Is it necessary to have VAT/GST in Hong Kong?

Is it necessary to have VAT/GST in Hong Kong? Limitations of Research: the researcher could not use all the internet sources because some of them are written in Chinese, the researcher followed the structure that is provided by you but I have noticed that there is repetition in the points that are mentioned in the objectives and the points that are mentioned in the chapter plan, also there is a repetition in the resources that are mentioned in the data and information needs and the points in relevant literature consulted. The researcher shall bear no responsibility for any confusion caused by the un-clarity of the attached document. Introduction: More than 120 countries have imposed Goods and Services Tax, the only developed country that has not imposed this tax is Hong Kong. VAT or GST has been introduced by France in 1954(Ministry of Economy, Finance and Industry). All the developed countries (except Hong Kong) and most of the developing countries have followed France in imposing VAT/GST because this tax is considered: Fair: VAT/GST is considered a fair tax because it relates the amount of collected tax to the amount of consumption; the more you consume, the more you pay VAT. Simplicity: unlike any other taxes, VAT/GST is considered a straightforward tax; it is imposed according to a known percentage on the value of the products and services Efficiency: this tax is very efficient, it is very easy to collect it and it is very difficult to avoid it. Chapter2: Objectives: The purpose of this research is to find out whether VAT/GST is a suitable tax for Hong Kong or not. The research has covered very large material and literature about Hong Kong and similar economies to Hong Kong such as Singapore. The research also aimed to show that most of the governments of the world are broadening their budgets by imposing VAT/GST on customers while they are trying to reduce income and corporate taxes. Chapter3: Literature consulted: The research has covered a large part of literature published by global accredited organizations such as Price Waterhouse coopers, Ernest Young and the government of Hong Kong. The major text books have been used to give us a broad idea about the issue in research while the specialized working papers, Internet articles and government websites have been used in order to give us a clear idea about the issue in research. The research consulted working papers published by several universities and bodies in order to explain the theoretical principles behind imposing VAT/GST (Hubbard,G,R(1997)and the impact of VAT/GST on the informal sector in developed countries. Chapter4: Proposed Methodology: we can see from the above chart the deficit that have faced Hong Kong from 1997 until 2003, the revenue was very low compared to the spending which proved to be steady. †During the same year, about 70% of the total revenue collected by the Inland Revenue Department came from profits tax and salaries tax. Nevertheless, the profits and salaries tax nets are very narrow and shrinking. Less than 40% of our workforce of 3.2 million people pay any salaries tax, and only 10,000 people pay the maximum salaries tax rate of 15%. About 5% of the payers of profits tax contribute to 80% of the profits tax revenue. Further loss of profits could occur as a result of globalisation. Besides, the spread of e-commerce will have implications on all governments abilities to assess and collect business-related taxes. In this regard, both the Financial Secretary and the Secretary for the Treasury expressed their concerns on the impact of the exponential growth of e-commerce on Hong Kongs territorial-based tax system. The Government will set up a Task Force to review public finances and an independent committee on new broad-based taxes†, Wong, J(no date given) The research has depended on major questionnaire that have been distributed to citizens and companies in Hong Kong in order to get their opinion about VAT/GST tax. The response that I have got from this questionnaire has been used in predicting the change in consumption behavior by the citizens of Hong Kong. The research has also depended on comparative analysis in order to see how Hong Kong economy will be affected and how the whole tax system will be redesigned. The research depended on some graphs to illustrate the topic further. Chapter5: Data and Information needs and sources: This research needs theortical as well as practical data and comparative analysis. This research is different because it assesses the potential of something that might happen in the future. The researcher has conducted a questionnaire in order to measure the acceptance of the people to VAT and their views about the fiscal position of their country. The researcher tried to make sure that the sample is random, so the results are random too and not biased. The research required me to use some theoretical concepts in order to assess the impact of VAT. The research also depended on comparative analysis in order to see what happened to similar economies that have implemented VAT/GST. Chapter6: Chapter Plan: Understanding the principles behind using an expenditure tax like GST/VAT: Definition of GST: Goods and Services tax is imposed on: Goods and Services tax is broad-based and equitable and is capable of yielding sizeable and steady revenues. VAT or GST is a consumption tax, it is paid by the consumer of the product or the service as a percentage of the final price. It is related to all commercial activities involving the production and distribution of services; it is not charged on companies which mean that companies can deduct from their VAT liabilities the amount of tax they have paid to other taxable persons on purchases for their business activities. Hong Kong government is considering introducing VAT/GST tax in 2009(Hong Kong’s Inland Revenue). Difference between VAT and Sales Tax: VAT is imposed