Management and Leadership Essay

Management and leadership are considered synonymous, but actually they are two different words. Management is defined as, â€Å"The art, manner or practice of managing, handling supervision or control whereas leadership is defined as, â€Å"The ability to: â€Å"express a vision, influence others to achieve results, encourage team cooperation, and be an example.† Leadership is â€Å"getting others to want to do things.† Leadership is intimately tied up with motivating and influencing others. Managers are administrators who write business plans, set budgets, monitor progress, solve problems and facilitate meetings. A manager achieves authority and position through experience, understanding, time and loyalty. Managers have subordinates but a leader has followers. A leader can be a manager, but a manager is not necessarily a leader. The leader of the work group may emerge informally as the choice of the group. If a manager is able to influence people to achieve the goals of the organization, without using his or her formal authority to do so, then the manager is demonstrating leadership. As put by Faye Wattle ton, â€Å"The only safe ship in a storm is leadership.†Organizational CultureAccording to Webster’s New Collegiate Dictionary — â€Å"culture is the integrated pattern of human behavior that includes thought, speech, action, and artifacts and depends on man’s capacity for learning and transmitting knowledge to succeeding generations.†Organization culture is a system of shared beliefs and values that develops within an organization and guides the behavior of its memebers .It includes routine, behaviors, norms, dominant values and a feeling or climate conveyed..The pupose and function of this culture is to help foster internal integration, bring staff members from all levels of the organization much closer together and enhance their performance. A company’s culture determines a lot of the organization’s behavior. A culture may be strong (having a dramatic influence over an individual’s behavior) or weak (having a relatively low impact on behavior).A strong culture is a coherent set of beliefs, values, assumptions, and practices embraced by most members of the organization. It fosters motivation, commitment, identity, solidarity, and sameness, which, in turn, facilitates internal integration and coordination. An understanding of organizational culture and how to transform it is crucially important for managers and leaders to achieve strategic outcomes. The position of strategic leaders in an organization assists them to see the dynamics of their organizational culture and attain the essence of strategic success through positive transformation. â€Å"Effective managers recognize that replacing a long term culture of traditional values with one that embodies the competitive values needed in the future can take years. But the rewards of that effort will be an organization much more effective and responsive to its environmental challenges and opportunities.†(Bateman & Snell, 2007)Organizational Culture at Southwest AirlinesSouthwest Airlines was founded in 1971 as a low-cost regional air carrier. The company’s mission stated on its website truly reflects its positive and healthy organizational culture. â€Å"We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.†Southwest Airlines has consistently been successful in terms of profitability, good employee and union relations, and customer satisfaction – at a time when most airline carriers are struggling in all these areas. Central to the company’s success is a culture of flexibility, family-orientation, and fun. They believe in, â€Å"The way you treat and reward employees is one part of your company’s culture†. Culture is the company’s way of life. It is how the business functions, operates, handles stress and reinforces its staff. It is the company’s general attitude toward the world. Southwest has built a reputation as a fun, light-hearted and irreverent airline with a happy staff. It is said that Southwest’s biggest hiring criterion is whether an applicant smiles during his or her interview. Southwest feels it can train anyone to do the job, but it cannot teach a person to have a positive attitude. Southwest Airlines has recognized that smiling staff members can  handle negative issues skillfully and still satisfy their customers. Southwest is also identified as the early leader of worker responsibility. The company limits emphasis on the formal organizational structure. At Southwest, decision making is the process which is done by management/worker committees. Leadership meetings are taped and shared with employees. The researchers learned that productivity could be maximized when employees felt as though their needs were being considered by receiving attention for their work. This phenomenon became known as the Hawthorne Effect. It is as true today as it was during the last century that paying attention to our human assets produces tremendous results. Southwest Airlines has learned to capitalize on the principles of the Hawthorne Effect. Southwest Airlines has consistently remained at the top of its industry, while placing a rigorous focus on employees’ feedback and needs. Southwest seeks to share the company’s success with its employees. The airline achieved high levels of employee satisfaction and was included in the Fortune magazine’s list of the â€Å"100 Best Companies to Work for in America† for three years in a row. â€Å"Southwest’s no-layoff response to September 11 was a reminder to its employees of the organization’s tradition of caring for its people. When asked to comment on this, an official explained, â€Å"Its part of our culture. We’ve always said we’ll do whatever we can to take care of our people. So that’s what we’ve tried to do.† Many analysts feel that the remarkable performance of Southwest is because of its ability to build and sustain relationships characterized by shared goals, shared knowledge and mutual respect between employees. Southwest’s organizational culture was shaped by Kelleher’s leadership. Kelleher’s personality had a strong influence on the culture of Southwest, which symbolizes his spontaneity, energy and competitiveness. Southwest’s culture had three themes: love, fun and efficiency. Kelleher treated all the employees as a â€Å"lovely and loving family†. Southwest attempts to promote a close-knit, supportive and enduring family-like culture. The Company initiated various measures to foster intimacy and informality among employees. Southwest encouraged its people to  conduct business in a loving manner. Employees are expected to care about people and act in ways that affirm their dignity and worth. Instead of decorating the wall of its headquarters with paintings, the company hung photographs of its employees taking part at company events, news clippings, letters, articles and advertisements. Southwest’s organizational culture encourages employees to be innovative, to communicate, understand and care, be devoted to customer service and most importantly to be an Individual. It maintains its success due to employee education, much of which takes place in Southwest Airlines’ festive learning center: the University for People. Southwest sees learning as a never-ending process. University for People trainers, known as facilitators, build a foundation for an ongoing learning environment through a supervisory leadership class called â€Å"Leadership Southwest Style,† which utilizes the Myers-Briggs Type Indicator ® (MBTI ®) assessment for self discovery. At Southwest Airlines, management wants employees to feel comfortable, reflecting its philosophy that an employee who is comfortable can think more freely and creatively. Regular celebrations bring employees together. These include â€Å"Spirit Parties,† Culture parties, and weekly Deck Parties at headquarters. Activities at these events include talent shows, dance contests, limbo contests, karaoke, and famous person look-alike themes. The Culture Committee welcomes new employees with a New Hire Welcome Kit, which includes a bag, tee-shirt, badge holder, pen, and welcome letter. Southwest Airlines is an excellent example of social invention that helps people discover their true capabilities. The social environment combines humor with responsibility. Employees work in teams without outside supervision. At job interviews, along with other self-development attitude, the prospective employee must show a sense of humor. The company recognizes the key to its culture is â€Å"The Spirit of LUV.† Their commitment to hire people with the capacity to love and serve others has yielded a bountiful harvest of loyalty and money. Hence it shows a very well combination of management and leadership. Key concepts of organizational culture at Southwest Airlines †¢Encourage to assume ownership †¢Hire for life †¢Trust their decisions†¢Give employees  immediate access to critical information. †¢They have the power to make adjustments and to fix significant problems quickly. Results achieved through these concepts†¢On-time arrivals, proper baggage handling, and customer complaints are communicated on a weekly basis. †¢Everyone is focused on customer service and making Southwest a success which allows them to expand outside of â€Å"assigned† responsibilitiesStrategies that organizational managers and leaders can use to create and maintain healthy organizational cultureMotivation Management – Leaders must have coaching skills, not control skills. Motivated people have goals and seek ways to achieve them. Efficiency is the result of motivated employees. The self motivated employees assume responsibility for their tasks. It creates an environment where workers trust management and management trust workers. Continuous Learning Opportunity – Motivation is associated with the desire to learn. Without it, motivation dies. Most businesses operate with a wide knowledge gap between worker and management. All through history this has been the policy, it is job security for leadership. Today, efficiency requires workers to assume responsibility and this requires the narrowing of the knowledge gap. This is achieved by empowering workers. A strong organizational culture and an approach to learning that encompasses more than just training classes can create an organization that learns and improves upon its past successes. When change occurs, organizations with a learning culture and a focus on organizational development can surpass even their own expectations. ConclusionTo sum up, leadership is essentially related to a person’s skills, abilities and scope of influence and management is a theory and a way of doing business. The managers who truly exercise the four functions of management; planning, organizing, leading and controlling, to accomplish their organizational goals are also true leadersAs time and requirements of  an organization change, there is always a need to change managerial functions. Managers at all levels must anticipate and adapt to changes. In any ordinary but expanding organization the next future change might be to restructure the organization. Technology is bringing a change in leadership styles. The command-and-control leadership methods of the last century are extremely inefficient in the fast changing technology world. Motivating environments are needed on the front-line with people who assume responsibility and exercise leadership. To attract and keep this type of person, the work environment must inspire and exploit employee capabilities. References Bateman, Thomas S. & Snell Scott A. (2007). Management: Leading and collaborating in acompetitive world. (Seventh edition), Ch-2 & 12 pgs 66- 69 & 393-383Southwest Airline webpage. Retrieved on April 20, 2007 from www.southwestairlines.comSouthwest Airlines. Retrieved on April 19, 2007 from www.caseplace.orgFrazee, Bonnie (Nov, 2006).Organizational Behavior and the Learning Process. Retrieved onApril19, 2007 from www.innovativelearning.com

