the question as to whether is answered with a view to the object of achieving growth in the core business (Picot, 2002). However, Buckley and Ghauri (2002) stated also that mergers and acquisition have become the most dramatic demonstration of vision and strategy in the corporate world. More than 50 percent of the mergers so far have led to a decrease in share value and another 25 percent have shown no significant increase. When coming to a conclusion what is now the main purpose to merge, the author would conclude that it depends on the companys expansion strategy and the different motivation to form alliances. However, effective mergers and acquisitions can serve as a platform for corporate growth, lead to increased market share, provide the foundations required generating and gaining advantages from economies of scale and scope as Collins and Montgomery (1999) concluded. These factors are seen as the most important motives to form a merger and to believe that it would help the effected corporations to strengthen their market position and even gain more market share. 3.4.1. Synergy According to Coyle (2000) synergy is the additional benefit that can be derived from combining the resources of the bidding and target companies. Synergy has been described as the two and two makes five effect. It can also be classified as Gaughan (2002) put it, as synergy and value creation are a synonymous and synergy is when the value of the MA exceeds the value of the two separate firms put together. According to Habeck et al. (2000) the term synergy is used as a synonym for cost cutting. However, in his book he argues that those companies that understand this definition of synergy as cost cutting need to redefine it as it also includes the positive aspects of the MA such as growth and knowledge sharing. Furthermore, he states that it is important to capture growth synergies as quickly as possible and favour those areas where cost efficiencies can be gained. Therefore synergy is an important part in a successful merger. Ansoff (1986) classified different types of synergies. Manag ement synergy occurs when the top management of one of the companies resolves problems of the other company through their experience. Investment synergy can occur from the joint use of plant and equipment, joint research and development efforts, and having common raw materials inventories. Operating synergy can arise from better utilization of facilities and personnel and bulk-order purchasing to reduce upcoming material costs. And finally sales synergy where a merged organization can benefit from common sales administration, distribution channels, warehousing and sales promotion. 3.4.2. Creating Synergy through Mergers Hitt et al. (2001) states that there are four foundations in the creation of synergy which are called strategic fit, organisational fit, managerial actions and value creation. As all four foundations exist the chance of creating synergy is substantially better. Strategic fit can be defined as the match between the two companies organisational capabilities. As two companies with similar capabilities and the same strengths and weaknesses merge the chances of creating synergy is reduced. Organisational fit means that the two companies are highly compatible, meaning that these have similar management processes, cultures, systems and structures. This makes it easier for the firms to share resources, knowledge, skills and effectively communicate. Companies without organisational fit could find that the integration process will be hard to implement. Managerial actions is that creating synergy requires the active management of the acquisition process, in order to realize the different synerg ies and the benefits they convey. To create synergy an active management is needed that recognises the international issues and other problems connected with the MA process. Value creation is the last of the four synergy creation foundations. It is based on the fact that the benefits from the synergy need to exceed the cost of creating and capturing synergy. The costs that should be less than the value of the synergy that is created include those associated with a purchasing premium, financing of the transaction and the set of implementation actions required to integrate the acquired unit into the existing organisational structure. Synergy will add no value as creating it outweighs the value of the synergy. Gaughan (2002) has compiled a model of the process of realizing synergistic gains. The management needs to carefully deal with the strategic planning since the better planned MA is a better chance to succeed. Secondly the management needs to integrate the two companies into one. Finally the synergy can be separated into revenue enhancing synergies or cost cutting synergies. Ficery et al. (2007) furthermore points out that synergy created through MA, the targeted company has access to new geographic market or access to a new customer segment allowing the acquiring company to reach those new markets and segments at a faster pace and at a lower cost. CHAPTER FOUR 4.1. Introduction In this chapter, the author examines the most suitable methodology for the research area and justifies the different methods chosen. It outlines the authors main decisions on methods and data collection and considers their implications for the research findings. It also includes details for the sources used for information collection and explanations why other research methods were rejected. Furthermore, this chapter will give an insight into how secondary research has been gathered, discuss advantages and limitations of research methods and illustrate ethical issues. 