on every stage of production while Sales tax is actually collected in the form of extra charge by the retailer, who remits the tax to the government. VAT and the Theory of Economics: There have been a long debate between different economic schools of thought around the world about tax reform. Some economists prefer income tax to VAT/GST because it provides fair treatment to the citizens of the country while others prefer VAT/GST. According to Hubbard,G,R(1997), some economists support VAT for the following reasons: Imposing VAT instead of income tax will encourage capital accumulation and savings. Removing income and profit taxes will remove distortions in the allocation of capital among different economic sectors. A broad based consumption tax would avoid potential costly distortions of firm’s financial structures. Importance of VAT: Today it is a key source of government revenue in over 120 countries. About 4 billion people, 70 percent of the worlds population, now live in countries with a VAT, and it raises about $18 trillion in tax revenue, Liam E., Michael K., Jean-Paul B. and Victoria S(1991) VAT has advantages and disadvantages: Disadvantages of imposing VAT: VAT discourages specialist economic activity and fragmentation in the production because VAT will be fragmented; VAT encourages integration in order to avoid compounded VAT. VAT encourages financing big governments: in the 1960s, the size of governments in the US and the UK were approximately equal, in the year 2002, the size of the government in Europe have exceeded the size of the US government, many analysts attribute the difference between the sizes of the two governments to VAT, The expansion of the government will lead to higher prices and inefficient production, the thing that will lead to more taxes in the future. VAT will reduce the available capital to private businesses and raise interest rates, increasing interest rates will stifle economic growth and reduce the potential growth. Advantages of imposing VAT: VAT could finance the debt of the government because it provides stable and steady stream of income that is capable of financing development projects. VAT could reduce consumption and make the citizens of any country save and invest more money. By encouraging integration, VAT could push the economy towards mergers that will reduce the stages of production; VAT simply tends to encourage big businesses to get bigger by buying other companies, this could yield economies of scale and generate synergies.. Selectivity: the government can select the products and services that it needs to impose VAT on, for example, most government exclude food from VAT, by using VAT governments could take into its consideration the difficult economic situation of the poor and decide the exclusions that apply to them. VAT is a secure way to finance the government’s structural deficit, VAT covers most of the economic segments in the economy and it is very difficult to evade it. Introduce a historical background, economy and tax system in Hong Kong: The Modern History of Hong Kong: Hong Kong was a British dependency from the 1840s until July 1, 1997, when it passed to Chinese sovereignty as the Hong Kong Special Administrative Region (SAR), Pannell,C(1998). The British control of Hong Kong began in 1842, when China was forced to cede Hong Kong Island to Great Britain after the First Opium War. In 1984 Great Britain and China signed the Sino-British Joint Declaration, which stipulated that Hong Kong return to Chinese rule in 1997 as a Special Administrative Region (SAR) of China. The Joint Declaration and a Chinese law called the Basic Law, which followed in 1990, provide for the SAR to operate with a high degree of economic autonomy for 50 years beyond 1997, Reference: China Connection. In the Fifties of the last century, the threat of the cold world was looming over the world. Investors were looking for a safe heaven to locate their businesses and investments in a neutral place away from the eastern and the western camps, investors found in Hong Kong a promising country that is able to deliver good business environment that could foster growth and political stability at the same time. Growth in Hong Kong depends on several other economies such as the growth in the US economy and the growth in China and Southeast Asia in general. Growth in Hong Kong is related to oil prices and world wide prices; Hong Kong is a small island with very little raw resources, it depends on exporting raw materials from abroad in order to manufacture them on its land and re-export them again to other parts of the world. Manufacturing: In 1950s, Hong Kong attracted manufacturing jobs and the vast majority of its work force where working in factories. In 1980s, Hong Kong had about 905,000 manufacturing workers and manufacturing was the most important economic sector, Economist Intelligence Unit (2003). Until 1990s, Factories were manufacturing products that depended on labour intensive work force, after that manufacturing jobs started dropping because of the climbing costs of labour and land. In 1990s, the number of manufacturing jobs was about 575,000 jobs. In 2001, the manufacturing sector contributed to less than 5% of the GDP, Economist Intelligence Unit (2003). Like most of the developed nations, Manufacturing in Hong Kong is becoming concentrated on manufacturing hi-tech products and services. The manufacturing sector has been replaced by rapidly expanding service sector, in 1991; the service sector has generated 72.3% of the GDP in Hong Kong and in 2002, the service sector has generated about 83.9% of the GDP, Economist Intelligence Unit (2003). Services: A- Banking: The banking sector is now the most important economic sector in Hong Kong, Hong Kong is currently the fifth largest banking centre in the world. Hong Kong offered investors a very good opportunity to invest in a growing emerging economy. Investors