I=PAT

Doucet 2010

I = PAT Paper

The I =PAT formula seeks to identify the impact (I) human population (P), affluence (A), and technology (T) has on the environment (Dietz and Rosa, 1994). Hynes (1994) believes the appeal of using I=PAT to discuss environmental issues is the simplistic physical insight it provides. Traditionally, the (P) variable denoted the most importance, but trends in developed countries such as Canada, are causing widespread critique of the importance placed on population (Sherbinin, Carr, Cassels, & Jiang, 2007). Many believe technology is responsible for the greatest impact in developed countries (Commoner, 1972). Nonetheless, the single most important variable impacting the Canadian environment is the population (P) because its great influence of and interaction with variables (A) and (T). First, Canada’s promising land allowed early habitants to develop affluence and technology. However, the impact of an increasing population, coupled with abundant natural resources enabled and pressured the Canadian economy to grow. Second as the economy matured, the population grew more, the more the demand for consumption grew, and the more waste accumulated. Third, in the relationship I = PAT, the impact of (P) can explain the changes in the growth of (A) and (T). The size of (P) affects the affluence in the economy, which in turn affects the amount of capital used to develop new technology.

The debate

One of the most important arguments regarding I=PAT is determining the variable that impacts the environment the most. Many refute the theory that (P) is the most important variable as developing countries with very large populations have smaller impacts on the environment than developed countries with relatively smaller populations (Commoner, 1972). Commoner (1972) argues that technology is the culprit as evident by the fast growing pace of technology and the stable growth of the population in developed countries. However, each of the variables holds different levels of importance in different environments and economies. Canada’s environment is ideal for a growing economy. Canada’s rich natural resources have made it possible for individuals to flourish and for the economy to grow. The country’s natural resources have made economic profits and investments in technology possible. In early history, many migrants were attracted to Canada for its rich land. Affluence and technology did not take precedent until the population grew denser. Larger communities required greater affluence and efficient technology to support the population. Thus, although the impact from technology is growing faster than affluence or population, it is driven by needs of the population. A massive reduction in the population level would inevitably curb the need for innovative technology, and decrease production as consumption would also decrease.

The impact of (P)

Evidence to support the debate of population’s impact is seen even when measuring the (P) variable independently, one can denote that a greater population can have a greater impact on the environment. “All people use resources and create waste, and many people have children who use more resources and create more waste” (Hynes, 1994, p. 19). In 2006 Canada’s population rate alone had almost doubled since 1956 (Statistics Canada, 2008). As the population in Canada has grown so has the amount of CO2 emissions, pollution, and the loss of wildlife habitats (Statistics Canada, 2008). However, the greater impact of Canadian’s on the environment is not attributed solely to an increase in population. This is evident when looking at the rates of growth of both the population and impact on the environment. As noted by Statistics Canada (2008) “ Population growth is an important piece of the puzzle for understanding our impact on the environment; however, it must be considered in conjunction with the other pieces” (Para 19).

The impact of (P) in conjunction with (A) and (T)

Although the size of the population is an important variable in measuring society’s impact, there are two other variables that interact with (P) to determine the full impact on the environment. Those variables are affluence (A) and technology (T). Variable (A) is measured by GDP or per capita consumption, and (T) expresses the amount of technology used to supply units of consumption (Gretchen, Daily, & Ehrlich, 1992, Para 10). Therefore, the total affluence and technology used in the Canadian economy also impact the environment. The consumption function of an economy is not based on population alone, but on marginal propensity to consume, which is based on income. Wealth is an important component as it drives an economy’s GDP (A). The more wealth there is, the more consumption, and waste (Dornbusch, 2005). The same holds true for technology as it increases the productive capacity of the economy (Gretchen, et al., 1992). Statistics Canada (2008) reported that the national growth in automobiles outpaced the growth in population during the late 50s, 60s, and 70s. The growth rate in consumption can be attributed to increases in affluence and technology. Dornbusch (2005) states that GDP is a measure of aggregate demand. There are three ways GDP can grow. The first is an increase in the population and pressure for more goods to sustain the population. The second is increased demand for goods from a larger propensity to consume because and the wealth effect. Last, a greater propensity to consume and economies of scale reduce prices. Although (A) and (T) are measured independently, an increase in population not only increases the multiplier effect but it can also increase each variable.[1] To grow GDP, production needs to increase, which entails more inputs such as labor (Dornbusch, 2005). The relationship between labor and capital demonstrate that a larger population increases GDP or affluence (A). GDP increases wealth, and new technologies are developed due to economies of scale. Nonetheless, although affluence and technology greatly impact the environment, their interaction with population produces the greatest impact.

Conclusion

I=PAT, although simplistic, allows individuals to measure the impact interactions between population, affluence, and technology have on the environment. Critics argue that technology in developed countries is the culprit. But strong evidence suggests that population is responsible for the greatest impact in the Canadian environment. It is not population alone or the figure represented by the variable that measures the full impact. Rather, the full impact is measured by the role it plays on the growth rate of affluence and technology.

 

 

 

 

 

 

 

 

 

 

 

 

References

Commoner, B. (1972). The environmental cost of economic development. In Population resources and the Environment. Washington, DC: Government Printing Office.

Dietz, T. & Rosa , E.A. (1994). Rethinking the environmental impacts of Population, Affluence and Technology. Human Ecology Review. Summer/Autumn, (1).

Dornbusch, R., (2005). Macroeconomics (7^th ed.). Canada: McGraw-Hill Ryerson.

Gretchen, C., Daily, & Ehrlich, P.R., (1992). Population, sustainability, and earth’s carrying capacity: a framework for estimating population sizes and lifestyles that could be sustained without undermining future generations. American Institute of Biological Sciences. Retrieved on October 14^th from: http://dieoff.org

Hynes, H. (1994). Taking population out of the equation: Reformulating I=PAT. Women’s International Network News, 20(4), 19. Retrieved from MasterFILE Premier database.

Sherbinin, A., Carr, D., Cassels, S., & Jiang, L. (2007). Population and environment. Annual Review of Environment and Resources (32), 345-373. Retrieved from: www.anualreviews.org

Statistics Canada (2008). Canada’s growing population and its environmental influence, 1956 to 2006. Retrieved on October 15, 2010 from: http://www.statcan.gc.ca

 

 

 

 

 

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[1] When (P) increases the value of P creates a multiplier effect on (I) as the greater value is not added to (A) and (T) but multiplied. I = (P) x (A) x (T). However, and increase in (P) can lead to an increase in (A) and (T) as these figures are calculated on a per capita basis. Therefore, (I) would derive from a multiplication of larger (P), (A), and (T) variables.

Notes on Business Cycles and the Aggregate Demand Supply Model

Changes in GDP, inflation, and unemployment are related through the business cycle.

