A Case Study on Cost Estimation and Profitability Analysis

ISSUES IN ACCOUNTING EDUCATION Vol. 26, No. 1 2011 pp. 181–200 American Accounting Association DOI: 10. 2308/iace. 2011. 26. 1. 181 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines Francisco J. Roman ABSTRACT: This case exposes students to the application of regression analyses to be used as a tool pursuant to understanding cost behavior and forecasting future costs using publicly available data from Continental Airlines. Speci? cally, the case focuses on the harsh ? nancial situation faced by Continental as a result of the recent ? ancial crisis and the challenges it faces to remain pro? table. It then highlights the importance of reducing and controlling costs as a viable strategy to restore pro? tability and how regression analysis can assist in this pursuit. Students are next presented with quarterly data for various categories of costs and several potential cost drivers, which they must use to perform regressions on operating costs using a variety of cost drivers. They must then use their regression results to forecast operating costs and conduct a pro? tability analysis to project quarterly pro? ts for the upcoming ? scal year.Finally, students must summarize the main results of their analysis in a memorandum addressed to Continental’s management, providing recommendations to restore pro? ts. In particular, the concept of mixed cost functions is reinforced, as is the understanding of the steps required to perform regression analysis in Excel, interpreting the regression output, and the underlying standard assumptions in regression analysis. The case has been tested and well received in an intermediate cost accounting course and it is suitable for both undergraduate and graduate students. Keywords: cost estimation; pro? ability analysis; cost behavior; regression analyses; cost functions. Data Availability: All data are from public sources and are available in hard copy inside the case. Data are also availabl e in electronic form by the author upon request. INTRODUCTION n 2008, the senior management team at Continental Airlines, commanded by Lawrence Kellner, the Chairman and Chief Executive Of? cer, convened a special meeting to discuss the ? rm’s latest quarterly ? nancial results. A bleak situation lay before them. Continental had incurred an operating loss of $71 million dollars—its second consecutive quarterly earnings de-I Francisco J. Roman is an Assistant Professor at Texas Tech University. I thank Kent St. Pierre editor , Michael Costa, and two anonymous referees for their suggestions on previous versions of the case. Editor’s note: Accepted by Kent St. Pierre Published Online: February 2011 181 182 Roman cline that year. Likewise, passenger volume was signi? cantly down, dropping by nearly 5 percent from the prior year’s quarter. Continental’s senior management needed to act swiftly to reverse this trend and return to pro? tability. Being the fourth largest airline in the U.S. and eighth largest in the world, Continental was perceived as one of the most ef? ciently run companies in the airline industry. Nonetheless, 2008 brought unprecedented challenges for Continental and the entire industry as the United States and much of the world was heading into a severe economic recession. Companies cutting deeply into their budgets for business travel, the highest yielding component of Continental’s total revenue, together with a similar downward trend from the leisure and casual sector, combined to sharply reduce total revenue.Concurrent with this revenue decline, the price of jet fuel soared to record levels during 2008. 1 Thus, while revenue was decreasing, Continental was paying almost twice as much in fuel costs. Interestingly, fuel costs surpassed the ? rm’s salaries and wages as the highest cost in Continental’s cost structure. This obviously had a negative impact on the bottom line, squeezing even fur ther the already strained pro? t margins. The outlook for a quick recovery in the U. S. economy and, consequently, an upturn in the demand for air travel in the short term did not seem likely.Continental’s internal forecasts indicated that a further decline in passenger volume should be anticipated throughout 2009, with a recovery in travel possibly occurring by the middle of 2010. To summarize, adverse economic conditions in the U. S. , coupled with the rise in fuel costs, were dragging down Continental’s pro? ts and relief was unlikely through the foreseeable future. THE DECISION TO REDUCE FLYING CAPACITY AND THE IMPACT ON OPERATING COSTS Given the situation described above, management needed to act swiftly to restore pro? tability. Several strategic options were evaluated.Since the U. S. and much of the world was facing a severe recession, the prospect for growing revenues by either raising airfares or passenger volume seemed futile. Contrary to raising revenue, Con tinental’s managers believed that raising fares could potentially erode future revenues beyond the present level. Discounting fares did not seem a plausible solution either, because given the severity of the economic situation a fare cut could fall short in stimulating additional passenger demand and lead to lowering revenues. Thus, because management anticipated that revenues would remain ? t for most of the year, the only viable short-term solution to restoring pro? ts was a substantial and swift reduction in operating costs. This could most effectively be accomplished in two ways. First, through a reduction in ? ying capacity adjusted to match projected passenger demand. With this in mind, Continental’s management agreed to reduce ? ying capacity by 11 percent on domestic and international routes. 2 As a result of this action, Continental would eliminate the least pro? table or unpro? table ? ights and, accordingly, would ground several planes in the ? eet.Managemen t anticipated that this decision would reduce several of the ? rm’s operating costs. Apart from this, Continental could achieve further reductions in costs by implementing several cost-cutting initiatives and through operational ef? ciencies. For example, management pro- 1 2 To illustrate, jet fuel is tied to the price of oil and, over the past year, oil prices surged from about $70 to $135 per barrel. Consequently, the price of jet fuel increased markedly, from an average of $1. 77 per gallon to $4. 20 by the mid-summer of 2008. Speci? cally, on June 13, 2008, Continental Airlines announced that it planned to reduce its ? ght capacity by 11 percent. By shrinking capacity, Continental expected to reduce the number of domestic and international ? ights from its three major hubs in Houston, Cleveland, and Newark Maynard 2008 . Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Conti nental Airlines 183 jected that it could achieve reductions in Passenger Services expenses by consolidating several tasks during passenger check-in and by reducing food and beverage waste served during ? ights. Additionally, the ? m could reduce various miscellaneous expenses through targeted cuts in discretionary spending. In sum, to close the gap in pro? tability, Continental’s strategy was geared toward slashing operating costs by cutting capacity and through aggressive identi? cation and implementation of cost-cutting initiatives. The next step would be for management to know precisely how their decision to downsize capacity would impact the ? rm’s future operating costs, and also identify speci? c areas in which the ? rm could achieve additional cost reductions. Additionally, the cost analysis would help forecast the ? m’s operating costs and projected pro? ts or losses for the upcoming ? scal year. However, before we can proceed with such analysis, an exam ination of how the various categories of Continental’s costs behave is in order. Before we begin, let us prepare with an overview of the airline industry and its competitive landscape, and an understanding of why cost behavior bears particular relevance in this case. Relative to other industries, airlines are a very dif? cult business to manage. In particular, they are exposed to tremendous risks brought by volatility inherent in their business model, as they deal with high ? ed costs, labor unions, instability in fuel prices, weather and natural disasters, passenger safety, and security regulations. These aspects bring a large burden to airlines’ cost structures. Moreover, competition within the industry is ? erce; the proliferation of discount carriers, such as Southwest Airlines and, most recently, Jet Blue, and the end of fare regulation in 1978, has hindered airlines’ pricing power and their ability to spur revenues. For these reasons, cost containment is a critically important aspect of pro? tability in this industry.In order for Continental to restore pro? tability in this harsh environment of weak demand for air travel, it must be able to contain its operating costs, especially its massive ? xed costs, which are visible in several ways. For example, salaries for pilots, ? ight attendants, and mechanics, as well as aircraft leasing costs, are typically ? xed, varying little with shifts in passenger volume. Because ? xed costs typically embody the amount of operating capacity of a ? rm, they are commonly referred as â€Å"capacity† costs. Since ? xed costs do not self-adjust to ? ctuations in passenger volume, the only way in which they can be decreased or increased is if management adjusts them in accordance to the level of operating capacity. In contrast, other costs, such as passenger services and reservation and distribution costs, behave as variable and would self-adjust with variations in volume or operating activity. He nce, to assess the impact of this strategic decision to alter Continental’s cost structure, and identify the areas that could achieve the greatest reduction in costs, we must resolve how Continental’s operating costs behave and what drives them.In what follows, we learn how to apply regression analyses to examine cost behavior and forecast future costs, and then use that knowledge to assess how the reduction in ? ying capacity would affect Continental’s operating costs and pro? tability in the near term. ESTIMATING COSTS USING REGRESSION ANALYSES The previous discussion highlighted the importance of examining the behavior of Continental’s operating costs to pave the way for a cost and pro? tability analysis using regression analysis. Regression analysis is a powerful statistical tool that is frequently used by ? ms to examine cost behavior and predict future costs. The idea behind regression analysis is straightforward: historical data for costs, and the various activities that could potentially drive operating costs, are inserted into a mathematical calculation which yields the average amount of change in that particular cost that has occurred over time. Average values provided by regression calculations may then be applied to estimate future change that will occur in that cost given a one-unit change in one or Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 184 Roman ore of the business activities which drive that cost. 3 More precisely, in a regression model, cost is a function of one or more business activities or factors underlying a business operation. Simply put, the business activities are the drivers of operating costs. Therefore, since activities drive costs, our ? rst step in the estimation of a cost function is to identify the underlying activities or other potential factors that drive the cost in question—the cost drivers. This requires extensive knowledge of the business ope ration. In the case of Continental Airlines, the potential drivers of operating costs vary greatly.For instance, as previously noted, the number of passengers that Continental ? ies may drive the costs related to Passenger Services. Likewise, Aircraft Maintenance and Repairs costs could be driven by the number of aircraft in the ? eet and by the level of ? ying capacity set by Continental i. e. , available seat miles . In synthesis, to predict how Continental’s operating costs would be affected by the decision to reduce capacity, and to identify those areas in which additional room is available for cost cutting, we need to identify which costs in this ? rm’s cost structure behave as variable, ? ed, or mixed in which elements of both variable and ? xed are observable . Equally important, we should also identify the speci? c drivers if any of each cost. Your job is to assist management in their quest to restore pro? tability at Continental Airlines. Speci? cally, you mus t conduct regression analyses to examine cost behavior and then use this information to forecast operating costs and pro? tability for the upcoming year. As part of your cost analysis, you should investigate how the decision to cut ? ying capacity would impact the ? rm’s future operating costs and, equally important, identify those speci? expense categories or operating areas in which this ? rm could attain additional costs saving by implementing cost-cutting initiatives. Your conclusions should be outlined in a memorandum directed to Continental’s Executive management team. You are provided next with a description of Continental’s operating costs and the potential drivers of costs so you can conduct regression analysis to estimate the corresponding cost functions. To help you in estimating the regressions, a comprehensive set of instructions for performing regression analysis using Microsoft Excel is provided in the Appendix.Immediately following the descriptio n of costs, a series of questions is provided that should help guide your analysis. Additionally, to help you estimate your regressions, Exhibit 1 presents past quarterly data for all of the above expenditures for the period of January 2000 through December 2008, while Exhibit 2 provides quarterly operations data for the same period of time. CONTINENTAL’S OPERATING COSTS AND POTENTIAL COST DRIVERS As shown in Exhibit 1, there are ten categories of operating costs.These include salaries and wages, aircraft fuel and related taxes, aircraft rentals, airport fees, aircraft maintenance and repairs, depreciation and amortization, distribution costs, passenger services, regional capacity purchases, and other expenses. Of these, some represent a single expense item. For example, the cost of aircraft rentals and airport fees together comprise a single cost item. Other costs represent cost pools comprising several cost items. Such is the case of passenger services and other expenses. T he following provides a detailed description of each cost, along with the potential cost drivers. 