International and Comparative HRM

Contents

Introduction. 3

Part 1. 3

China. 3

Germany. 4

United States. 5

Part 2. 7

Offshoring. 7

Part 3. 10

Payment Scheme. 10

Conclusion. 12

References. 13


Introduction

Expanding overseas for Saints Construction based in the UK is a good idea for its business aspirations. Business enterprise should always be looking for opportunities for growth and development, particularly in both established and emerging markets. The company can only hope to continue being successful by expanding its businesses to other countries and capitalizing on the benefits. The strategy is also useful because the company will be able to guarantee sustained profitability even when the market I one country is not at its best.

Part 1

China

There are some strengths and weaknesses of expanding overseas to countries that have potential as investment sites. The key strengths of investing in China are cheap labour, a weaker currency and a continuously growing market. China has one of the world’s largest populations, making it an extremely lucrative investment destination because of the availability of cheap labour (Bottelier 2007, 53). Opening up a production site in China will be beneficial for Saints Construction because the company will be able to reduce the number of wages it will pay to the employees.

The other key benefit of investing in China is that the currency is valued much lower than that of other major countries of the world. That means the company will be able to get more resources and profits from each dollar because the business can be valued through the Chinese currency. The ever expanding market in China is the third key reason to invest in China because the potential for growth is extremely lucrative. Several global businesses now have headquarters in Chinese cities because the markets are ever expanding, and the potential for profitability is increasing, as well.

There are some weaknesses to observe when investing in China because they can be significant hindrances to the business. First, as much as China has embraced the free market principles in its business society, the country is still governed by a Communist government. The laws and regulations for doing business and governing the new production facilities, therefore, will be different, and this can affect profitability. The political landscape of China can be detrimental and costly for foreign investors especially if they do not have a good understanding of the laws of the land (Carter & Estrin 2005, 824).

The rules for accounting in China, too, differ to those of several other capitalistic countries. This factor has been a crucial reason for the failure of several foreign investments in China because audits, reporting financial statements and capital requirements differ. The result is that a company can end up losing a significant amount of income because of a lack of understanding of the guidelines of doing business in the country (Doellgast & Gospel 2011, 118). The difference in business and financial rules in the country is a serious weakness for investing in China because it will be difficult to consistently account for all the business expenses.

Germany

Germany is a lucrative investment destination for oil companies because there are very well set-up infrastructure and the availability of several financial institutions to offer financing options. Saints Construction will be able to reap several rewards in the future by investing in Germany because the nation has some of the best infrastructures globally. Setting up a production site will take a relatively short amount of time, and finding qualified labour in the country will not be a problem. There are several oil drilling companies set up in the North Sea, and thus finding suitably qualified professionals to help the company set up will not be a problem (Herrigel 2008, 112).

Another benefit of choosing to invest in Germany is that there are numerous appropriate financial institutions that will offer aid. German banks, as well as the numerous international financial institutions set up in the country, have excellent deals for oil and gas companies. Germany is a popular destination for several enterprises within the oil and gas industry, and this has effectively led to the establishment of the finest financial institutions in the country (Kitschelt & Streeck 2004, 75). The low-interest rates coupled with sound financial advice from the banks make Germany an excellent choice for investing.

The key weaknesses of choosing to invest in Germany are that the country is progressively turning to fossil fuels and the market size is getting smaller. As of 2013, some business and individual investments in renewable sources of energy in Germany were already amounting to €100 billion (Kitschelt & Streeck 2004, 74). The country is turning more and more towards the renewable sources of energy such as geothermal, wind and solar energy. The oil industry in the country is likely to play a very small role in the energy sector shortly because the demand for fossil fuels will have decreased tremendously.

An increasing number of employees in the energy sector in Germany are turning to the renewable energy sector. As of 2010, the number of employees employed in the sector was roughly 367,000, and this figure is expected to grow by 117,000 by 2020 (Herrigel 2008, 114). The declining reliance on oil and gas means that the industry will shrink over the next few years, and finding labour will become much more expensive. This weakness means that the high initial costs that the company spends investing in the market will not be worth the effort.

United States

The United States, perhaps, is the most attractive country in terms of investing in the oil and gas industry. The main reason for this is that the United States still has large reserves of untapped fossil fuels within its territories. Opting to invest in the country leaves the opportunity for further expansion within the country in the future. The fact that a majority of the fossil fuel deposits in the United States are yet to be exploited leaves a mouth-watering opportunity for further growth shortly (Iles 2013, 83). The United States shows potential for growth in the oil and gas sector than any other country in the world.

The United States is also a good potential destination for investment because it has one of the most productive global economies. From a human resource perspective, the employment force of the United States will always be increasing, and this means that it will be easy to staff the production facility in the country. The working culture in the nation will help to spur the new production facilities, and to have the foreign employees gel with the cultures in the country will ensure success (Katz & Darbishire 2000, 21). The successful business environment in the country will be a key factor in getting the right employees and achieving success.

There are a number of weaknesses of choosing to invest in the United States. First, unlike most developing countries in the world, labour is not going to come cheap, and the company will have to spend heavily to get the right employees for the jobs. Opening a production facility will involve finding suitably qualified employees in the country, a task that will consume considerate resources. The initial wages for the company will be high because the standards and minimum wages that will apply to all employees will be higher than investing in other countries (Katz & Darbishire 2000, 50).

