Supply chains and distribution in India

Supply chains and distribution in India Abstract Indias FMCG industry has emerged as a distinct sector over the last few decades. Multinationals are seeking to pursue growth opportunities in emerging markets due to increased globalization and competition. India is one such emerging market that not only provides multinational companies with a large customer base but also welcomes western products. Having a presence in India means sourcing, moving and processing up to one billion or more units. In addition, the cost expectations and the larger size of the consumer market will have implications on supply chains. Excellent supply chain strategies for India will involve adopting efficient processes enabling products to smoothly change hands from the supplier to the consumer while adapting to the constraints of cost, infrastructure availability and market size of the economy. Other constraints associated with political, religious or cultural barriers may also need to be considered. The report is divided into two major parts. One deals with the distribution chains prevalent in the urban market while the second part delves into the intricacies of the rural distribution market. We follow the same format for both the parts starting with an introduction into the current trends found in the urban or rural market, then clearing our point with a case study and finally presenting what are the challenges faced by the companies. Supply Chain Management in Urban region- Introduction The FMCG sector is the fourth largest sector in the country and has been growing in folds in the past few decades. The sector has both organized and unorganized players and the number of players in both the segments are on increase, in addition to this there is also an increase in the number of products introduced every year. Since the sector is characterized by the fast movement of goods and services its dependence on effective supply chain is higher than that of any other sector so supply chain management is become one of the most vital functions. Supply chain management in urban sector typically refers to procurement of raw materials, processing them into finished products and distributing them in the urban region till its reaches the end consumer. Every company/ firm in the FMCG sector has its own supply chain models which are similar yet different from one another. Below are two examples of the supply chain models. The supply chain management in urban regions is more to do with choices for instance in logistic a firm can choose to transport the product via railways, roadways, airways or in some case even waterways. An effective supply chain will enable the firm to minimize the cost, maximize returns, match the supply to the demand and ultimately satisfy the customers. An urban supply chain in most cases has clear cut distinction between the inbound supply chain (pertaining to providing raw materials and components), in house supply chain (conversion process), outbound supply chain (distribution of good and services. The profile of the urban consumers plays a crucial role in determining the supply chain because at the end without the consumer there is no point in building up the supply chain model. Strategic decisions like number of outlet the firm would have to distribute its product, the kind of outlet, method to transport the product, places from were the raw material is procured, manufacturi ng method (automated, semi automated or manual) etc are taken keeping the consumer and the utility of the product to the consumer in mind. This is on account that the urban consumers are well informed and there are many competitors fighting for that consumer. The Supply Chain of Dominos Pizza (India) Dominos Pizza in India Dominos Pizza opened its first store in India in 1996. Jubilant FoodWorks Limited, a Jubilant Bhartia Group Company holds the Master Franchisee Rights for Dominos Pizza for India, Nepal, Sri Lanka and Bangladesh. Prior to Sep 24, 2009, the company was known as Dominos Pizza India Limited and underwent a name change, rest of the terms remaining the same. The promoters of the company are Mr. Shyam S Bhartia, Mr. Hari S Bhartia and Jubilant Enpro Private Ltd. Today Dominos has more than 300 stores in India with more than 9000 employees. According to the India Retail Report 2009, we were the largest Pizza chain in India and the fastest growing multinational fast food chain between 2006-2007 and 2008-2009 in terms of number of stores. Over the years Dominos Pizza has focused on:- Delivering great tasting pizzas Superior Quality Exceptional Customer service Think global and act local Value for money offerings Being a home delivery specialist capable of delivering pizzas within 30 minutes or else FREE Revenue in India 70% of the revenue comes from home deliveries 30% of the revenue comes from OTC sales 30 minute Guarantee Dominos has its unique proposition that they deliver pizza at a customers doorstep within 30 mins of placing the order or they would receive the pizza free. They have positioned themselves as a brand that delivers happiness home (Khushiyon ki Home Delivery) has an emotional benefit which they offer to their customers Dominos Supply Chain Integration Shown below is a high level flow of the supply chain followed by Dominos Pizza, India:- Raw Material Procurement Distribution Logistics Inventory Management Operational Strategy Production Process Quality Initiatives Customer Service R Raw Material Procurement Dominos has 4 commissaries or production kitchens-cum-warehouses (Regional Centralized Facilities) in India Delhi Caters to 54 outlets in NCR region including 33 outlets in Delhi City itself Bangalore Caters to 90+ outlets across south zone Kolkata Caters to 15+ outlets in Kolkata Mumbai Caters to 80+ outlets in Maharashtra including 51 in Mumbai and 15 in Pune Raw materials like Wheat is brought in from Jalandhar and sent to commissaries in refrigerated trucks. Pizza dough is prepared using a proprietary recipe in the commissaries. They are then made into dough balls and sent to retail outlets in refrigerated trucks. Vegetables like tomato, capsicum, baby corn, onion and spices are purchased locally. Cheese is brought in from Karnal, Haryana. Food which is frozen is sent in these trucks at -18 deg Celsius. It uses a hub and spoke model with commissaries as Hub and retail outlets as spokes. Logistics Wheat (Jalandar) Dough Vegetables (Local) Cheese (Karnal) Commissary Refrigerated Trucks Retail Outlets Inventory Management Major inventory consists of perishable items with a very small shelf life. Some of the items are tabulated below:- ITEM SHELF LIFE Dough Ball 3-4 days Seasoning and Toppings 4-5 days Onion, Capsicum , Tomato 5 days Cheese Blend 4-5 days Chicken Meat 2-3 days Cheese Dip 4-5 days Mexican Wrap Base 3-4 days Each store maintains approximately 4 days of inventory since most of the items have a shelf life of around 3-4 days. Inventory is refilled by trucks from the commissary every 4 days. There is a mini cold storage in every outlet. Inventory levels are monitored centrally by POS (point of sales) data using Intura Vision (POS management system) installed in every outlet. Intura Vision is the simplest and most reliable point-of-sale management system available for delivery and quick service restaurant operations. Intura Vision streamlines every aspect of your operation, including order taking, credit card processing, kitchen management, deliveries, inventory, and customer marketing, to make your business more efficient and profitable. There are two POS per outlet. Orders are received in telephonic form also there are in-store orders. Production Process The entire production process is streamlined into three stages:- Dough Table Here the pizza base is prepared. It is rolled out of the dough ball. There are three standard sizes Personal (8 inches), Medium (10 inches) and Large (14 inches). Personal, medium and large serves one, two and four persons respectively. Then cheese blend is applied on the base. The entire process of making a pizza base takes 1-2 minutes. Bake line In this stage toppings and seasonings are applied on the top of the prepared base. The choice of toppings depends upon the pizza ordered. Customers also have the facility to customise their own pizza by choosing their toppings from a variety of toppings available. Toppings can be veg, non-veg or both. Customer can also choose the seasoning they prefer depending upon the spices they would like to have in their pizza. The entire process of make line is 1 minute. Ven The pizza is then ready to be