3 4 For ease in exposition, cost functions and regression analyses are discussed brie? y here. For further insight on cost functions and on the mechanics of regression analyses, I refer the reader to the Appendix. A cost driver represents a particular business activity, which usually tends to have a cause-and-effect relationship with a given cost. For example, for airlines, a typical cost driver for landing fees is the number of daily ? ights carried by the airline, as well as the number of passengers ? own. An increase decrease in the number of ? ights or passengers ? own would increase decrease landing fees.Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 185 EXHIBIT 1 REVENUES AND OPERATING COSTS DATA Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 Period 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 Q-2008 Revenues Fuel Salaries and Wages Capacity Purchases Aircraft Rentals Landing Fees 2,277,000,000 334,000,000 672,000,000 — 206,000,000 2,571,000,000 313,000,000 719,000,000 — 210,000,000 2,622,000,000 354,000,000 748,000,000 — 215,000,000 2,429,000,000 392,000,000 736,000,000 — 213,000,000 2,451,000,000 345,000,000 758,000,000 — 214,000,000 2,556,000,000 349,000,000 800,000,000 — 223,000,000 2,223,000,000 322,000,000 779,000,000 — 230,000,000 1,739,000,000 213,000,000 684,000,000 — 236,000,000 1,993,000,000 208,000,000 732,000,000 — 228,000,000 2,192,000,000 254,000,000 746,000, 000 — 231,000,000 2,178,000,000 76,000,000 743,000,000 — 227,000,000 2,039,000,000 285,000,000 738,000,000 — 216,000,000 2,042,000,000 347,000,000 778,000,000 — 223,000,000 2,216,000,000 302,000,000 762,000,000 — 224,000,000 2,365,000,000 316,000,000 778,000,000 — 225,000,000 2,247,000,000 290,000,000 738,000,000 158,000,000 224,000,000 2,307,000,000 333,000,000 688,000,000 317,000,000 220,000,000 2,553,000,000 387,000,000 711,000,000 328,000,000 222,000,000 2,602,000,000 414,000,000 703,000,000 347,000,000 224,000,000 2,437,000,000 453,000,000 717,000,000 359,000,000 225,000,000 2,505,000,000 470,000,000 715,000,000 353,000,000 227,000,000 2,857,000,000 75,000,000 649,000,000 382,000,000 229,000,000 3,001,000,000 684,000,000 646,000,000 406,000,000 234,000,000 2,845,000,000 714,000,000 639,000,000 431,000,000 238,000,000 2,947,000,000 672,000,000 661,000,000 415,000,000 245,000,000 3,507,000,000 744,000,000 791,000,000 454,000,000 248,000,0 00 3,518,000,000 858,000,000 743,000,000 475,000,000 249,000,000 3,156,000,000 760,000,000 680,000,000 447,000,000 248,000,000 3,179,000,000 684,000,000 726,000,000 430,000,000 248,000,000 3,710,000,000 842,000,000 821,000,000 444,000,000 248,000,000 3,820,000,000 895,000,000 836,000,000 446,000,000 249,000,000 3,523,000,000 33,000,000 744,000,000 473,000,000 249,000,000 3,570,000,000 1,048,000,000 729,000,000 506,000,000 247,000,000 4,044,000,000 1,363,000,000 704,000,000 589,000,000 246,000,000 4,072,000,000 1,501,000,000 765,000,000 553,000,000 244,000,000 3,471,000,000 993,000,000 760,000,000 425,000,000 240,000,000 129,000,000 138,000,000 133,000,000 132,000,000 141,000,000 153,000,000 139,000,000 148,000,000 161,000,000 160,000,000 163,000,000 149,000,000 152,000,000 152,000,000 165,000,000 151,000,000 160,000,000 163,000,000 171,000,000 160,000,000 171,000,000 181,000,000 182,000,000 174,000,000 185,000,000 198,000,000 195,000,000 86,000,000 193,000,000 190,000,000 209,000,00 0 198,000,000 207,000,000 210,000,000 225,000,000 210,000,000 Period Distribution Costs Aircraft Maintenance Depreciation Passenger Services Other Expenses 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 248,000,000 261,000,000 255,000,000 217,000,000 243,000,000 230,000,000 159,000,000 171,000,000 167,000,000 149,000,000 160,000,000 162,000,000 95,000,000 98,000,000 102,000,000 107,000,000 105,000,000 111,000,000 85,000,000 91,000,000 97,000,000 89,000,000 91,000,000 96,000,000 286,000,000 284,000,000 288,000,000 277,000,000 318,000,000 295,000,000 (continued on next page)Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 186 Obs. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Roman Period Distribution Costs Aircraft Maintenance Depreciation Passenger Services Other Expenses 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3 Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 194,000,000 142,000,000 172,000,000 158,000,000 138,000,000 124,000,000 27,000,000 138,000,000 131,000,000 135,000,000 137,000,000 140,000,000 139,000,000 136,000,000 138,000,000 154,000,000 154,000,000 142,000,000 160,000,000 178,000,000 157,000,000 155,000,000 161,000,000 176,000,000 171,000,000 174,000,000 182,000,000 194,000,000 182,000,000 159,000,000 142,000,000 104,000,000 114,000,000 119,000,000 119,000,000 124,000,000 133,000,000 126,000,000 135,000,000 115,000,000 112,000,000 102,000,000 107,000,000 93,000,000 112,000,000 106,000,000 116,000,000 121,000,000 127,000,000 140,000,000 140,000,000 140,000,000 144,000,000 169,000,000 166,000,000 142,000,000 159,000,000 167,000,000 52,000,000 135,000,000 120,000,000 131,000,000 106,000,000 112,000,000 112,000,000 114,000,000 116,000,000 110,000,000 110,000,000 108,000,000 104,000,000 105,0 00,000 104,000,000 102,000,000 99,000,000 98,000,000 97,000,000 95,000,000 96,000,000 97,000,000 99,000,000 99,000,000 99,000,000 101,000,000 106,000,000 107,000,000 106,000,000 108,000,000 112,000,000 111,000,000 89,000,000 71,000,000 77,000,000 73,000,000 78,000,000 68,000,000 70,000,000 73,000,000 81,000,000 73,000,000 69,000,000 76,000,000 84,000,000 77,000,000 77,000,000 84,000,000 91,000,000 80,000,000 82,000,000 90,000,000 97,000,000 87,000,000 90,000,000 9,000,000 105,000,000 95,000,000 96,000,000 107,000,000 113,000,000 91,000,000 121,000,000 166,000,000 382,000,000 454,000,000 276,000,000 277,000,000 320,000,000 91,000,000 250,000,000 455,000,000 304,000,000 279,000,000 287,000,000 278,000,000 316,000,000 280,000,000 282,000,000 305,000,000 293,000,000 323,000,000 313,000,000 333,000,000 340,000,000 357,000,000 357,000,000 328,000,000 356,000,000 427,000,000 461,000,000 372,000,000 Period Total Aircraft 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-200 2 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 514 522 535 522 548 557 501 522 538 570 570 554 562 70 OPERATIONS AND COST DRIVER DATA Leased Aircraft Flights Passengers Available Seat Miles 403 410 414 398 406 416 377 393 400 404 401 410 419 428 98,820 97,871 97,967 98,378 98,590 99,018 98,564 81,109 81,883 82,815 81,737 78,809 75,178 75,617 11,201,000 12,084,000 12,155,000 11,456,000 11,220,000 12,256,000 11,254,000 9,508,000 12,062,000 13,099,000 13,006,000 12,874,000 11,518,000 13,044,000 20,951,000,000 21,384,000,000 22,356,000,000 21,409,000,000 21,459,000,000 22,813,000,000 21,994,000,000 18,219,000,000 20,375,000,000 22,286,000,000 22,626,000,000 21,054,000,000 20,843,000,000 21,241,000,000 Available SeatMiles Regional — — — — — — — — — — — — 1,767,000,000 2,073,000,000 (continued on next page) Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cos t Estimation and Pro? tability Analysis at Continental Airlines Obs. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Obs. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Period Total Aircraft 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 187 OPERATIONS AND COST DRIVER DATALeased Aircraft Flights Passengers Available Seat Miles 570 579 586 587 592 594 598 604 611 622 630 634 648 648 630 625 631 628 641 630 653 632 428 434 437 440 445 448 453 459 466 477 483 484 482 480 446 418 415 415 414 390 412 397 76,297 75,650 74,859 75,816 74,211 74,443 71,494 74,651 74,630 75,886 74,962 77,729 77,468 79,030 78,601 82,582 81,118 80,850 76,719 76,096 78,599 76,000 Available Seat Miles Regional 13,727,000 13,769,000 12,810,000 14,558,000 14,862,000 14,252,000 14,122,000 15,540,000 15,905,000 15,448,000 15,594,000 17,596,000 17,328,000 16,601,0 00 16,176,000 18,120,000 17,901,000 16,733,000 16,440,000 7,108,000 17,962,000 15,183,000 22,819,000,000 21,907,000,000 22,670,000,000 24,150,000,000 24,674,000,000 23,588,000,000 23,585,000,000 25,482,000,000 26,833,000,000 25,720,000,000 26,117,000,000 28,259,000,000 29,262,000,000 27,280,000,000 27,250,000,000 29,592,000,000 30,346,000,000 28,550,000,000 28,376,000,000 30,304,000,000 30,383,000,000 26,448,000,000 1,605,000,000 2,980,000,000 2,400,000,000 2,603,000,000 1,999,000,000 3,408,000,000 2,740,000,000 3,026,000,000 3,112,000,000 3,095,000,000 3,082,000,000 3,374,000,000 3,503,000,000 3,292,000,000 3,126,000,000 3,177,000,000 3,193,000,000 3,104,000,000 3,098,000,000 ,450,000,000 3,390,000,000 3,046,000,000 Period Passenger Miles Flown Employees Fuel Price Fuel Consumed 1Q-2000 2Q-2000 3Q-2000 4Q-2000 1Q-2001 2Q-2001 3Q-2001 4Q-2001 1Q-2002 2Q-2002 3Q-2002 4Q-2002 1Q-2003 2Q-2003 3Q-2003 4Q-2003 1Q-2004 2Q-2004 3Q-2004 4Q-2004 1Q-2005 2Q-2005 15,005,000,000 16,491,000,000 17,325,000,000 15,340,000,000 15,114,000,000 17,053,000,000 16,206,000,000 12,767,000,000 14,867,000,000 16,489,000,000 16,960,000,000 17,252,000,000 14,352,000,000 16,129,000,000 18,041,000,000 16,412,000,000 16,255,000,000 18,735,000,000 19,922,000,000 18,239,000,000 18,112,000,000 20,292,000,000 45,000 45,500 46,000 5,944 38,396 39,000 39,500 39,461 40,229 41,011 41,809 40,244 38,960 39,000 39,500 39,000 38,240 37,496 36,766 38,255 41,831 45,742 $0. 829 $0. 797 $0. 865 $0. 885 $0. 856 $0. 815 $0. 824 $0. 826 $0. 644 $0. 723 $0. 760 $0. 740 $1. 029 $0. 881 $0. 857 $0. 872 $1. 041 $1. 787 $1. 199 $1. 190 $1. 453 $1. 670 377,000,000 386,000,000 398,000,000 372,000,000 369,000,000 391,000,000 373,000,000 369,000,000 308,000,000 332,000,000 340,000,000 316,000,000 305,000,000 308,000,000 330,000,000 314,000,000 320,000,000 347,000,000 345,000,000 321,000,000 324,000,000 344,000,000 (continued on next page) Issues in Accounting EducationVolume 26, No. 1, 2011 American Accounting Associ ation 188 Roman Period 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Passenger Miles Flown Employees Fuel Price Fuel Consumed 3Q-2005 4Q-2005 1Q-2006 2Q-2006 3Q-2006 4Q-2006 1Q-2007 2Q-2007 3Q-2007 4Q-2007 1Q-2008 2Q-2008 3Q-2008 4Q-2008 Obs. 21,762,000,000 20,033,000,000 20,336,000,000 23,367,000,000 24,042,000,000 21,772,000,000 21,450,000,000 24,623,000,000 25,422,000,000 22,670,000,000 22,280,000,000 24,836,000,000 24,746,000,000 20,825,000,000 50,018 42,200 42,600 43,450 41,500 38,033 41,800 43,300 41,400 39,640 43,000 40,100 43,500 42,490 $1. 880 $1. 776 $1. 904 $2. 10 $2. 215 $2. 064 $1. 895 $2. 079 $2. 206 $2. 499 $2. 797 $3. 856 $3. 450 $2. 925 364,000,000 344,000,000 347,000,000 375,000,000 387,000,000 362,000,000 361,000,000 395,000,000 406,000,000 380,000,000 375,000,000 389,000,000 395,000,000 339,000,000 EXHIBIT 2 PROJECTIONS OF REVENUES AND OPERATING ACTIVITY FOR YEAR 2009 Variable Revenues Available seat miles Available regional seat miles Number of passengers Number of planes Number leased planes Price of fuel per gallon Gallons of fuel consumed Quarter 1 Quarter 2 Quarter 3 Quarter 4 $2,962,000,000 26,323,000,000 2,971,000,000 14,408,000 634 398 $1. 82 403,000,000 2,767,000,000 28,007,000,000 3,044,000,000 16,348,000 617 394 $2. 