Business cycle: The more or less regular pattern of expansion (recovery) and contraction (recession) in economic activity around full employment output.

Potential GDP: output that is produced when all factors of production are fully employed.

Output Gap: Measures the difference between actual output and the output that could be produced at full employment, or potential GDP.

Output Gap= Potential output- Actual output.

• Actual output declines relative to potential output during recessionary periods.
• Unemployment increases very quickly during recessions, but recovers very slowly.

Aggregate Demand and Aggregate Supply Model

AD curve: shows combinations of the price level and the level of output for which the demanders of goods and services are in equilibrium.

• The AD curve slopes downward, because as the price level increases, with the nominal money stock held constant, the real money stock decreases. An increase in the nominal money stock shifts the AD curve outward. The vertical shift in the AD curve is proportional to the change in the nominal money stock.
  • The aggregate-demand curve slopes downward for three reasons. The first is the wealth effect: A lower price level raises the real value of households’ money holdings, which stimulates consumer spending. The second is the interest-rate effect: A lower price level reduces the quantity of money households demand; as households try to convert money into interest-bearing assets, interest rates fall, which stimulates investment spending. The third is the exchange-rate effect: As a lower price level reduces interest rates, the dollar depreciates in the market for foreign-currency exchange, which stimulates net exports.

• Any curve will shift due to an exogenous change. Therefore, a change in fiscal or monetary policy will shift the AD curve.

AS Curve: Relationship between the amount of final goods and services produced in the economy and the price level.

• The shapes of the AS curve depend in the time frame being analyzed.
• In the very short-run the Keynesian AS curve is horizontal; indicating that firms will supply whatever amount of goods are demanded at the existing price level.
• The Keynesian AS curve is relevant for the very short run when firms can hire more labor without increasing current wage.
• The Classical AS curve is vertical, indicating that the same amount of goods will be supplied no matter what the price level. It is based on the assumption of full market clearing, so the labor market is in equilibrium with full employment of the labor force.

Keynesian AS curve

Classical AS curve

Aggregate demand policies: Keynesian and Classical

Keynesian:

• In the very short run, the AS curve shifts to the right, output increases, while price level remains constant.

• The assumption that prices and interest rates are fixed implies the aggregate supply curve is flat as shown in the Figure Consequently, any change in aggregate supply (i.e., a rightward or leftward shift) will have no effect on the economy. Aggregate demand is the driving force in the Figure. On the supply side firms simply increase or reduce production at the constant market price to meet the level of demand.

Aggregate demand and non-linear aggregate supply

• The shape of the short run AS curve is assumed to be non-linear. This is because, at low levels of output, more output can be produced without inflationary pressure on prices. The economy has ‘slack’ in it, with unused resources waiting to be used. The AS curve will be horizontal at first, but, as more resources are used, factor prices will start to rise, and less output is possible. This process accelerates up to full employment, where after no more output is possible. Beyond this point AS becomes perfectly inelastic.
• At low levels of output, below potential Y, the AS curve is quite flat. When output is below potential there is very little tendency for prices of goods and wages to fall. Where output is above potential the AS curve is steep and prices tend to rise continuously. In a recession we are on the flat part of AS so demand management policies can be effective at boosting the economy without having much effect on the price level. When economy approaches full employment policy makers must be wary of too much stimulus to avoid running the AD curve up the vertical portion of the AS curve.

Aggregate Demand expansion: the classical case

• The assumption is that there is full market clearing, a shift in the AD curve leads only to a price level increase in the long run.

Supply-side Economics

1.    Supply side economics is based on the idea that cutting taxes will affect both the supply and demand sides of the economy.

2.    As a result of a tax cut, the AD shifts upward to the right and the AS curve shifts to the right. However, the shift in the AS curve will be less than the shift in the AD curve. In the short run the equilibrium also shifts to the right on the constant price line. As a result total tax revenues fall proportionally less than does the tax rate. In the long run the economy (equilibrium) shifts up to intersect AS and AD which increases GDP but only by a very small amount. Total tax revenues fall, and the deficit rises. In addition prices are permanently higher.

Notes on the Classical Market Clearing Model

The economy in the long run: Classical Market clearing Model

The Economy in the long run Assumptions

• The productive Capacity of the economy is fixed
• The time frame of the long run model, 10-15 years, is short enough that the capital stock is not growing quickly enough to increase full-employment output
• The Aggregate supply curve is vertical (Classical aggregate supply curve)

 

3.1 The supply of goods and services: The production function and the labor market

 

Production Function: The production function is a technological relationship showing how much output can be produced for a given combination of inputs.

• (Y) or output is assumed to be produced through a production function, which combines factors of production (K), and labor (N)
• The basic production form: Y= AF(K, N)
• The term (A) accounts for the level of technology or productivity

 

Cobb-Douglas production function: Y=AKO N1-0

• 0 and 1-0 are weights equal to capital’s share of income and labor’s share of income (fraction of total output that compensates each function)
• Canada’s production function is Y= AK0.3 NO.7
• Ideally a measure of A helps economists understand the functions of the economy
• A= Y/ K,N (Solow residual). However, A can change if the units the other variables are measured in change. This problem can be overcome how total factor productivity has changed over the years
• Measured this way we can see that A (factor productivity) decreases during economic slowdowns and increases during recoveries

Long run assumptions of production function

• Abstract from productivity changes and A can be ignored
• Changes in the capital stock are small enough that their effect on full-employment output can be ignored.
• Y= F(K,N)
• For a given technology and capital stock, the amount of output depends on the amount of labor input.
• The Cobb-Douglas production function can be used to graph the production function of the economy
• Capital and technology become fixed at their 2002 levels ( Y= 18.7* (949.9 o.3) No.7 )
• The production function relates the amount of output that can be produced using various amounts of labor input, holding capital and technology constant.
• The production function is used to derive the demand for labor curve.

 

The production with fixed capital and technology. Fig. 3.1 p. 52

 

• Positive slope: when a unit of technology is added to production process, even though technology and capital are fixed, output goes up.
• Marginal Product of Labor (MPN): shows the amount of output, which increases for each additional unit increase. The slope of the production function gives the MPN.
• Diminishing marginal product of labor: shows that as labor increases, the amount of extra output that is gained from an increase in labor input becomes smaller.
• The marginal product of labor: is downward sloping, as each additional until of labor contributes less to output than the previous unit did.