baked in oven. The temperature maintained is 470 Fahrenheit. Oven has a capacity to bake 6-7 pizzas in one slot. The pizza needs to be baked for about 5-6 minutes. The ovens used now-a-days are fully automatic along with a conveyer belt, so that the flow is continuous. In case of production in India, Dominos has a turnout of 1 pizza per minute. This meets the current demand requirement. The constraint here is the oven. They have overcome this by withdrawing the 30 min guarantee during festivals like New Year, Christmas, Diwali and rush-hours. Operations Strategy Dominos follows a hub and spoke distribution network wherein the 4 commissaries are the hubs and the retail outlets are the spokes. The raw material is replenished in the outlets from the hubs every 4 days or when it gets over, whichever is earlier. Vegetables are purchased locally (delayed differentiation). They have incorporated IST (interstore transfer) to cater to sudden spikes in the orders during special occasions wherein inventory falls short. In such cases material from nearby store is transferred to the critical store so that there is no halt in operations. They also have performance based costing for their employees where employees are given incentives depending upon the volume of sales which they achieve. Higher the sales better the incentives. Present status due to mismanaged Supply Chain in India: In India, about 60% of food value is mislaid in the supply chain from the farm to the final consumer. Consumers end up paying approximately 35 percent more than what they could be paying if the supply chain was refined, because of wastage as well as multiple margins in the present supply structure. Comparing with what returns farmers in India get (30%), in the USA the farmers can receive up to 70 percent of the final retail price and wastage levels are as low as 4 to 6 percent. Therefore we can appreciate the benefits that could be generated from implementing those practices and tapping those skills for the supply chain in India. The significance can be understood by the fact that the logistics  cost component in our country is as high as 7 10 percent against the global average of 4 5 percent of the total retail price. Therefore, the margins in the retail sector can be improved by 3 5 percent by just improving the supply chain management. Supply Chain Challenges Urban India Some key reasons of underperformance of supply chain management in urban India 1. Supply chain risk mitigation in an economic downturn: supplier financial risk, volatility in energy, commodity, labor rates and currency exchange, unpredictable economic recoveries. 2. Searching for working capital: FMCG companies will look to reduce inventory and lower operating or carrying costs. Buyers will look to extend payment terms Suppliers will drive to collect receivables more quickly, creating the need for a liquidity buffer such as supply chain financing 3. Shortening the supply chain by making proper use of transportation facility: Companies will need to plan a distribution system that takes care of the realities of domestic transportation infrastructure. Indias supply chains must contend with slow transit networks and inadequate infrastructure. For example, 70 % of Indias seaborne trade is handled by just 2 of the 12 major ports. The Railways is also constrained when it comes to freight movements. Historically, the countrys rail capacity was limited to passenger traffic, and people protested the use of rail for freight movement. Only of late has the government initiated efforts to promote rail shipments. Most commercial shipments in India make their journey aboard a truck. Hiring a carrier meant working with a small trucking company, as the country has no large, national transportation companies. A recent study of the transportation industry found that the majority of carriers had less than five trucks in their fleets. Scheduling deliveries and pickups also can be tricky. At present, most warehouses are located in the heart of Indian cities, and many municipalities prohibit large truck movements during daytime hours. It is possible to negotiate special exemptions in some places, but generally shippers must plan on nighttime movements. Another alternative is to unload large shipments at a cross dock outside the city and move orders to smaller vehicles for delivery. 4). More free-trade agreements and more scrutiny: The entry of foreign players in the retail segment will increase competition even further. More importantly multi-national companies might be having more money at their disposal. Thirdly they will also have access to latest technology and a ready highly efficient model to implement from.   5). Push-pull boundary: Increased competition, and fluctuating demand will make it difficult to identify the points at which the flow of goods switches from being pulled by consumers to being pushed by extractors.. 6). Maintenance of safety stock: Instead of having huge safety stocks at different places, centralized place will have to be used to have even more cash liquidity and lesser availability of godowns. 7) Judicious use of newer technologies and decision making tools: Use of newer technologies such as RFID (Radio Frequency Identification) continue to change the way SCM systems are designed and managed. Until recently, barcodes were the primary means of tracking packages. The advent of cheap, reliable RFID technologies have eliminated the need to physically scan packages in shipment, storage, etc, since packages with the embedded chips can be remotely scanned. 8) Creating a demand-driven supply chain To support a demand-driven supply chain, FMCG companies must deploy performance-oriented supply chain practices, such as continuous monitoring and alert notification. This will give them a clear idea of their total supply network to adapt to changes in demand and adjust based on real-time insight into global operations. A reliable demand plan provides the foundation for sales and ops planning (SOP) which helps FMCG companies better arrange daily operational; more effectively balance supply and demand; and make better decisions that impact both the top and bottom lines. 9) Other problems faced:. Inadequacies in infrastructure such as lack of high quality road networks, power shortages and insufficient storage spaces. The current rise in property prices and rentals may render a few retail business models unviable. The retail industry loses to the tune of US$120 to US$130 million every year in frauds, thefts and employee pilferage, shop lifting, vendor frauds or inaccurate supervision despite using standard and modern security features Multiple taxes at the federal and state level Rural Market Introduction The FMCG sector in the urban areas is becoming quite saturated (though it will continue to dominate in the next 8 10 years) while the penetration in the rural areas are only about 1%. The rural areas have and will continue to make up more than 50% of Indias total households and accounting for more than its current 66% contribution to total FMCG consumption. Rural India has a large consuming class with 41 per cent of Indias middle-class and 58 per cent of the total disposable income. Currently, nearly 34% of the off take of FMCG companies come form rural areas. Companies like HUL, ITC and Colgate have already established good distribution networks in these regions. Other companies would start catering to these regions in near future. Figure 1: Urban and Rural growth rates (Personal Care products) A huge segment of this market is currently flooded with obscure brands that are largely manufactured and distributed by small and medium enterprises. However, with the growing competition in the FMCG business, it has become difficult for SMEs to market their products sustainably. This is mainly due to the solidly established brand images of bigger players and the increasingly sophisticated demands of the urban customer. SMEs also lack the capital investment needed to compete with bigger players. However, with the growing economy, substantial business opportunities for FMCG producers have emerged in the Indian rural sector. The rural FMCG market is growing with a CAGR of 3-4%. In the case of products like soaps, talcum powder, cooking oil, tea, cigarettes and hair oil, the share of rural market crosses 50%. The capital expenditure of urban consumers on FMCG products is Rs. 49,500 crore, while that spent by rural population is over Rs.63,500 crore. This is indicates the growth rate and participation of rural FMCG markets in India. Despite the huge scope for FMCG products in the fast-emerging