07 430,000,000 $2,947,000,000 28,933,000,000 3,130,000,000 16,795,000 604 380 $1. 99 369,000,000 $2,462,000,000 26,291,000,000 3,002,000,000 15,258,000 601 379 $1. 98 479,000,000 All ? nancial and operational data represent quarterly data for the quarter beginning January 2000 Observation 1 through December 2008. Data have been compiled from Continental’s 8-K and10-K reports, submitted to the Securities and Exchange Commission. De? nitions of Operations Variables: Available seat miles the number of seats available multiplied by the number of miles ? wn; Available regional seat miles available seat miles on regional routes; Number of passengers number of paying passengers ? own; Number of planes number of planes in the ? eet, including regional routes aircraft; Number of leased planes number of leased planes; Price of jet fuel average price per gallon of jet fuel in the respective quarter; and Gallons of fuel consumed number of gallons of fuel consumed in the respective quarter. Salaries and Wages This account represents costs related to salaries and wages, as well as fringe bene? ts, of Continental’s workers. These include salaries for pilots and wages for ? ght attendants and ground crew, as well as wages for Continental’s mechanics. Additionally, a signi? cant portion of this salary pool represents wages of reservation specialists, customer service representatives at airports, and the salaries for administrative and support personnel e. g. , ? ight schedulers, technology Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 189 personnel, accountants, and division managers . A possible cost driver of salaries is the available seat miles. Aircraft Fuel and Related Taxes This represents the cost of jet fuel and related fuel taxes. Jet fuel cost tends to be driven by the current price of jet fuel and gallons of jet fuel consumed. Aircraft Rentals These are expenses for capital leases of aircraft. The main driver is the number of leased planes in Continental’s ? eet, including regional jets operated on behalf of Continental by four regional airlines under various capacity purchase agreements. Airport Fees Represents landing fees and passenger security fees paid to the various domestic and international airports where Continental ? ies.Landing fees are driven by the number of passengers. Aircraft Maintenance and Repairs These are expenses associated with the service and maintenance of planes. These include expenses related to scheduled maintenance, spare parts and materials, and airframe and engine overhauls. The main drivers of these cost s are the number of planes in the ? eet and the number of miles ? own. Depreciation and Amortization This represents depreciation and amortization expenses of aircraft, ground equipment, buildings, and other property. It must be emphasized that the largest portion of depreciation expense relates to the depreciation of aircraft.Although depreciation expenses are driven by the acquisition cost of Continental’s capital assets, depreciation is greatly in? uenced by both company policy and accounting principles, such as the depreciation method, that a ? rm adopts. Distribution Costs These expenses represent credit card discount fees, booking fees, and travel agency commissions, all of which are affected by passenger revenue. Therefore, the driver of these costs is total revenue. Passenger Services This is also a cost pool that includes expenses related to processing and servicing passengers prior to take-off, during ? ight, and after arrival at their destination.A signi? cant port ion of these costs is generated by Continental’s Field Services Division, the main function of which is to provide service to planes prior to take-off. Some of these expenses relate to checking in passengers, handling luggage on and off planes, cleaning planes, stocking planes with beverage and food, and refueling the aircraft prior to take-off. The potential cost driver of these costs is the number of passengers. Regional Capacity Purchases These are costs related to the purchase of regional routes served by several regional airlines on behalf of Continental ExpressJet, Chautauqua, CommutAir, and Cogan .These costs are 5 Available seat miles is calculated as the number of seats available for passengers multiplied by the number of scheduled miles those seats are ? own. Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 190 Roman driven by the combined ? ying capacity of the four airlines: available regional seat miles. Other Expenses This is a cost pool that comprises many ancillary and discretionary expenditures, including technology expenses, security and outside services, general supplies, and advertising and promotional expenses.Further, this cost pool contains various special charges for gains and losses from the sale of retired aircraft and costs of future leases. Given the large variety of miscellaneous items, there is no clear driver of these expenses; however, a large portion of them, such as advertising and promotional expenses, are driven by total revenue. DISCUSSION QUESTIONS 1. 2. 3. 4. 5. 6 Using the quarterly data for operating costs and the various cost drivers of costs provided by Exhibits 1 and 2, estimate regression for cost category of costs.Then, write the appropriate cost function for each category of cost and then interpret your regression results. Based on your regression results, where do you see the largest reductions in costs if ? ying capacity is lowered by 11 percent? Also, in which areas d o you see opportunities to achieve further cost reductions and why? Exhibit 2 provides a quarterly forecast of revenues, jet fuel prices,6 and the projected operating activity for 2009. Using the information from your regressions and the forecast information provided in Exhibit 2, estimate Continental’s operating costs and expected pro? for the upcoming ? scal year. Based on the results of your pro? tability analysis, what can you say about the ? rm’s ? nancial outlook? Would Continental be earning an operating pro? t in 2009? If not, what should Continental’s management do to restore pro? tability in 2009? Summarize your conclusions in a memorandum addressed to Continental’s CEO. In the memo, you must clearly communicate your main ? ndings, emphasizing speci? c areas in which you see the greatest potential to achieve further reductions in costs and, based on your pro? tability analysis, sum up the ? nancial outlook for 2009.You should note that Continent al has entered into several future contracts to hedge the exposed risks of rising fuel prices. The projected costs for jet fuel on exhibit re? ects the value of the various future contracts which guarantee Continental a ? xed price for jet fuel at various maturity dates in 2009, as well the estimated gallons of fuel that Continental plans to use during the year. Issues in Accounting Education American Accounting Association Volume 26, No. 1, 2011 A Case Study on Cost Estimation and Pro? tability Analysis at Continental Airlines 191 CASE LEARNING OBJECTIVES AND IMPLEMENTATION GUIDANCECost estimation is a fundamental aspect of managerial/cost accounting Datar et al. 2008; Eldenburg and Wolcott 2005 . For example, cost estimation is critical for developing budgets, setting up cost standards, inventory valuation, product costing, and many other applications. Ultimately, ? rms’ ability to accurately predict production and operating costs has a profound impact on decision-making. A dditionally, given the frequency with which ? rms downsize or expand their operations in response to economic or market-wide conditions, knowing how this strategic decision of scaling output impacts ? ms’ future operating costs, and which tools can facilitate this task, has become increasingly relevant for ? rms. Nonetheless, despite its importance, cost estimation is a topic that merits further discussion in accounting textbooks. Although several managerial/cost accounting textbooks provide rich theoretical discussions of cost estimation, including cost behavior, cost functions, and, to some extent, regression analyses, the examples that are typically used to illustrate such an important concept often lack a sense of realism. Either ? titious data are commonly used in cost estimation, or the examples covered fail to capture realistic situations faced by ? rms in a â€Å"real world† context. Accordingly, this case aims to close this gap. The objective is to support stu dents in learning how to apply regression analyses to understand cost behavior and forecast future costs using real data from ? rms. The case focuses on the harsh ? nancial situation faced by Continental Airlines as a result of the recent ? nancial crisis and the challenges it faces to remain pro? table.It then highlights the importance of reducing and controlling costs as a viable strategy to restore pro? tability, and how regression analysis can assist in this pursuit. Students are next presented with quarterly data for various categories of costs and several potential cost drivers, which they must analyze and then perform regressions on operating costs using a variety of cost drivers. Based on these results, students have to examine how costs behave and then use the regression output to forecast the ? rm’s operating costs for year 2009. As part of the cost analysis, students must also identify speci? areas in which Continental could achieve the largest cost savings as a re sult of cutting capacity and implementing other cost-cutting measures. Apart from this, they must conduct a pro? tability analysis to project quarterly pro? ts for the upcoming ? scal year. The learning objectives of the case are as follows: 1. 2. 3. Students learn to conduct regression analysis in Excel and use this technique to study cost behavior and forecast future costs. Students also learn how to use actual ? rm-level data from public sources for estimating costs, and apply cost estimation in a â€Å"real world† context that involves a widespread decision among ? ms: downsizing capacity. Moreover, learning to use public ? nancial information in cost estimation could have implications that reach beyond accounting; learning to access public ? nancial information exposes students to the possibilities of applying regression analysis for business analysis in general, including cost and pro? tability analyses. The case requires students to synthesize their ? ndings in a memor andum addressed to Continental’s CEO; thus, students are also exposed to re? ning their writing skills in a business setting. Implementation GuidanceThis case is primarily designed for use in an intermediate managerial/cost accounting undergraduate class; however, it could also work well in a graduate-level managerial accounting course, at either the master’s level or M. B. A. Issues in Accounting Education Volume 26, No. 1, 2011 American Accounting Association 192 Roman The realistic nature of the setting everyone can easily identify with the business model of airlines makes a particularly appealing environment for students to learn how regression analyses can be applied in cost estimation in a real-world context.The questions presented in the case include both practical and theoretical questions. As an augmentation of the principles contained in the application of this case, instructors could enhance the student experience by devoting time to reviewing the concepts o f cost functions and cost estimation, as well as discussing the fundamentals of regression analyses, so students can be exposed to these concepts prior to receiving the case. Alternatively, students can review these concepts on their own.The Appendix provides a detailed explanation of cost functions and regression analysis and describes the steps to perform regression analysis in Excel. Additionally, it provides students with broad guidelines to write an effective memorandum. Student Feedback The case was administered to two sections of an upper-level intermediate undergraduate cost accounting class at a major U. S. university. Seventy-seven students responded to an evaluation survey to assess whether they improved their understanding of the concepts illustrated in the case, as well as to whether the case illustrated a â€Å"real world† application in predicting operating costs.As shown in Table 1, students agreed that the case enhanced their understanding of the use of regre ssion analyses in predicting future costs mean of 4. 17, based on a ? ve-point scale , the case encouraged them to think critically about the behavior of operating costs in a â€Å"real world† context mean of 4. 03, based on a ? ve-point scale ; plus, they found the case interesting and recommended it for use in teaching cost estimation via regression analyses mean of 4. 07, based on a ? ve-point scale; see also Table 2 . Similar positive responses are shown in Table 2. For example, Table 2 reports students’ knowledge on the use of regression