How to Be a Defensive Driver

How to Be a Defensive Driver Most of Americans carry on a DL (Driver License) with them. They know it is mandatory to have a driver license since they drive to work or to school every day; however, that is without mentioning the people that someone else takes to such places. When someone requests a DL, that person goes through a process of practice and examination in order to be able to have one. Most of them pass the examinations and practices, and they become a licensed driver for the State they reside in.Obviously, a good driver is not the one that has received a driver license, but the one that drives defensively. These strategies can only be learned in several stages. Precaution is one of the most important strategies to consider when driving a motor vehicle. When a driver operates his or her vehicle on freeways and highways, there are some precautions that need to be performed. Looking in the sides-mirror is very important since the driver needs to be alert of any strange movem ents of other vehicles.No one knows when others are driving under the influences of drugs or alcohol, or both. Also, paying attention to the traffic is very important. All drivers need to know how the traffic flows in order to consider the speed of the vehicle. Being alert on the road is the important key because other vehicles can also hit the brakes unexpectedly in seconds without the other driver noticing it. Distractions can be a challenge for a motor vehicle driver. Each driver is surrounded by many distractions, and these can be found inside the car or outside of it.While monitoring a motor vehicle, a driver is challenged with today’s electronic devices and technology. Today, cell phones play a big part in a driver’s distractions since they have been improved. The availability of internet on Smart Phones is one example of it, and most Americans own these devices. This distraction can be really dangerous since it encourages the driver to use the Social Medias freq uently. Drivers need to ignore cell phones at all time during operation and concentrate on the road.Moreover, manipulating the radio and changing stations back and forth to find the one preferred can also be quite dangerous since the driver has his eyes concentrated on the radio display. Driver must maintain concentration and avoid distractions as much as they possibly can. One more example of some driver’s distraction can be â€Å"kids†. Children, especially when they are young and immature, can get restless in the back seats which can cause the driver to turn around to see what they need. As a result, the driver loses concentration, and the situation can be seriously risky.In other words, kids can exasperate the driver and keep him distracted from the task behind the wheel. Even though there are so many distractions, there always will be a solution to avoid them in order to be a defensive driver. Sitting on the seats of a vehicle, starting the engine, and pressing th e gas can be an essay way to call someone a driver, but when it comes to the situation when a driver needs to demonstrate some of the skills that he or she has learned, most of those drivers out there can’t show any.A real driver is the one who takes the process seriously to archive the goals of a defensive driver. However, to be on the list of the real drivers only take to know some simple strategies that can be learned and comprehended step by step. Precaution and avoiding distractions are part of how to be a defensive driver, but also experiences in monitoring a vehicle is important to consider.