benefited from tax free capital gains and high dividends. B- Tourism: Tourism is a significant source of economic growth in Hong Kong; nearly 9 million people visit Hong Kong every year, Tourists spend around $7 billion every year. Tourism is the third source of foreign exchange reserves in Hong Kong. The banking and the tourism sectors have delivered a very good growth to the Hong Kong economy. In 1996, Hong Kongs per capita gross domestic product (GDP) was second to Japan and Singapore in Asia and exceeded that of the United Kingdom, Canada, and Australia, Reference: internet article: Marimari (no date given). . Sources of Success: Hong Kong offered investors business-friendly laws and gave complete freedom to the movement of capital in order to encourage investments and promote growth. Hong Kong is duty free zone and there are few barriers to trade goods and services; this has made the country an important link ring between the east and the west. Hong Kong left market forces decide wages and prices; the government did not legislate any minimum wage requirement or anti-trust laws. Competition in Hong Kong: The decline of the manufacturing sector has caused the decline of competition in Hong Kong. Competition is considered an essential part of the market system. Competition benefits consumers and businesses, it benefits consumer by lowering prices and it benefits businesses by allocating resources in a more efficient ways. Competition is very important to the health of Hong Kong economy, competition gives world economies the flexibility to adjust its prices in the case of external shock (macro-economic shock) Sturm,P, Jahangir,A, Breuer,P, Nishigaki,Y (2000). Emerging economies that depend on fixed exchange rates usually suffer from real exchange rate appreciation. The real exchange rate appreciation could be treated by either: Switching to a flexible exchange rate: according to the â€Å"law of one price† flexible exchange rate will adjust exchange rates in order to make tradable products have the same price everywhere in the world. Lowering prices: lowering prices of products is an important toll in avoiding international competition, lowering prices could only happen if the structure of the market is competitive. Having a competitive market structure in lowering prices and keeping international capital flows coming to Hong Kong. Tax Regime in Hong Kong: Hong Kong tax regime is based on a territorial-based tax regime; the tax is imposed on incomes that arise from Hong Kong, Hong Kong’ Inland Revenue. The economy of Hong Kong has gained a competitive advantage because it imposes no taxes on capital gains and dividends; this has encouraged many investors to invest in that country and established an important financial centre in Asia. Hong Kong has the following simple tax structure: Property Tax: Property tax is levied on rental income from land and buildings situated in Hong Kong. Salaries Tax: Salaries tax is imposed on incomes derived from working in Hong Kong or if incomes derived from services rendered from Hong Kong. Profits Tax: profits that are generated in Hong Kong are subject to taxes, profits of unincorporated business stands at a rate of 15% and corporations at 16.5%. The relationship between Hong Kong and the foreign exchange rate: The currency in Hong Kong is Hong Kong dollar which is pegged to the US dollar, if Hong Kong government wanted that peg to continue, it should tighten its fiscal deficit. The currency of Hong Kong is an investment asset, many investors diversify their currency allocations, this diversified allocation to the funds of the global investors results in an important cash inflow to Hong Kong. For the Hong Kong dollar to get part of the allocation, Hong Kong should stabilize its budget in order to attract more foreign investment. Analyze why the government considers launching a broad-based tax; Narrow tax base: Hong Kong has very narrow tax base, narrow tax base means that the collected revenues do not provide enough revenue to cover the expenditure of the country. If we compare TAX/GDP ratio in Hong Kong compared to other Asia Pacific and OECD countries we find out that Hong Kong has the lowest ratio of TAX/GDP. Hong Kong has a narrow tax base because the tax base is shrinking since 1998; sound tax systems are based on growing and stable (not volatile) tax base. Hong Kong has the lowest corporate tax rate among the OECD countries, the current corporate tax stands at 16%. Erosion of Tax Base: The erosion of tax base is actually a result of several factors, such as: sliding house prices, illegal betting, e-commerce and online stock trading. In the following section I will explain each of these factors separately: sliding house prices: For a long time, Hong Kong depended on land and property transactions to contribute to government revenue of Hong Kong. Collected tax from property in Hong Kong(stamp duty, rates and shares and estate duties) is well above the international benchmarks as a percentage of GDP, Property from taxes/GDP=24% for Hong Kong against 5% for the OECD and 10% for the Asia Pacific countries), Reference: Hong Kong Government, Tax Base Study. Hong Kong depends on Land sales revenues in financing its budget, this has made Hong Kong increasingly dependent on non-tax revenues. In the tax base study that has been conducted by the government of Hong Kong and KPMG consultancy, the study reports the fact that Hong Kong’s non-tax revenue is about 80% of its tax revenues against 16% for OECD benchmark. Because Hong Kong has enjoyed a buoyant business environment for years, banks started granting credit very easily to businesses, the expansion of credit was accompanied by rising house prices, land prices started going up sharply from 1984 to 1997, Gerlach, S Peng, W(2002). Many companies found working in the construction sector very profitable because they can make profit from two sources: Net profits from building new