External environmental influences Essay

The external environmental factors described in the following essay have a direct or indirect influence on HRM. To be effective, HR managers must monitor the environment on an ongoing basis; assess the impact of any changes; and be proactive in implementing policies and programs to deal with such challenges. Economic Environment The economic environment has a major impact on business in general and the management of human resources in particular. Economic conditions affect supply and demand for products and services, which, in turn, have a dramatic impact on the labour force by affecting the number and types of employees required, as well as an employer’s ability to pay wages and provide benefits. When the economy is healthy, companies often hire more workers as demand for products and services increases. Consequently, unemployment rates fall, there is more competition for qualified employees, and training and retention strategies increase in importance. Conversely, during a downturn, some firms reduce pay and benefits in order to retain workers. Other employers are forced to downsize, by offering attractive early retirement and early leave programs or by laying off and terminating employees. Unemployment rates rise, and employers are often overwhelmed with applicants when vacancies are advertised. In most organizations today, productivity improvement is essential for long-term success. Through productivity gains, managers can reduce costs, conserve scarce resources, and increase profits. This leads to a win-win situation, since higher profits often result in better compensation and improved working conditions, thereby enhancing the employees’ quality of work life and their motivation to further improve productivity. Australia’s relatively low productivity growth rate and high labour costs are of grave concern, since competition with foreign companies has become increasingly important. Australia’s economic success increasingly depends on the ability of Australian employers to meet international quality and  productivity standards and become more cost-competitive. This applies to firms selling products and services in the domestic market, in which foreign competition is increasingly a factor, as well as those with international markets. Labour Market Conditions The labour market is the geographic area from which an organization recruits employees and where individuals seek employment. In other words, it is the area in which the forces of supply and demand interact. The labour market is often different for various employee groups within an organization. While clerical and technical employees are generally recruited locally, the labour market for senior managers and highly specialized employees is often national or even international in scope. One measure of an organization’s effectiveness is its ability to compete successfully for high calibre human resources. Many factors motivate candidates to seek employment with a particular organization, including type of business/industry, reputation, opportunities for advancement, compensation, job security, and working conditions. Location and climate and other aspects of a firm’s physical surroundings, such as housing, commuting, and living costs, can help or hinder a firm’s ability to attract and retain employees. Recent population shifts to the coastal and small towns and rural areas can be attributed, at least in part, to the desire of many individuals to work and live in what they perceive to be a more desirable physical environment. Such shifts alter the demand for and supply of individuals in local labour markets, a factor that firms must always take into account when deciding where to establish a new venture, expand, or downsize. Because the labour market is not controlled or influenced by any one factor, it is unstructured and often unpredictable. Nevertheless, organizations must constantly monitor and track trends affecting supply and demand of human  resources. By doing so, they can gather information about the prevailing pay rates for employees with particular talents or skills, and estimate how difficult it is likely to be to attract and recruit staff. Labour market conditions should also be monitored to determine present and emerging trends (such as the changing composition of the labour force) as well as changing values and expectations, so that policies and programs can be adapted and/or designed in order to recognize and take advantage of these trends. Globalization Globalization refers to the tendency of firms to extend their sales or manufacturing to new markets abroad. For businesses everywhere, the rate of globalization in the past few years has been nothing short of phenomenal. â€Å"The bottom line is that the growing integration of the world economy into a single, huge marketplace is increasing the intensity of competition in a wide range of manufacturing and service industries.† Production is becoming globalized, too, as firms around the world put manufacturing facilities where they will be most advantageous. Also, there are increasing numbers of multinational corporations–firms that conduct a large part of business outside the country in which they are headquartered and that locate a significant percentage of their physical facilities and human resources in other countries. Many organizations are locating new plants in areas where wages and other operating costs are lower. For example, Australia’s Hewlett Packard’s computers are assembled in Singapore. While cheaper labour is one reason for transferring operations abroad, another is to tap into what Fortune magazine calls â€Å"a vast new supply of skilled labour around the world.† Many multinational firms set up manufacturing plants abroad, not only to establish beachheads in promising markets, but also to utilize that country’s professionals and engineers. This globalization of markets and manufacturing has vastly increased international competition. Throughout the world, organizations that formerly  competed only with local or national firms–from airlines to automobile makers to banks–are now facing an onslaught of foreign competitors. From boosting the productivity of a global labour force to formulating selection, training, and compensation policies for expatriate employees, managing globalization and its effects on competitiveness will thus continue to be a major HR challenge in the years to come. Demographic Trends and Increasing Work-force Diversity Demographics refers to the characteristics of the work force, which include age, sex, marital status, and education level. Demographic changes occur slowly and are well measured, which means that they are known in advance. The fact that Australia’s labour force is becoming increasingly diverse is one of the major challenges confronting HR managers today. Diversity refers to â€Å"†¦ any attribute that humans are likely to use to tell themselves, ‘that person is different from me,'† and thus includes such factors as race, gender, age, values, and cultural norms. Population Growth The single most important factor governing the size and composition of the labour force is population growth. Currently, the fastest growing groups in the Australian work force are women, visible minorities, Aboriginal people, and persons with disabilities. Age The baby boomers, born between 1946 and 1965, began crowding into the labour market in the late 1960s. The sheer number of â€Å"boomers† helped to expand the economy and made it easier for HR departments to focus on issues such as cost containment, since recruitment and selection, while important, were not the most critical problems. During the 1990s, individuals in this â€Å"population bulge† experienced a great deal of competition for advancement. This challenged managers to find new strategies for forging career paths, such as lateral moves, to keep this group motivated and satisfied. The  oldest of the baby boomers are now in their mid-fifties. Life expectancies have increased and fertility rates have declined, the average age of the population is increasing substantially. Since some baby boomers have already taken advantage of generous early retirement programs and many more will be retiring over the 25 years, pension plan and social security benefits issues are starting to present a very serious concern for employers and governments, given the smaller labour force available to support the retirees. Many organizations with a primary interest in the younger age group, such as retail establishments and fast-food chains, have already started to feel the impact of the fact that the population from which they have traditionally gained customers and part-time workers is starting to shrink dramatically. Some employers have undertaken initiatives to attract older workers, especially those who have taken early retirement, by offering job sharing and expanding the number of part-time hours available. For example, McDonald’s Restaurants of Australia is another organization that is actively recruiting seniors, as well as directing advertising efforts to appeal to the senior market. HR specialists must remember that many HR policies, benefits plans, and reward systems that attract and motivate employees in one age group may not appeal to those in another due to differing values and priorities. Education The level of education of the Australian labour force is increasing at a significant rate. more Australians are pursuing higher education, through a variety of institutions ranging from universities and colleges/TAFEs to trade schools, private-sector organizations, and professional associations.  growth in the number of cooperative-education programs, designed to enable students to gain work experience while still attending school, and of  distance-education opportunities, which mesh Internet technology with the fundamental need to continue learning. Given the higher expectations of the better-educated labour force, managers are expected to try to ensure that the talents and capabilities of employees are fully utilized and that opportunities are provided for career growth. In today’s economic climate, doing so is not always possible. Visible and Ethnic Minorities The proportion of visible and ethnic minorities entering the Australian labour market is growing, in jobs ranging from general labour to technical, professional, and skilled trades. Ethnic diversity is also increasing. Thus, HR specialists must ensure that policies and programs are developed in their organizations to accommodate and celebrate the diverse cultural characteristics of visible and ethnic minority employees, something that requires much more than ensuring compliance with human rights legislation. Women The growing presence of women has been one of the dominant trends in Australia’s labour force since the 1950s. Factors contributing to the dramatic increase in female participation rate include smaller family size, increased divorce rate, the need and desire for dual family incomes, increased educational level, and the availability of more-flexible working hours and part-time jobs. The employment rate for women has also continued to climb. Recent studies have shown that women have moved into occupations in which the unemployment rate is low, while men tend to be clustered in jobs in which the risk of unemployment is much higher.73 There is still strong evidence that women are underutilized in the Australian work force, however. Aboriginal Peoples Indigenous peoples are still facing considerable difficulty in obtaining jobs and advancing in the workplace. Persons with Disabilities Despite the fact that human rights legislation in every Australian jurisdiction prohibits discrimination against individuals with disabilities, Australians with disabilities continue to confront physical barriers to equality every day. Inaccessibility is still the rule, not the exception. Even though studies show that there are no performance differences in terms of productivity, attendance, and average tenure between employees who classify themselves as having a disability and those who do not, persons with disabilities continue on average to experience high rates of unemployment and underemployment, and lower pay. Overall Impact of Increasing Diversity Managers must be extremely aware that related to the work-force diversity described above are significant value differences about the overall importance of work, what aspects or characteristics of a job are most important, tolerance of discipline in terms of hours and pace of work, attitudes toward authority, and definition of loyalty. Employees increasingly expect to exercise more freedom from management control, and are more demanding and questioning. More people are seeking jobs that are attuned to their personal values and provide the opportunity for them to bring their personalities to work with them,87 as well as flexible work arrangements and other programs that will enable them to balance their work and personal lives.88 Policies and practices must be adapted to embrace the diversity of the dominant values represented in an organization’s work force. Trends in the Nature of Jobs and Work Major changes have been occurring in the nature of jobs and work, in part as a response to a number of the environmental challenges already discussed. Telecommuting, is the use of microcomputers, networks, and other communications technology (such as fax machines) to perform in the home work that is traditionally done in the workplace. Many firms are using more contingent employees–defined as workers who do not have regular full-time or part-time employment status–to handle vacation and leave coverage, peak-period demands, extra workload, and specialized tasks or assignments. Included are contract workers, seasonal workers, casual and non-regular part-time employees, temporary employees, independent contractors (freelancers), consultants, and