Scams, stealing, theft Research Paper Example | Topics and Well Written Essays - 2000 words

Scams, stealing, theft - Research Paper Example obbery (application of force in order to steal from someone), copyright theft (non-physical theft, of ideas/ thoughts), retailing theft (shoplifting), credit card theft, embezzlement, possession of stolen material, forgery, identity theft, and so on. Stealing is an offense that results in punishments such as fines and jail terms. In the contemporary society, theft is fast becoming the number one global crime with surveys indicating that over a quarter of jailed person in major world nations are serving time in prisons on theft related convictions. This is not to mention the numerous cases that often go unreported or un-noticed by the law. One of the most notorious kinds of theft in the present age is shoplifting. Shoplifting refers to the removal of an item (goods) from a sales shop (shop) without paying for it. There are several questions that continue to trouble mankind concerning the crime of theft. What really triggers a person to steal? Is there a specific age in which one is transformed into a thief? Who is to blame for the alarming increases of theft cases around the world? What can be done to curb the tendency to steal? This essay attempts to answer these questions in a fair, well-informed and well-supported way using expert opinions, experiences and global surveys. As per the results of Jack L. Hayes International’s 26th Annual Retail Theft Survey, approximately 1.2 million dishonest workers and shoplifters were caught in the year 2013 in the United States alone. Equally more surprising is the fact that these apprehensions were done in only the 23 retail companies that were surveyed with more than USD 200 million recovered from these thefts. These figures continue to rise yearly and were noticeably higher than the statistics for the previous year, 2012. With increasing retail thefts, shop owners are facing huge annual loses with the innocent consumer forced to pay higher prices for goods in order to cover the losses from theft. This theft thus results

Diverse workforce management Essay Example | Topics and Well Written Essays - 3250 words

Diverse workforce management - Essay Example Diverse workforce is necessary for the successful management of cross cultural business. For example, it is impossible for American company Apple to manage their business successfully in China with the help of American employees alone. It should be noted that the locals have better knowledge about the local market and hence their services are essential for Google like big international companies to manage their business successfully at different parts of the world. Moreover, immigration has been increased a lot in the recent past because of globalization. Exchange of workforce between countries is a common thing nowadays because of globalization. In America, Middle East and European countries, manpower is extremely scarce and hence it is extremely expensive there. On the other hand, in India and China like countries manpower resources are abundant and hence it is cheap there. Globalization helps expensive labour oriented countries to utilize cheap labour force available in India and China like countries. In short, management of diverse workforce is essential in most of the international companies at present. This paper analyses management of diverse workforce by taking American company Apple Inc. as an example. ... Torrington (2011) pointed out that â€Å"Apple is currently facing lot of difficulties in its recruitments and selection processes. â€Å"The key difficulty in recruitment process is the lack of specialist skills in the labour market† (Torrington et al., 2011, p.43). America is a country which is labelled as an expensive labour oriented country. In other words labour costs in America are extremely high compared to the labour costs in other parts of the world. So, in a heavily competitive business world, it is difficult for Apple to manage their business functions with the help of locals alone. It is necessary for Apple to exploit the services of overseas workforce not only for their American operations but also for their international operations. Kirton & Greene (2005) mentioned that â€Å"Diversity exists among men and women of the same ethnic group. It also exists among women community as well as men community of the same ethnic group (Kirton & Greene, 2005, p.14). In othe r words, diverse workforce is not at all a term related to people from different cultures or communities. Diversity can exist even among domestic workforce since no two individuals are alike. So, managing diversity means managing individuals of different kind. â€Å"It can be the integration of different parts of an organization; it can be the issue of national culture within a multinational organization and it can be the development of equal opportunities† (Kandola and Fullerton, 1998, p.6). Even though Apple is keen in maintaining a diverse workforce, several overseas employees working in Apple has many complaints about the attitude of the company towards them. Many of the top managers in Apple Company behave like

Internal Control Failures Paper Essay Example | Topics and Well Written Essays - 1500 words

Internal Control Failures Paper - Essay Example It was found that most cases of internal control failures were caused by individuals external to the firm, management-level and non-management-level employees, attitude of employees towards ethics and fraud, and lack of strict reporting and double control measures within the organization (Chrorafas, 2000). The main problem was that top management did not support internal control procedures. In some quarters, this project was regarded with extreme wariness, but there also was caution about appearing to attack the idea of a conceptual framework overtly because the logic of seeking such a basis for decision making was difficult to assail. "The displacement and resettlement of the local population, of 192 World Bank projects displacing 2.5 million people between 1986 and 1993, dam and reservoir projects caused sixty-three percent of those displacements" (Macdonald 2001, p. 1011). This meant that although the issues were extremely contentious, the debates were conducted in a lower key tha n those over specific standards, and the subject rarely broke into the public prints because the media tended to view it as too esoteric for popular consumption. "A lack of regular monitoring limits the public's access to project information and impairs accountability" (Macdonald 2001, p. 1011). The... Therefore, in both the building and funding contexts, personal interests are given greater consideration than technological, ecological, or economic feasibility" (Macdonald 2001, p. 1011). The cause of the bank instability and the associated inefficiency is to be found in a specific characteristic of the financial intermediation activity: maturity transformation. The bank relies on fractional reserves. As consumers have random needs for liquidity, a financial intermediary can offer a liquidity insurance while holding in cash only a fraction of the amount deposited and investing part of the deposit in longer-term and relatively illiquid projects. This increases the welfare of depositors but it also causes instability. Project failures show the need to change policies and internal control procedures. "Bank involuntary resettlement policy requires resettlement plans to compensate relocatees, by either improving or restoring the economic base of those relocated" (Macdonald 2001, p. 1011) . This situation leads to shortage of funds and implementation of stricter financial policies. The financing of highly illiquid projects on the international markets relies on relatively short-term debt, and a run of creditors may lead a country into deep trouble even if it would otherwise have had no problems in servicing its debts (Chrorafas, 2000). "In addition, the Bank "bears special responsibility for resettlement issues in the preparation and appraisal of projects because this period before signing loans is when the Bank has maximum involvement and leverage" (Macdonald 2001, p. 1011). These failures influence internal control procedures and new internal policies. The difference is that the rules-of-conduct approach leads to relatively small and infrequent

Time Management Research Paper Example | Topics and Well Written Essays - 2000 words