4.2. Research strategy This chapter examines the most suitable methodology for the research area and justifies the methods chosen. The author explains how the linkage between the academic literature and reality was explored by using research methods. Furthermore, it will give an insight into how secondary research has been gathered, discuss advantages and limitations of research methods and illustrate ethical issues for this thesis. According to Jankowicz (2000) there are four research strategies that can be used for conducting: the archival method, the case study, the survey and the field experiment. By using the archival method, the companys present and future performance can be analysed by using past financial figures. Using the case study as a research method, a specific organisation can be analysed by researching the internal and external situation of the organisation to find conclusion for a specific subject. Through surveys, human input can be used to find representing input out of the population to a specific topic. A field experiment applies the scientific method to experimentally examine an intervention in the real world. The case study is the most suitable research method to use, as the objective of this research is to analyse and investigate the external situation within a real-life

Robert Bolt :: Essays Papers

Robert Bolt Over his lengthy, distinguished career, British screenwriter and playwright Robert Bolt has been thrice nominated for Academy Awards and has won twice for Doctor Zhivago (1965) and A Man for All Seasons(1966). Born and raised in Manchester, Bolt served in the British Air Force during WWII and afterward attended Manchester University. Following graduation, Bolt became a teacher of English at the prestigious Millfield private school in Somerset. He remained there between 1950-58. In his spare time, Bolt wrote radio and stage plays, but gained little recognition until he penned the script for his play Flowering Cherry (1957). His third play, A Man for All Seasons opened in 1960; the original production made actor Paul Scofield a star and was a hit on the London and Broadway stage. The publicity surrounding the production attracted the attention of movie producer Sam Spiegel who hired Bolt to completely revise recently exiled writer Michael Wilson's script for David Lean's Lawrence of Arabia. (1962). The result was an Academy Award nomination for Bolt's script. Throughout the decade, Bolt would specialize in adapting literature to the screen. He would not have an original script produced until Lean directed Bolt's Ryan's Daughter (1970). Unfortunately, the film bombed at the box-office. After that, Bolt spent a while working on his playwrighting career and found success with Vivat! Vivat Regina! (1970). His next script was for the costume drama Lady Caroline Lamb (1972) starring Bolt's wife Sarah Miles, who had also starred in Ryan's Daughter. In 1976, Lean approached Bolt with a new idea for an epic reworking of the story of the Bounty mutiny. With funding by Dino De Laurentiis and Paramount studio, Bolt set to work on the script. Over the next two years, Bolt concentrated most of his energy on the script, creating two versions. Robert Bolt :: Essays Papers Robert Bolt Over his lengthy, distinguished career, British screenwriter and playwright Robert Bolt has been thrice nominated for Academy Awards and has won twice for Doctor Zhivago (1965) and A Man for All Seasons(1966). Born and raised in Manchester, Bolt served in the British Air Force during WWII and afterward attended Manchester University. Following graduation, Bolt became a teacher of English at the prestigious Millfield private school in Somerset. He remained there between 1950-58. In his spare time, Bolt wrote radio and stage plays, but gained little recognition until he penned the script for his play Flowering Cherry (1957). His third play, A Man for All Seasons opened in 1960; the original production made actor Paul Scofield a star and was a hit on the London and Broadway stage. The publicity surrounding the production attracted the attention of movie producer Sam Spiegel who hired Bolt to completely revise recently exiled writer Michael Wilson's script for David Lean's Lawrence of Arabia. (1962). The result was an Academy Award nomination for Bolt's script. Throughout the decade, Bolt would specialize in adapting literature to the screen. He would not have an original script produced until Lean directed Bolt's Ryan's Daughter (1970). Unfortunately, the film bombed at the box-office. After that, Bolt spent a while working on his playwrighting career and found success with Vivat! Vivat Regina! (1970). His next script was for the costume drama Lady Caroline Lamb (1972) starring Bolt's wife Sarah Miles, who had also starred in Ryan's Daughter. In 1976, Lean approached Bolt with a new idea for an epic reworking of the story of the Bounty mutiny. With funding by Dino De Laurentiis and Paramount studio, Bolt set to work on the script. Over the next two years, Bolt concentrated most of his energy on the script, creating two versions.