leased employees.108 Contingent workers currently account for about 12 percent of all jobs in Australia, a figure that is expected to reach 25 percent by 2010.109 There are more regular part-time employees in Australia than ever before. These are individuals who work fewer hours than fulltime core employees, typically during peak periods (such as evenings and weekends in retail stores and restaurants). Approximately 33 percent of all employed women work part-time: two-thirds of them by preference, and the other one third because they were unable to obtain full-time employment.112 The fact that part-time workers are often paid less than their full-time counterparts–and may not have benefits coverage–has raised some major equity concerns. Small businesses, classified as firms with fewer than 50 employees, whether sole proprietorships, partnerships or corporations, are a large and increasingly important part of the Australian economy. A Service Society Employment trends in Australia have been experiencing dramatic change. The primary sector, which includes agriculture, fishing and trapping, forestry, and mining, now represents only 2.8 percent of jobs. While the secondary  sector (manufacturing and construction) has grown In common with trends in Western Europe and the U.S., the sector of the Australian economy accounting for the greatest growth in recent decades is the tertiary or service sector, which includes public administration, personal and business services, finance, trade, public utilities, and transportation/communications. While much of this growth is attributable to rapid technological change (initially in the form of automation and more recently in improvements in IT), part is due to an increase in outsourcing of particular activities by primary- and secondary-sector firms to decrease costs and increase efficiency. Subcontracted functions range from building maintenance to provision of security, cafeteria management and laundry services to payroll and training and development. Since all jobs in this sector involve the provision of service, often in person but increasingly through the design, installation, and maintenance of service-providing technologies (such as automated banking machines and cable television), effectively managing and motivating human resources is critical. Although there are some lesser-skilled jobs (in housekeeping and food services, for example), many service-sector jobs demand knowledge workers, employees who transform information into a product or service, whose responsibilities include planning, problem solving, and decision making. Knowledge Work and Human Capital Management expert Peter Drucker has said that â€Å"the foundation of an organization is not money or capital or technology–it’s knowledge and education (human capital). By 2005, knowledge workers will be the single largest group in the labour force.†116 He is not alone in this belief. Many experts believe that the distinguishing characteristic of companies today and tomorrow is this growing emphasis on human capital. Jobs today in all sectors demand a level of expertise far beyond that required of most workers 20 or 30 years ago, which means that human capital is quickly replacing machines as the basis for most firms’ success. Furthermore, it is not  unusual for more than one-quarter of sales to come from products less than five years old. As a result, â€Å"innovating–creating new products, new services, and new ways of turning out goods more cheaply–has become the most urgent concern of corporations everywhere.†11 For managers, the challenge of fostering intellectual or human capital lies in the fact that knowledge workers must be managed differently than workers of previous generations. New HRM systems and skills are required to select and train such employees, encourage self-discipline, win employee commitment, and spark creativity. Apple computers is one organization that has learned how to encourage creativity and access the skills and ideas of all of its employees:118 Technology It is mainly through technological innovation that firms develop new products and services and/or improve existing ones in order to remain competitive, and gain the productivity and quality needed for competitive advantage. Manufacturing advances, such as robotics and computer-aided design / computer-aided manufacturing (CAD/CAM), have eliminated many blue-collar jobs, replacing them with fewer but more highly skilled jobs. When robots were introduced in the automobile industry, for instance, there was a major decrease in the demand for welders and painters, but a new demand for technicians who could program, install, and service automated equipment.89 Due to computer technology, similar changes have been occurring in the nature of office work. Optical scanners, computerized x-ray scanners, and Magnetic Resonance Imagery (MRI) are technological advances that have caused major occupational changes in the medical field over the past few decades, and such advances are being made every d ay. Currently, for example, a few doctors are attempting to revolutionize heart surgery using computer assistance and robotic arms.90 The overall impact of the technological changes affecting almost every field is that labour-intensive blue-collar and clerical jobs have been decreasing, while technical, managerial, and professional jobs are on the increase. This shift in employment opportunities has many implications for organizations: jobs and organization  structures are being redesigned; new incentive and compensation plans are being instituted; revised job descriptions are being written; and new programs are being instituted for employee selection, evaluation, and training/retraining–all with the help of HR specialists. Unfortunately, the training of the Australian labour force has not kept pace with the rate of technological change and innovation. Consequently, there is a scarcity of skills in certain fields. Many Australian firms, such as Telstra, inevitably have to look outside of Australia to fill their high-tech openings, which is rather disturbing given the fact that there are currently about 1.1 million Australians seeking employment. While much of the impact of information technology has been positive, it has also led to some organizational problems. For many employees, it has created anxiety, tension, resentment, and alienation. Unions have consistently expressed concerns about job displacement and health hazards, such as those related to video display terminals. All of these issues must be addressed through effective HRM practices such as information sharing, counselling, ergonomic refitting, job redesign, and training. Information technology has also hastened what experts call the â€Å"fall of hierarchy,† or promotion of egalitarianism. Power and authority are spread more evenly among all employees. For example, with â€Å"distributed computing,† every employee with a personal computer on his or her desk can tap into the firm’s computer network and obtain needed information. Expecting employees to make more decisions has implications for selection, training, and compensation. Questions concerning data control, accuracy, right to privacy, and ethics are at the core of a growing controversy brought about by the new information technologies. Sophisticated computerized control systems are used to monitor employee speed, accuracy, and efficiency in some firms, including IBM Australia. More and more firms are also monitoring employee e-mail, voice  mail, telephone conversations, and computer usage, and some now monitor employee behaviour using video surveillance.94 Reasons for such monitoring include eliminating time wastage, deterring abuse of company resources, protecting network security, preventing misappropriation of company resources, ensuring compliance with health and safety standards and regulations and other legislation, and monitoring employee behaviour and performance. Employers considering monitoring employees should be aware that doing so may present both practical and legal problems: such monitoring may have counterproductive results such as increased job stress, decreased morale and productivity, lowered employee self-esteem, and decreased trust in and respect for the employer Setting up and maintaining a monitoring system may involve significant economic costs surveillance of employees in the workplace raises the controversial legal issue of employee privacy rights. Human Resources Information Systems Changing technology has also had major implications for HR departments. Over the past few decades, many firms introduced a Human Resources Information System (HRIS) to store detailed information on employees, HR policies and procedures, government laws and regulations, collective agreements, etc. HRIS computer applications include: salary and benefits administration; tracking statistics on absenteeism, grievances, and health and safety; collecting data for government statistical reporting and employment equity purposes; advertising jobs and recruiting candidates; and communicating with employees. Computers are now being used not only for storage, retrieval and analysis of information but for broader applications, including basic report production, long-range forecasting and strategic planning, and evaluation of HR policies and practices. Such systems can decrease time lost to comparatively non-productive work like data entry and employee scheduling, thereby providing time for HR department employees and managers throughout the firm  to focus on more strategic issues. Today, many Australian firms, are utilizing computer technology even more extensively by introducing a Human Resources Management System (HRMS), defined as an information management system accessible to staff at all levels, designed to ensure that the organization’s human resources are recruited, selected, developed, employed, deployed, and supported effectively. Functional applications include succession planning, pension plan projections and eligibility monitoring, interactive employee retirement training, and more. Self-service applications for employees and managers ensure that information reaches those who need it, with one-time data entry, less maintenance, and improved quality and accuracy. Government Various laws enacted by governments have had and will continue to have a dramatic impact on the employer-employee relationship in Australia. In one recent survey, 70 percent of the HR specialists responding cited changing regulatory requirements as a major factor altering their work environment. The legal framework for employment includes: constitutional law, particularly the Charter of Rights and Freedoms; acts of parliament; common law, which is the accumulation of judicial precedents that do not derive from specific pieces of legislation; and contract law, which governs collective agreements and individual employment contracts. Such laws impose specific requirements and constraints on management policies, procedures, and practices. Some of the employment-related legislation is aimed at prohibiting discrimination in various aspects and terms and conditions of employment, such as human rights, employment equity, and pay equity. Other laws require employers to meet certain obligations, such as occupational health and safety, employment standards, and labour relations. Still others make various payments mandatory, such as Workers’ Compensation, Employment Insurance, and the Australia Superannuation Plans. All of the laws mentioned above and their regulations have important  implications for all managers, since they must: Stay abreast of legislative developments is a major ongoing responsibility. Often, the HR department staff members play a major role in helping other managers to remain current by circulating reading material or holding seminars. Develop and administer policies and practices that ensure compliance to avoid loss of government contracts, suits by affected employees or regulatory bodies, fines, and bad publicity. Try to ensure that compliance does not interfere with the efficient and effective accomplishment of their other responsibilities. This means finding ways to comply with regulatory requirements with as little cost and disruption as possible. For example, many firms have developed manuals, videotapes, and self-administered quizzes, such that employees can study independently at home or at work during off-peak times, and submit their completed quizzes for evaluation and verification of training completion. Bibliography 1. Baron, J.N. and Kreps, D.M. (1999) ‘Consistent human resourcepractices’,California Management Review, 41(3), pp.29-53. 2. De Cieri, H. and Kramar, R. (2003) Human Resource Management in Australia; strategy, people, performance, McGraw Hill Australia. 3. Dessler, Griffiths and Lloyd-Walker (2004), Human Resource Management, 2nd ed, Frenchs Forest, N.S.W. : Prentice Hall Australia 4. Heneman, H.G, Donald P. Schwab, D.P (eds) (1978), Perspectives on personnel/human resource management, Homewood, Ill : R. D. Irwin, 1978 5. Lansbury, R.D. and M. Baird (2004) ‘Broadening the horizons of HRM: Lessons for Australia from the US experience’ Asia Pacific Journal of Human Resources, 42(2), pp.147-155. 6. Mirabal, N. and De Young, R. (2005) ‘Downsizing as a Strategic Intervention’ Journal of American Academy of Business, 6(1), pp.39-45. 7. Nankervis A., Compton and Baird (2005) Human Resource Management: strategies and processes, 5th ed.,Thomson, Southbank, Victoria Australia 8. Stone, R. J, (2005) Human resource management, Milton, Qld.: John Wiley & Sons Australia, ch 1 9. Travaglione, A. and Marshall, V. (eds) (2000) Human Resource Strategies: An Applied Approach, Irwin/McGraw Hill, Roseville. 10. Todd, T and Crake. A, Human Resource Management 237, lecture notes (2005) 11. Young, S. (2000) ‘Outsourcing: Lessons From the Literature’ Labour and Industry, 10(3), pp.97-118.