Another significant disadvantage of investing in the United States is that the company will have to contend with the strict tax laws. The company is going to have to pay its employees significantly more than in most other countries of the world because there are strict tax laws to comply with. In addition to this, there are corporate taxes that the production site must contend with, and this will further cut into the income that the company will make. The tax laws in the country happen to be one of the most significant hindrances to direct foreign investments in the United States as they contribute to decreasing income (Iles 2013, 88).

China is the most appropriate recommendation for investing for Saints Construction because it offers the best potential for growth and expansion. The Chinese energy sector has been expanding exponentially for the decades because of the massive growth of its own economy. China is among the largest consumers of oil in the world, making it a key destination for investing in the industry (Bottelier 2007, 57). The likely success of the company is good news for the human resources department because the company will be able to access the best labour in the country cheaply. The reason for this is because it will not be possible to achieve the same amount of success in the United States and Germany.

China is the right choice also because of the easy availability of cheap labour. About 650 million of the Chinese population still lives a rural lifestyle, meaning that it will be easy to find labourers for the production site at a low cost. The significant extent of China’s labour makes it a lucrative investment destination because Saints Constriction will never have to spend beyond its means on wages. In addition to this, the company will be able to prosper without having to follow the stringent conditions that are otherwise present in the United States and Germany.

Part 2

Offshoring

There are a number of benefits and challenges of offshoring production in the approach that Saints Construction has chosen. The first benefit of offshoring is that it reduces the number of operations that the main production site back in the United Kingdom will have to handle. A different production site might handle some of the operations that the main production site is handling, and this will be crucial in offering a chance to make future plans(Doellgast & Gospel 2011, 127). Offshoring will also enable the company back in the United Kingdom expand its operations appropriately based on the markets that are yet to be exploited.

The other benefit of offshoring is that it presents a company with an opportunity to exploit another market (Doellgast & Gospel 2011, 131). The main production site is located in the United Kingdom, and this helps in exploiting the available market and expanding the market share. Offshoring will open up another market option, and this will help improve the visibility and reputation of the company. Operating in a new market will allow Saints Construction to build up on its client list and open a new avenue of profitability on another continent. An additional market to exploit will be beneficial as the company can expand to supply new markets and maximize profitability.

Offshoring also reduces the reliance of the company on a single market, instead opening up other alternatives. The company will benefit from offshoring in case there are unexpected changes in the British market that cut down on its profits. Thence, it can benefit by operating in another market because they can still gain and cover for the losses experienced in the domestic market (Edwards 2011, 54). Offshoring is an excellent risk strategy for a firm because it guarantees that it is still profitable despite hindrances, and that it can meet the demands of all its employees.

Offshoring, most importantly, helps to increase the overall size of the firm. Saints Construction can only achieve its ambitions of being a leading company in the oil and gas industry by increasing its scope of operations. The company’s operations in another company will progressively lead to its growth because there will be more income and more profits (Brewster, et al. 2013, 84). A progressively increasing profitability capability means that Saints Construction will be in an even better position to remunerate their employees appropriately and offer better payment schemes. The act of offshoring will help the company achieve its long-term goals of being a driving force within the industry.

Offshoring, though, can have some challenges that can threaten the overall future of the company. First, the act of offshoring requires huge financing for the entire process to be possible. Relocating skills and expertise as well as the costs of setting up in a new location makes it very difficult to reap any benefits soon (Blinder 2006, 2). The financial outlay for the company is likely to be quite high, significant enough to merit the retrenchment of 750 employees from the Belfast production site. The high financial costs will be a significant challenge that will determine if the company can remain profitable because setting up in another country will always be costly. A good financial plan will be crucial if the company wants to avoid the challenge of inadequate financing as this reason can determine if the company will ever be able to be productive.

Secondly, domestic laws and regulations will be different when offshoring to another country because the rules in the United Kingdom will not necessarily apply in other countries. The variation in laws and the manner of doing business is likely to slow down the process of setting up a new production site in a foreign country. Domestic regulations in some instances can vary significantly, and they can have a detrimental impact on the ability of the company to make profits. China, for example, is an example of such a destination because the laws governing business activities in the communist state vary from those of the United Kingdom. The laws for financial accounting and other accounting principles will be different, and income can be lost by failing to understand the variations. Adapting to a new environment will always be a challenge, and the lack of a proper plan will be a significant challenge to the process of offshoring (Carter & Estrin 2005, 827).

Part 3

Payment Scheme

The existing company policies on pay and reward will require careful scrutiny before any decisions can be made. Depending on where the company will invest, there will be some regulations, laws and cultures to consider when implementing a pay scheme. The financing available to the company perhaps will be the most crucial determinant of the type of pay scheme that the company adopts for its overseas operations. Provisions will also have to be made in case the plans for the offshore company become successful and warrant implementation back in the United Kingdom.

Saints Construction currently utilizes an individual performance payment scheme to remunerate its employees. Research shows that labourers in China would prefer a scheme that considers the principles of fairness and equality within the workplace. The individual performance related scheme would only be a success in the country if it applied to every employee (Brewster, et al. 2013, 81). Each will contribute positively if they know that they are on similar payment levels depending on the type of work they perform. An equity system will also enable the provision of the culling system where the company can dismiss the low-achieving employees on an annual basis.