Time Management - Research Paper Example Notably, time is constant and scarce and hence this topic seeks to define the need and methods that help college students to develop effective strategies to manage their time for purposes of balancing the conflicting demands of study time, working hours, leisure time, and other endeavors that limit study time. In college education, time management is significant in revising for examinations, attending lectures, and participating in sporting activities. I chose this topic because traditional students always lack enough time to do everything they need in college. As such, this topic will inform the students on the need and methods of planning and controlling the amount of time spent on certain activities with an aim of increasing the efficiency and effectiveness of their academic pursuit. This topic is significant in that it informs the students on the benefits of proper time management as well as the academic problems. Proper time management in college may involve future planning, monitoring the allocation of available time, goal setting, and prioritizing tasks. Numerous tools, skills, and techniques will help the students to accomplish their goals and tasks within the set deadlines. Such methods may include goal setting, prioritizing tasks, monitoring the academic pursuit, creating a list, organizing a work schedule, and limiting procrastination. Through effective time management, college students will enjoy certain benefits that may include good performance, establishing conducive learning environment.

Poverty and Violence in a Complex Relationship Essay

Poverty and Violence in a Complex Relationship - Essay Example This paper will put the complexity into perspective. The question posed by the ‘Economist’ deserves critical consideration because getting viable answers to the causes of violence and poverty can serve as a benchmark. Such knowledge would prove very useful in defining the global priorities in the long-term venture of promoting human development. The fact that peaceful nations in the developing world have registered positive growth In the recent past, in rates that are markedly higher than those in violent nations, establishes a pattern (Heitmeyer, & Hagan, 2003:24). This fact proves Aradau and Brown’s argument that human security is a precondition for human development very relevant (Butcher, & Papaioannou, 2012: 31). Without security, people live under constant fear. The constancy of fear among people has the potential of causing developmental paralysis. The case study illustrated in the ‘Economist’ comparing Burkina Faso and Burundi serves to provide more insight (The Economist, 2011:1). In 1990, the two African states presented an almost equal potential for economic growth. However, the violence that erupted in Burundi following the assassination of its president derailed the economic growth. After more than a decade of instability and violence in Burundi, a comparison to peaceful Burkina Faso portrayed the detrimental effects of violence. Burkina Faso was doing better and had registered a wealth gain of two and a half times. This serves to highlight that violence has the potential of making a nation poor. In the absence of the violence that resulted, probably Burundi would be an emerging economy in Africa.

Analysis Of Turkish Airlines Advertisement Campaign Term Paper

Analysis Of Turkish Airlines Advertisement Campaign - Term Paper Example Subject to its prominence, the airline flies with the best in the world and has contemplated introducing a new brand that enhances its global reach under the motto ‘Widen Your World’ (Turkish Airlines 2014). To achieve this, the airline has introduced a new TV advertising campaign that features international sports celebrities, Kobe Bryant and Lionel Messi. Notably, the ad has been receiving high publicity where it became the most-viewed commercial in YouTube’s history with over 105 million views (Al Hilal Group 2014) after its broadcast across 170 countries, in over 20 different languages (Bracher 2013). This report will derive a detailed analysis of the advert and make relevant recommendations. Directed by Marco Grandia and produced by Electric Zoo, the â€Å"Legends on Board† advertisement seeks to maximize the demand and the market advantage of using a celebrity in an advertisement (Mediabistro Inc. 2014). While Kobe Bryant is a basketball superstar, Lionel Messi is a football superstar and both stars are the airlines brand ambassadors. The Turkish Airline advertising agency, Crispin Porter + Bogusky released the ad campaign on 6 December 2012 for Turkish Airlines (Bracher 2013). The ad runs for one minute and features Kobe Bryant and Lionel Messi as the main characters and other airline passengers and personnel as supporting characters (Kobe vs. Messi: Legends on Board - Turkish Airlines 2012). Kobe Bryant and Lionel Messi act as signifiers in the ad as they represent their nationalities by competing in international sports competitions. Indeed, the â€Å"Legends on Board† ad depicts a competition involving Kobe Bryant, Lionel Messi, and a flight attendant who seek to draw the attention of a young boy with a Turkish Airlines-branded ball (Mor 2012).  Ã‚  

Comparative Law Essay Example | Topics and Well Written Essays - 2250 words

Comparative Law - Essay Example Political arguments about gun rights fall into two basic categories, first, does the government have the authority to regulate guns, and second, if it does, is it effective public policy to regulate guns? (Spitzer, 1995). Gun debate refers to a continuing political and social debate concerning both the constraint and accessibility of firearms within the United States. It has been among the most controversial and intractable issues in  American politics. The debate has been distinguished by an impasse between an individual right to bear arms based on the  second amendment  and the accountability of government to avert crime, preserve order and protect the welfare of its residents. The right to own a gun and defend oneself is considered by some as a central tenet of the  American identity (Spitzer, 1995). The two early state court cases,  Bliss  and  Buzzard, set the debate in interpreting the Second Amendment, i.e. whether it protected an Individual Right or a Collective Right and occupied the American legal experts thinking for years to come .A debate about how to interpret the Second Amendment evolved through the decades and remained unresolved until the 2008  District of Columbia v. Heller  U.S. Supreme Court decision (Cornell , 2006). ... Gun rights groups maintain that bans on the sale of certain types of weapons have not proved effective in reducing violent crime, and that proposals for stricter background checks at gun shows are designed to eliminate gun shows themselves. Some gun manufacturers have volunteered support for safety locks, but the NRA has criticized safety locks for placing an undue burden on gun manufacturers without a proven benefit to the public (Crothers, 2003). The first category, collectively known as rights-based arguments, consist of Second Amendment arguments, state constitution arguments, right of self-defense arguments, and security against tyranny and invasion arguments. Public policy arguments, the second category of arguments, revolve around the importance of a militia, the reduction of gun violence and firearm deaths, and also can include arguments regarding security against foreign invasions. On June 26, 2008, in  District of Columbia v. Heller,  the United States Supreme Court aff irmed, by a 5-4 vote, the decision of the D.C. Circuit Court of Appeals. This decision struck down the D.C. gun law. It also clarifies the scope of the  Second Amendment to the United States Constitution, stating that it stipulates an individual  right  irrespective of membership in a militia. However, the court made it clear that like other rights, the right to bear arms is not without limitations, leaving open the prospect of governmental regulation. The decision declined to rule on the  incorporation  of the Second Amendment, leaving its applicability to the states unsettled "While the status of the Second Amendment within the twentieth-century incorporation debate is a matter of importance for the many challenges to state gun control laws, it is an issue that we need not