houses and buildings. Profits from capital gains resulting from continuous increase in house prices. The construction sector was one the most attractive economic sectors in the country. Foreign and national banks expanded credit to companies which operate in the construction sector; the banking sector played an â€Å"accelerator† role in the run-up of the property prices. The government in Hong Kong has constructed its tax system around the fact that land prices are going up all the time because they are in demand. Because of the financial crises of August 1997 that hit south east Asia and also because of the government policy on housing, Revenues from land sales and land utilization(lease, rent) dropped dramatically, suddenly the government found its huge revenues from land dwindling. On the 16th of January 2000, the secretary for the treasury stated that: â€Å"The other significant factor supporting our finances, in recent years, has been the high levels of revenue from land and property transactions. But as property prices stabilize, the huge windfalls are unlikely to recur in the future† illegal betting: Hong Kong’s treasury depended on revenues from betting activities in the country. Hefty taxes has made too many people start thinking about illegal betting, Schuman,M(2004). On the 16th of January 2000, the secretary for the treasury stated that: â€Å"The impact of illegal gambling and the rise of gambling through the Internet threaten to erode our income from betting tax† Hong Kong’s Home Affairs bureau said handle plunged 30% from 1996-97 to 65 billion Hong Kong dollars (US$8.3 billion; euro6.5 billion) in 2003-04, while government revenue from betting dropped from HK$12.3 billion (US$1.6 billion; euro1.24 billion) to HK$8.78 billion (US$1.13 billion; euro882 million). Meanwhile, the amount of cash and betting slips seized from illegal soccer and horse gambling operators jumped from HK$9.38 million (US$1.20 million; euro942,000) in 2001 to HK$19.7 million (US$2.53 million; euro1.98 million) in 2004, according to the government. The government said handle is projected to drop another 30% by 2007-08 if no action is taken, Reference: the associated press (2005). e-commerce: Hong Kong tax system is based upon territorial system, which means that profits and incomes that are derived from Hong Kong should be taxed according to Hong Kong tax laws, the development of e-commerce and the expansion in on-line selling to customers who are not based in Hong Kong through websites that belong to the global network makes hard for the government of Hong Kong to draw a clear line between the income that is derived from the internet and the income that is derived from Hong Kong. On the 16th of January 2000, the secretary for the treasury stated that: â€Å"The spread of e-commerce will have implications on all governments abilities to assess and collect business-related taxes. For us, the impact will be further accentuated by the territorial-base of our taxation regime† online stock market trading: the development of modern communications and the development of the financial markets made trading on-line possible from all over the world, trading has been made very easy by websites that are based on the web, the development of futures, options and spread betting markets have made possible to trade 24 hours a day. It is very hard to impose taxes on online trading because the companies who established these websites do not have a physical place in Hong Kong. On the 16th of January 2000, the secretary for the treasury stated that: â€Å"The acceleration in global stock market trading through the Internet will require us to consider whether the stamp duty we charge on stock transactions can be maintained at its present level, or whether by doing so we would impede the further development of the Hong Kong stock market† Hong Kong has a prolonged problem in tax revenues resulting from low income tax on working population and the constant decrease in the number of working individuals because of aging. The secretary of treasury addressed this problem by saying: â€Å"For we all take for granted the low level of taxation which we enjoy in Hong Kong. For example, less than 40% of the workforce pay any salaries tax, and only 10,000 people pay the maximum salaries tax rate of 15%. Companies pay profits tax at 16%, and only profits arising in Hong Kong are subject to tax. Also we have no taxes on other income or capital gains, no sales or value-added taxes on what we buy, and duty is payable on very few commodities. So much for revenue, on the expenditure side, the community expects more and better public services. An ageing population will place increasing demands on our health and welfare services. The need to tackle pollution will bring substantial costs. We need to reconcile this need for additional spending with a contracting revenue base. Based on the above reasons the treasury of Hong Kong is considering widening the tax base a strategic option. Expanding the tax base is a constitutional obligation as well as an economical obligation. Hong Kong has to reduce its deficit if it wants to keep the value of its dollar strong and able to attract investors. †¦. These sound practices are now enshrined in the Basic Law. So we are under a constitutional obligation to keep our finances in a healthy state. With a fiscal deficit last year, and a projected deficit this year and next year, the law and prudent financial management demand that we bring our finances back into the black in the near term. This would also have the added advantage of maintaining our fiscal reserves at the level necessary to help support the Hong Kong Dollar, an indisputable requirement given the events of 1998. 