The choice of a payment scheme for operations within Germany and the United States will depend on existing labour laws, the set minimum wages and the qualification of the employees. The company will not be in a position to set very low wages because they might not be in line with the laws of the country. The set minimum wages offer an insight into the type of expenditure that a company will incur by paying the employees working in the respective countries (Doellgast & Gospel 2011, 146). The qualifications of the employees will also be influential in determining a pay scheme because highly qualified employees will definitely be paid differently from other employees, even those doing the same job.

The existing policies should be extended to the new site because the company does not want to significantly alter its operations and create equity for the employees still in the United Kingdom. Any changes in the payment schemes in the new production site might mean getting a different human resource management team (Blinder 2006, 3). The operations of the company are likely to change because the expectations of the employees will be different. The company will not be able to retain its image by changing the way employees represent the company by altering the payment schemes. The best way forward for Saints Construction is to maintain the current method of paying its employees as it has already proven to be successful. The production site in the new location will be able to pick up on its operations based on the way employees in the United Kingdom approach their responsibilities.

The company should extend the current policies to the new production site to prevent any problems with the employees working on the UK sites. A change in the payment schemes that benefit the employees in the foreign location will result in calls for equity from the employees in the Belfast and Northampton production facilities. The employees of both sets of companies will agitate that their contribution is equal towards the growth and progress of the company and that an equitable method of paying them be adopted. The individual performance payment related scheme that is currently being used by the company has yielded significant success, and it might just be relevant to retain these policies. This approach will reduce the burdens that the employees are likely to cause, and this will allow for rapid growth and expansion for the new production facilities.

Conclusion

Having an alternative plan, too, is a good idea in case changes happen shortly. Saints Construction should not just limit themselves to the current individual performance payment scheme that has served them well. Changes in the industry mean that the employees will always have new demands, and this will influence the type of policies implemented in both production sites. The company needs to consider all the challenges of offshoring to a new location to ensure that the employees remain as productive as possible. Another important decision that has to be made will regard the number of employees that the company will send from its production facilities in the United Kingdom. There is a need to ensure continuity in the operations of the company, even in an overseas production plant. The reason for this is that the overall objectives of the company have to be followed for there to be any hope of success. Offshoring will be a good idea for Saints Construction because the company will be able to grow into the future.


References

Blinder, A., 2006. Offshoring: the next industrial revolution? Foreign Affairs, March/April.

Bottelier, P., 2007. What India can learn from China and vice versa, China and World Economy 15(3): 52-69.

Brewster, C.; Sparrow, P.; Vernon, G., & Houldsworth, E., 2013. International Human Resource Management. Chs.8  and 9.

Carter, C. & Estrin, A., 2005. Opening of China’s trade, labour market reform, and impact on rural wages, The World Economy 28(6): 823-839.

Doellgast, V., & Gospel, H., 2011. Outsourcing and international HRM. In Edwards, T. and Rees, C. (eds) International Human Resource Management: Globalization, National Systems and Multinational Companies, Harlow, Pearson. Ch.15.

Edwards, T., 2011. The Transfer of Employment Practices across Borders in Multinational Companies, In Harzing, A. and Pinnington, A. (eds) International Human Resource Management, London, Sage. Ch.8.

Herrigel, G., 2008. ‘Roles and Rules: Ambiguity, Experimentation and New Forms of Stakeholderism in Germany, Industrielle Beziehungen 15, 2, 111-132.

Iles, P., 2013. HRM in North America and Western Europe: The emergence of a ‘Western’ HRM model? In Iles, P. and Zhang, C. (eds) International Human Resource Management: A Cross Cultural and Comparative Approach, London: CIPD.

Katz, H., & Darbishire, O., 2000. Converging Divergences: Worldwide Change in Employment Systems, Ithaca, Cornell University Press. Ch.2, 17-70.

Kitschelt, H., & Streeck, W., (eds.), 2004. Germany: Beyond the Stable State, London: Frank Cass.

Revlon and Avon Analysis

 

Table of Contents

Executive summary 2

Introduction 3

Company profile and description for Revlon and Avon…………………………………………………………….………………3

Performance and capital analysis……………………………………………………………..………………………………….…………7

Revlon and Avon “Tax burden”…………………………………………………………………………………………….….………………7

Revlon and Avon “Interest Burden”…………………….…………………………………………………………………………………..8

Revlon and Avon “operating margin”………………………………………………………………………………………………………8

Revlon and Avon “asset utilization”………………………………………………………………………………………………….……9

Revlon and Avon “financial leverage”…………………………………………………………………….……………………………..10

Capital structure …………………………………………………………………………………………………………………………………..12

The working capital analysis “Revlon &Avon” 14

Day receivable  14

Cash cycle conversion 15

Day’s inventory  17

Day payable…………………………………..……..……………………………………………………………………………………………….18

 Moody’s bonding rating analysis…………………………………………………………….. ………………………….19


Executive summary

This paper tends to analyze the performance of two main companies, The Company’s include Revlon Inc and Avon the two companies have a huge impact in the stock market and mainly compete with each other in product sales and distribution to service offer this research and analysis will mainly focus on the two company’s sales, and market performance.