Andrew Jackson Sectionalism

Sometimes when a ruling authority decide what they think is the â€Å"best† for their country, sectionalism evolves. Sectionalismisloyalty to the interests of one's own region or section of the country, rather than the nation as a whole. In simple words,it means one would only strive toimprove their town or area, rather than improving the country. An example of sectionalism would be during Andrew Jackson’s presidency. The decisions made during Jackson’s president caused sectionalism itself to manifest. Signs of sectionalism showed after Congress released the Tariff of 1828, the vetoing of the re-chartering of the Bank of the United States, and Jackson refusing to admit Texas as a state. The Tariff of 1828 was a major factor that contributed to the emerging sectional conflicts during Andrew Jackson’s presidency. Passed by Congress in 1828, it was aimed to protect the booming industries in the north and tax the south on imported goods such as wool, fur, liquor, etc. The South was angry at paying a high amount on imported goods, since it harmed their economy. As a result, South Carolina threatened secession from the Union. Congress, hoping to make things work better for the south, issued the Tariff of 1832, lowering the tariff down to 35% with a reduction of 10%, but the southerners still thought this was not enough. So it led to the Nullification Crisis of 1832; the South Carolinians said the Tariff of 1832 was unconstitutional, declaring it to be a void. Jackson, angry about this whole conflict, issued a proclamation against S. C. in which Governor Hayne from S. C. eleased a counter-proclamation, causing sectional tensions to be lurking around the corners. This whole conflicted ended when Henry Clay proposed a compromise bill that would reduce the Tariff of 1832 by about 10% over a period of eight years, so that by 1842 the rates would be down to 20% to 25%. Andrew Jackson vetoing the re-chartering of the Bank of the United States proved sectionalism to be emerging. Jackson and the westerners saw the BUS as a tool of the rich to get ric her, but to the easterners, it was a great institution that reduced bank failures secured their funds. The vetoing of the re-chartering of the Bank of the United States started when Henry Clay deployed a strategy hoping to bring Jackson’s popularity down so then he can hopefully win the next presidential election. He presented Jackson a bill for the re-chartering of the BUS that was four years early. The point of this was if Jackson signed it, he would lose supporters from the west and south, and if he vetoed it, he would lose the support from the elite and wealthy people of the East. However, the people from the east were now a minority and they fearedJackson. Jackson vetoed the re-charter bill, scorning the BUS to be unconstitutional, which aligned the west against the East. Sectionalism emerged between the north and the south when Jackson refused to admit Texas as a state. After Texas gained its independence from Santa Anna in 1836, many of the Texans wanted to become part of the Union, but the slavery issue wouldn’t allow this. If Texas was to be admitted to the Union, then that means there would be 13 slave states and 12 free states, breaking the whole point of the Missouri Compromise. The Missouri Compromise called for all states above the 36 degree 30 line to be free, and the states under that line would be slave states, bringing a fair balance between slave states and free states. The Northerners were uneasy with Texas since they didn’t want Texas to be admitted to the Union, otherwise there would be more slave states than free. During Andrew Jackson’s presidency, tensions between the south, west, and north emerged causing sectionalism. Sectionalism emerged after Congress released the Tariff of 1828, the re-chartering of the Bank of the United States was vetoed, and Jackson refusing to admit Texas as a state.

Marketing and Information System Essay Example | Topics and Well Written Essays - 500 words

Marketing and Information System - Essay Example The marketing information which will be designed for Dell will gather the order information such as customer’s name, address, contact number, age, and the specifications for the computer. It should be noted that the business organization utilizes online distribution for all their products. This means that customers all customers visit the company’s website in order to place and track their orders. All this data will be stored in a database and will be updated real-time. This means that information will be stored as they are given by the customers. In order to make ordering efficient to the customer, the record will be used each time the customer places an order. This will make ordering easier as customers won’t need to retype their personal information. The customers will also be given options if to use the credit card that they have used on their previous purchases. The data gathered from this database will allow Dell to track sales according to geographical loc ations. This will also track trends in aggregates demand and demand according to geographical demands. This will help Dell to where to concentrate aggressive marketing efforts in order to stimulate purchases. The database will also allow Dell to identify the preferred specifications of customers and the add-on features that they want which will the business organization to standardize their inputs. The company can also associate the demographic factors with the specifications of the computers ordered.

Social Imperialism Essay Example | Topics and Well Written Essays - 500 words

Social Imperialism - Essay Example The introduction of social imperialism was formerly understood in the late nineteenth century when socialists and the lower-class movement became partners in imperialism. Its foundation has been related to the misery of the 1870s and early 1880s and efforts by regimes to recover economic losses as simultaneously exasperating labor agitation and socialist. Advocates of imperialism like Joseph Chamberlain and Jules Ferry; justified it by reasoning that the fruits of the kingdom would financially support social reform, give solution for the stagnation and unsteadiness of mid-nineteenth-century European economies and improve the dilemma of the poor—â€Å"the cry of the business population,'† ‘n’, Ferry's words--by having the funds for steady employment making goods for confined colonial markets. Hobson demystified such points of view: overseas investment whether in official colonies or informal areas of influence. He disputed exhausted capital from European-dom estic financial system. More contemptuous politicians such as Bismarck merely appealed to regal â€Å"crisis ideology,† using abroad military adventures and a focal point on outside enemies to distract attention from the deficiencies of economic arrangements and domestic politics. Benefitting the pursuit of kingdom enabled the German country to put off the democratization of political supremacy.Perhaps since, unlike Britain, France was in short of a substantial informal kingdom in the mid-nineteenth century.