Marginal Product of Labor and Demand. Fig 3.2 p. 53

 

• The goal of any profit maximizing firm is to maximize profit, which equals total revenue minus total cost.
• When a firms hires an additional unit of labor, it incurs a marginal cost and receives a marginal benefit.
• The marginal benefit to a firm is the value of the additional unit of output that is produced by that additional unit of labor is called the value of the marginal product. It is measured as the marginal product (MPN) x the price;

W= MNP X P

• The profit maximizing condition is represented by the real wage. Real wage is defined by the payment to labor measured in terms of output, calculated as the nominal wage divided by the price level; w= W/P or
• A profit maximizing firm will hire labor until the real wage equals the marginal product of labor w= MPN.
• The demand for labor curve is simple the MNP curve drawn with real wage on the y-axis.

The Supply for Labor. Fig 3.4 p. 55

 

• We assume that workers, in deciding how much labor to supply, compare the costs and benefits of working an extra hour.
• The marginal benefit of working an extra hour is measured by how much this extra hour of work will increase consumption.
• When a person works an extra hour he or she receives a nominal wage
• Given this nominal wage the amount of extra consumption that can be made depends on the price of goods and services, measured by price level (P)
• The ratio of W to P is W/P, is the real wage and measured in terms of goods and services
• In this manner the benefit of working an extra hour is measured by the real wage, w.
• The marginal cost of working an extra hour is the hour that worker must give up other non-work activities. This is called leisure.
• Therefore, workers supply labor up to the point where marginal benefit equals marginal cost.
• We assume that increases in the real wage make it more attractive to give up an extra hour of leisure, therefore the labor supply curve slopes upward.

 

Equilibrium in the Labor Market

 

Full employment: occurs when all members of the labor force are employed; individuals not working are not counted in the labor force and therefore are not counted as being unemployed.

• The intersection of point (N, w) represents equilibrium in the market
• In the classical model all prices are assumed to be flexible, which ensures that the markets are in equilibrium at all times.
• In the labor market real wage is assumed to be moving very quickly, therefore equilibrium (N) is at the full employment of labor workforce.
• At equilibrium all workers in the labor force are employed.
• Any individuals who are not working are not in the labor force because the real wage is too low for them to seek employment are choosing not to enter the workforce therefore cannot be counted toward unemployment.

 

To determine output at this level the equation is

 

Y*= F(K,N*)

 

Capital and Technology are fixed;

Y* is the level of output the economy would reach if all prices were flexible and all factors of production were fully employed but not growing

 

The Classical Aggregate Supply Curve

The Classical Aggregate Supply curve is vertical because in the long run the supply of goods and services depends only on the production function. Y, depends only on N (for a given fixed level of capital and technology). Also in the labor market N depends upon the real wage, (w). Therefore, the production, or supply, in the long run is independent of the price level.

 

3. 2 The Demand for Goods and Services

Underlying Assumptions

• The Demand for goods and services is made up of C+I+G+NX.
• In the long run, government spending is exogenous.
• The long run model is interested in consumption and savings decisions of households and investment decisions of businesses.

 

Introduction

 

• The focus is on aggregate demand, which explains how income is allocated among the different spending units C + I + G + NX
• Growth theory is an important question of how a consumer allocates current income between consumption today and consumption in the future
• A decision of consumers to spend less today is really a decision to consume more tomorrow
• In an economy savings by consumers feeds into investment by firms, and investment is an increase in the capital stock

 

Consumption and Savings

 

• We can apply the same fundamentals of weighing the costs and benefits to the framework of consumption and savings as we did with worker’s desire to work more hours.
• When an individual receives income, he or she must allocate it between current consumption and savings
• The rate of time preference is the rate at which individuals are willing to give up consumption today to be compensated by increased consumption in the future;

1.     If you are inclined to be a saver you will have a low rate of time preference

2.     If you are inclined to spend you perceive a large cost to giving up current consumption and will have a high rate of time preference

3. Giving up current consumption in savings is thus impacted by the marginal benefit of savings given by the real rate of interest

4.     As real interests rates increase consumers desire to save more, shown by an upward sloping curve

5.     The curve is drawn in a Private savings curve (Sp) to distinguish the function from government savings

 

Investments

 

• Firms purchase machinery and equipment to increase their productive capacity in terms of capital stock
• Investment demand depends on the real rate of interest

 

Example

How does a firm know whether borrowing money is profitable?

 

A 1 million dollar expansion is expected to generate an extra 100,000 dollars in revenue for the firm. The firm will be willing to borrow money if the cost of borrowing is lower or equal to the return or benefit.

 

(1 million/100,000) gives the rate at which firms will be willing to borrow. At 10% interest rates or lower the firm in this scenario will borrow money to finance an expansion.

 

• Thus, investment spending is negatively related to the real rate of interest and the investment demand curve slopes downward

 

Equilibrium: Savings Equals Investments

 

• In the classical model, the Aggregate Demand is concerned with the allocation of income
• When consumers save, they can be though of as lenders, or suppliers of funds
• Businesses (when they are making decisions to borrow for expansion are investing). Businesses can be though of as demanders of funds
• There is equilibrium when lenders supply the amount borrowers demand. Therefore, equilibrium exists when savings = investments

 

Algebraic equations

 

National Account Identity for closed economy	Y = C + I + G
What are investments?	I = Y – C – G
Disposable income	YD = Y + TR – TA
Disposable income and National identity	(YD-C) + (TA- TR- G)= I     S = Sp + Sg = I
Government Surplus or Deficit *Also government savings (Sg)	TA- TR- G
Private savings (Sp)	YD-C

 

FISCAL POLICY AND SAVINGS

 

• Effects on equilibrium:

1.     When total savings decreases, the savings curve shifts to the left

2.     When total savings increase, the savings curve shifts to the right

• An increase in government purchases reduces government savings (TA-TR-G). The curve shifts to the left and on the graph shows a higher real interest rate and lower savings and investments.
• Thus we can conclude that a government budget deficit lowers savings and increases interest

 

3.3 The Money Stock, the Price level, and the Inflation rate

 

Assumptions

 

• There is a close relationship between money and the price level
• In the long run the rate of inflation in an economy is determined by the rate of growth of nominal money

 

Money

 

The major function of money is as a medium of exchange. This is summarized through the quantity theory of money equation:

 

MV= PT

Where T represents all the real transactions in the economy over a period of time and where P represents the average price of all these transactions. M is the size of the money stock (supply) and V is the velocity of circulation, which is a measure of the speed with which money circulates in an economy.

 

V= PT/M

 

In reality it is difficult to measure T. Therefore a proxy for T exists. We use Y the measure for real GDP as a substitute for in the equation.

 

MV= PY

 

• PY is a measure of the dollar value of the transactions in an economy, which is just nominal GDP.

Money Market

• We assume that there exists a money market with money supply and money demand.
• When individuals demand money, they do so in order to purchase goods.
• Money is a nominal variable. We express nominal money in terms of the number of goods it can purchase as M/P which is the real money stock.
• The demand for money equation is expressed as

 

Md/P= kY

 

 

The Implementation Process (Business Analysis)

Doucet (May, 2010).