rural markets, some gray areas need to be worked out before SMEs can establish sustainable businesses: à ¢Ã¢â€š ¬Ã‚ ¢ Rural India does not represent a homogeneous market. The tastes and preferences of the consumers vary from district to district in the country. With changes in the language and dialect, advertising has to be tailored specifically for different target consumers. à ¢Ã¢â€š ¬Ã‚ ¢ Networks are not efficient to tackle the distribution demands. Problems exist in reaching the interiors of the country. Initial expenditures to develop distributor networks are immense, because in Roads and communication networks are not efficient to tackle the distribution demands. à ¢Ã¢â€š ¬Ã‚ ¢ As there is little consumer research regarding the rural markets, companies commit the folly of overestimating the awareness of product usage in the rural market. à ¢Ã¢â€š ¬Ã‚ ¢ The Indian consumer is traditionally price sensitive and more so in the rural parts. Multinational companies that modify portions and packaging to create a greater value proposition have succeeded in targeting the rural consumer. à ¢Ã¢â€š ¬Ã‚ ¢ The rural distributor cannot stock a large variety of products because of credit problems. Also as the retailer plays a vital role in the village in convincing the consumer about the usage of the product, it becomes imperative to provide sufficient information and infrastructure support to stock adequate inventory of goods. Major global brands have included villagers in their distribution channels, not only providing employment but also extending the reach in the rural markets. à ¢Ã¢â€š ¬Ã‚ ¢ While increased penetration of telecommunication has resulted in an increased awareness among villagers, it is still important to understand that a major chunk of rural community is not educated enough to comprehend the technicalities of the product/brand usage. Models for Rural distribution chains Approach 1 : Dedicated Rural Entrepreneur: The Individual is preferred to have a two wheeler and act as the spoke between the super stockiest and the villages in a hub and spoke model. He is expected to know the area well and has sufficient education to run a business. He is recruited to cover the nearby areas as well ( upto a 40KM range). He acts as the point of contact to receive and deliver the goods to the respective stores in his area of service. The analysis says this model works well for products that cost more than 75 per Kilo and the important part is that the company need not worry about the administration part of the operation. Approach 2: Distributor consolidation for urban and rural markets: Here we are to consolidate the urban distributor and the super and sub stockiest into a single group to serve the retail outlets. This entity is supposed to cover the town and the villages nearby. Approach 3: Consolidated Distribution with tele-order booking: Rural tele-density in India is expected to go up in the near future. This would help to remove the role of saleman an facilitate direct communication with the rural retail outlets to the super stockiest. However the drawback is that the company might loose on the relationship with the retail store in the absence of a sales person. Approach 4: Distributor choice based on unutilized reverse logistics potential Another non-traditional form of Collaboration for rural distribution could be to partner with other partner low-margin, high-reach players in rural markets. An example could be that of the dairy industry. The vehicles form the Dairy factories goes empty to the rural areas for collection and comes back with the milk. So it could be used for the transportation of goods from the factory site to the rural areas. Pepsico Distribution Chain Pepsico Indias distribution in rural areas thrives on two major factors :- Third party outsourcing Hub and spoke model in the rural areas. This mechanism is followed in the urban areas as well but in the rural regions the local entrepreneurs from the smaller spokes of the distribution channels. In all its operations the transportation is outsourced to the third parties. However there are some cases in which large distribution centres have their own fleet for transportation of finished products. The major two challenges faced by the company in the Indian context are the insufficient distribution in the rural sector and the inherent market risks. Distribution forms a major part of the companys concerns as it not only accounts to the revenues lost but also the potiential market share. The concern is primarily because of the Physical conditions of the Indian market and also the low purchasing power of the rural customer base this results in the setting p of the distribution centre cost being high. Coupled to that we have the insufficient sales offsetting the set up cost. Another concern is the taste of the rural customer who is more attracted to the local juice store or the fruit stall thereby increasing the competition from the unorganized sector. In case of distribution we have the issue of the size of retail store. The retail outlets in rural areas are more or less Kirana stores and there is near complete absence of the retail chains. So the amount of inventory that can be stocked in the small retail stores is very small. Apart from the distribution channel issues we have the risk of the market conditions. The small shops in the rural areas lack the refrigeration or storage capacities. The inventory is kept to meet the demands for the day and most of it is kept out in the open dues to lack of storage facilities. Thus many a time during the rainy season we can see the closure of these shops and sales of the products getting stalled. Pepsico has implemented the following strategies to overcome these concerns Utilizing the collective efforts of the small scale farmers, land holders and regional government Alliances with other multinationals Promoting entrepreneurship It started with a strategy similar to project Shakti used by the Hindustan Lever, but alliances were with local entrepreneurs and other multinationals. Its started by making the entrepreneur the spoke of its regional distributional network in the rural areas and then went along with Hindustan levers to share its distribution network. This helps the entrepreneur having a larger spectrum of products for distribution and hence a better prospect. The distribution chain of Pepsico India has a fragmented design which can be largely attributed to the lack of transportation infrastructure. And this resulted in the creation of collaborative and entrepreneurial partnership that thrives with symbiotic existence. An example could be that of a supplier who Is willing to lease land holding from other farmers Supply Chain Management in Rural Market- Challenges The following are a few of the challenges that a company faces while managing its supply chain in rural markets. Multiple Tier, Higher Cost and Administration Problem In the first place, the rural supply chain requires a larger number of tiers, compared to the urban one. The long distances to be covered from the manufacturing points to the scattered consuming households cause this situation. At the minimum, the rural supply chain need the village-level shopkeeper, the mandi-level distributor and the wholesale/stockiest in the town. And on top of them are the manufacturers own warehouse and branch office operations in selected centres. Such multiple tiers and scattered outfits push up the cost and make supply chain management a major problem. The scope of manufactures direct outlet such as showrooms or depots is quite limited in the rural market unlike in urban areas. It becomes expensive as well as unmanageable. The dependence of the firm on intermediaries is much greater in rural areas as direct outlets are ruled out. But controlling such a vast network of intermediaries is a difficult task. Control is mostly indirect. And because of these factor s the firm has to be more careful while selecting the supply chain members in rural areas. Non-availability of dealers Another problem is the availability of dealers. Many firms find that there are limited numbers of suitable dealers. Even if the firm is willing to start from scratch and try out rank newcomers, the choice of candidate is really limited. Poor Viability of Retail Outlet Retail sales outlets in the rural market suffer from poor viability. A familiar paradox in rural distribution is that the manufacturer incurs additional expenses on distribution, still the retail outlets find that the business in unremunerative. The scattered nature of market and the multiplicity of tiers