This research  permits to examine existing cross connection between Revlon Inc and Avon Products Inc. hoping to measure up the impacts of business volatilities on Revlon and Avon and check how they will expand away market hazard if joined in the same portfolio for a given time skyline. You can likewise use pair exchanging procedures of coordinating a long position in Revlon with a short position of Avon. If you don’t mind likewise check progressing drifting unpredictability examples of Revlon and Avon.

Considering 30-days venture skyline, Revlon Inc is required to create 0.44 times more degree of profitability than Avon. Then again, Revlon Inc is 2.26 times less unsafe than Avon. It exchanges around 0.1 of its potential returns per unit of danger. Avon Products Inc is at present creating about -0.02 for every unit of danger. On the off chance that you would put 3,611 in Revlon Inc on july 15, 2015 and offer it today you would win a sum of 64.00 from holding Revlon Inc or create 1.77% arrival on speculation more than 30 days.

 

Introduction

Company profile and description for Revlon and Avon

Revlon

Revlon, Inc., consolidated on April 24, 1992, produces, showcases and offers the world over a scope of magnificence and individual consideration items, including makeup, hair shading, hair consideration and hair medications, excellence devices, men’s prepping items, against per-spirant antiperspirants, scents, skincare and other magnificence care items. The Company works through two sections: the Consumer portion and the Professional section. The Company’s Consumer fragment comprises of items that are produced, advertised and sold fundamentally inside of the mass retail divert in the United States and globally, and also certain retail chains and other strength stores outside the United States, under brands, for example, Revlon, Almay, Sinful Colors and Pure Ice in beautifying agents; Revlon Color Silk in ladies’ hair shading; Revlon in excellence apparatuses, and Mitchum in against per-spirant antiperspirants. Buyer Segment

The Revlon brand comprises of face cosmetics, including establishment, powder, become flushed and concealers; lip cosmetics, including lipstick, lip gleam and lip liner; eye cosmetics, including mascaras, eyeliners, eye shadows and temples items, and nail shading and nail consideration lines. Establishments inside of the Revlon brand incorporate Revlon Color-Stay, Revlon Photo-Ready, Revlon Age Defying, Revlon Super Lustrous, Revlon Color-Burst and Revlon Grow Luscious. The Company’s Almay image comprises of hypo-allergenic, dermatologist-tried, aroma free beauty care products and skincare items. The Almay brand comprises of face cosmetics, including establishment, squeezed powder, groundwork and concealer; eye cosmetics, including eye shadows, mascaras and eyeliners; lip cosmetics, and cosmetics removers. Establishments inside of the Almay brand incorporate Almay Smart Shade in face; Almay Intense i-Color in eye, and Almay Color + Care in lip.

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Avon

The most seasoned magnificence organization in the United States, Avon Products, Inc. has developed from an unobtrusive line of scents sold way to-way to one of the world’s driving image of beauty care products. It makes and offers beautifiers, aromas, toiletries, embellishments, attire, and different enriching home furniture. Avon utilizes an extraordinary direct-offering system, which was incredibly in charge of its inconceivable achievement in the 1950s and 1960s, when ladies were effortlessly found in the home for deals purposes. After unsuccessful endeavors at broadening into the human services administration industry left the organization with monstrous obligations in the late 1980s and mid 1990s, Avon started to refocus on its roots: magnificence items and direct offering. Regularly, Avon conveys beauty to the lives of ladies everywhere throughout the world. At Avon, excellence means discovering the right lipstick shade for a client; giving an income opportunity so a lady can bolster her family; and empowering a lady to get her first mammogram. Magnificence is about ladies looking and feeling their best. It’s about championing financial strengthening and enhancing the lives of ladies around the globe.

Avon is an organization saturated with convention, grounded by its center values and standards and also its vision “to be the organization that best comprehends and fulfills the item, administration and self-satisfaction needs of ladies – internationally.”

A main worldwide excellence organization and one of the world’s biggest direct merchants, Avon has very nearly $9 billion in yearly income. Its product offering incorporates beauty, form and home items, with such all around perceived brand names as Avon Color, A-NEW and Skin-So-Soft, Advance Techniques, Avon Naturals and mark.


Performance and capital analysis

Revlon and Avon “Tax burden

Revlon and Avon

In relation to the graph above tax burden tends have an impact on the two companies. Higher Taxes from Acquisition Should Strain Cash Flows .Revlon’s procurements for money charges remained at $72 million in FY13 against previous prior evaluation of $82 million.

Furthermore, an increment in EBIT going ahead, coming about because of higher net offers of the Revlon-TCG incorporated unit ought to prompt an increment in expense payables. It was expected, a compelling duty rate of 30% for FY14, with total expense procurements of pretty nearly $85 million contrasted with previous evaluation of $81 million. Changes made to expense estimate for 2014 and past have added to a 25% decrease in the graph shown above. In relation to Avon the year 2010-2011 the tax burden within the company was relatively constant towards the end of FY12 there was a slight drop, increase in 2013 and again a slight drop in FY14 respectively

Revlon and Avon “Interest Burden”

 

In relation to the above graph the interest burden in contrast to the above graph of the two companies within the industry is different. The interest burden in Avon Product Company since 2010 has been deteriorating. in the year  2010 to year 2011 there was a slight increase with a positive figure of 2.42 and in the year 2012 there was a decrease of about 11.88 in the fiscal year 2013 to 2014 there was a slight decrease recorded of about 1.56.