Entrepreneurial Risk Traits and the Ability to Manage Uncertainties Essay

Entrepreneurial Risk Traits and the Ability to Manage Uncertainties - Essay Example As the owner of the business, an entrepreneur is also perceived as a risk taker. This is because all the decisions pertaining to the success or failure of the business lies with him. Despite this revelation, the Global Entrepreneurship Monitor in 2006 reported that many people in the UK are risk averse, with more than two-thirds of respondents revealing so. As many of businesses fail, such fears are well placed. Many businesses fail due to a number of reasons among them being lack of finance, poor infrastructure, shortage of skills and complexity of regulations or the red tape among others (Storey 1994, p.5-9). Nevertheless, the ability to evaluate the uncertainties and risks that are integral part of all businesses decisions is a vital element of successful entrepreneurship. For this to be accomplished, entrepreneurs must do their research properly to ensure that all reasonable steps are taken to mitigate any potential failure. This is because, the outcome of a successful risk takin g result into a profitable venture (Timmons 1999, p.15-22). The objective of this paper is to explore how the entrepreneurial trait of risk taking and the ability to cope with uncertainty may impact the operating environment of a small business. ... Because of these risks and uncertainties, small business entrepreneurs live in fear of failing to accomplish their goals of business success. It is, therefore, imperative that small business entrepreneurs must be vigilant to ensure that they do not plunge into the ‘pit holes’ of the business. Business expansion for instance comes with many challenges most of which comes as a result of lack of knowledge of new locations, and lack of the ability of manage large strategic, structural, technological and the human resource and the constrain of monetary base as well according to Rae (2007, p.10). Expanding the size of the business implies that more employees are required; more capital is also needed as well as the challenges of coping under the new business environment. Some of the risks and uncertainties that an entrepreneur must be aware of and device proper ways to manage them for the success of the business include: Financial constraints Entrepreneurs are definitely faced by the risk of inadequate finance especially when trying to expand their business venture. This is because no single business can be expanded without the need of more capital investment. Since the business is small, it may not be at a position to provide the more capital outlay required to meet all the business needs. As such, an entrepreneur must be at a position to take all the risks necessary to ensure that the probable financial needs are available. For instance, an entrepreneur should take the risk by borrowing the required finance from financial institutions. The other strategy that may be employed by the entrepreneur includes seeking a merger with other firms to help pull resources together for the success of the business. An entrepreneur with such a risk-taking trait will easily come

Does the UN hold relevance in today’s world Essay Example for Free

Does the UN hold relevance in today’s world Essay After the failure of League of Nations, the necessity of an international organization of wider character was felt. This need was fulfilled with the creation of UN in 1945. It had the responsibility to maintain international peace and promote cooperation in solving international economic, social and humanitarian problems. The UN has completed fifty seven years and apparently seems to be more assertive, confident and visible, both in its approach and actions. The recent manifestations of this confidence have been its interventions in Kuwait, Somalia, Angola, Rwanda, Zaire and Afghanistan Apart from few highlights the UN has always been in question for its power to handle the disturbing issues around the world. The founders of the UN had envisaged that the organization would act to prevent conflicts between nations and make future wars impossible, however the outbreak of the Cold War made peacekeeping agreements extremely difficult because of the division of the world into hostile camps. The UN has also drawn criticism for perceived failures. In many cases, member states have shown reluctance to achieve or enforce Security Council resolutions, an issue that stems from the UNs intergovernmental nature—seen by some as simply an association of 192 member states who must reach consensus, not an independent organization Looking at the past it can be said that UN has failed in serious issues but nevertheless it has made progress toward world cooperation and has adapted to changing circumstances that were not dreamed of by its founders.