5- Aging population: Hong Kong has an aging population; this has put an increasing pressure on the social security system and the infrastructure. This has made the secretary of the treasury to state: The directions indicate that the continuation of current revenue and expenditure policy is not an option Considered that introducing general consumption tax is the most suitable for Hong Kong? In order to see if the general consumption tax is the most suitable tax or not we have to evaluate all Hong Kong tax options. Tax Options for Hong Kong: 1- Reduce Personal Allowance: Hong Kong tax systems is one of the most generous tax systems in the world, as we have said earlier fewer than 40% of the work force pay taxes, some tax experts are suggesting the government reducing its tax free income allowance in order to increase tax collection revenues, experts say that a reduction in the basic allowance of 10% will raise about $2bn revenue, even if Hong Kong decided to reduce the personal allowance by 50% this will raise 90% of its traditional revenue from the existing tax base is simply contributing more revenue, this options will not be suitable to Hong Kong because it does not broaden the tax base, this option will increase the weight of salaries tax in the overall tax collection, KPMG Tax base study. 2- Expand the Existing Tax Base via imposing capital gains tax: this option is not considered the best option because it will affect investment decisions negatively and lead to capital outflow from the country and make the country lose its competitive advantage. Imposing capital gains tax may cause job losses and that will make the tax collection from salaries substantially less, so the gains from imposing capital gains tax will be offset by loss of tax from loss of income and salaries taxes. Imposing taxes on dividends may not lead to desirable results. 3- Increase corporate taxes: Increasing corporate taxes is one of the main issues that the government of Hong Kong is discussing, most of the analyst believe that this is not an option because increasing the corporate tax will simply cause damage to the position of Hong Kong in the global market, analysts think that there is a global trend to reduce corporate tax in all over the world. Analysts think that countries are in competition with each other to provide facilities and tax concessions to corporations. If Hong Kong increased its corporate tax, it would be very easy for corporations to shift their headquarters to somewhere else in the world. According to Hong Kong Institute of Certified Public Accountants the government of Hong Kong is suggesting giving more corporate tax concessions to corporations in the following three areas: A- Full profits tax exemption to regional headquarters/offices in Hong Kong in respect of management consultancy income Derived by the Hong Kong entity from associated entities Overseas. B- Exemption of interest income received by regional offices from Loans made in Hong Kong to their overseas associates. C- Group relief. D- Loss incurred in the current year of assessment should be permitted to be offset against the assessable profits of one previous year. 3- Introduce New Taxes: introducing new taxes (apart from VAT/GST) could an innovative solution to Hong Kong’s structural fiscal deficit. In fact, there is no limit to the number of taxes that a government could impose in order to provide suitable macroeconomic environment for development. For example, Hong Kong could introduce environmental taxes in order to reduce carbon dioxide emissions from cars and factories, we all know that developed countries contribute significantly to the increasing stock of greenhouse gas emissions that causes global warming. Because Hong Kong has very busy airports and sea ports, Hong Kong could impose new taxes on land and sea departures. Experts advise the government to outsource the activities that it does not usually do efficiently, outsourcing will help the government reduce the deficit that is caused by inefficient use of resources. Experts did not only advise the government to introduce new taxes but also to abolish some taxes. For example, abolishing taxes on alcohol beverages in order to encourage wine tourism Experts think that applying this option will not solve Hong Kong’s structural deficit problem completely for the simple fact that Hong Kong has a reputation that it is a low tax country and if the government imposed taxes on several economic activities, Hong Kong reputation will be affected and this may have a damaging effect on the position of Hong Kong in the financial and business world. What experts are trying to say that Hong Kong government should introduce new taxes and abolish old taxes in order to keep the current balance of taxes and respond to the modern needs of the society (such as environmental taxes). 4- Broad-Based tax on general consumption: this could be VAT (Value Added Tax), GST (Goods and Services Tax) or Sales Tax. Kong’s structural deficit problems. Government says that a 3% GST will yield about $18bn which stands for 1.5% of GDP. Analysts recognize that GST is a powerful solution to Hong Kong’s Problem, 3% GST is capable of solving the problem, and in addition to that, 3% GST is in line with international standards. This tax is not only capable of covering the government expenditures but also capable of broadening the tax base since it is imposed on nearly all kinds of consumption. There are few points that the government needs to take in to its account when constructing the VAT/GST: It is recommended that the VAT/GST should be simple; simplicity is the common feature of Hong Kong tax system and keeping the proposed VAT/GST simple is consistent with the rest of the tax system. It is recommended that the VAT/GST should be comprehensive; in other words, it should include most goods and services in the economy, making the VAT/GST comprehensive will guarantee stable revenue to the government and will prevent further increases in the rate of VAT/GST. Stability: it is advised that the rate of the VAT should stay constant for 5-10 years to come, stability in the tax rate is very important in creating stable consumption and investment decisions, consumers will base their consumption decisions upon the prices of products and s