In Revlon Inc from 2010 to the fiscal year 2014 the interest burden margin within the industry was constantly shifting at a rate of 1% with increase and decreased observed in the year 2013.

It can be concluded that the interest burden of Revlon Inc is generally constant compared to that of Avon within the industry.

Revlon generally has the lowest interest burden compared to Avon.

Revlon and Avon “operating margin”

Operating margin gives investigators a thought of the amount of an organization makes (before premium and assessments) on every dollar of offers. At the point when taking a gander at working edge to focus the nature of an organization, it is best to take a gander at the adjustment in operating margin after some time and to think about the organization’s yearly or quarterly figures to those of its rivals. On the off chance that an organization’s edge is expanding, it is acquiring more per dollar of offers. The higher the edge, the better.

In relation to the two companies Revlon and Avon, the above graph implies that the margins are relatively in relation to the above, the operating margin of Avon is constant and thus its generating less dollars, same applies to the Revlon company whereby there is a constant margin   since the year 2010 to 2014 the operating margin of both companies is generally at the same level in the industry that had an increase in the year 2010-2011 to 2012 in which there was an increase from the year 2013 -2014 .

Revlon and Avon “asset utilization”

 

The asset utilization figures the aggregate income earned for each dollar of assets an organization claims.

For instance, with an asset utilization proportion of 52%, an organization earned $.52 for every dollar of asset held by the organization. An expanding asset utilization implies the organization is by and large more productive with every dollar of asset it has.

In relation to the above graph the Revlon asset utilization decrease constantly while for Avon it increases constantly within the margin of the industry level. In the year 2010-2011 there was an increase Avon’s asset utilization and dropped significantly in the year 2012. In the following year 2013 there was a slight increase in asset utilization in which in the fiscal year there was a drastic increase of 0.08.

In relation to Revlon’s company there was a drastic decrease since 2010 to 2014 hereby there was a 0.10 huge decrease from 2012 to 2013 within the industry margin.

Revlon and Avon “financial leverage”

Financial leverage Is the extent to which an organization uses settled wage securities, for example, obligation and favored value. The more obligations finance an organization utilizes, the higher its budgetary influence. A high level of money related influence implies high premium installments, which adversely influence the organization’s main concern profit per offer.

In relationship to the graph above Avon Inc use their debts to acquire additional asset in the business within the industry margin level on the other hand Revlon inc uses less of its debts to acquire additional assets .

The use of debts in Revlon is generally low while that of Avon is generally high in relation to the graph.


Capital structure

Revlon

March 2014           march 2013               march 2012

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Most recent (march 2015)        Historical

Type           %         amount Type Percentage Amount
Debt              156            1.8 bill Debt 144 1.9bill
Preferred        —–     ———– Preferred —- ———-
Equity           -55.6             -658.9 mill Equity -46.3 -589.0 mill

DEBT AND COVERAGE RATIO

Firm     Ind Avg

Debt/Assets 0.98 0.33
Debt/Equity -1.16 0.61
Current Assets/Current Liability 1.75 1.14
EBITDA/Interest 3.59
Debt/EBITDA 6.25 2.15
Cash flow Ops/Total Debt 0.11 0.39

 

 

Avon

Firm     Ind Avg

Debt/Assets 0.53 0.33
Debt/Equity 8.98 0.61
Current Assets/Current Liability 1.29 1.14
EBITDA/Interest 4.65
Debt/EBITDA 4.96 2.15
Cash flow Ops/Total Debt 0.11 0.39

The working capital analysis “Revlon &Avon”

 

Working capital can be summed up in the following equation where by

Working capital = assets- liabilities (current)

The working capital proportion (Current Assets/Current Liabilities) shows whether an organization has enough fleeting resources for spread its transient obligation. Anything underneath 1 demonstrates negative W/C (working capital). While anything more than 2 implies that the organization is not contributing abundance resources. Most accept that a proportion somewhere around 1.2 and 2.0 is sufficient. Also known as “net working capital”.

On the off chance that an organization’s present resources don’t surpass its present liabilities, then it may keep running into inconvenience paying back leasers in the short term. The direst outcome imaginable is liquidation. A declining working capital proportion more than a more extended time period could likewise be a warning that warrants further examination. In this way, if an organization is not working in the most effective way (moderate accumulation), it will appear as an increment in the working capital.

 

Day receivable

  DAYS RECEIVEABLE      
  2010 2011 2012 2013 2014
AVON INC 27.76 37.54 38.05 36.87 33.90
REVLON INC 54.55 56.02 55.28 61.90 44.92
INDUSTRY 0.71 0.55 0.58 0.70 0.93

 

The table above illustrates the “day receivable” analysis between the two companies.

Day receivables are a measure of the normal time an organization’s clients take to pay for buys, equivalent to records receivable divided by yearly deals on layaway of credit multiplied 365

In relation to the above case the measure of Revlon Inc clients take to pay for buys is generally hire compared to Avon Inc in the FY14 on the industry margin.