KLSE Relationship with Inflation and Exchange Rates

KLSE Relationship with Inflation and Exchange Rates Capital market is a financial market which is for long term investment funds with the maturities greater than one year. In USA, capital market was controlled by security exchange and it was established in 1934. While in Malaysia, Bank Negara Malaysia (BNM) capital market has been developed since 1980s. It is a market where securities such as common stock, preferred stock and bonds are issued or traded. Companies, government and other organizations use capital market in order to raise funds for their operations. In other words, capital market helps organizations or institutions whether in public and private sector to gain capital. Besides that, capital market also traded an investment funds like debt, equity and mortgage loan. The central bank, Bank Negara Malaysia (BNM) also played a very important role in develop and care of this market. Kuala Lumpur Stock Exchange or more popular known as KLSE is the only one stock market in this country. All the listed securities in Malaysia are done by KLSE since the KLSE is a self-regulatory. Based on this study, KLSE Composite Index are represented by the stock market, money supply represented by M3, consumer price index represented the inflation rates and exchange rates represented by the Malaysian Ringgit (RM) against the US Dollar. In KLSE it has their own rules where buyers and sellers trade their transaction with each other. Since KLSE was established, there were ups and down movement of KLSE causes by many variables. To measure the performance of stock market, stock index is used. Besides, it can be used by all investors as a benchmark for them to evaluate the performance of holding shares. KLSE Composite Index is comprised of 100 companies listed on the exchange. The movement of stock prices can be triggered by the movement in financial sector in particular, that is the money supply. From this situation, there might be a relationship between KLSE Composite Index with money supply. A negative relationship between stock market and inflation in India and by previous study that also comes out with the same result might support the relationship between KLSE Composite Index with inflation rates. The motivation of this study is to find out whether there is a relationship between KLSE Composite Index with the level of money supply, inflation rates and exchange rates. Thus, if the Malaysian economic are facing with inflation, the stock price will be low and vice versa. 1.2 BACKGROUND OF THE STUDY Kuala Lumpur Stock Exchange (KLSE) is a formal stock market and it is widely constructed such as the composite index, EMAS index, and the various sector indices of tin, plantation, hotel, services, automobile, industrial and properties. KLSE is a self-regulatory organization and has emerged as one of the top performing bourses in developing countries in 1992. Based on the previous study, stock index is used to measure the performance of all stock market. KLSE calculate the index for each main sector traded however, mostly it will use the KLSE Composite Index because it will comprise the stocks traded on the KLSE. Since it is the only stock market in Malaysia, the monitoring and supervising do by Minister of Finance (MOF) and by Securities Commission (SC). KLSE Composite Index has been introduced on 1986 where one stock index was needed which can act to stock market performance and Malaysia economy. All the data that has been calculated electronically by KLSE can be taken by brokers companies and other customers at any time since the index is base on minute to minute. KLSE are really a well known stock market in the world. In 1970s and 1980s, KLSE had major development until it had become one of the largest market capitalization bourses in South-East Asia. However, when Singapore out from Malaysia in 1965, the Stock Exchange of Malaysia then, known as the Stock Exchange of Malaysia and Singapore. In spite of, in 1973 when the currency exchange between Malaysia and Singapore drop, again it changes the name and become Kuala Lumpur Stock Exchange and Stock Exchange of Singapore. In 2004, KLSE has changed it name and now it is known as Bursa Malaysia Berhad. This Bursa Malaysia focused to improve the products and services that they conduct. While in year 2005, Bursa Malaysia was listed on the Main Board of Bursa Malaysia Security Berhad. While in KLSE Composite Index, it has been accepted as a local stock market barometer when it was introduced in 1986. From the investor side, the major factors that determine the stock market are the climate of economic. This study investigates the impact of inflation rates, exchange rates and money supply towards stock market. Based on the previous study, there are several researches that have been handled to investigate this dependent variable and independent variables. 1.3 PROBLEM STATEMENT This study is to analyze whether there are significant relationship between KLSE Composite Index as a dependent variables with the money supply (M3), inflation rate and exchange rate as an independent variables. Malaysia stock market performance nowadays has staged at an encouraging recovery and gain in selected blue chips and this can be proved when in 2007, Malaysias economy placed the third largest economy in Southeast Asia. Malaysian stock market is able to provide profitability investment since strong domestic spending give benefit sector trading in Kuala Lumpur Stock Exchange (KLSE). The movement of KLSE Composite Index Inflation depends on many economic factors. For this study, researcher tries to figure out whether the economic factors could affect the performance of KLSE Composite Index. The economic factors for this study refer to money supply, inflation rates and exchange rates. Researcher also tries to figure out, whether the economic factors could be major elements of stock investments. Inflation is happen when a country has printed too much money which will increase the rate of consumer price and also will affect the cost of living. Good news for inflation is, the last report of inflation rate in Malaysia is about only two percent which is in November 2010. There was a negative relationship between inflation rate and stock price. This is because during inflation, cost of living and cost of production will increase and investor will not invest as before inflation happen. Exchange rate refers as a payment or change for person that want to do exchange in currency from one country to currency of other country. While for the study in relationship with exchange rate, it also showed a negative relationship. When there is an increment in level of currency, the charges for each exchange also will be affected. This means they have to change the currency in a large amount and it might affect their money. Therefore, the rational of doing this research is to find out, whether KLSE Composite Index are linked to economic condition in level of money supply, inflation rate and exchange rate? 1.4 OBJECTIVES OF THE STUDY This study is to figure out the relationship, movement and performance of dependent variable and independent variables. It has divided into two types of objectives. The objectives of this study are: 1.4.1 GENERAL OBJECTIVES The major objective of this study is to identify the relationship between dependent variable (KLSE-CI) and independent variables which are money supply, inflation rates and exchange rates in order to know whether there is any positive or negative relationship. 1.4.2 SPECIFIC OBJECTIVES To determine the relationship between inflation rates and KLSE Composite Index To determine the relationship between exchange rates and KLSE Composite Index To identify whether changes in variables are significant in affecting the movement of KLSE Composite Index 1.4.3 NULL HYPOTHESES (H0) There is no significant relationship between KLSE Composite Index (dependent variables) with money supply, inflation rates and exchange rates (independent variables). 1.5 SCOPE OF THE STUDY This research paper is to examine the relationship between Kuala Lumpur Stock Exchange Composite Index with level of money supply (M3), inflation rates (CPI) and exchange rates (Ringgit against US Dollar). The data for this study are gathered a period for 60 months (5 years) from 2006 to 2010. As been stated, the multiple regression analysis is used to measure the relationship between dependent variable and independent variables with monthly basis issued by Bank Negara Malaysia (Central Bank of Malaysia). 