Hotels and the Environment

HOTEL INDUSTRY AND THE ENVIRONMENT By VASUNDHARA TANWAR LITERATURE REVIEW When we talk of hotels we never think that something like that could have an impact on the environment and people would spend millions of rupees and infinite number of hours to deal with this so called impact. However this is absolutely the case. The seemingly small problem is literally taking the world by storm. So much so that national governments, hotels and even the UN are taking steps in order to find solutions to this problem.Extensive research has been done in the recent years by economists and scientists etc to come up with the most sustainable ways to run hotels since the degradation of the environment is a major concern worldwide. Papers like â€Å"An analysis of environmental management, organizational context and performance of Spanish hotels† by M. J. Alvarez which addresses the factors that determine the deployment of environmental management practices and its effects on firms’ finan cial performance have been published.Results find support for the notion that age of facilities, size, chain affiliation, stakeholder environmental pressures, and their use of operations management techniques exert a lasting influence on the degree of implementation of environmental management practices by hotel firms. Moreover, findings show a positive relationship between environmental management practices and firms’ financial performance. Various other economists in different countries have drawn similar conclusions. The United Nations environment programme also published a guide â€Å"how the hotel and tourism industry can protect the ozone layer†.Environmental Good Practice in Hotels, published by UNEP IE and the International Hotel & Restaurant Association (IH&RA), presents 15 case studies selected from the IH&RA annual Environmental Award. The case studies document environmental programmes initiated by independent hotels and international chains across the globe – in Australia, Asia, Africa, Europe and North America. Action areas include environmental policy, design and construction, water, energy, waste, emissions, purchasing, staff training, and guest communication. The range of environmental initiatives featured is extensive, from simple recycling easures to water conservation using the latest technology, and from resorts built to strict environmental guidelines, to small hotels where the personal commitment of the general manager drives environmental activities. All case studies highlight the environmental and economic benefits gained by the actions taken. Also included are examples of environmental initiatives taken by national hotel associations, and a list of sources on environmental management publications and programmes in the hotel industry. These are just some examples of what is being said and done by organizations that observe what is going on.The actual participants, the hotels, are also not far behind. Many hotels hav e come up with various innovative ways to contribute to the betterment of the environment. Some of them have won various awards for this very purpose. Hotels now days strive to achieve the ECOTEL ® certification which is primarily the hallmark for environmentally sensitive hotels. One of the pioneers in such activities would be the orchid group of hotels. However, there are others that strive to achieve excellence in this cause and some have been quite successful too. INTRODUCTION Most countries rely heavily on the services sector for its growth.A major part of this sector is tourism. Tourism is one of the leading growth sectors of the economy and brings in billions of dollars for developing countries. When we talk about tourism we can hardly isolate it from talk of hotels. Hotels in a sense are synonymous with tourism and one cannot be talked about without reference to the other. The growth of the tourism industry has greatly increased the amount of stress on the environment. Now each individual has varying degrees of impact on the environment which largely depends on the personal choices made by individuals and is scattered world over. The same is true for hotels.They have an effect on the biodiversity right from its conception. This makes it imperative for us to study exactly how and where do hotels affect our environment, what can be done to reduce this impact and how aware is the current generation of hotels regarding this issue. Taking the example of India we see that as a result of increasing tourism in Goa, developers built several hotels. The hotels soon drew up to 66,000 gallons of water per day from wells and other local sources. Many of the wells and rivers the community had relied on went dry. This is a common problem in many areas where tourism runs into the limits of natural resources.With various such instances in several parts of the world today, ECOTOURISM—tourism that is nature-oriented and environmentally focused—is growing rapidly. This represents a growing market for environmentally