Case study on Bestbuy from HBR Example | Topics and Well Written Essays - 1000 words

On Bestbuy from HBR - Case Study Example Problems continued to increase after a tornado hit the company in 1981 forcing Schulze to shift his strategic plan from services to discounted brands. Eventually, he ventured into superstores in 1983 and thus, rebranded the business Best Buy (2). Best Buy faces stiff competition both locally and globally from these chains necessitating it to initiate different strategies to cope with competition. The company partnered and acquired different businesses in a bid to expand its market share and product lines to increase its revenue base and gain the competitive advantage over the rival firm Wal-Mart. The company acquired Pacific Sales Kitchen, partnered with Carphone Warehouse, Dell, Apple, Napster Inc., Jiangsu Five Star Appliance Co. among much other business in the U.S., Europe, Canada and China (5). Conversely, due to competition and the changing market environment, the company has experienced fluctuating revenues and net profits. For instance, in 2009 due to pressure from rivals, the company’s operating profits declined to $2.0 billion up from $2.2 billion in 2008, despite a growth in sales. Similarly, in the fiscal year 2012, the company’s stock closed at $24.70 up from $ 56.86-year-end close in 2006 resulting in approximately 55% loss in market capitalization (1). The electronics industry is a competitive market with some of the world’s well-established retail chains and superstores such as Wal-Mart. This has resulted in Best Buy losing its market share gradually to online retailers such as Amazon and discounters (1). Best Buy can leverage from greater international expansion, The Company has penetrated international markets over the years through partnerships and acquisitions of other businesses, which has enabled it to open new stores in these markets.

A fountain pen Essay Example | Topics and Well Written Essays - 1250 words

A fountain pen - Essay Example Companies source raw materials required in the production process from various stockholders and international suppliers. Before distribution to various target markets, assembling of the components occurs at specific sites (Anklesaria 211). The design of fountain pens is in various ways and styles. A fountain pen may be custom made or produced in bulk. In designing custom fountain pens, an individual generally decides the elements and style that he wants to be incorporated in the product, thus may include specifications like, color, laminating strips, the engraving of particular patterns on the surface, or inlaying materials like gemstones into surface. A custom pen usually has a different and unique look from the design of other fountain pens produced in bulk. Mass produced pens usually resemble in design and shape but may differ in color. This is because custom pens are generally expensive to produce than the mass-produced pens. A fountain pen incorporates various materials in its production process. The pen’s barrels are made from a series of materials including gold, silver or copper; however, these materials are utilized for custom pens. Consequently, mass produced pens are produced out of inexpensive materials including Lucite also referred as acrylic resin, cellulose acetate among other moldable polymers. Consequently, hand-made fountain pens use stable and solid materials including plywood, leather, antlers, and crushed velvet. These affordable materials utilize simple tools in production. Moreover, the nib is also a vital component of the fountain pen, which is usually made out of stainless steel, gold, or sterling silver as the former is the widely utilized material. On the other hand, the pen fittings and clips are made out of electroplated gold alloys while custom pens may make use of gold (Anklesaria 211). The ink is also an important

Thesis driven essay Example | Topics and Well Written Essays - 750 words - 2

Thesis driven - Essay Example Through the Allegory of the Cave, in his work The Republic, Plato describes the position of unenlightened man, and 24 centuries later, the main hero of Wachowski Brothers’ movie The Matrix, hacker Neo, makes his way from the Cave towards enlightenment. According to Plato, human is caved in his/ her regular and familiar environment. He/ she does not ask questions, and does not will to change own life in more real and true way. Despite the ever-present possibility to start those changes, which Plato vividly describes as a light from the ideal world behind one’s back, most of the humans prefer to keep living in their familiar world of illusions, which is only a poor projection, a shadow of the ideal world. Unenlightened and delusioned man is a prisoner of his/ her own illusions. In Wachowski Brothers’ movie, the Matrix is a platform for humans’ illusions. Morpheus describes it as â€Å"the loading program†, â€Å"the construct for simulations† (The Matrix). Most of the people live in a common simulation, which is determined by AI. As Plato predicted, a more powerful â€Å"brain†, AI, had excelled human’s intelligence, and because the machine has no notion of morality, AI uses humankind brutally, but rationally for own benefit. The image of a caved unenlightened man is almost literally illustrated in the movie, especially in the scene, where Neo wakes up in a capsule and find himself to be a caved, but in a rather modern and more technical way. He is a part of high-technical mechanism, where Plato’s chains are cables and leads. They chain Neo’s whole body, but what’s the most important, they chain Neo’s brain. The familiar environment looks dark and grey now, and very similar to the Cave. Morpheus says, this darkness was made by humans (The Matrix). To get free from AI control, and to get out of the capsule, Neo symbolically bursts those cables and leads, and find himself confused and

The Internet from Christian and Islamic Perspectives Research Paper

The Internet from Christian and Islamic Perspectives - Research Paper Example Internet in Islam The popular notion, especially in the West is that Islam may not be comfortable with the Internet. Images of censorship and restriction would probably inform this perception. But the fact is that the Internet is accessible to many Muslims across the world. There is no specific Islamic teaching that bars the use of the Internet for Muslims. As a matter of fact, many Muslims are finding the Internet a convenient and useful way to learn not just about common knowledge but also about Islam, its rituals, among other information. Today, both traditional Muslim texts and contemporary Muslim conversation have found their way to the information superhighway (Bowen and Early, 300). Abdulla also pointed out that while Islam is not dependent on the Internet and computers and would not miss it if it disappears, there is still the fact that these technological innovations have expanded several aspects of Islam (62). For example, the Internet is also increasingly becoming a place for Muslims to join together into many communities that strengthen relationship and brotherhood. According to Karagiannis and Wagner, the Internet, along with the so-called "new media", created new forms of Islamic communities, which revolve around shared communications and which bind together new relationships (97). These are made possible by the amount of information that can be accessed as well as the social media (popular among Muslims) and the emergence of the e-mail messaging tool. These facilitate Islamic propagation. The capability of the Internet to be accessible to many people makes it an effective form of evangelizing tool. Many people are learning about Islam online and this is particularly important especially in the era wherein Muslims are constantly being treated with suspicion and Islam, being commonly misinterpreted. Many Muslims find the Internet useful in these areas. The Christian Tradition The utility of the Internet is also true in the case of Christians. Every one agrees that on its positive side and in regards to its technological capabilities, it is important for evangelism and missionary activities. As Campbell explained, from the point of view of many Christians, the Internet serves as "a social technology that helps people of shared faith gather together, thereby connecting those from the same religious tradition who would normally be separated by geography, time and other limitations" (39). This characteristic is supposed to be congruent with the Christian religious concept of the "body of Christ", which in this case manifest in a networked community of believers with the Internet as a medium. The Internet also serve as a resource and communication tool for Christians across the globe in their religious activities, information campaigns, among other evangelical works. It allows the Christian churches to reach out to its flock and facilitates in giving charity, missionary work, among others. Comparison It is important to underscore t hat the positive perspectives on the Internet as demonstrated in the previous sections are both true in the cases of Christianity and Islam. And this is also shown in terms of the negative attitude or perspective towards the Internet is not exclusive to any religion. There are Christian and Islamic values that can be both threatened by the Internet. For example, Christians criticize the uncensored content in the Internet that are made available to

Forensic Accounting Investigation Research Paper

Forensic Accounting Investigation - Research Paper Example 1). 1.2 Why is this issue? The purpose of using business intelligence in the organization is to identify and collect business data and to make better decision on various aspects of business including proper accounting practices. Business intelligence system will also help the business to make effective business decisions and the resultant financial gains besides facilitating business growth. Accurate information is nessaccery for taking efficient decision in the business. Business intelligence system would also help the business to get accurate and reliable data in the organization. â€Å"Business Intelligence Solutions (BIS) lead to better business decision making through providing access to enterprise data for easy analysis against Key Performance Indicators† (Business Intel n.d., para. 2). Many organizations have become subjects of fraudent practices due to the lack of proper forensic accounting systems focusing on business intelligence. The research will help highlight thi s issue and evolve ways and means to counter the same. 1.3 What could this research shed light on? There have been a number of researches conducted on this topic. However there is still scope for conducting further research because it will identify the significance of business intelligence in order to take efficient decisions in the business. More over, with the passage of time and the advancement in technology, various aspects of business and accounting keep transforming. Therefore, fresh research will help in addressing the changes that occur due to the evolution. Prompt and accurate decisions are essential for meeting the competition efficiently and effectively. This research will high light the importance of business intelligence system in the organization and how it will help in locating frauds and misappropriations for safeguarding the interests of the shareholders involved. â€Å"Business intelligence helps to improve customer service by identifying the frequent problems wit h each product and identifying potential solutions† (Sabherwal & Fernandez 2009, p. 17). 1.4 Research Aims and Objectives: Depending on the purpose of this research the main aim will be: To identify areas where business intelligence can be deployed to co ordinate accounting activities effectively and efficiently. To take prompt and accurate decisions in the business. To make a co ordination among various departments in the organization. 1.5 Research questions’ (1) How to make effective decisions? (2) How can delegate information among various department in organization? 1.6 Literature Review: For the purpose of this literature review, the analysis of the literature will begin by investigating from books, journals and scholarly articles. â€Å"The literature broadly refers to information relevant to your topic of interest† (Literature Review: Academic Tip Sheet 2008, p. 2). Business intelligen

Volkswagen Strategic Management Case Study Example | Topics and Well Written Essays - 3250 words