The Implementation Process

Before beginning the implementation process it is important to assess the organization’s readiness (BABOK, 2009). The organization readiness assessment provides a description of the effect(s) a solution or decision might have on the organization and helps the stakeholders identify if the organization is ready for the changes the solutions will introduce.

Step 1. Making a decision for implementation

(Note Step 1 of the implementation process is one of the final steps in the decision-making process, and thus will not be touched on in great detail. The decision-making process incorporates Implementation, thus both can be thought of a cycle feeding each other).

1.1   Follow an effective decision-Making process:

Frame the Problem	Identify the Problem Define criteria, goals, objectives Evaluate effect of the problem
Making the Decision	Identify causes of the problem Frame alternatives Evaluate impacts of alternatives Make a decision
Evaluate the Decision	Implement the decision Measure impacts

Note: From the University of Phoenix website (2004).

1.2.0 Guidelines:

1.2.1 Focus on meeting a timetable

1.2.2 Identify obstacles in implementing a decision

(Note: some obstacles may be found through a Force Field Analysis- explored in the Appendix).

Below are some common examples of obstacles (to implementation) that can occur in an organization:

• Board resistance; • Competing business priorities • Management opposition or inertia; • Lack of awareness of the issue; • No existing Code of Conduct; • Cost concerns; • No clearly assigned responsibility for the implementation project.

Step 2. Plan the Implementation

• Set the framework: Establish a common understanding of the task and agree on aims, objectives and a timetable carried out by a risk-assessment.

• Test the “written” policy, or decision with scenario drafting

Step 3. Develop the project (decision)

• Fill out any missing details; turn decision into well-documented change management exercise with timelines, responsibilities and goals.
• Integrate policy or decision into organizational structure:

– Conduct Force field analysis if needed

• Assign responsibilities
• Review the capacity of support functions
• Review the capacity of operational functions
• Adapt existing policies to meet and fit in with new decision and policies
• Develop training programs for converting staff to change management if needed
• Develop the communication strategy
• Prepare for incidents and events of non-conformity of new decision

Step 4. Implement the decision (Get it working!)

Going from decision-making to implementing a decision is often a grueling task and one that requires a lot of time and effort. To ease the transition it is often helpful to elicit the aid of an SME.

Implementation Subject Matter Expert (SME)

A list of potential individuals responsible for implementing a decision in an organization:

Developers/Software Engineers, Organizational change management Professionals, System Architects, Trainers, and Usability Professionals (BABOK, 2009).

• Communicate the new policy or decision
• Implement the training programs

Step 5. Monitor

5.1 Problem Tracking: An organized approach to the tracking, management, and resolution of defects, issues, and problems (BABOK, 2009).

Problem Tracking can involve using an IT system to track problems or issues that users report. Problem records can also be used and should include the following information for the problem tracking to lead to a successful and timely resolution of problems;

A description, the name of the person who identified the problem, the date identified, the impact, the priority, the date the problem must be resolved, the owner of the assigned problem, the status, the action needed to resolve the problem, the person responsible for the problem, the completion of the date of action, and the outcome (BABOK, 2009).

Step 6. Evaluate and improve the decision and or implementation (if needed).

• Receive feedback from monitoring

• Evaluate effectiveness

• Report to management

• Board review and sign off

The process has come to a full circle and any steps or processes needed to evaluate and improve the decision and or implementation may be repeated if necessary.

Review: Implementation steps recalled in organizational matrix plan (Appendix B)

References

International Institute of Business Analysis (2009). A guide to the Business

Analysis Body of Knowledge (BABOK Guide) Version 2.0.

MindTools.com (1995-2010). Understanding the force field analysis. Retrieved on

June 3^rd, 2010 from: http://www.mindtools.com/pages/article/

newTED_06.htm

Transparency International (July, 2005). Business principles for countering

bribery: six step implementation process. Retrieved on May 29^th 2010

from: http://www.transparency.org/global_priorities/

private_sector/business_principles/six_step_implementation_process

University of Phoenix. (2004). Decision-making steps appendix. Available from the

University of Phoenix student/faculty website: http://ecampus.phoenix.edu

(Retrieved May 27, 2010).

NORTEL: IMPLICATION OF UNETHICAL ACTS

Doucet (June, 2010)

Nortel: Implication of Unethical Acts

Making ethical decisions in accounting is growing in complexity because of the larger number of stakeholders in business, and the greater responsibility on accountants. In the early 2000s many financial and accounting scandals went public in the media. As a result the practice of accounting in recent years has evolved drastically and greater accountability and consequences have been issued to corporations. In the United States authorities made many headlines with companies who practiced fraudulent activities, such as Nortel, to serve as a warning to those who dare brake rules in the future.

Accusations

In 2007, the SEC issued a press release that noted the charges they laid to four former senior executives of Nortel Networks Corporation for their role in supporting financial fraud. The executives were accused of numerous fraudulent acts in using accounting fraud to bridge the gap between the company’s true performance with its internal goals and the expectations of the public (SEC, 2007).

Unethical behavior

As outlined in the press release, the unethical behavior that was displayed by senior executives had misled the public, and caused billions of dollars in losses to Nortel investors and shareholders. The issue gives rise to the complexity of stakeholders involved in accounting. Ultimately, it was the pressure from Wall Street and the public’s expectation of Nortel’s growth that led to initial discrepancies, later the large payouts to senior members and the greed of Nortel’s executives served as justification to mislead investors. In the end, those with most at stake, small investors and shareholders, incurred the biggest loss.

According to the SEC’s complaint, senior executives of Nortel engaged in a number of illegal and unethical practices. The executives altered Nortel’s revenue numbers, by breaching revenue recognition policies, improperly established and released reserves to meet earnings targets and fabricated profits altogether to payout greater performance-related bonuses.

Breaching accounting standards

One of the most troubling facts of the case is that Nortel’s executives specifically ignored and violated protocols established by United States GAAP to pull forward expected revenue to meet public expected revenue targets. As stipulated by law, all companies whose shares are listed in a public exchange must follow accounting guidelines as established by GAAP (Young, etal, 2007).

Conceptual framework: relevance and reliability

Other implications that arise from not following the accounting standards established from GAAP rest in the conceptual framework underlying financial reporting. Relevance and reliability are two important subtopics in the subject matter. “Accounting information is reliable to the extent that it is verifiable, is a faithful representation of the underlying economic reality, and is reasonably free of error and bias” (Young etal, 2007, p. 38). What is important to consider in this case is that reliability of information is especially important for individuals who do not have the sophistication, or expertise of verifying if the information contained in the company’s financial statements are factual. Most of the investors and shareholders of Nortel fit into this category and this was the major reason the public incurred the greatest losses.