in the supply chain use up the additional funds the manufacturer is prepared to part with. And no additional money comes to any of the groups. Moreover, the business volume is not enough to sustain the profitability of all the groups and the retail outlet suffers the most. Inadequate Bank Facilities Supply chain in rural markets is also handicapped due to lack of adequate banking and credit facilities. Rural outlets need banking support for three important purposes. To facilitate remittances to principals and to get fast replenishment of stocks To receive supplies through bank (retiring documents with the bank) To facilitate credit from bank As banking facilities are inadequate in rural areas, rural dealers are handicapped in all these aspects. It is as estimate that there is only one bank branch for every fifth village. Inadequate Credit Facilities Inadequacy of other institutional credit is another constraint. Rural outlets are unable to carry adequate stocks due to lack of credit facilities. They are unable to extend credit to their customers. Thus there is a vicious circle of lack of credit facilities leading to inadequate stocking and loss of business, finally resulting in poor viability of outlets. Lack of Transportation Facilities Many rural areas are not connected by proper transportation facilities. There are a very few villages with railways lines. Atleast 50 percent of the rural roads are poorly surfaced, and many totally destroyed or severely damaged by the monsoons and remain unserviceable. Also the use of bullock carts looks inevitable for many years into the future. In such a scenario distribution of goods via any supply chain is a huge challenge in itself. Lack of Proper Communication Facilities Communication with these villages is difficult and highly expensive. Moreover, 300,000 villages in the country have no access to telephone. This acts as a hindrance to proper supply chain management. Other Challenges Apart from the above there are various other challenges that firms face on day on day basis like. Low literacy rate Difference in languages and Dialects Prevalence of Seasonal Demand Rural policy Caliber of the rural community- they have great acumen but they need intensive training Supply Chain Management in Rural Market- How to tackle the Challenges In order to tackle the problem of supply chain management the following strategies can be implemented. Satellite Supply Chain In this system stockists are appointed in the major towns and feeder towns. They by and large discharge the following functions; (a) Financing (b) warehousing and (c) sub-distribution. Retailers in and around feeder towns get attached to these stockists. The manufacturer supply goods to the stockists either on consignment or on cash/credit basis. Further these stockists deliver the good to the retail market points or satellite markets. Over a period of time some retailers grow in stature and importance. If such retail points also coincide with centres of demand and transportation within the feeder town area, they are elevated to stockists points. If 15-20 retailers were operating as part of the original stockists network, 5 or 6 get elevated over a period of time to stockists. Fresh retail points get established simultaneously out of which some get attached to the original stockists while others to the new one. This process continues as long as the market and consumption level keep expanding and the supply also catches up via such a supply chain. Just like second-generation stockists, set of third generation stockists get established with the passage of time. At any point of time, a certain number or retail points hover round a particular stockist. Hence the system is called Satellite Supply chain distribution. The satellites have their own satellites too. The advantages of this system are Market penetration takes place without manufacturer having to expand his direct stock points. This system can bring in ample rewards in terms of increased sales and lesser distribution costs. Syndicate Supply Chain This solution is essentially for small companies: tie up with leading companies that already has a presence in rural market and distribute products through there supply chains. Relying on Private Village Shops Tie ups with the village private shops are the cheapest and most convenient channels in the rural markets. Supply Chain Management in Rural Market- Opportunities In the present scenario, companies operating in India will have only two options: either

Merchant of Venice Essay Outline Essay

I. INTRODUCTION: A. Is Shylock a man â€Å"more sinned against than sinning,† or does he take his revenge too far in the pursuit of his pound of flesh? B. The wrongs against Shylock climax in the courtroom scene. He has lost his ducats, daughter, and now his religion. C. Thesis: The absolute epitome of selfishness can be described from within Shylock’s character; that selfishness is what prevents any would-be sympathizers from being able to fully commit themselves to Shylock’s case. II. BODY PARAGRAPH 1: A. Topic Sentence: Being the antagonist and villain throughout the play Shylock must be the antithesis to the general characteristics of the protagonist and supporting cast. B. Shylock was a Jew, a not very admirable quality during the late 16th century in Venice. C. â€Å"Shylock, albeit I neither lend nor borrow/ by taking nor by giving of excess† (Act 1, Scene 3, Lines 61-62) D. He is a usurer, something that Antonia literally despises and spits upon. E. This shows the hypocrisy of Antonio’s actions F. The daughter of his, Jessica, wishes to be free of him while he cloisters her and denies her liberties in order to keep her for himself. G. Shylocks character is what fuels him, but the treatment he has had to endure has affected the way the reacts to people. III. BODY PARAGRAPH II: * A. Transition/Topic Sentence: The power Shylock has to be a constant obstacle is abused often and with no guilt, he is fueled from only the intense urge of revenge. * B. The bond, from which Antonio is tied to, has no loophole from the pound of flesh, even when Bassanio wishes to not be tied to it. * C. â€Å"You’ll ask me, why I rather choose to have/ A weight of carrion flesh than to receive/ Three thousand ducats. I’ll not answer that,/ but say it is my humour†¦Ã¢â‚¬  (Act IV, Scene I, lines 40-43) D.Shylock will not allow a counteroffer to his pound of flesh, even though it was offered threefold. * E. Shylock is a direct obstacle to Lancelet’s happiness and has kept him for too long. * G. Having to go live in the ghetto has given Shylock a home where he can nurture his despisement of Christians. IV. BODY PARAGRAPH III: * A. Transition/Opening   * Sentence: Anti-Semitism debates are a central theme, and the hypocrisies that stem from it are defined in Shylocks views of Christians. * B. He is portrayed as more consumed by the fear his ducats are gone than his own daughter. * C. â€Å"My daughter, O my ducats, O my daughter!/ Fled with a Christian! O my Christian ducats!† (Act II, Scene 8, lines 15-16) * D. â€Å"If you wrong us,/ shall we not revenge?/ If we are like you in the rest,/ we will resemble you in that†¦Ã¢â‚¬  (Act III, Scene I, Lines 54-62) * E. When he is taunted by Solania and Salerio he points out the differences between Jews and Christians and claims that the evil he has been taught he will execute even better. * F. He does not believe that they can co exist and refuses to dine with them or pray with them, only conduct business. * G. â€Å"I will buy with you, sell with you, talk with you†¦Ã¢â‚¬  (Act I, Scene III, lines 32-34) V. BODY PARAGRAPH IV: * A. Transition/Opening Sentence: The entire court scene is the showcase of how all the wrongs committed upon Shylocks Jewish soul will now come back to haunt his wrongdoer. * B. tries to bargain himself out of his punishment even when he has lost * C. â€Å"Shall I not barely have my principal?† (Act IV, Scene1, lines 356) VI. CONCLUSION: * * A. In determining whether or not it is right to sympathize with the plight of Shylock, it is necessary to forgive him for his revenge. But why is he forgiven when he could not forgive Antonio; for if he had then the character of Shylock would not be in question. * B. Reconfirmed Thesis: In his refusal of mercy and forgiveness, Shylock sets himself up for failure, and fails without grace leaving as a broken man without money, religion, or his precious ducats. * C. The debate of the humanness of Shylock has withstood the hardy hands of time because of his relatableness as a villain. It is harder to hate the villain when you have reasons to hate the hero.