1.6 LIMITATION OF THE STUDY There are some limitations in conducting this research. The limitations that have been highlighted are as follow: Limited variables chosen make it difficult to interpret the relationship of dependent variable and independent variables and it been conclude as not really efficient. The data collected are mostly from internet, journals, newspapers and economic reports. Unreliable collected data will lead to unreliable results. The data for this study is gathered for monthly collective data which taken from Bank Negara Malaysia. Only three independent variables (money supply, inflation rates and exchange rates) have been chosen since there are too many internal factors that can classify the relationship and can affect KLSE Composite Index. This study cover period for 60 months (5 years) 2005 to 2010, are considered quite a short period compare to other research. The finding might not be perfectly accurate. For this research, only one country is focused which is Malaysia in order to limit the scope of research. The limitation for this research can be more reliable if the data taken based on weekly basis. Since best research comes with accurate data from weekly or daily basis data. 1.7 SIGNIFICANCE OF THE STUDY This study provides some useful information about the relationship between KLSE Composite Index with levels of inflation rates, exchange rates and money supply. The significant of this study is to build better understanding for readers and useful information to investors in making good investment decision. In addition, this study provides two important aspects in Malaysia economy (exchange rates and inflation rates) which can help companies in Malaysia to make decisions to issue their shares during the period of good economic and during the economic when it face with high inflation. Studies examining the relationship between money supply, inflation rates and exchange rates under Malaysian experiences are very limited, and it is hope from the available findings from this study, it can be use as a direction or reference for further research. CHAPTER 2 2.1 LITERATURE REVIEW According to Ooi Beng Hooi (2011), entitled The Relationship between KLCI and Ringgit Malaysia against US Dollar, he would like to explain the relationship between stock price and currency exchange rate. Researcher had done his research in four years starting from July 2005 until July 2009. Last, he comes out with the conclusion that state that a significance and strong relationship are explained in both KLCI and Ringgit Malaysia against US Dollar. The results of this research are really useful and in can be us as references for future study. According to Noor Azlinna Azizan and Hasyaliny Sulong (2011), entitled The Preparation Towards Asean Exchange Link between Malaysia Stock Market and Asia Countries Macroeconomics Variables Interdependency, they investigated the interaction between stock prices and macroeconomic variables in Asia countries include Malaysia, Indonesia, Singapore, Thailand, India, China, South Korea, Japan and Taiwan to view the interdependency of our stock market to other Asia countries macroeconomics variables. As a result, the researcher found out that only stock price and exchange rates have the most impact to our stock market. According to Oguzhan Aydamer (2009), with the topic of The Relationship Between Stock Prices and Exchange Rates Evidence From Turkey, he disclose the relationship between macroeconomics variables such as money supply, inflation rates, exchange rates, interest rates and stock price. This research is done for 8 years from February 2001 to January 2008 which focuses in one country that is Turkey. After all the research has been made, he then concludes that there is a negative relationship between exchange rates and all stock market indices. Besides, he also stated that other variables are also having negative relationship. According to Aisyah Abdul Rahman, Noor Zahirah Mohd Sidek and Fauziah Hanim Tafri (2009), a research on Macroeconomic Determinants of Malaysian Stock Market, are investigates the relations between selected macroeconomic variables and stock prices for the case of Malaysia. In addition, this research highlights that Malaysian stock market has weak interaction with money supply, exchange rates and interest rates as compared to the industrial production index. Sara Alataqi and Shokoofeh Fazel (2008), with topic Can Money Supply Predict Stock Price said that, when they refer to other previous researcher, most of them come with the same result which a positive casual relationship between money supply and stock prices is frequently hypothesized by some financial analysis. While for both of these researchers, Sara Alataqi and Shokoofeh Fazel theier belive are against with that statement. From the research they have made, the results that they get are totally different with the previous study. They have proved the reason and all the calculated data in their research. As a result, they strongly explained that there is a negative relationship from money supply to stock price and also a negative relationship from interest rate to stock price. Paritosh Kumar (2008), Is Indian Stock Market Related with Exchange Rate and Inflation, said that short-term foreign assets are fully exposed to exchange risk and exchange rates movement might affect the domestic companies. He also strongly believes that, a relationship between exchange rates and stock prices do exists but it just does not rule out any relationship between them. The end result for this research is he admit that there is a significance relationship even though it shows a negative sign which means to a negative relationship. According to Shamail Arzu (2008), Relationship Between Exchange Rates and Stock Prices comes to the conclusion which changes immediately in currency can absolutely affect ups and down in the stock index. Besides, he found that fluctuation in currency rates and movement in stock exchange is negatively will affect imports and exports in a country as well. Koffie Nassar (2005), Money Demand and Inflation said that by doing an analyzing data on the relationship between money supply, prices, inflation and income in Madagascar, it comes to the result which state that a negative correlation do exist and inflation expectations are largely determined by every past events. By controlling inflation in the short run, most of the broad money growth can be effective. It concludes that the variables are not strongly significance with the dependent variable. Ramin Cooper Maysami, Lee Chuin Howe and MohamadAtkin Hamzah (2004), Co-integration Evidence From Stock Exchange of Singapores All-S Stock Indices said that the objective of their research is to examine the relationship between selected macroeconomic variables with Singapore Exchange Stock Indices. The result highlighted that the majority of the macroeconomic variables includes broad money, exchange rates and other factors are much more seriously have strong casual relationship with Singapore Exchange Stock Indices. According to Chandran V.G.R and Norazman Shah Abd Rahman (2004), entitled Causality between Money Supply and Stock Prices: A Preliminary Investigation on Malaysian Stock Market, help the researchers in order to observed the relationship between money supply and stock prices. However, based on this study, researchers are using a simple bivariate Granger causality to test the Malaysian stock market. It shows that by predicting the changes in money supply, thus it may afford for better understanding in stock prices. Ming-Yu Cheng and Hui-Boon Tan (2002), entitled Inflation in Malaysia, sait that the objective of this study is to identify either it contribute to the significance relationship or not. Both researchers come to the same conclusion where based on the variables that they have been discussed, it still significance but it cannot be calssified as strong significance. According to Professor J.P.Gupta, Professor Alian Chevalier and Fran Sayekt (2000), entitled The Casuality