Volkswagen Strategic Management - Case Study Example VW group have 8 automobile brands with 44 vehicle and component production plants in European countries as well as in six countries in America; Asia & Africa. Sales operations spread around 150 countries across the globe. The group has eight major brands of vehicles namely Volkswagen passenger cars, Audi, Bentley, Bugatti, Lamborghini SEAT, Skoda and Volkswagen commercial Vehicles- each deal autonomously with their own vehicle business includes development and production to marketing & servicing (Accessed from the website www.volkswagen.com). 1. As part of the corporate governance and strategic management, VW group has adopted various strategic choices. Strategic fit is developing strategy by identifying opportunities in the business environment and adopting resources and competences to take advantage of these (Porter, 1980). Strategic choices are concerned with decisions about an organization's future and the way in which it needs to respond to the market pressure and influences. At different level of organization, executives are faced with choices as to how to meet the expectations of stakeholders' whilst satisfying the needs and expectation of the users, often-in competition with other organizations. Hannan & Freeman (1977) suggest that as organizations, adaptor of a particular environment they become less flexible. Organization's choices are constrained not only by an explicit cultural dimension in the sense of what we believe around here but also by what skills and resources are available and in what context those s kills and resources become valuable. Prahalad & Bettis (1986) argue that organizations have dominant logics and that these logics are based on the mental maps developed in the organizations core business. Michel Porter's (1985) five forces strategies low cost strategies and strategic choices are some of the strategies have been adopted for competitive advantages for the organizations. Campbell-Hunt (2000) suggests that differentiation can take on number of forms based on marketing variables, sales variables, quality reputation variable and product innovation variables. Sustainable competitive advantage depends on companies being able to develop and protect resource advantages by focusing on particular market position. Finally, organization's ability to succeed in a business arena depends on is ability to develop a market position that is supported by appropriate assets and capabilities. Strategic choices include corporate strategy, Business or competitive strategy and directions and methods of development. Corporate level strategy (Andrews, 1987) is concerned with the overall purpose and scope of an organization and how value will be added to different parts of (business units) the organizations. Corporate level strategy includes portfolio decisions extent of diversity and management and control of subsidiaries. The second level can be thought of in terms of business unit strategy (Hall, 1978) which is about how to complete successfully in particular markets. Business strategy includes sustainability, competitive advantages competitive strategy and strategies in hyper-competitive conditions. Finally, the directions and methods of development include market development, product development, diversification, acquisitions alliances as well as critical success criteria. It also includes the concept of suitability, acceptability and

Analyse and compare the following two texts Essay Example for Free

Analyse and compare the following two texts Essay Discuss the similarities and differences between the texts and their theme(s). Include comments on the ways the authors use elements such as structure, tone, images, and other stylic devices to communicate their puposes. Death as the permanent ending of all life in a person has been treated as an enigmatic subject. As birth is marked by engaging pleasure, death sometimes is either celebrated as the beginning of a new life, or totally the contrary, is commemorated with condolence and pain. Through life, death is a monotonous experience that we live every day, and as a result, literature could not cast it away as an invisible theme. Instead many pieces of literature have been fantasized by the theme of death, in which they try to discover new meanings and try to give it new boundaries. These two texts, No one wore black (Daily Mirror, Saturday, August 12, 1995) and the fragment taken from The Orton Diaries (edited by John Lahr, 1986.) are examples of how literates have been attracted and involved by the enchants of this phenomenon. These two text with a common theme, death and its celebration as a funeral, share many similarities and simultaneously are allotted as separate individuals. The structure of the two texts is crucial, no only to the effect that is produced, but also, by the tone that both the authors are trying to generate. Firstly, in No one wore black, the interrelation of all the parts as a whole are dealt in a highly stylistic manner. Although the texts target is to function as a descriptive journalistic report, the author writes in such way that it seems to be a rhythmical composition, sometimes rhymed, expressing experiences, ideas, or emotions in concentrated imaginative and powerful style than that of disseminating news. He strictly structures it in a poetic form in which paragraphs are more like verses since they only are composed by one sentence each. It is separated into individuals segments yielding a more rhythmic flow through the text and creating a more strait forward statements. Meanwhile, the other text is organized in a prosaic way with a much more ordinary form of written language lacking rhyme or meter. It certainly lacks sensibility of eloquence. However, the sentences here are similarly arranged in a short manner. The text contain short sentences that are direct, straight and not interrupted. For example, in line 3 and line 5: I couldnt get flowers and the funeral is at ten express a simple idea. Likewise, just as in the first text were the author introduces it with: The children were in sneakers and carried daisies. The manner of writing, in these two texts, that show a certain attitude on the writers, consisting in the choice of words and the phrasing, is totally unparallel; the subject of death is addressed in different ways. First in No one wore black the authors tone in certain cases is very optimistic, while in others, is tragic and dramatic. As it was mentioned before, the position that the author takes is that of a funeral to be a celebration of the child who had danced and laughed and loved (line 4-6). He even describes that the order of service was printed in purple and decorated with butterflies and flowers creating an atmosphere of great beauty conditioned with perfect satisfaction, happiness and delight. It can also be appreciated when there is an allusion to paradise: along the village lanes where the curly-haired child should have been learning to ride her bike. Through the sundrenched gardens where she should have shouting and laughing with her friends. (line 30-36). The reference to paradise made here suggest a continuity of Sophies life after death, nevertheless, it is also increases the tragic mood, since it is described as the place of how it should have been and how the child should had enjoyed her life. Moreover, the narrative doesnt stop to characterize more the suffering and great undergoing of pain, and its best described in when its said, But Sophie had been cruelly snatched from among them and there was no escaping the grim reminder of the bell. (line 15-18). Simultaneously, the author doest abandon totally his descriptive and factual writing when he firmly reveals that Sophiewas found strangles at Llandudno, North Wales, 13 days ago after disappearing from the tent in her uncles garden (line 41-44), with a more crude and insipid language. However, the authors tone doesnt give up his tendency to take the most hopeful and cheerful view of matters and retakes the optimistic tone by saying Heaven must have been missing an angel (line 71-7 2). As for the other passage, the tone here is a monotonous pessimistic, with a tendency of sentimental carelessness. We are first introduced into a normal and a routine situation, just descriptive without any sensation or profound thought: I made a cup of tea and shaved. Then I went out to try and buy some flowers. I had no intention of getting a wreath (line 1-2). It is the same with the anterior described anterior, where it is also introduced with a very simple sentences, The children were in sneakers and carried daisies (line 1-2), expressing no emotion, or at least is not known until the reader doesnt continue to read the passage. As the second text continues, the author achieves a fatalistic tone were he sarcastically expresses Actually when I read the dreadful, sickening wording on the other wreaths: To a dear Mum. At peace at last with little Tony' (line 5-6). At the same time, later on in the passage the sarcastic and superficial tone is taken by the author again: My Aunt Lucy was upset because strict protocol wasnt observed. Theyre all walking all wrong'. This phrase clearly makes the reader to categorize the theme of death under a celebration that is institutionalized by the high social class. On the other hand, there is a piece of this fragment that can be compared side by side with the first text where the author states the womans last wish by saying Her last wish was to be buried with Tony, my nephew who was drowned, aged seven, eighteen months ago (line 23-25). The description of Tonys death is similarly a factual description of a crude reality, just as the one made in line 45 to line 48 in the first text, where the death of the child is delineated. The two authors to communicate their purposes, they make use of various images. In the first text, the first image made is to daisies, wild flowers, which relate to the paradise image made later on, where the author creates this utopist atmosphere for the girl and mentions, Through the sundrenched gardens where she should have been (line 33-34). Another image that creates the dramatic and tragic mood is the use of the bell. Through the first sentences of the text the author explicitly creates a feeling of optimism by describing the funeral as a celebration, but he then roughly introduces the feeling of pain and remembrance of grief when he states And all the while, the terrible bell tolled (line 10-11) and continuing One low note, deep and soft like sadness; one higher note, harsh and sharp like pain (line 22-24). Simultaneously, in the second text there is another image made with flowers, since usually in funerals flower represent revival and are used to decorate or lighten up the dull atmosphere. However, in this passage the lack of flowers at the beginning of the passage emphasizes the environment of grief. Also in this passage the image of paradise is made when it said Several women were at their garden gates as the cortà ¯Ã‚ ¿Ã‚ ½ge passed (line 16-17). The image of garden reminds us the garden of Eden, and the gate refers to the doors of heaven. It clearly explains how this woman is passing from one life to the next one. Another way which the writers communicates with the reader is by the use of stylistic devices. The use of these figures of speech are essential more in the first text than the second, since the in No one wore black is written in a more poetic way. To begin with, the author creates rhythm by the use of alliteration and repetition: the child who had danced, and laughed and loved (line 5-6) or in soft like sadness; harsh and sharp (line 22-24). A further device of rythm is the triple effect that the author produces when he lists word in group of threes: again in line 5 to 6 danced, laughed, loved and also when he describes how the family had dressed, in bright yellow and white and red (line 8-9). There is also a slight use of smiles in which one thing is likened to another, for example when the author says So they came dressed as if for a family picnic (line 7-8) and again in line 22 to 24 One low note, deep and soft like sadness; one higher note, harsh and sharp like pain. In the other hand, the second passage is not surrounded by stylistic devices, better, the author decides to make his language simple and descriptive. The only element that sometimes is also used in poetry is the overuse of adjectives. For example here the author uses adjectives to make the scene much more explicit: I read the dreadful, sickening wording (line 5) or very young and hearty (line 21). Seen through comparison and contrast, it can be said that death is given a new way of delimitation. Firstly because, the authors have a totally different attitudes to this phenomenon. On strictly denotes it as a celebration, while the other describes it as an institutionalized ceremony, in which is not the feelings of grief, suffering, pain or even happiness in some cases, is included. By this commentary describing the ways in which both the authors use elements such as structure, tone, images and stylistic devices, the reader can get a better approach of the theme, and at the same time find the purposes which the writers are try to communicate. As for this theme, related to death and its commemoration, it clearly shows how this mystery has been set up with new boundaries in the means of its discovery.