friendly options in the tourism industry. Ecotourism aside, many in the hotel industry have recognized the negative impact their business activities have on the environment and have taken action to alleviate those impacts. Environmentally responsible business practices dovetail well with the newfound popularity of ecotourism. They harmonize tourism and environmental sustainability.This awareness has given rise to what can be called the â€Å"GREEN HOTELS†. The term â€Å"green hotels† describes hotels that strive to be more environment friendly through the efficient use of energy, water, and materials while providing quality services. Green hotels conserve and preserve by saving water, reducing energy use, and reducing solid waste. They have seen benefits such as reduced costs and liabilities, high return and low-risk investments, increased profits, and positive cash flows. Identifying these benefits and inc entives has allowed the popularity of green hotels to grow. Hotels are consistently becoming greener.The most costly and wasteful use of resources in hotels are usually in the consumption of nonrenewable energy, excessive water use, and the generation of waste. Through this paper we would try to point out the complex nature of the impact that hotels have on our environment and the steps that can be taken in order to minimize this impact as much as possible. We would also like to shed light on the work that has already been done in this field by various hotels and organizations. Many organizations have done commendable work in trying to reduce their ecological footprint and have, in some sense, become pioneers and inspiration for others.For instance, the orchid group of hotels is pretty known for the kind of work it does. IMPACTS Tourism has a fairly large environmental footprint. Hotels, being at the heart of it, shoulder the responsibility for this. The following table shows that h otels are responsible for 21% of total emissions generated by tourism industry. These just constitute one part of their impact which in reality has many layers and levels to it. The hotels have an impact on the biodiversity at each stage of its life cycle, right from planning to its closure.These impacts could be summarized as follows: At the planning stage, the most important issue in determining the level of impact that a hotel will have relates to choices about its location and design. Even the most sustainably operated hotel will have major impacts if it is built in a biodiversity-sensitive area. Choices about the materials that will be used to construct the hotel, where those materials will come from and the total physical footprint of the hotel will also influence how significant its impacts will be in the operational stage.At the construction stage, impact is determined by the size and location of the area cleared for development and where construction activities are taking p lace, the choice of construction methods, the sources and amount and type of materials, water and energy used to build the hotel, the location of temporary camps for construction workers, inadequate storage facilities for construction materials, the amount of construction waste that has to be disposed of, and other types of damage such as surface soil erosion or compaction caused by construction activities or disruption of natural water flows and drainage patterns.In the operational stage, a hotel's impact comes mainly from the energy, water, food and other resources that are consumed in running the hotel, by the solid and liquid wastes it produces, by the way its grounds are managed, and by the direct impacts of its guests. In addition, regular renovation and replacement of furniture, appliances and facilities can cause impacts through purchasing choices and increased waste generation.Using energy and water more efficiently, using organic and sustainably produced food, reducing, tr eating and disposing of waste appropriately, making sustainable purchasing decisions and managing gardens with natural-style plantings can all help a hotel to reduce its adverse impacts on biodiversity. Similarly, a hotel's relationship with host communities not only affects the sustainable operations of the hotel but also the use of environmental resources by communities themselves. At the closure stage, a hotel's impacts come from the disposal of materials removed from the hotel to refurbish it, convert it for other uses, or demolish it, nd from the work involved in these activities. It may be possible to reuse and recycle some materials, but there may also be some toxic materials, particularly from older buildings, which will require careful handling and management. A responsible hotel operator should also foresee supporting activities of ecological restoration as required. Responsible siting and design, the effective management of energy and water consumption, and the proper dis posal of wastewater and solid waste are important challenges for any hotel hoping to improve the sustainability of its