Loss of neutrality

Senior executives of Nortel manipulated relevant accounting material in such a way that it influenced shareholders and investors in poor decisions. Although the information the company was feeding the public allowed individuals to make predictions about the financial outcome of past, present, and future events; the predictions were false as the information was also false. The information was manipulated in such a way that it lost its neutrality. The information favored senior management to general shareholders. Christopher Conte, member of SEC in relation to the allegations of the senior members of Nortel said: “ These defendants all received significant compensation, in some cases in the millions of dollars, while they were manipulating Nortel’s financial results. In some cases, these individuals received such compensation only because they manipulated Nortel’s financial results” (SEC, 2007, Para 4).

Consequences and charges

The charges against the former chief executives of Nortel will lead to “permanent injunction, civil monetary penalties, officer and director bars, and disgorgement with prejudgment interest against all four defendants” (SEC, 2007, Para 10).

Conclusion

In light of the recent and many cases of fraudulent acts in financial reporting and accounting, ethics is becoming an important concern. The SEC hopes the consequences it lays on companies who have betrayed the trust of the public, such as Nortel, will be enough to create a widespread reform of accounting practices in the country.

References

SEC (2007). SEC charges four former senior executives of Nortel Networks

Corporation in wide ranging financial fraud scheme. Retrieved on June 3^rd, 2010

from: http://www.sec.gov/news/press/2007/2007-39.htm

Young, N.M, Warfield, T.D., Weygandt, J.J., Wiecek, I.M., & Kieso, D.E. (2007).

Intermediate accounting (8^th ed.). Ontario, Canada: Wiley & Sons Ltd.

International code of ethics

Doucet, Van-Kampen, Mworia (2010).

International Code of Ethics

The international code of ethics presented below will serve as a moral compass to aid global organizations in business decisions. The stipulated code will serve as a standard in global ethics to establish and regulate ethical, social, and environmental responsibilities of companies operating in global markets. The established standard will become a useful tool in comparing, and measuring the level of responsibility taken by global organizations. As such organizations will be held accountable to ensure their decisions do not cause negative social outcomes on foreign economies.

Code of ethics

1. Respect the economic and social environment of foreign markets. Carefully measure the impact of business on:
   1. The economy: The ethical organization will care about the global economy by helping to create positive economic conditions not only for the wealthy but also for the most vulnerable of citizens as well.
   2. Social welfare: The business or institution  shall take action to ensure not to harm social welfare with the introduction of business in the foreign economy. The organization will not take part in business that will destroy the livelihoods of citizens, otherwise harm, or take advantage of citizens.
2. Laws and regulations:
   1. Respect the rules, laws, and cultural behaviours and traditions of foreign countries when conducting business in foreign markets.
   2. Political climate: The business or institution shall understand and respect the politics and the way that the government is governing the country in which trade will be happening.
   3. Multilateral trade: Organizations will support trade agreements between many nations at once. Multilateral trade allows all nations involved in the agreement equal trading treatment.
3. Respect the environment of foreign countries, and avoid business activities that would otherwise damage it or impede it:
   1. Avoid illicit operations:  Do not conduct illegal business questionable in ethical behaviour.
   2. Environmental pollution: Do not conduct business in foreign countries that one would not conduct in one’s own country for the purpose of preserving one’s own environment at the detriment of another’s.
   3. Exploitation of resources: Do not conduct business in any way that will take natural resources and exploit and possibly cause extinction of such natural resources.
4. Corporate Culture requires that all involved organizations understand the culture of other countries and in unity develop guidelines that will help form a shared culture.  A corporate culture has:
   1. Shared goals and values: Deciding what is good and bad for all those involved sets a guideline of expected behaviour.  Establishing goals declares what need to be achieved and all parties can focus on attaining the desired results.
   2. Learning culture: Such a culture will facilitate sharing knowledge among teams.  It will also help in reviewing the successes and failures in the relationships as they seek change.
   3. Clan control of values: A requirement for non-straightforward issues, requiring trial and error, adaptation, and flexibility.
   4. Leadership: By example, successful leaders will lead all teams in enacting the proposed code of ethics.  Followers adopt the values portrayed by their leaders even when they are not seen as ethical.
5. Study the foreign culture to form an understanding of, and respect of the rules that form the ethics behind cultural differences. According to  Dr. Greet Hofstede there are five dimensions that form different cultures:
   1. The power distance index (PDI):

This index focuses on the degree of equality and inequality between the country’s people. Two categories make up the PDI: The High Power and Low Power Distance. High Power Distance refers to the inequalities of power and wealth and how much growth is allowed in the society., a High Power Distance example is a caste system. Low Power Distance ranking is the gap between the power of citizens’ and their wealth. The polarization gap between wealth and power is wider in the Low Power Distance ranking system.

1. The Individualism index (IDV):

This Index focuses on how much members of the culture define themselves apart from their group memberships.  Hofstede uses two category’s in the IDV: High Individualism and Low Individualism.  High Individualism refers to people who develop and display their own individual personalities and loosely affiliate themselves with a group’s personality. Low Individualism refers to the high affiliation that one relates to their group’s personality.

1. The Masculinity index (MAS):

This Index focuses on the traditional value of Male and Female power, control, and achievement.  Hofstede uses two categories, Masculinity, and Low Masculinity.  Masculinity refers to a culture  driven by men. Men hold all the power and control the household. Low Masculinity refers to a culture that has equal power distribution between men and women.

1. The Uncertainty Avoidance index (UAI):

This index focuses on how hesitant the society is toward the unknown and the attempt to minimize uncertainty.  Hofstede uses two category’s, High Uncertainty Avoidance and Low Uncertainty Avoidance. A High Uncertainty Avoidance Orientation refers to a culture whose rules are set in place to help reduce the amount of uncertainty in the future. Low Uncertainty Avoidance refers to a culture being more flexible to rules and guidelines, and less worried about the future. This society also has more tolerance for a variety of opinions and lifestyle differences.

1. The Long- Term Orientation index (LTO):

This index focuses on the society’s value on history, culture, and long- term devotion to traditional thinking. Hofstede uses two categories, High Long-Term Orientation and Low Long-Term Orientation. High Long-Term Orientation refers to a culture that values history, long-term commitments and tradition. Low Long-Term Orientation refers to a culture that does not value the past or present and has more of a focus on the future. In Low Long- Term Orientation changes occur more frequently and commitment levels are low in traditional style thinking.

How the proposed code is ethical

The stipulated code of ethics can be used to create an organizational goals and an organizational vision that will help direct the business in ethical activities.