9/11 the After Effect on Canada

Sunner CHC2D1-06 Mr. Pasquantonio June, 4th, 2012 9/11: The After-effect on Canada The events of September 11, 2001 (9/11) are remembered throughout the world. On this unforgettable day, three aircrafts crashed at different locations throughout the United States. Two of which crashed into the famous World Trade Center taking thousands of innocent lives. These attacks had allowed countries to learn and prepare to avoid any similar future events. Moreover, the effects of 9/11 had indirectly influenced Canada, beneficially and detrimentally.Canada as a nation had learned from this tragic experience as well as mourned the losses of its neighboring nation. The terrorist attacks had dramatically affected Canada; socially, economically, politically. To begin with, Canada’s social atmosphere had been indirectly affected by 9/11. The aftermath of 9/11 mirrored similar social effects of the United States, within Canada. Canadians developed a sense of paranoia for unexpected terrorist at tacks, which may possibly occur at any given period.Many Americans believed that the terrorists had slipped through Canadian borders; in consequence, attacking Canada may be easy for terrorists. The events of 9/11 had influenced many of the majority class Canadians to assimilate a patriotic and vengeful mind state. Post 9/11 minority Canadians were witnessing a dramatic increase of discrimination and racial profiling. Several majority class citizens and patriotic citizens were acting chaotic by performing hate crimes for their own self-interest of protecting themselves.Similarly, several minority individuals consisting of brown skin tone were perceived to be terrorists and prone to alienation, â€Å"Muslim, Jewish, Hindu, and Sikh Canadians all once again found themselves on the receiving end of unjust treatment meted out by their neighbors. Due to the reaction of the community; Sikh and Hindu temples were razed and targeted as a terrorist threat. Overall, the social atmosphere wit hin Canada had been detrimentally affected by the event of 9/11.Secondly, Canada’s economy had been ultimately influenced by the attacks of 9/11. Canada’s economy like many others is partially dependent on the United States. In consequence, Canada mirrors the United States economic progress. . The aftermath of 9/11 had mainly been negative for Canada’s economy. In 2009, Canada had imported 51. 1% to its biggest trading partner, the United States however, the increased border security applied by the United States resulted in a 2. 4% decline in Canada’s exports to the United States.Several businesses had laid-off workers. Over 462 form layoffs were executed and an estimated of 130,000 workers were displaced. Canada had expended $1. 2 billion in order to enhance border security. After 9/11 Canada’s security expenses had dramatically increased to an estimated total of $10. 7 billion. Increased security after 9/11 had continuously led to harmful effects towards the economy. However, improved security within Canada had led people to believe that the country was a much safer place than before.Similarly In result to 9/11, Canada’s economy had shifted negatively. Finally, Canada had undergone numerous political changes as a result of 9/11. Canada had applied new policies and regulations to ensure and safeguard the protection of society and to avoid any future acts of terrorism. As a result, Canada introduced the ‘Canadian Anti-Terrorism Act’. Such an act was necessary in-order to calm down society and create a sense of safe-haven. The act was created only after the 9/11 attacks, and the main goal was to prevent history from repeating itself.Also, Canada had created a new act to further increase security and prevention of terrorism, â€Å"Public Safety Act, which features executive regulations designed to secure sites and substances exposed to terrorism. The main purpose of the act was, to prevent terrorist attacks and protect Canadians, However, many Canadian citizens where shocked by the event and wanted to reach out and give their full support in helping the United States. To sum up, Canada’s political state had endured an extensive amount of changes. In conclusion, Canada had been affected circuitously by 9/11.Post 9/11, Canada had appeared out as a different nation; it had changed socially, economically, environmentally. Socially, Canada had reacted towards the tragedy with an increase of discrimination, racial profiling and hate crimes. Moreover, Canada’s economy had suffered negatively because of our dependence on the United States. Corporations and businesses had experienced lower profits for the months following the attacks as a result of increased security. Canada had also shifted politically with the creation and innovation of new and old laws and regulations for the greater good of society.Such an terrible event that had taken place on 9/11 will never be forgotten; i t will be imprinted into history and used as an example to avoid any similar events. Works Cited Adelman, Howard. â€Å"Canadian Borders and Immigration Post 9/11. † International Migration Review. Volume 36, Number 1 (Spring 2002), 15 Athanassakos, Alex, Meis, Scott and Nieuwenhuis, Sid, â€Å"THE IMPACTS OF THE US TERRORIST ATTACK ON CANADA'S ACCOMMODATION INDUSTRY. † Ontla. On. Ca. http://www. ontla. on. ca/library/repository/mon/3000/10301210. df, accessed 17th November 2010. Gloverman, Steven and Storer, Paul. The Impacts of 9/11 on Canada-U. S. Trade. Toronto: University of Toronto Press, 2008, 19 & 159 Kent, Roach. â€Å"Canada’s Response to September 11. † Kent, Roach, Michael, Hor and Victor, Ramraj. Global Anti-Terrorism Law and Policy. Cambridge: Cambridge University Press, 2005, 535 Kruger, Erin, Mulder, Marlene and Korenic ,Bojan. â€Å"Canada after 11 September: Security Measures and ‘Preferred' Immigrants. † Mediterranean Q uarterly. Volume 15, Number 4 (Fall 2004), 84-85 n/a. Canada's Actopms Against Terrorism Since September 11. † Foreign Affairs and International Trade Canada. http://www. international. gc. ca/anti-terrorism/canadaactions-en. asp, accessed 20th November 2010. n/a. â€Å"Of man, being the first part of Leviathan,† Thomas Hobbes. 1909-14, http://www. bartleby. com/br/03405. html, accessed 21 November 2010. William C, Banks. â€Å"United States Responses To September 11. † Kent, Roach, Michael, Hor and Victor, Ramraj. Global Anti-Terrorism Law and Policy. Cambridge: Cambridge University Press, 2005, 520 ;amp; 525

A Business Report Of Tesco And Walmart Finance Essay - Free Essay Example