The below graph represents the above information

 

Cash cycle conversion

  CASH CYCLE CONVERSION    
  2010 2011 2012 2013 2014
AVON INC 25.19 33.09 19.96 17.42 0.84
REVLON INC 75.96 71.72 64.51 68.13 46.62
INDUSTRY 1.13 0.57 0.51 1.92 0.80

 

A metric that communicates the timeframe, in days, that it takes for the two companies to change over asset inputs into money streams. The money change cycle endeavors to quantify the measure of time every net information dollar is tied up in the creation and deals handle before it is changed over into money through deals to clients. This metric (in table above ) takes a gander at the measure of time expected to offer stock, the measure of time expected to gather receivables and the timeframe the two companies  are stood to pay their bills without bringing about punishments.

In the above table is evident that Avon Inc has the has the shortest cycle thus less time capital is tied up in the business procedure

The graph below represents the above information

 

Day’s inventory

A monetary measure of an organization’s execution that gives speculators a thought of to what extent it takes an organization to turn its stock (counting products that are work in advancement, if relevant) into deals. By and large, the lower (shorter) the DI the better, yet it is essential to note that the normal DI differs starting with one industry then onto the next.

  DAYS INVENTORY      
  2010.00 2011.00 2012.00 2013.00 2014.00
AVON INC 70.57 70.35 62.95 67.26 59.81
REVLON INC 92.19 82.25 82.66 117.18 85.53
INDUSTRY 4.68 1.12 0.96 1.41 0.79
 

 

 

 

This measure is one piece of the money transformation cycle, which speaks to the procedure of transforming crude materials into money. The day’s offer of stock is the first stage in that procedure. The other two stages are day’s deals exceptional and day’s payable extraordinary. The main measures to what extent it takes an organization to get installment on records receivable, while the second measures to what extent it takes an organization to pay off its

records payable. In relation to the above statement in contrast to Revlon and Avon, Avon’s day inventory increase with decrease spontaneously while Revlon’s Day inventory drastically  increase in the FY13 as it remains constant between the 92-80 measure.

Day payable

Both Revlon and Avon must hit a fragile parity with DP. The more they take to pay their leasers, the more cash the organizations have close by, which is useful for working capital and free income. In any case, if both organizations take too long to pay its leasers, the banks will be miserable. They may decline to develop credit later on, or they may offer less positive terms. Additionally, on the grounds that a few banks give organizations a rebate for convenient installments, the organizations may be paying more than it needs to for its supplies. On the off chance that money is tight, in any case, the expense of expanding DP may be not exactly the expense of prior that money prior and needing to get the shortage to proceed with operations.

In relation to the case study company that is Avon and Revlon, it’s evident that Avon Inc’s DP shifts drastically in the industry constant margin each and every year as Revlon’s DP decrease with increase hence it’s not that stable. The table below represents the above information

  DAYS PAYABLE      
  2010 2011 2012 2013 2014
AVON INC 73.14 74.80 81.05 86.71 92.87
REVLON INC 70.79 66.54 73.43 110.95 83.84
INDUSTRY 0.00 0.00 0.00 0.69 0.85

 

Moody’s bonding rating analysis

Avon

Avon’s Baa3 senior unsecured rating mirrors its position as one of the biggest worldwide direct offering organizations, solid brand acknowledgment in its esteem situated magnificence, design and home items, and expansive geographic broadening. These qualities are tempered by income and aggressive weights, a low EBIT edge, and danger that its circulation leeway in creating markets will disintegrate. These dangers feebly position the organization inside of the Baa3 rating. Avon is likewise presented to direct patterned swings as its items speak to more optional buys than numerous other non-strong shopper items. Avon’s expanding dependence on creating markets and nations, for example, Brazil, Russia, Mexico and Venezuela makes introduction to monetary and remote money variances that prompt more prominent profit instability. Dynamic agent tallies and units sold were negative in each of its four noteworthy geographic districts in each of the last seventy five percent. Grumpy’s accepts that this is characteristic of the broadness of the organization’s income and working weight, and will be hard to rapidly pivot.

Avon’s endeavors to enhance productivity is further tested by the seriously aggressive worldwide magnificence and individual consideration classifications, and the subsequent need to maintain large amounts of brand promoting, item improvement, and interests in illustrative enrollment, preparing and backing. Avon’s immediate deals model is a favorable technique for coming to customers in creating markets as conventional blocks and-mortar retail entrance is low in these districts.

Sizable money offset, positive anticipated free income, and the nonattendance of critical developments in 2014 and 2015 backing Avon’s liquidity position. Generously the majority of Avon’s $795 million of money is held seaward with generally $18 million held in Venezuela Bolivares that is not promptly open and an extra $300 million needed to bolster continuous operations. On the other hand, the rest of the money is open with negligible expense spillage. Irritable accepts that the money and an undrawn $1 billion pistol lapsing in March 2017 give adequate ability to Avon to store anticipated needs.


Revlon

The update of Revlon’s Corporate Family appraising to B1 mirrors the organization’s capacity to support working and money related energy regardless of the continuous difficulties of the macroeconomic environment and strengthened aggressive environment. Revlon’s credit measurements keep on enhancing humbly determined by solid productivity and income era with further increases expected in monetary 2011.