Goals define expected outcomes hence removing any doubts on what is the purpose of working together.  Such clarity does show ethics.  Clan control solves problems that have “no one best way” of handling them.(Bateman-Snell, 2007).  It ensures that all involved parties will fulfil their obligations to the best of their abilities and creates a fair environment. Leaders play a big part in defining the culture within the organization and they will influence employees behaviour.  A good leader will empower teams to create trust and achieve goals. The values and ethical standards of an organization will define what kind of leadership is seen within the organization.  Effective leaders will ensure that all individuals follow the code of ethics. In addition, the stipulated code of ethics covers areas of uncertainty and establishes a framework in which organizations reflect beyond their ability to profit from conducting business in a foreign country but also on the impact of their presence on the country. The code of ethics attempts to bridge the gap between what is morally right and wrong. For example, the bullet points cover issues such as harming the livelihood of citizens, or taking advantage of them.

Finally, the last bullet covers studying cultural differences in societies to ensure that any business activities do not offend the culture of the country penetrated. Using Hofsted’s study of cultures the stipulated code of ethics highlights that every global organization must take steps to protect the individual beliefs that make a culture unique. To be ethical it is important to gain an understanding of the cultures an organization is doing business with to ensure that members are not disrespecting sacred beliefs and subtle differences.

What one can be learn about ethics from other cultures:

No one culture is the same as the other and what people term to be ethical or unethical has a greater influence by their culture. Learning different ethics offer organizations a unique scope on what is seen as important from a multinational level of doing business. Ethic understanding is pivotal in succeeding in today’s multinational, multigenerational, multicultural world so that a company can understand and comprehend the layered complexion of today’s market and today’s consumer.
Conclusion

Cultural values greatly influence ethical standards as well as behaviour in business. Great leaders will show sacrifice for values that form an international code of ethics by sending a clear and strong message on the importance of ethics.

References

Bateman, T.S., Snell, S.A. (2007). Management: Leading and collaborating in a

competitive world (7th ed.). New York: McGraw-Hill.

ITIM International (2009). Greete Hofesteede 5 Culture Dimensions: Retrieved June 3,

2010 from http://www.geert-hofstede.com/

Critical thinking applications in day trading

Jenna Doucet (April, 2010).

Applying Critical thinking to Day Trading

Authors Paul and Elder (2001) state, “There is nothing more practical than sound thinking” (p. 20). This statement cannot be overemphasized to day traders. In an industry where one makes hundreds of decisions a day, all of which need to processed quickly and all of which directly effect the individual’s profitability, critical thinking is a much needed skill that unfortunately very few posses. Many studies demonstrate that day traders are ruled by emotions such as greed and fear and rarely prescribe to rationale thinking when trading (Lo, Respin & Steenbarger, 2005). A strong application in critical thinking can enhance the trader’s bottom line and minimize losses incurred from emotional biases.

Critical thinking is defined as “ thinking explicitly aimed at well-founded judgment, utilizing appropriate evaluating standards in an attempt to determine the true worth, merit of value of something” (Paul & Elder, 2001, p.26). It is said that critical thinking encompasses three dimensions, which are, in effect, analytic, evaluative and creative components (Paul & Elder, 2001). Thus applying critical thought to decisions in the stock market would resemble carefully analyzing market conditions. Unfortunately, many stock traders do not abide by rationality their decisions are clouded by emotion. The National Bureau of Economic Research attests to this in their 2005 clinical study of day-traders, which shows that the main psychological drivers behind a day trader’s performance is based on greed and fear. The study also suggests that individuals whose emotional reactions are heightened by monetary gains or losses exhibit significantly worse trading performance (Lo, Respin & Steenbarger, 2005).

The critical thinker will make decisions based on careful analysis of the market which can include various strategies based on fundamental analysis, technical analysis and on economic analysis or a combination of all three. When one critically thinks several variables are considered (Paul & Elder, 2001). The markets can seem unpredictable and price movements in securities is speculative- that is the price of a stock is not necessarily a true representation of a company’s worth but rather a picture of what investors perceive the company’s worth to be (Canadian Securities Textbook, 2008). The key to critical thinking in the industry is “discipline” (Scriven, Paul, 1987), once a strategy has been developed traders should abide by the rules imposed and not let emotions step in. For example, in times of fear traders are compelled to sell their stocks, especially during periods of abrupt price changes and regardless of the overall outlook on of the market or analysis conducted. Selling off a stock too quickly can result in unnecessary capital losses or lost opportunities. On the other hand greed is characterized by strong optimistic agents and can cause traders in the pursuit of profit maximization to ignore important trends indicative of declining market prices.

Decisions to buy or sell securities should be based solely on trends identified in the market based on careful analysis and not on emotional responses to stock’s performance. When making decisions based on emotion the situation is skewed and the final decision may not yield the best outcome (Paul & Elder, 2001). Not all strategies are successful and the critical thinker understands that strategies and thinking in general should be re-assed over time. According to Paul and Elder (2001) the best thinkers “routinely take thinking apart” (p.17). Thus a critical thinker would not entrust following stock-trading strategies blindly and would routinely evaluate the success or failure rate of his or her applications. A few other characteristics about critical thinkers which can be used to develop a framework for critical thought in trading are to think purposefully, use intellectual tools, and to distinguish their thoughts from feelings and desires (Paul & Elder, 2001). For example when trading individuals should seek to understand the reasons behind their decisions and actions and have clear goals and priorities. Furthermore, traders should make use of intellectual tools to raise the quality of their decisions; these tools can include knowledge, current information or news in the markets, studies, proven strategies and other methodologies. The critical thinker knows how to check for accuracy and precision and they know to “expand their thinking to include insights from multiple perspectives” (Paul & Elder, 2001, p.16). Finally, the critical thinker will know when he is urged to make a decision to buy or sell a security out of an emotional drive or because of rationality. The ability to recognize the fear and greed within oneself can help the individual not succumb to unconscious decision-making.

Conclusion

The need for critical thinking aptitudes in day traders is fundamental to success. Critical thinkers take an analytical and evaluative approach to decision-making and are less prone to poor trade performance resulting from emotional biases such as greed and fear. Traders must be disciplined in their approach to trading and make decisions based on careful analysis of the market and adjust their positions to the market condition not on emotional attachments to the balance in the trader’s account. Day traders who exhibit critical thinking characteristics often re-evaluate their thinking and decision- making patterns, think purposefully, use intellectual tools to assist them in making well-formed decisions, and are able to distinguish rationality from emotional biases.

References

Canadian Securities Textbook (2008). Toronto: CSI Global Education.

Lo, A. W., Repin, D. V., & Steenbarger, B. N. (April, 2005). Fear and green in financial markets: a clinical study of day-traders. The National Bureau of Economic Research. 95 (2). 352-359. Retrieved March 27, 2010.

Paul, R. & Elder, L. (2001). Critical thinking: tools for taking charge of your learning and your life (2^nd ed.). Upper Saddle River, NJ: Prentice Hall.