Sample details Pages: 11 Words: 3318 Downloads: 5 Date added: 2017/06/26 Category Business Essay Type Compare and contrast essay Did you like this example? This report aim to evaluate two food retailers under two different account standar GAAP and IFRS and prepare appropriate recommendations to the an investor wishing to invest for maximum capital growth in the longer term. Background Analysis and ratio analysis are employed. 1.Background Analysis 1.1Tesco 1.1.1 Tescos History In 1919 Tesco was established in East London by Jack Cohen. Don’t waste time! Our writers will create an original "A Business Report Of Tesco And Walmart Finance Essay" essay for you Create order The company introduced the brand name Tesco as a tea packets in 1924. 20 years later, Tesco stores was listed on the London Stock Exchange with a share price of 25p(Tesco.plc 2010) Tesco continued its international expansion in the 1990s till now which including market opening in Poland, Hungary, Slovakia and the Czech Republic. In the same period, Tesco entered Asian market such as China , Thailand and South Korea. Furthermore the company offers the following key products and services represented in table 1. Table 1 Products, Services and Brands Products: Food General merchandise Electrical goods Clothing Household goods Home furnishings Petrol Services: Online sale of products Telecommunication services Financial services Pharmacy services Broadband internet services Brands: Cherokee FF Healthy Living Value Tesco standard Finest Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor 1.1.2 Food Retail in the United Kingdom The food retail market includes the retail sales of all food products and beverages. The UK industry generated total revenues of $165,404.1 million in 2008 (Datamonitor 2009). The compound annual growth rate (CAGR) increased 4% for the period 2004-2008. Hypermarket, supermarket, and discounters sales generating total revenues of $102,648.2 million, equivalent to 62.1% of the industrys overall value in 2008. According to Datamonitor(2009) the performance of the industry is forecast to decline which is expected that the industuty reach a value of $194,819.4 million by the end of 2013. Table2:United Kingdom Food Retail Industry Value:$ billion,2004-2008 Year $billion $billion %Growth 2004 141.6 77.1 2005 144.6 78.8 2.2% 2006 149.4 81.4 3.3% 2007 155.8 84.9 4.2% 2008 165.4 90.1 6.2% CAGR,2004-2008 4% Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor 1.1.3 Tescos position and competit ors It is no doubt that Tesco is a leading company in UK market especially in food retailer. According to Datamonitor(2009) the company had 30.7% share of the UK grocery market in the calendar year ended December 2008. It is recorded in 2009 annual report(Tesco.Plc 2009) that the company generated revenues of  £54,327 million ($96,210.4 million) in the financial year (FY) ended February 2009, an increase of 14.9% over 2008. And the main competitor Asda Group recorded recenues of $33.4 billion during the financial year (FY) ended January 2009 (Datamonitor 2009). There are other major competitors as following J Sainsbury plc, Wm Morrison Supermarkets PLC,Marks and Spencer Group plc, Wal-Mart Stores, Inc.,and Somerfield. 1.1.4 Evironment and Exceptional Recent Events of Tesco The recessionary climate is a significant factor should be taking into account to evaluate the macro economic evironment, The International Monetary Fund(2009) reported that the UK economy will deflate 4.2% in 2009. As a result, the demand for non-food product will be under such a difficult economic times. At the same time, there is intense conpetition in the UK grocery market. Although the prospect of future economic is not favourable, Tesco has already adjust their short-term promote strategy such asDiscount Brands at Tesco and further strengthen their long-term strategy including international expending and providing diversified product and service. Tesco opened 622 new stores in financial year 2009 which included 435 outside UK (Tesco.Plc 2009). A representative events is Tesco entry into the Indian market. Furthermore, It is noteworthy that Tesco acquired the remaining 50% of Tesco Personal Finance from Royal Bank of Scotland suggested that Tesco move a furhter step in personal finance service(Tesco.Plc 2009). 1.1.5 Five-year Financial Review of Tesco Figure2:Tesco Revenues, Profitablity and Total assets 0.00 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 2005 2006 2007 2008 2009 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% Revenues Total Assets Profit Margin Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor From the graph above, it is unavoidable notice that the tatal assets of Tesco doubled for the last five years indicating that the company experienced a critical period of expansion. The profit margin because the depressed global economy. 1.2 Wal mart 1.2.1 Wal marts history Wal-Mart was established in 1969(Wal-Mart Stores, Inc 2009). In the following year, Wal-Mart became a publicly-held company. In 1972, the company got listed on the New York Stock Exchange. During 21st century, Wal mart is one of the most successful retailers in the world. the company operates in Argentina, Brazil, Canada, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India,Japan, Mexico, Nicaragua, Puerto Rico and the UK.The table below provide the key products and services Wal m art provided. Table 3: Products, Services and Brands Products: Dry and wet grocery Beverages Frozen foods Flowers Health and beauty products Household products Pet supplies Fabrics and crafts Stationery and books Automotive accessories Hardware and paint Horticulture products Sporting goods Apparel Shoes Jewelry Toys Home furnishings Housewares Major and minor home appliances Cameras Cellular phones Services: Photo processing services Cellular service plan Money order services Wire transfers Brands: Wal-Mart Great Value Equate Ol Roy Sams Choice Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor 1.2.2 Food Retail in the United Amercia The food retail industry of US generated total revenues of $824,422.2 million in 2008 (Wal-Mart Stores, Inc 2009). It is reported by Datamonitor(2009) that the compond annual growth rate(CAGR) of 5.8% from 2004 to 2008. Compaired with UK , sales made by h ypermarket, supermarket, and discounter produced 80% revenues which is $ 659,808.3 million. As the global economics downturn, the performance of the industry is expected to decelerate with a forecaseted CAGR of 2.7% for the period spanning 2008-2013(Datamonitor 2009). Table 4:United States Food Retail Industry Value:$ billion,2004-2008 Year $billion %Growth 2004 657.3 2005 699.2 6.4% 2006 741.5 6.1% 2007 787.6 6.2% 2008 824.4 4.7% CAGR,2004-2008 5.8% Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor Figure 3:United States Food Retail Industry Value:$ billion,2004-2008 0 100 200 300 400 500 600 700 800 900 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 $billion %Growth Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor 1.2.3 Wal marts position and competitors Wal mart Stores (Wal-mart) is the worlds largest retail company. According to Marketline, Wal mart is on the top of food ratial indu stry all around the world in terms of revenues. Morover, the major competetor produced $105,823million in financial year 2009, meanwhile Wal mart generated revenue $405,607 million meanwhile provided more than 2,100,000 job opportunity. The other major competitors of Wal-mart Stores, Inc. included Target Corporation Safeway Inc., Sears Holdings Corporation, J. C. Penney Corporation, Inc., Kroger Co., The Tesco PLC, Carrefour S.A and Metro AG 1.2.4 Evironment and Exceptional Recent Events of Wal mart Wal mart is facing fierce competition from a larger number of domestic and foreign companies incluing Carrefour, Tesco, Target and so on. Another risk merit consideration is the foreign currency fluctuation as Wal mart has operations in approximately 15 international countries. According to the annual report (Wal-Mart Stores, Inc 2009), during 2009 there is over 24.6% total net sales generated by international operations. The acquisition of Distribucion y Servicio is another major operation during 2009. Wal mart acquired 75% of the outstanding shares of Distribucion y Servicio. 1.2.5 Five-year Financial Review of Wal mart Figure 4:Wal mart revenues profitability and total assets 0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 2005 2006 2007 2008 2009 3.15% 3.20% 3.25% 3.30% 3.35% 3.40% 3.45% 3.50% 3.55% 3.60% 3.65% Revenues Total Assets Profit Margin Source ¼Ãƒâ€¦Ã‚ ¡Datamonitor The figues above provide some key financials of Wal mart. Revenues fllow up from $281,488.million to $401,204. million for the last four years. Nevertheless the profit margin declined to 3.3% in 2009 due to the recession of the global economic. 