Revlon’s B1 corporate family evaluating mirrors the organization’s worldwide image establishments, solid geographic and item enhancement for various surely understood brands in shading beauty care products, hair shading and scents, and maintained solid benefit (monetary 2010 EBITA edges of 16.2%) and income measurements (financial 2010 Free Cash Flow to Debt of 6.9%). Revlon’s appraisals are compelled by its still moderately high balanced influence (monetary 2010 Debt to EBITDA of 5.4 times) and restricted scale in the very aggressive beatufiers classification portrayed by profound took, substantial contenders.

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We anticipate that Revlon’s productivity will be reasonable in spite of continuous speculations expected to keep up income development and piece of the pie including noteworthy item advancement, item show capital expenses and brand promoting and special spending. Be that as it may, Revlon’s evaluations will remain to some degree compelled by the very focused nature of the beauty care products and individual consideration classification in which it works and the organization’s still moderately high balanced influence (5.4 times).

 

Reference

  1. Datamonitor. (2008, March). Global Make-Up Market to 2011. Research andMarkets. Retrieved March 14, 2012, from www.researchandmarkets.com/reports/597392/global_make_up_market_to_2011
  2. Eichengreen, B. J., Gupta, P., & Kumar, R. (2010). Emerging giants: China and India in the world economy. New York: Oxford University Press.
  3. Foeth, M. (n.d.). Legal Obligations of Mexican Companies – Or How to Avoid Common Pitfalls – Corporate/Company Law – Mexico. Articles on All Regions, Law, Accountancy, Management Consultancy Issues. Retrieved March 15, 2012, from http://www.mondaq.com/unitedstates/article.asp?articleid=50684
  4. Kaufmann D., Kraay A., & Mastruzzi M. (2009). Governance matters VIII aggregate and individual governance indicators 1996-2008. Washington, D.C].: World Bank Development Research Group, Macroeconomics and Growth Team.
  5. Perry, W. (2007). Jane’s sentinel country risk assessments. Coulsdon, Surrey: Jane’s Information Group.
  6. Rao, R. (2010). Why do companies implement functional structures?. Global Online Corporate Community. Retrieved March 14, 2012, from www.citeman.com/8601-why-do-companies-implement-functional-structures.html

 

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Struggling Haiti

Realization of economic development and prosperity remains the key objective of virtually all governments in the world. However, due to capital limitations, most governments, especially from developing nations resort to lending from financial institutions such as World Bank, and International Monetary Fund (IMF), or regional development banks such as Inter-American Development Bank (IADB) (White, 2012). Additionally, such governments also borrow from their bilateral friends. This is in earnest to enable them pursue their most ambitious development projects, and sometimes to correct balance-of-payment deficits. Nevertheless, such governments must adhere to some outlined conditions that are spelt out in the article of agreement in order for them to secure the loans; otherwise, the loans are withheld (White, 2012).

Equally, a healthy population significantly contributes to economic development of a nation in various ways. In this line, human development and gender inequality, also affects the economic development of a nation in many ways (Acemoglu, Robinson, 2012). This paper outlines how Haiti, one of the developing and a very poor nation in the western hemisphere has used loans and grants to develop herself. In addition, the paper also outlines how a healthy population, affects her economic development.

How Funding from IMF and World Bank and Other Financial Institutions Affects Her Economic and Political Development

Since her independence to date, Haiti remains to be heavily indebted because she not only borrows from World Bank and IMF but also from bilateral friends and from regional banks such as IADB.  By June 2009, her debts totaled to anincredible figure of $1.2 billion(Frankema and Masé, 2014). Most of these debts are taken with an aim of funding development projects and correcting her balance-of-payments. However, the funds are never directed to the intended

purpose, but they are misused and embezzled by corrupt government officials and military regimes who have been ruling the country. For instance, it is estimated that $900 million, of the loans were taken by Baby Doc, one of the former dictators, when he fled the country (Frankema and Masé, 2014). As a matter of fact, were it not for the loan relief granted by World Bank, IMF and  IADB and other bilateral creditors in 2009, Haiti would be heavily indebted by now, and would be on her knees struggling to repay unending loans.

It is quite discouraging to note that even after severally being granted loan reliefs she continues to take new loans, and increasing her foreign debts. For instance in 2010, after she was hit by a fierce earthquake, she was granted a loan of $102 million by IMF to assist in her recovery (Hiatt, 2007). As a result, she remains to be a victim of financial neo-colonialism, since the funds are misused by her leaders, whereas the citizens remain responsible for the debts. As a result, she remains extremelyunderdeveloped. In fact, she is the poorest nation in the Western world with over 80% of her populace living below poverty line (Hiatt, 2007). Therefore, neither her funding by World Bank, IMF, IADB, and her bilateral creditors contribute to her political nor economic development.

 

How a Healthy Population Contributes To Economic Development

To a great extent a healthy population is tantamount to a better economic development, not only for Haiti but also for any nation, as can be demonstrated in various ways. At first, a healthy populace improves the productivity of a nation. This is because healthy workers who are physically and mentally robust tend to concentrate more in their economic activities as compared to workers who are suffering from diseases and disability (Acemoglu, Robinson, 2012). Therefore, a healthy population in Haiti improves her productivity.