Sriven, M. & Paul, R. (1987). Critical thinking. The National Council for Excellence in

Critical Thinking. Retrieved on April 15, 2010 from: http://www.criticalthinking.org/aboutct/define_critical_thinking.cfm

Discussion Merrill Lynch and Marketing

It is important for companies to change their marketing and positioning strategies over time because trends in the market place change and evolve over time. To remain competitive a firm’s marketing strategies “must change as the product, market, and competitors over the product life cycle” ( Armstrong, Kotler,  Cunningham, & Buchwitz, 2010 p.304). The lifestyle of a product is simply a statement that relates the fact that products have a limited life, product sales cycle through various phases, profits rise and fall along with product life cycles and products require various different marketing strategies according to the life-cycle stage the product is in (Armstrong, Kotler,  Cunningham, & Buchwitz, 2010).

The Story of Merrill Lynch

A long standing company that changed its marketing campaign, this time related directly to a change in the industry and the needs of consumers is Merrill Lynch.

Fuelled by changes in technology, widespread use of the Internet, lower commission costs, and the favourable stock market activity of the Dot.com era, the 1990’s imposed several changes to existing brokerage firms such as Merrill Lynch. Mathews (n.d) writes to this affect on how the internet changed the landscape of the financial services industry and how large well-known financial institutions responded. “ Online Brokerages, when they first came into the scene, attacked mass markets with unbelievable ease, speed and success that it took conventional brokerages like Merrill Lynch, by surprise” (Mathews, n.d, para. 1).

Merrill finally responded to the changing marketplace and as author Levinsohn (1999) recalls:

Late spring brought a watershed event when Merrill Lynch & Co., the “full service” broker personified, capitulated to the threat of the discount broker. Merrill Lynch said it would reconfigure its package of financial advice, securities research and trade order-and-execution, which retailed for about $250 per transaction, and offer a low-end account for only $29.95 per trade. It was sea change not only for Merrill, but for the entire full-service retail brokerage industry, which enjoyed commissions of $12.8 billion in 1997 (para. 10).

In a paper entitled the brave new world, Merrill Lynch spoke of it’s 4 key strategies employed during the 90’s to regain competitive advantages in the industry. In summary the four marketing strategies that positioned the company’s new products were: liberate the efficient frontier, packaged solutions, outcome oriented products and creative funding solutions. All of these product solutions were targeted at different consumer segmentations and the goal was to add value positioning (Merrill Lynch, 2007).

Although Merrill Lynch is a company that has been able to withstand the times, 2010 might be a good year for Merrill to once again re-evaluate it’s standing in the industry. Ads like Merrill Lynch is “Bullish on America” from 1971 might not be enough to give customers confidence in Merrill after the collapse of the U.S economy in late 2008. The trademark Bull of Merrill once symbolized growth, strength, optimism, and confidence (Merrill Lynch, 2006), but now people are saying “Merrill Lynch needs a dressing down” (Dougherty, 2008). In 2008, author Dougherty reported on the culture clashes and conflicting attitudes and values between “wall street and main street”. In a twist of words and Merrill’s former glorious ad campaign, Dougherty (2008) states what many are thinking: “ Merrill Lynch is bullish on snobbery and status” (para. 2).

References

Armstrong, G., Kotler, P., Cunningham, P., & Buchwitz, L.A (2010). Marketing: an

introduction (3^rd Canadian ed.). Toronto: Perason Canada

Dougherty, D. (2008). Merrill Lynch needs a dressing down. Retrieved on April

12, 2010 from: http://boingboing.net/2008/11/18/merrill-lynch-needs.html

Levinsohn, A.(1999). Online brokerage, the new core account? Retrieved on

April 12, 2010 form: Questia database.

Mathews, I. (n.d). Benefits, costs, and limitations of online investing to the

individual investor. Retrieved on April 12, 2010 from: http://www.journal.au.edu/abac_journal/2002/…/article3_may02.doc

Merrill Lynch (2006). “Bullish on America”. The big Apple. Retrieved on April 12,

2010 from: http://www.barrypopik.com/index.php/new_york_city/entry/bullish_on_america_merrill_lynch/

Merrill Lynch (2007). The Brave new world. Retrieved on April 12, 2010 from: gmi.ml.com/…

/pdf_download_BraveNewWorldWhitepaper.asp?…BraveN ewWorldWhitepaper

Supply and Demand in the Stock Market

Jenna Doucet (March 2010).

Supply and Demand in the Stock Market

In most industries the law of supply and demand is an accepted theory to explain the price of products and services. One industry that overlooked the significance of the law of supply and demand in the past is the stock market. Experts attributed the Stock Bubble of the 1990s to an overly simple theory; it was believed that rising prices in stocks were caused by an underlying rise of companies’ value. The price of stocks in the 1990s is today better understood as derived from a shortage of equities in the market (Oswin, 2005). The law of supply and demand is a fundamental concept in economics that explains market factors such as the quantity of a product or service demanded by consumers, the supply of products or services that suppliers are willing to produce and the relationship between supply and demand to create market equilibrium. The law of supply and demand also tries to explain what conditions in the market create changes in quantity demand and supplied in the market (Colander, 2008).

In his essay, The Relative Shortage of Equities, Oswin (2005) describes some of the conditions that affect stock market activity and explains the theories behind the demand and supply of equities, which drive the prices of the market. According to Oswin (2005), the law of supply and demand is the cause behind bear and bull markets. Investors use the term bear market to describe markets in which the prices of stocks are stubbornly declining. A bull market is characterized by a strong upward trend in the prices of stocks. According to the law of supply and demand, the increase in the price of a product is caused by a shortage of supply or excess demand, and a decline in price is associated with a surplus in supply or a decrease in demand (Colander, 2008). Oswin (2005) states that during the Great Stock Bubble “ Investors’ determination to buy equities exceeded issuers willingness to satisfy their demand for stocks” (p. 4). Furthermore, Oswin (2005) notes, “issuers competed with investors in buying back company shares, contributing to the shortage” (p. 4).