2 Evaluation of Financial Statements: A Comparative Analysis 2.1 Profitability Analysis 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2009 2008 2007 2006 Figure 5: ROCE Tesco Wal mart Peer Median Source: Company Filings 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2009 2008 2007 2006 Figure 5: Return on equity Tesco Wal mart Peer Median Source: Company Filings 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 2009 2008 2007 2006 Figure 6: Net profit margin Tesco Wal mart Peer Median Source: Company Filings The graphs above provide information about the profitability of Tesco, Wal mart and international peer median from 2006 to 2009 financial years. It is notable that the performance of Wal mart maitained continuity and stability for the last 4 years while Tescos experenced a more volatile operation. Compared with Tesco, Wal marts higer ratios such as ROCE and Return on equity capital employed Indicating that resources being employ ed by Wal mart are being used more effectively. However, it is interesting to note that the net profit margin of Tesco is slightly higher than Wal marts impling that Tesco operated effectively in the market place. Furthermore while compared with their international peers , Wal marts performance surpass their counterparts in financial year 2009. In addition it appears that although it was impossible to predict the scale of the global economic slowdown, Wal mart has responded well by adjusting their business to this environment. In 2009 Wal-Mart entered Chile through the acquisition of a controlling interest in Distribucià ³n y Servicio (DS),Chiles largest food retailer. Moreover ,the net sales increase 7.2% due to decreasing price based on the every day low cost every day low price (EDLC-EDLP) strategy. Those increases resulted from our global expansion programs, comparable store sales increases and acquisitions. Overall, Wal mart outperform Tesco. 2.2 Liquidity . 0 0.2 0.4 0.6 0.8 1 1.2 1.4 2009 2008 2007 2006 Figure 7: Current ratio Tesco Wal mart Peer Median Source: Company Filings 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 2009 2008 2007 2006 Figure 8: Quick ratio Tesco Wal mart Peer Median Source: Company Filings 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 2009 2008 2007 2006 Figure 9: Cash ratio Tesco Wal mart Peer Median Source: Company Filings The bar charts below represent three liquidity ratios indicating that Wal mart stayed constant at a relative high level than Tesco in terms of Current ratio and Cash ratio. However the Acid test implyed a opposite conclusion that Tesco outperformed Wal mart for the possible reason that Wal marts inventory occupied a great proportion in current asset. Moreover, even though Tesco and Wal mart are leading food and grocery retailer, the international peers generate a imp ressed operation. Despite that Wal marts cash ratio show a decline indicating that Wal mart adjust its component of the current asset leading to a lower level of liquidity in very short term, Wal marts cash ratio remained a higher level than Tescos. In conclusion, Wal mart remained steady at better level than Tesco especially preferable for short term creditors. 2.3 Efficient use of working capital 0 10 20 30 40 50 2009 2008 2007 2006 Figure 10: Inventory turnover period Tesco Wal mart Peer Median Source: Company Filings 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 2009 2008 2007 2006 Figure 11: Receivables turnover period Tesco Wal mart Peer Median Source: Company Filings The par chart below provide two ratios about how efficient Tesco, Wal mart and global peers operated. In one hand, from 2006 to 2009, the gap between Wal marts inventory turnover period and Tescos is narrowing. Howe ver in fical year 2009, Wal marts inventory turnover period is around 10 days per year higher than that of Tesco indicating that Tesco operated their inventory more efficient. On the other hand Tescos receibables turnover period grew steadily for the last for years reached around 12 days per year while Wal mart maintained stable approximately 3 days. The variance in Tescos Receivables turnover period is due to Tesco has acquired the remaining 50% of Tesco Personal Finance from Royal Bank of Scotland. a move which will enable Tesco to enter personal financial service industry. To sum up although it is clearly stated that Tesco outperform Wal mart in food retailer industry, due to the large propotion in personal financial service of Tesco, Wal mart is more efficient. 2.4 Investment ratio and stock price 0 5 10 15 20 25 2009 2008 2007 2006 2005 Figure 12: P/E ratio Tesco Wal mart Peer Median Source: Figure13 Stock price Source: Google Finance The graphs above 2.5 Stability Ratio 0.00% 50.00% 100.00% 150.00% 200.00% 250.00% 300.00% 2009 2008 2007 2006 Figure 14:Debt-to-Equity ratio Tesco Wal mart Peer Median 0 0.2 0.4 0.6 0.8 1 2009 2008 2007 2006 Figure 15:Gearing Tesco Wal mart Peer Median Focus on the par charts we can conclude that Tesco experenced a significantly increase in debt-to-equity ratio and gearing ratio while Wal mart stayed constant from 2006 to 2009 financial year. The immense movment of Tesco is due to its expending strategy which including boost its international market share and entering to personal financial service sector. This new strategy greatly accelerates the demand of debt of Tesco which influenced the ratio enormous, indicating that they didnt exposed themselves to more risk. Moreover, it is obvious and noteworthory that compared with their peers group, Tesco and Wal mart app ear to be more risky. As mentioned before, Wal mart is a more feasible to a risk averse investor. 3 Conclusion 1) Overview of comparision According to the backaround analysis and financial ratios analysis between Tesco and Wal mart, it is easy to concluded that Wal mart is the leading company around the world while Tesco experenced a significant growing period for last five years. Wal mart performance more stable compared with Tesco that have more develop chance and broader develop space. 2) Implications for Potential Investment According to the recent year performance, it is suggested that Tesco is a better choice for an investor wishing to invest for maximum capital growth in the long term. On contrast, the creditor and supplyers of would prefer Wal mart due to its constant perfomance and better liquility not only short-term but also long term. 3) Limitation of the Analysis This analysis mainly depends on the historical public accounting data and financial rat ios, however, it ignores accounting policies may differ between different companies. 