operations.Now even though a hotel has environmental impact through different stages of its lifecycle the most easily cited and the longest running impact that they have is at their operational stage since once a hotel has been built, it stays in the business for very many years under normal circumstances. The day to day running has impacts which are a lot times ignored in the overall picture. This mostly becomes the case because individually, hotels do not have a significant impact on the environment. Collectively however, they can be very wasteful and use huge amount of resources.It has been estimated that seventy-five percent of hotels’ environmental impacts can be directly related to excessive consumption. This is wasteful in terms of resources and creates unnecessary operational costs. The three key areas of environmental impact are energy, water, and wa ste. Energy – Excessive energy use is extremely costly and with minor adjustments, it can lead to massive cost savings. According to Gossling et. al. (2005), â€Å"the average energy consumption per bed per night in hotels might be in the order of 130 Mega joules.Hotels generally use more energy per visitor that local residents, as they have energy intense facilities, such as bars, restaurants, and pools, and have more spacious rooms. Studies have determined that a hotel emits an average 20. 6 kg of carbon dioxide per night. Waste – A study conducted by Bohdanowicz(2005) also indentified that hotels are not only resource intensive and that waste generation is on e of the most visible effects on the environment. One estimate identified that â€Å"an average hotel produces in excess of one kilogram of waste per guest per day†.Approximately thirty percent of waste in hotels can be diverted through reuse and recycling. Water  Ã¢â‚¬â€œ Tourists and residents alike require a clean and dependable supply of water for survival including drinking, cooking and cleansing. However, water is integral to the amenities usually expected by tourists, such as swimming pools, landscaped gardens, and golf courses. Water also supports industries such as agriculture that support the tourism industry (Pigram, 1995). Thus, tourists demand more water than local resident s on a per capita basis (Essex, Kent ; Newnham, 2004).It has been estimated by Salen (1995) that 15,000 cubic meters of water would typically supply 100 rural farmers for three years and 100 urban families for two years, yet only supply 100 luxury hotel guests for less than two months (Holden, 2000). In dryer regions, tourists' water consumption can amount to 440 liters a day per tourist, which is almost double the average amount of water used by residents in Spain (UNEP, 2008). In destinations that do not have the required infrastructure and systems to manage these impacts, severe degradation of the environment can occur.The following table summarizes the environmental impact of the day to day workings of any hotel Service/Activity| Description| Main Environmental Impacts| Administration| Hotel management Reception of clients| Energy, water and materials (mainly paper) Generation of waste and hazardous waste (toner cartridges)| Technical Services| Equipment for producing hot water and heating Air conditioning Lighting Swimming pools Green areas Mice and insect extermination Repairs and maintenance| Energy and water consumption Consumption and generation of a wide range of hazardous products Air and soil emissionsGeneration of waste water Pesticides use| Restaurant/bar| Breakfast, lunch, dinner Beverages and snacks| Energy, water and raw materials consumption Packaging waste Organic waste| Kitchen| Food conservation Food preparation Dish washing| Consumption of energy and water Packaging waste Oil waste Organic waste Generation of odours| Room Use| Use by guests Products fo r guests' use Housekeeping| Energy, water and raw materials consumption Use of hazardous products Generation of waste packaging Generation of waste water| Laundry| Washing and ironing of guest clothesWashing and ironing of hotel linens| Consumption of energy and water Use of hazardous cleaning products Generation of waste water  | (Graci, 2009) This gives us a clear enough picture of the ecological impacts of hotels. Thus it becomes imperative that each hotel recognizes them and takes initiative to curb these impacts. With the growth of the tourism sector all over the world and with more and more hotels coming up each day these small things become issues of epic proportions when looked at collectively. In a time when our environment is in a very fragile condition one can’t ignore such a situation.The sooner hotels realize this the better it would be. However, these issues were not even brought to light till very recently. The annual hospitality consultants’ conferenc e in 2007 did not even mention any of the environmental issues that plagued hotels in their top 10 problems of the industry. BEST PRACTICES There are many green practices that hotels can implement and they also