What is unique about the stock market is that the value of securities is largely dependent on speculation. In essence market expectations are what drive the demand and supply of securities. Thus, understanding how the law of supply and demand affects stock prices is much more complex than in other industries. To simplify, it can be said that when investors expect market prices to rise and believe they can make a profit, the demand for securities will also rise, the opposite is true when individuals expect declining prices. The law of demand also states that when prices are lower demand rises, and this is also true for securities when combined with reinforcing market expectations. A lower price for a security, especially when that security is expected to increase in value will cause a rise in demand. On the supply side, issuing companies are more apt to sell securities when the price of their stock will be high as to maximize capital to finance growth. This is in accordance with the law of supply that states supply increases when prices are high and profits are expected to increase. However, the demand for supply is also affected by outside forces such as a company’s need for raising capital. If a company has enough capital to finance growth operations and does not need to borrow, there will be no need for companies to issue additional securities. In a booming market, in which corporate profits are steady and growing, and the need for issuing additional securities is low, stocks will be in high demand and prices will rise. Additionally, sellers and buyers of securities in the secondary market create supply in the market. When prices are rising, investors are willing to hold on to their stocks for longer periods of times and there is a shortage of sellers. When prices are declining, investors are more eager to sell their securities to protect their paper profits or to minimize exposure. Equilibrium of price is created when potential buyers willingness to pay for a security matches what suppliers are willing to sell their securities for.

References

Colander, D. C., (2008). Economics (7th ed.). New York: McGraw-Hill.

Oswin, J. (2005). The relative shortage of equities. Capital flow Analysis. Retrieved onMarch 13, 2010 from: http://www.capital-flow-analysis.com/investment-theory/shortage-of-equities.html

Project Planning in Teams

Jenna Doucet (2oo9).

Project Planning in Teams

Working in teams has become common place for most education and workforce instituitions. The successful team  project is dependent on how well the team develops a plan to attack the project. Team members should focus on the planning stages of the project as the primary goal. Successful project planning is dependent on team leadership, identifying the project and defining its goals and planning for effective collaboration amongst team members.  Understanding the various aspects involved in project planning is not only a constituent to effectively achieving the team’s goals, but a reflection of the institution’s ability for success.

The  first step in project planning is the election or appointment of a team leader. A team leader’s role is to facilitate the success of a project, through careful and meticulous planning the effective leader establishes a road map that ensures all parties involved have coordinated tasks and responsibilities to accomplish. “All groups need leadership. Without leadership, a group may be nothing more than a collection of individuals lacking the coordination and motivation to achieve a common goal ” (Leadership in Groups, p. 173).

The next logical step in project planning is the implementation of the project’s scope or specifics. This is where the team establishes their goals and objectives. The use of a comprehensive team charter can help the team leader’s and  members cooperate on a plan of action that meets the project’s demands (Hayes, 2000). The Team charter is a cooperative project where all team members are encouraged to give input on such delicate subjects such as the team’s goal and guidelines for managing limitations and conflicts. A comprehensive team charter should incorporate the following elements :

Project objectives

The first step of the team charter should be to identify the project’s objectives. Objectives are the what, when and where of the project. These include the project’s overall timelines and content as well as  the individual goals of the team’s members (Grey and Larson, 2003). For example, in an educational setting, a team might be tasked with writing an academic paper on Team work. Together the team  might decide that the project’s objectives are to write a paper on conflict resolution and set the assignement’s due date as their timeline. Furthermore, they may collectively have a common goal of achieving a mark of 80% or higher. Team members will have individual goals as well and some may wish to achieve a grade of 90% while others would be happy just to get a passing grade. In this case, the simple act of defining the team’s collective and individual goals will bring the team one step closer to meeting each other’s expectations. In an organizational setting the compilation of individual successes translate to the organization’s overall success.

Deliverables

According to Grey and Larson (2003) the next step of the  project planning process is to state major deliverables, which are “ the expected outputs over the life of the project” (p.101). For example, when tasked with writing an essay the outputs could be each of the five stages of the writing process: Planning, Outlining, Drafting, Revising and Editing. In the oganizational setting, deliverables usually include time, quantity and costs estimates (Grey and Larson, 2003).

Milestones

Milestones fall into the third step of the project planning stage and are defined by Grey and Larson (2003) as the individual project tasks that must be completed by specific dates. Organizations typically structure milestones as the natural control points in a project. For any writing assignement in the educational instituition,  this could categorize individual processes and timelines for the the five stages of the writing process. For example, in the planning stage of the academic paper the team would define the steps such as researching subtopics A,B and C and by a set compilation date.

Barriers and Limitations

Defining barriers and limitations are the final stage of defining the project scope. According to Grey and Larson (2003), defining a project’s limitations can help prevent the team from establishing false expectations. Barriers or limitations are any challenge the team may face in meeting the project’s goals and objectives, which include such things as timelines, potential conflicts amongst team members, and in the organizational project other factors such as budget.

Finally in order for the team members to reach their goals they must be able to come together as a team. Careful preparation and planning is also a key factor in ensuring the team’s ability to work together effectively. In the early stages of planning it is important to take into consideration the potential of arising conflicts.Traditionally conflict management has not been of interest to most individual’s planning a team project, however neglecting this step can have serious consequences of the project’s success (Bubshait and Farooq, 1999). It is important to understand that no team is immune to conflict and even the most productive and cohesive of groups will have their share of disagrements. Conflicts can yield constructive results if managed successfully (Capozzoli, 1999). It can be difficult however,  to manage  a conflict constructively in the heat of an argument. It is therefore a good idea to brainstorm on potential conflict scenerios and have team members negotiate and comit to a plan of action before an incident occors. Pre-determining resolution techniques can help ensure the team’s commitment to the resolution and overall success of the project.

In conclusion project planning is a key factor in the success of a project. Any project can be successfully managed with a competent leader, the implementation of a comphrehensive charter, where details such as objectives and goals, deliverables, milestones and limitations are considered, and finally where a plan of action for conflict resolution has been adopted.

References

A. Bubshait and G. Farooq (1999). Team building and Project Success. Retrieved june on 13^th 2009 from:http://proquest.umi.com/pqdwebdid=43052090&sid=1&Fmt=4&clientId=2606&RQT=309&VName=PQD&cfc=1

C. Grey and E. Larson (2003). Project Management: The Managerial Process, 2e The Mc-Graw Hill companies.

D. Hayes (2000). Evaluation and Application of a Project Charter Template to Improve the Project Planning Process. Retrieved on june 11^th 2009 from: The Meritus University Library Learning Team Toolkit: http://web.ebscohost.com/ehost/pdf?vid=2&hid=107&sid=7198cd8b-a486-4dc8-9dee- 35118af9270a%40sessionmgr108

Leadership In Groups (n.d). Retrieved on june 4^th 2009 from: The Meritus University Library Learning team toolkit: http://www.apollolibrary.com/LTTMU/download/LeadershipInGroups.pdf

T. Capozzoli (1999). Conflict Resolution: A key ingredient in successful teams. Retrieved on june 12^th 2009 from: The Meritus University Library Learning Team Toolkit: http://proquest.umi.com.ezproxy.apollolibrary.com/pqdwebindex=0&did=000000045982839&SrchMode=5&Fmt=3&retrieveGroup=0&VInst=PROD&VType=PQD&RQT=309&x=&VName=PQD&TS=1065547552&clientId=13118