4 Evaluation the impact of GAAP and IFRS Through the analysis Tescos and Wal marts financial statement and the ratio analysis, it can clearly be concluded that there are remarkable difference between two different reports under GAAP and IFRS. The format of the financial statement. For example Tescos financial statements only publish one year comparative financial information whereas Wal marts include three years(banlance sheet two years). Further more different criterion is emploied when determinming a specific entry such as inventory cost. LIFO is prohibited under IFRS, while GAAP permitted which greatly influence the result of ratio analysis. Therefore, such difference significantly reduced the comparability of two company and may mislead the investor to some extend. Section B: Convergence 1 Introduction The growing acceptance of International Financial Report Standards(IFRS) server as an incitant factor for the convergence between US GAAP and IFRS. As recorded in IFRS (2008) there are approximately 113 countries require or allow the use of IFRS for the preparation of financial statement by publicly held companies. Furthermore, series of accounting fraud scandals such as Enron, WorldCom and other large companies blow down to the American investors confidence in the capital market, It has shaken the American legislature,regulatory institution and the publics trust in the quality of U.S. accounting standards. Hence, it seems natural to ciritsise current account standard and the US standard setters have recently announced a roadmap to convergence. Finally, the issue of whether the harmonisation should be processed and to what extend the exercise will be success was raised. According to Levitt(1998) the former SEC chairman, the truth is, high standards lower the cost of capital indicating that higher accounting quality and disclosure under internationally accepted standards such as IAS/IFRS lower the firms capital cost. However it is unconsidered to outweigh the benefits of convengence if we taking into account factors affecting acount standard as following plitical, business culture, accounting culture even language. This essay will argue that although the convergence between US GAAP and IFRS is an irreversible trend, it is inevitable exist some concers which interfere the convergence heavily. In order to demonstrate this, the paper will illustrate that from two sections. Firstly, the section of the pressures for convergence will be analysed. Subsequently, it will be discussed in terms of some major concers. 2 Pressure One of the key argument for accelerating convergence is that globalization and mutinational bussines. As reported by KPMG(2008) that even in advance of any enforcement of IFRS for U.S reporting, companies may have to deal with IFRS financial reports in situations such as following: a U.S. company takeover an IFRS-report ing target, a U.S. company selling a business to an IFRS-reporting taget company and so on. Due to these transations these companies will need to understand IFRS-reporting style in order to be more knowledgeable in the ttransations. Take Wal mart as an example, it operation in over 16 conutries including UK which is a member of IFRS-reporting system. Under this situation, it is unavoidable that for Wal mart have to deal with IFRS. In addition, it is noteworth that Wal mart may have to converted its financial statement of its foreign subsidiaries to U.S. GAAP for consolidation purposes. Last but not lest, different reporting standard and style will generate misleading and greatly reduce the comparability especially for an cross-border investor comparing two companies report under two different accounting system. Therefore , the shift from GAAP to IFRS not only is an umavoidable trend but also promoted the accounting conpareability and consistency especially on a global scope. In a ddition, according to Benston et.al(2006), IFRS accounting standards are more principles-based than rule-based which used in U.S.. Based on the above concept if the rule-based standard is better there is no need to shift current GAAP to IFRS. However, implement of principles-based approach in accounting standard can generate a more reliable account stander (Schipper, 2003). Generally, there are two major explanation. Firstly, the rules-based one is criticised for doing nothing when economic environment changes, especially some inventions of financial instruments emerge such as derivertive instrument (Kershaw, 2005). This position goes further that according to the existence of rules-based standards in the U.S., although SEC are trying to perfect current accounting standards, the development of the financial market is so rapid and the enterprises financial activities are so wide-ranging that the accounting standard can not cover all the situations. Another issue that merits condidera tion is the ruls-based standard misleads the public to ignore the risk of investment. In another word, the rules-based standard only require companies to disclose the risks of assets, liabilities, earnings and cash flows. Unfortunitely it fails to reflect the increasingly risks which due to financial instruments. Hence, the investors might fail to access the companys overall risk (Arjoon, 2006). Overall, it is can be infered that convergence are part of a process of improve the U.S current account standard. Nevertheless, convergence is not necessary to improve the account quality because priciples-based standard is not perfect. FASB(2002) publish the explanation of principles-based standard which offer more freedom to report financial statements. In other words, accounts play a significant role in the process of making financial report. Thus there are some disadvantages merit consideration. Admittedly, there are some potential flaws caused by priciples-based standard. It is av oidable if there is good auditing and regulation. Comparing with rules-based standard, principles-based standard is more adapable, and more effective in the current accounting circumstances. Consequently, it is easy to conclude that convergence between GAAP and IFRS is an unavoidable trend, furthermore, this will also greatly improve the current U.S. account standard. 3 Obstacles Various difficulties emerge when dream come to reailty. First of all, the term accounting convergence should be taking into considers. This term has been defined as: The process pursued by the International Accounting Standards Board (IASB) of eliminating the present differences between National Accounting Standards and the avoidance of future differences to achieve international accounting harmonization (Hussey Ong, 2005, p.229). It can be draw from the concept above that convergence aim to increase the comparability of accounting practices. According to Haverty, J. L.(2006) it is important to note that convergence not equal to comparability. Zeff,S.A.(2007) stated that there are some obstacles to global financial reporting such as culture in terms of business, financial, accounting, auditing and regulatory. Additionally, it is equally important to consider the problems of interpretation. In order to interpret some major obstacles to convergence, the following pargraph try to inverstgate business culture and language. On one hand, in the USA, it is common for certain industries to raise capital through long-term libilityss. For example, it is not surprised that the airline company would not owned the airline which would be owned by financial institutions. Furthermore, this practice would undervalue the assets hold by the company. However, such biased valuation would not be eliminated even after convegence. Hence, this is one of obstacles for a lack of comparability. On the other hand, language is a another factor should be considerd. U.S. and U.K. are both english countries , however it is noteable that the Brithsh and the Americans are unable even to harmonize the spelling of word hramonis(Alexander 2006). Consequently it is easy to draw a conclusion that diversity in culture, eonomic, legal, and political resons reduced the comparablity and the extent of convergence. 4 Conclusion To sum up, due to the aforementioned reasons we can safely arrive at the conclusion that the convergence between GAAP and IFRS is a irreversible trend even though there are some obstacles. According to Zeff, S.A.(2007),some obstacles are deeply cultural, while others aremore susceptible to modulation by the principal parties. Admittly harmonisation would not solute all the problem, but still can be a incitant factor to improve the current U.S. account sandard.