help save unnecessary costs. There can be many ways in which a hotel can reduce its footprint. Some of them can be: * Not discharging waste in water bodies – prevents pollution. * Recycling Use of compact fluorescent lights – saves energy. * Reuse of linens – saves water, detergent, energy and greenhouse gases. * Low-flow shower systems – saves water and energy. * Local products – save transportation costs. * Installation of green roofs – saves energy. * Installation of solar heaters or other renewable energy source – saves energy. These points are just a brief outline to what can really be done in order to go green. The possibilities as such are endless. There are some more sophisticated and cost heavy methods that can also be undertaken. BENEFITS OF GOING GREENCost benefits Financial savings are one of the most significant factors that influence the implementation of environmental initiatives in a hotel. This is especially evident for hotel businesses that operate in a highly competitive market and where the cost of energy, water and waste disposal are high. Hotel operators that can maximize their efficiency and reduce waste will be more cost-effective than their competitors. Hotels also use large amounts of energy to keep guests cool in hot temperatures, and equally large amounts of energy to keep them warm during the winter.In some destinations, hotels place an additional, sometimes unsustainable demand on local water resources and generate large quantities of food and packaging waste. Despite the setup costs and the possible lengthy return on investment associated with environmental initiatives, the economic benefits usually outweigh the cost of implementation. Starting with projects that are less ca pital intensive – such as retrofitting light bulbs, energy metering, and training staff to be conscious of energy use – can lead to substantial cost savings. Competitive advantageGreen programs can provide a competitive advantage to leaders as long as green activities continue to be voluntary. Over time, however, green practices in the hospitality industry will become a baseline requirement, particularly as the cost of non-renewable energy continues to rise, regulatory pressure increases, and consumers become more demanding. Therefore, hotels with business models that revolve around green practices will have the strongest opportunity to achieve a competitive advantage by being ahead of the emerging sustainability curve. Employee retentionEmployees are identified as one of the greatest benefits of going green. Employees, like hotel guests, are increasingly sophisticated and â€Å"tuned† into current thinking in society and are far more likely to identify with an employer whose principles and practices are aligned with their values. Environmental programs have proved to be an effective means of generating enthusiasm and motivating staff to work as a team to achieve a common purpose. Many hotel companies use environmental programs as a staff incentive – the financial savings earned are translated into cash or other rewards such as in-house events or trips.Employee turnover rate in the hotel sector is relatively high therefore increasing the retention rate will also save the business money in training of new staff. Customer loyalty There has been a shift in the expectations and demands of consumers. The typical hotel guest of today is more sophisticated and to varying degrees is likely to be concerned about environmental issues such as recycling bottles, cans and paper at home as well as making greener lifestyle choices, such as organic food or fuel-efficient vehicles.Many guests however, make their decision to stay at a hotel facility based on location, amenities, and service. The implementation of environmental initiatives may play a smaller role in a guest's choice of a property. The influence from customers however occurs when their level of awareness increases and they come to expect environmental practices such as recycling. Despite first-time guests basing their decisions on location, amenities and service, customer loyalty may increase once they have experienced a hotel which has demonstrated a level of environmental commitment.Regulatory compliance Hotels must anticipate future regulatory changes and implement initiatives to mitigate the possible costly effects of emerging regulation. Savvy businesses are aware that regulations do not have to be a negative restraint on their daily operations – in fact, they can offer opportunities to gain an advantage over competitors. Some environmental regulations are good for economic competition as they stimulate innovation that can offset the cost of complianc e. By implementing measures in the face of societal and egulatory pressures, unexpected, but substantial cost savings as well as potential new areas of profit may be found. The hotel industry worldwide is increasingly being regulated for waste, water, energy use and greenhouse gas emission. Being aware of pending rule changes will allow