Caliban Portrayed as a Child in The Tempest Essay example -- Tempest e

Caliban Portrayed as a Child in The Tempest      Ã‚  Ã‚  Ã‚   Can a grown adult develop and act like a child?   Shakespeaer's answer would have been yes.   This fact is depicted through the character of Caliban.   Caliban's speech and manners, as well as his thought, all display the very basic reactions and notions of human beings.   He is also controlled by a parent figure who comes in the form of Prospero.   An analysis of Caliban can hold him up to Piaget's Theory of Cognitive Development, which focuses on the development of children.   Caliban, unquestionably, fits one of Piaget's developmental stages.   Jean Piaget developed his Theory of Cognitive Senses in 1952.   According to Piaget, as children develop, they must make constant mental adaptations to new observations and experiences.   Piaget's theory was made up of four stages; the sensorimotor stage, the preoperational stage, the concrete operations stage, and the formal operations stage.   If children can be defined by these stages, it is important to note that Shakespeare's character Caliban can also be defined by Piaget's theory because he is presented ultimately as a child.   Part of his child-like demeanor stems from the fact that he is comparable to the primitive savage who does not understand the Western European world.      Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Caliban fits directly into Piaget's second stage of development, the preoperational stage   (Lamming 87).   According to Piaget, this describes most two to seven year old humans.   Although children in this stage can think, they are largely limited by what they can actually do.   They cannot reason, and they lack the mental abilities necessary for understanding abstract principles or cause and effect. Piaget called these missing abilities operatio... ...s of cognitive development, which suggests that Caliban has the mannerisms, actions, and ideas of a child around six or seven years old.   This is important to consider, because Caliban's actions have also been compared to the notion of Freud's id; he asks like the compulsive, troublemaking child.   Hence, the idea of the sympathetic but frustrating child is presented in the character of Caliban.    Works Cited Griffiths, Trevor R., "This island's mine: Caliban an Colonialism," Yearbook of English Studies 13(1983), pp. 159-80    Lawrence, Erol.   "Just plain common-sense: The roots of racism," in CCCS, 1982, pp. 47-92.    Lamming, Geroge.   The Pleasures of Exile.   London and New York: Allsion and Busby, 1984.    Mannoni, O., Prospero and Caliban: The Psychology of Colonizaiton, trans. Pamela Powesland (New York, Praeger, 1964).      

Skywest Case Study

SkyWest, Inc. , and the Regional Airline Industry in 2009 Strategic Profile and Case Analysis Purpose: The US regional airline industry like any industry has experienced some major pitfalls that can be attributed to the current economic global downturn. As a result, major stakeholders in the industry are looking for better strategies to cope.Among the pressing challenges are; the increasing and fluctuating cost of fueling the jets, the prohibitive costs of acquiring funds to purchase new jets, the intense competition among the major players, the dwindling market of business and leisure travelers, regulations that have increased costs, and the effects of September 11, 2001 terror attacks which has brought enhanced security which for the airline industry means long checks and overall dissatisfaction in customer service.Although it looks like the sky is falling for the airline industry, the gleam of hope that regionals like SkyWest are bringing to the complex airline business is showing a slow but hopeful recovery for the airline industry. This case analysis will first detail the internal workings of the regional airline industry and will specifically address SkyWest, Inc. , with regards to its strategies including the challenges it faces and the core competencies it has in its operations. This analysis will also focus on the product SkyWest, Inc. ells and the challenges, strengths, weakness, opportunities and threats (including financial) it faces in the regional airline industry and will recommend strategies that will strengthen the brand of the company. Industry analysis: Regional carriers like SkyWest airlines provide transportation to and from small communities through large airports where the major airlines operate, which in the industry lingo is called a regional feed. They also help to increase frequency of service in mainline markets during times of day of the week when demand does not call for use of large aircraft.The service that regionals provide is a s a result of partnerships with the major airlines that are usually contractual. This partnership is a symbiotic relationship that caters to the needs of both segments. Aircraft used by regionals include turboprops and jets that are usually owned by the regionals but carry the major airline’s flag. Regionals also own and operate their own brands that mostly cater to small communities; the term commuter airline is usually used when they perform this role.In the past decade, US Regional airlines enjoyed robust growth and financial returns over the past several years when major’s or network partners reduced capacity and outsourced flying due to financial trouble. SkyWest, Inc. , is a leader in the regional arena and this case will be based on that premise. SkyWest Strategy: Strategy according to the textbook is â€Å"doing what competitors don’t do or, even better, doing what they can’t do†. (Page 9). SkyWest is focusing on a low-cost provider strateg y in the regional airline industry.By focusing on a narrow market niche, SkyWest is building