Secondly, a healthy population means reduced treatment cost both to the government and to the families. As a result, the government can use the saved funds to steer economic development in other areas such as education, or development of infrastructure. Equally, the households can also use the saved money to improve their living standards or invest it (Frankema and Masé, 2014). Therefore, a healthy population in Haiti enables the households to lift their economic standards, and the government to invest in other economic development projects, culminating to overall economic development.

Thirdly, a healthy population also leads to improved learning. This due to the fact that households and the government can invest in education as they save on treatment. Besides, healthy learners also tend to retain more in school. As a result, the nation is able to produce more manpower that can drive her economy (Frankema and Masé, 2014). Therefore, a healthy population in Haiti means that more investment can be directed towards education; hence enable it to train and produce more manpower that can drive her economy. Ultimately, her general economy can improve six-fold.

Lastly, a healthy population means reduced levels of poverty due to adoption of family planning methods. It is almost natural knowledge that large families normally lead to high levels of poverty, especially in households that are economically deprived (Aristide, 2013). Therefore, smaller families through adoption of family planning methods tend to reduce poverty levels. For that reason, a healthy population in Haiti means that it can adopt family planning methods to control its size; thus reduce poverty levels.

How she has Used Funds from Financial Lending Institutions Such as World Bank and IMFto Improve Her Health Care System

Parts of the loans that are given to Haiti are meant to improve her health care system. For instance, between 2005 and 2009, she had received an approximate of US$278 million from World Bank, and most of which was expected to fund health care projects. In line with this, she was able to implement a HIV/AIDS treatment and prevention plan. Additionally, she has managed to improve immunization against measles amongst young children. Moreover, she has also managed to raise the immunization and prevention of diphtheria, pertussisand tetanus (DPT3). Therefore, to some extent she has managed to put the funds into good use, though most of it remains unaccounted for.

Conditions Set Out

In line with this, it is important to note that the loans are normally given under strict conditions that even demand macroeconomic policy reforms of the beneficiary countries. These conditions are spelt out in disguise of ensuring commitment by the government to repay the loans. However, they are colonial in nature and meant to exploit the beneficiary countries economically (Hiatt, 2007). For instance, for the loans to be given Haiti she was required to strengthen her management of public expenditure by observing asset declaration law, and auditing government accounts (Herlinger and Jeffrey, 2011).

In addition, she was required to strengthen her tax collection mechanism. Moreover, she was expected to favor foreign investors, open her market and lower tariffs on imports and exports (Aristide, 2013). From a critical analysis of the latter conditions, it is very clear that they were only meant to benefit foreign investors. Therefore, many developing nations that take loans from international and regional financial institutions end up being exploited when they follow the strict and colonial conditions that are set out to enable them secure the loans (White, 2012).

 

Recommendations

For Haiti to salvage herself from the cruel hands of neo-colonialism and heavy debts, the following must be adhered to:

  • She must work towards fighting corruption to a zero tolerance level, by enacting strict laws, so as to ensure that the funds meant for development are used prudently.
  • She must invest in education to ensure that more manpower is available to drive her economy.
  • She must invest in improving her health care system to ensure that a healthy manpower is readily available to run her economy at all times.
  • She should avoid borrowing in a reckless manner, but work towards creating her own wealth to develop her economy.
  • Her citizens must learn to elect responsible leaders who can lead them into prosperity.
  • Her creditors should stop imposing selfish conditions that are only meant to benefit foreigners when lending loans not only to Haiti, but also to other developing nations.

Conclusion

In summary, it is apparent that Haiti has neither been using the funding from World Bank and IMF to develop herself economically nor politically. Contrarily, the funds have always been misused and embezzled by corrupt government officials and the military regimes that have been ruling the nation. On the other hand, a healthy population greatly improves her economic development because the population is able to save on treatment cost and hence invest in other areas. In addition, the populace is more productive. Furthermore, the nation is able to produce more human power that can drive her economy due to investment in the education sector. However, she has managed used some funds to develop her healthcare system for instance, by implementing a HIV/AIDS prevention and treatment program. Nevertheless, if she can follow the outlined recommendations, she can definitely realize more benefits from the funding.

 

 

References

Acemoglu, D., & Robinson, J. A. (2012).Why nations fail: The origins of power, prosperity, and poverty. London: Profile Books.

Aristide, J. B. (2013). Haiti, Intervention in (2004) 275|.Encyclopedia of US Military Interventions in Latin America [2 volumes], 274.

Frankema, E., & Masé, A. (2014).An Island Drifting Apart. Why Haiti is mired in poverty while the Dominican Republic forges ahead. Journal of International Development, 26(1), 128-148.

Herlinger, C., & Jeffrey, P. (2011).Rubble nation: Haiti’s pain, Haiti’s promise. New York: Seabury Books.

Hiatt, S. (2007).A game as old as empire: The secret world of economic hit men and the web of global corruption. San Francisco: Berrett-Koehler Publishers.

White, E. J. (2012). Modernity, freedom, and the African diaspora: Dublin, New Orleans, Paris. Bloomington: Indiana University Press.