you to adopt measures in advance, and avoid potentially higher future costs which may be associated with compliance. Risk management Risk minimization is now viewed as increasingly intertwined with good corporate social responsibility and governance.Managing risk is as much about minimizing the potential damage from decisions and actions taken from within a company as it is about managing external exposure. Traditionally, a hotel's risk management strategy has been focused on health and safety concerns around food and water, pest infestation, fire or water damage, outbreaks of disease, and guest security and safety. In recent years however, environme ntal and social issues are emerging as a key risk issue for the lodging sector. Environmental risks include: * Water and land contamination. * Air and noise pollution. Supply chain environmental practices. * Waste management. Environmental risks also have an impact on the cost of capital for businesses of various types and sizes, and may affect the value of a company over the long term. In addition, the investment community is increasingly regarding excellence in environmental management and performance as an indication of the quality and aptitude of management in general. Some insurance companies and lenders are beginning to selectively adjust their rates based on environmental criteria stipulated by ethical funds.Companies that integrate the environment into their business decisions and reduce their environmental risk and potential liabilities are in a better position to secure investment and reduce their financial and reputational market exposure (Graci and Dodds, 2009). Cause it 's the right thing to do! Beyond regulation and compliance, many environmental and social initiatives are voluntary. Whether driven by cost savings or a principled strategy, the hotel industry is recognizing the environment, the community and their human capital as a valuable resource to be protected.Long-term business sustainability will depend on this. Many hotels have implemented social initiatives and corporate social responsibility (CSR) into their regular day-to-day practices. Corporate social responsibility in the hotel industry ideally exists in human resources management, the local community, and through promoting and practicing environmental initiatives and is heavily influenced by internal and external forces. CSR has been widely expanding throughout the hotel industry, mainly to prove that corporate unethical behavior is no longer a problem.Thus, hotels are embarking on being ethical through social initiatives by protecting and supporting communities, their human resourc es, and by implementing environmental initiatives. Many international and local hotels are becoming involved in corporate social responsibility in order to extend their brand knowledge to different types of audiences, to gain employee retention and improved competitive advantage, and lastly because it is â€Å"the right thing to do†. Sixty-five percent of the top 100 companies in the world employ some sort of corporate social responsibility statement featured on their websites.Several multinational companies have gained a very negative brand reputation based on their past unethical practices. Larger companies have been criticized as being the main culprit in releasing excess greenhouse emissions, climate change, environmental devastation, and unfair treatment of employees. Due to such criticisms and negative publicity, many businesses have increased the focus on corporate social responsibility. HIGH ACHIEVERS When it comes to hotels that are environmentally sustainable the fi rst name that comes to mind is the Orchid group of hotels.The Orchid  became Asia's first Five Star hotel to win the ECOTEL ® certification shortly after opening in May of 1997 and today (January 2011) is the only Hotel in the World to win over  80  international / national awards in 13 years from inception. Under the management of  The Orchid  Owner Vithal Kamat, the hotel has earned more environmental accolades than any other hotel in the world. With this latest achievement,  The Orchid  becomes one of only six hotels in the world to maintain top-level, â€Å"five-globe,† ECOTEL ®-Certification. Though orchid group is a pioneer in environmentally friendly hotels, others ave also done substantial work. The fern group of hotels in India being one of them. The Uppal in New Delhi, Seasons in Pune etc are other ecotel hotels. Various international hotels are also actively involved in such projects that put environmental sustainability at its fore. In conclusion it can be said that though environmental sustainability is big problem that is plaguing the hospitality industry, it’s still not too late to correct the situation. References * www. uneptie. org * http://www. concepthospitality. com * Accor 2010, ‘Child Protection'.Retrieved February 04, 2010 from  http://www. accor. com/en/sustainable-development/ego-priorities/child-protection. html * Alexander, S 2002, Green