a competitive edge by doing a better job than its rivals. Another strategy it employs is growth; the company has realized an internal growth through the expansion of its partnerships, geographic growth and the pursuit of new partnerships. But most importantly the reasons why SkyWest is successful is the efficiency it employs by the way: †¢It manages its fleet, thus less accidents and downtimes. †¢It empowers its employees better than other regionals; benefits, pay, continuous education. †¢On time performance- by consistently being the best in on time arrivals. Most importantly is how it manages its finances. Cost control is a major company undertaking and the ability to anticipate and cut costs has made the company competitive. The company has fine-tuned its core competencies through partnerships with Delta Connection and United Express which has created growth opportunities t hrough the volume of business these two airlines brought. By having a strong, focused and forward strategy, SkyWest benefited when these two major airlines were in bankruptcy. SWOT ANALYSIS: (Strength). †¢Safety – exceeds conventional safety standards. †¢Low-cost provider Cost efficient – the company has ordered jets that will be cost efficient/fuel. †¢Market reputation – on-time arrivals and cancellations- this attribute makes it attractive for other major airlines who can benefit using SkyWest as their regional servicer. †¢Financial stability – consistent growth in operating revenues/income. †¢Implementation of Stetson Quality Suite. Weakness – First, ASA (Atlantic Southeast Airline) – the acquisition of ASA from Delta in 2005 expanded the company business, however the labor unions that represent ASA employees is a weakness that can ground the company in case of a strike.Secondly, SkyWest was ranked low on customer service; this in the airline industry is a major requirement for competition since the product is universally the same when viewed by the customer. Developing and maintaining a high level of customer service is crucial. Third, the partnerships with Delta and United are also a weakness since the two major have similar business models. The majority of the company business comes from these two and the fact that both companies had undergone bankruptcy signals SkyWest to diversify its operation.The reliance on only these two is a major weakness that has to be addressed. Delta’s decision for not paying the $25 million it owed SkyWest is a . To add on this, issues like lost baggage accounted for a terrible rating of 9. 53 reports per 1000, which was double the industry average. Also a high number of customer complaints Airline quality rating study found SkyWest near the bottom of 16 airlines for customer service. Passengers also see the small planes as less safe than the bigger and more spacious airplanes that the majors operate.The company is bounded by the â€Å"scope clause† after the ASA acquisition. OPPORTUNITIES: †¢Low cost partnerships – SkyWest currently has no partnerships with this segment of the business. Creating partnerships with low cost providers is a future opportunity that can increase revenue. †¢Increase in business travelers- in the past the majors had the bulk of these niche, however regionals can get into this market because business travelers are becoming cost conscious and are frequent users thus untapped revenues can be realized. Changing industry – the major airlines are going through tough financial times thus there is more business to be realized from their outsourcing to regionals like SkyWest. †¢Global market – the company currently has operations in Europe, Latin America and China. Other avenues in the expanding global market can be explored. THREATS: †¢Labor unions – threat from acquisitions like ASA, which is union oriented. †¢Cost of fuel – the unpredictability of the energy industry is always causing uncertainty in the airline industry. Any increase in demand (from ASIA-especially China) can cause the cost of fuel to increase. Majors’ airlines may start their own low cost providers, competition is getting stiffer. †¢Government regulations- for instance the current restrictions placed on entrants to some markets and the $262 to $577 cost of regulation to the industry. †¢The economy – if it follows the current trajectory, competition for scarce revenues will continue. †¢Shutdown of major airline hubs †¢Competitors – Republic Airways Holdings acquired Midwest and Frontier †¢Scope Clause- it would limit the size of aircraft the company operates Financial Analysis:Looking at the company finances, the outlooks looks gloom. However, the nature of the current economy has contributed largely to SkyWes t, Inc. , reduction in revenue. Lost in the numbers are factors that were beyond the company’s control including costs like acquiring ASA, and figures like the $5. 2 million lost because of the Denver International Airport closure in December 2006.. Consequently, because SkyWest depends on revenues from its major partners, the cost of fuel that the partners reported in 2009 were reported as revenue, which means the numbers were not accurate.In addition, even with the growth in revenue in 2008, a decline in reported income of $111. 4 million was reported from the previous year (2007) and a decline of $29. 8 million for the quarter ending in December 31, 2008. Of particular importance is the $18. 3 million decline that was due to â€Å"reductions in flight schedules made by the company major partners†. (page c-208). ASA (which serves the southeast region) experienced cancellations and delays due to weather and grounding of 60 aircrafts due to safety issues which further reduced revenues by $7. 6 million.A further $5 was lost due to negotiations with Delta Airlines in regard to expenses. A more revealing picture is when the operating profit margin (left over revenue after paying variable cost) is calculated. SkyWest declined from 12. 5% in 2004 to 7. 30% in 2008. In contrast, the news is not all that bad. SkyWest management predicts a promising future. The combined revenue passenger miles increased by 4. 9% in June 2009 and its overall load factor were up by 2. 3%. Recommendations: SkyWest, Inc. , has all the necessary ingredients to sustain its leadership in the regional airline business.Case and point was when its consolidated revenues were $3,114 million at the end of the year 2006, up from $1,964 million the year before. However, the strategy of growth that the company is currently on signals pitfalls that are in its future. For instance, the partnership dependence that it places on the major airlines like Delta and United makes it vulnerable. B oth majors underwent bankruptcy and relying on them for revenues is risky for the company. Delta refused to pay the $25 million owed because it knew that SkyWest would not sue them because of their business.SkyWest should acquire low cost providers or even acquire other regionals to decrease adventures like ASA (unionized, poor performance culture). In addition, it should look into code sharing ventures that are less risky because the growth pattern it is capable of pursuing will yield more revenues. Of particular importance are the rival regionals like Frontier (owned by Republic), Southwest and the Mesa Air Group. In order to be competitive, SkyWest should look for ways that the company can acquire rivals. The move to pre-empt rivals will extend the reach of the company geographically and it would discourage new entrants.In addition, the company has to improve its customer service (training frontline employees) because the cost of losing customers translates directly into lost rev enues. ASA in particular came with a terrible image and the transfer of core competencies/culture from the parent company will improve the overall outlook and brand of the company. Moreover, after the ASA acquisition, the issue of unionized employees who joined the company has to be addressed. If the option of negotiation between the company and the union ever fails, major problems can be experienced.SkyWest, Inc. should keep ASA separate because in the event of a strike, business will be affected. Finally, the issue of going global in the regional airline industry is important. SkyWest operates in Europe, China and Latin America. The opportunities in China, Mexico and Latin America are possibilities that the company should explore. However, the decision to expand can make SkyWest, Inc. , vulnerable at the home market; thus a careful well researched and strategic plan should be implemented before embarking on a global arena. by capitalizing on external opportunities and fortifying t heir internal strengths, SkyWest, Inc. , can achieve better shareholder returns and remain the leader in the regional airline industry†. (USATODAY). Works Cited Thompson, A. A. , Strickland. A. J. and Gamble, J. (2005) Crafting and Executing Strategy (18th edition), McGraw-Hill, New York, pages C-206– C-226). USA TODAY (2009). Regional airline thrive while the big boys cut back. Retrieved from http://www. usatoday. com/travel/column/grossman/2013-21-3regional-airlines_N. htm

How to Measure Social Culture and Organizational Culture...

Introduction How to measure social culture and organizational culture of one country is an important issue (Miroshnik, 2002). Culture can be defined as the way of life of the group of people, which includes beliefs, art, law, morals, customs, and any capabilities and habits acquired by a man as a member of society, and enables people to communicate with others, provides the knowledge and skill necessary, and anticipates how others in society are likely to respond for the actions (Miroshnik, 2002). In other hand, managers frequently view culture as the collective programming of the mind which distinguishes the members of one human group from another and the interactive aggregate of common characteristics that influence a groups†¦show more content†¦For examples, Indonesians avoid admitting lack of knowledge, inability to complete something, or deny something that it is actually true in order to show dignity. Indonesians are polite people. Upon meeting and leaving, it is usual to shake hands with both men and women. The other example is Indonesians avoid using left hand when offering something to others, because it is regarded as the unclean hand. It is also rude to point someone with a finger (Makmur, 2002). The fact is Indonesian cultural values do not adapt or include some of the elements in the western societies. Singapore Country profile Singapore is located in Southeast Asia between Malaysia and Indonesia. Singapore was part of Malaysia in 1963-1965. The government of Malaysia decided to separate from Singapore in order to avoid further violence between Chinese dominated Singaporean and Malay Muslim communities. Through the 1990s, Singapore experienced sustained economic growth along with Four Tigers which are Hong Kong, South Korea, and Taiwan. The economy depends heavily on export trade, particularly on manufacturing and electronics sector. Singapores population was reported by the government at 4,351,400 in July 2005, and the ethnic Chinese make up 76.8 percent of the population. Malay is the national language and one of the four official languages, along with Chinese, Tamil, and English,Show MoreRelatedA New Team Of Global Employees1257 Words   |  6 Pagesstated countries. This study will look at culture evaluation instruments and how they will be useful to measure the business culture and to find cultural ho les associated with this team. There will be an explanation of how my style of leadership, and techniques will be persuaded by the social ethnicity and multiplicity of the team. There will be an explanation of how the social ethnicity of the team will likely persuade job outcomes and efficiency of the team. 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