Hotels: Opportunities and Resources for Success. Portland: Zero Waste Alliance. * Bohdanowicz, P 2005, ‘European Hoteliers' Environmental Attitudes: Greening the Business, Cornell Hotel and Restaurant Administration Quarterly, vol. 46, no. 2, pp. 188-204. * Bohdanowicz, P 2006, ‘Environmental Awareness and Initiatives in the Swedish and Polish Hotel Industries – Survey Results' International Journal of Hospitality Management, vol. 5, no. 4, pp. 662-668. * Bohdanowicz, P. and Zientara, P. 2008, ‘Corporate Social Responsibility in Hospit ality: Issues and Implications. A Case Study of Scandic' Scandinavian Journal of Hospitality and Tourism, vol. 8, no. 4, pp. 271-293. * Brebbia, C. A. and Pineda, F. D. 2004, Sustainable Tourism. WIT Press, Boston. * Claver- Cortes, E. , Molina-Azorin, J. F. Pereira-Moliner, J. , Lopez-Gamero, M. D. 2007, ‘Environmental Strategies and Their Impact on Hotel Performance' Journal of Sustainable Tourism. , vol. 15, no. 6, pp. 663-679. * Dodds, R. 005, Barriers to the Implementation of Sustainable Tourism Policy in Destinations. University of Surrey School of Management, Surrey. * Essex, S. , Kent, M. , ; Newnham, R. 2004, ‘Tourism development in Mallorca: Is water supply a constraint? ‘ Journal of Sustainable Tourism, vol 12, no. 1, pp. 4-28. * Fairmont Hotel and Resorts 2001, The Green Partnership Guide. A Practical Guide to Greening your Hotel, 2nd edition, Toronto * Fairmont Hotels and Resorts 2008, Corporate Responsibility. Retrieved February 04, 2010, fromhttp://w ww. fairmont. com/EN_FA/AboutFairmont/enviroment/Awards/CorporateEn

Descriptive Essay On Kitten - 874 Words

Crunch! I could feel a thick twig snap under my foot. It was September 17 and I was walking up the driveway, coming home from school. I was about â…” up the driveway when I saw something bouncing around in the yard, with my mom sitting there, watching it and smiling. I felt surprised, but also shocked at the same time because their was something tiny in my yard. Maybe it’s a kitten, I wondered. No, it can’t be. I wish that I could get another kitten, I thought. As I got closer, I was about 100% sure of what the tiny creature was. Oh my gosh! It’s a baby squirrel I thought. Curiosity went through my body. Why would mom be playing with a baby squirrel, I thought. I started to feel really happy and excited, I mean, there was a baby squirrel†¦show more content†¦Ã¢â‚¬Å"She’s so light!† I said. Joy and happiness rushed through my body. She was my kitten that I could take care of, that I would play with. Maybe I couldn’t take her to the vet, and maybe I wouldn’t be able to buy her food, but I sure wouldn’t let anything bad happen to her. I started to feel really mature because of that, I was also still very happy. My mom then showed me the cage that she was going to stay in until she was older, so that she couldn’t get hurt or wander away. Her and our other cat, Homer, are both outdoor cats, so they get treated like royalty. She had a massive litter box, a nice soft blanket to sleep on, and newly purchased metal food and water bowls, all in one cage. She also had blankets that we would put on the sides of her cage at night to keep her warm. We then went back into the yard to play with the kitten a little more. This is it, I thought. I finally have my own kitten again. I ran my fingers across the grass as she followed them. She jumped in between my legs and then went right under them. We then looked over and saw Homer, sitting up tall, and ready to show the kitten who is boss. My mom then said to me, â€Å"We should get her name picked out, I need to schedule an appointment for her to go to the vet, and they need a name to get her checked out.† My own kitten, I kept thinking.I felt overjoyed, happy, excited and glad! I had so many emotions running throughout my body that I didn’t know what to think. I quickly grabbed myShow MoreRelatedEssay on Analysis of Beneath My House852 Words   |  4 Pagesis a literary essay with an expressive approach. Erdrich narrates the day she rescues a kitten from beneath her house, despite the fact that she does not even like cats. Her maternal instincts take over when she hears the kitten cry, which causes her to do whatever it takes to rescue the kitten. Then, the author analyzes the event and she expresses her emotional response. Through the use of description and narration, Erdrich allows for the audience to imagine the rescue of the kitten â€Å"beneath herRead MoreEnglish Segment 1 Study Guide1694 Words   |  7 Pagesthat hold information from newspapers or academic publications are generally considered to be cited sources.   III.Love and Loss 1. Define and provide an example of each of the following terms: Simile Comparing things with like or as. Cute as a kitten Personification                              Ã‚     Figure of speech in which inanimate or nonhuman things are given human characteristics or abilities Life passed her by Metaphor Figure of speech that makes something seem less important or serious to