between Interest Rate, Exchange Rate and Stock Price in Emerging Markets: The Case of the Jakarta Stock Exchange highlighted that stock market are very complex and it can be very sensitive to exchange rates and interest rates. Any movement in stock market will totally affect the economy. When interest rate and exchange rates are fluctuating, it will cause a bad effect. Other than that, they agreed that interest rate and stock prices are independent series for most of the time and it a same result found in exchange rates which have strong relationship with stock price. Both variables are significance relationship towards stock price. CHAPTER THREE RESEARCH METHODOLOGY To find the result on this research, there are certain methods that can be used in order to determine the information data of relationship between the given variables. In this study, to determine the relationship between dependent variables (KLSE Composite Index) with independent variables (Inflation Rates, Money Supply and Exchange Rates), an analysis named the Multiple Regression Analysis and Statistical Package of Social Science (SPSS) is applied in order to analyze data and enhance better understanding for the result. This study covers the period from 2005 to 2010. These methods are the most applicable because it will evaluate the relationship between the variables. SPSS is used to interpret a result in research while Multiple Regression Analysis is used to measure the linear association between dependent variable and independent variables 3.2 DATA SOURCES Most of the data for this study are come from the secondary data. The closing prices of KLSE Composite Index at the end of each period were gathered and the data were achieved from Quarterly closing prices KLSE Composite Index over the period 2005 to 2010. Data for the independent variables, which are money supply (M3), inflation rate (CPI) and exchange rate were achieved from Monthly Statistical Bulletin issued by Central Bank of Malaysia (Bank Negara Malaysia) from 2005 until 2010. 3.3 THE DATA Based on this study, all the relevant data are the secondary data. There are: KLSE COMPOSITE INDEX Kuala Lumpur Stock Exchange (KLSE), which now known as Bursa Malaysia Berhad is a place for traders to do trading. It contains many counters where each of the counters is for different companies. Besides, it is a self regulatory organization that administers the conduct of its members and also members of stock broking companies. The data for KLSE were gathered from KLSE Yahoo Finance. MONEY SUPPLY Money supply is a total supply of money circulation use in economy. There are several types of measurement in money supply which known as M1, M2 and M3. In this study, researcher focuses more on M3. M3 which refer to broad money are consists of foreign currency deposits, saving deposits, fixed deposits, negotiable certificate deposit (NIDS) and repurchase agreement (Repos). The foreign currency deposits refer to deposit of foreign currencies hold by commercial banks, merchant bank and non-bank Malaysian residents. In this research, the data were taken from Monthly Statistical Bulletin of Bank Negara Malaysia. INFLATION RATES In economics, the inflation rate is a measure of inflation. In this study, the data were obtained from Monthly Statistical Bulletin of Bank Negara Malaysia. EXCHANGE RATES Exchange rate or also known as foreign exchange rate shows the relationship of currency between one country with others. In this research, researcher focuses on Malaysian (MYR) currency with US currency (USD). Increase in Malaysia ringgit means a decrease in the cost of exchange of Malaysian currency with other currency. The data for exchange rate were taken from Monthly Statistical Bulletin of Bank Negara Malaysia. THEORETICAL FRAMEWORK In this study, KLSE Composite Index is chosen as dependent variable and money supply, inflation and exchange rates are classified as the independent variables. This means that the changes in KLSE Composite Index actually depend on the changes in money supply, inflation rates and exchange rates. The diagram of the relationship between both dependent variable and independent variables are being showed below: Money Supply Inflation Rates Kuala Lumpur Stock Exchange Composite Index (KLSE-CI) Exchange Rates Dependent Variable Independent Variable HYPOTHESES This study consists of Null Hypotheses (H0) and Alternative Hypotheses (H1). The hypotheses are as showed below: Hypotheses 1 H0: There is no relationship between money supply and KLSE Composite Index. H1: There is a relationship between money supply and KLSE Composite Index. Hypotheses 2 H0: There is no relationship between inflation rate and KLSE Composite Index. H1: There is a relationship between inflation rate and KLSE Composite Index. Hypotheses 3 H0: There is no relationship between exchange rate and KLSE Composite Index. H1: There is a between exchange rate and KLSE Composite Index. MULTIPLE REGRESSION ANALYSIS Data for this study were being analyzed by using the Statistical Package of Social Science (SPSS) Software. Hypotheses are used to determine the relationship between dependent variables (KLSE Composite Index) and independent variables (money supply-M3, inflation rate, exchange rate). In order to determine the influential of money supply, interest rate and exchange rate towards KLSE Composite Index, a Multiple Regression Analysis is applied. This multiple regression analysis used the independent variables to predict the dependent variables. The Estimated Regression Model as follows: Y = c + ÃŽ ²M + ÃŽ ²F + ÃŽ ²X + ÃŽ µ Where: Y = Dependent Variable (KLSE Composite Index) c = Constant Term ÃŽ ² = Regression Coefficient (Beta Measurement) M = Independent Variable (Money Supply-M3) F = Independent Variable (Inflation Rate) X = Independent Variable (Exchange Rate) ÃŽ µ = Error Term COEFFICIENT RELATIONSHIP Researcher used R2, T-Statistic and F-Statistic to determine the relationship between money supply, inflation rate and exchange rate towards KLSE Composite Index. COEFFICIENT OF DETERMINATION (R2) Coefficient of Determination or known as R2 is the most usually used in linear regression. R2 present how well the regression model describes changes in the value of dependent variable (Y) that can be explained by the independent variables. It shows how the line fits the data. The value of R2 is range from zero to one. The range indicates whether the correlation is strong or not. If R2 is zero, the equation explains that there is no relationship between the dependent variable and independent variables. While if the R2 is 1, the equation explains the relationship between dependent variable and independent variables are do exist. The higher the value of R2, the better the regression equation will be. When value of R2 is higher, the exploratory power will increase and be more accurate for forecasting purposes. An equation of R2: Total VariationR2 = Total Explain Variation This equation are used when researcher decide to calculate by manual. However, in this study, researcher has chosen Statistical Package of Social Science (SPSS) in order to calculate all the data that are gathered from Bank Negara Malaysia for the 60 months periods. The result of this R2 will be shows and explains in analysis and findings. It also will conclude whether all independent variables will explain the dependent variable or it will not. T – STATISTICS ( T-STAT) T- Statistic is used to decide whether to accept or reject the null hypotheses and also to analyze the significant relationship between dependent variable and independent variables. The value in t-table will be compared with the calculated t-value. T is critical value at certain significant T = (n – k – 1) n = number of observations / years k = number of independent variables If the computed t-statistic is greater than t-critical value at certain significant levels, thus reject H0. If the computed t-statistic is lower than t-critical value at certain significant levels, thus accept H0. T-Computed > T Critical Value, accept H1 and reject H0 T-Computed F – STATISTICS (F-STAT) Researcher is also using F-Statistic in order to know the consistency of overall regression equation. F-Statistic will evaluate the significant of each individual component of entire regression model. Equation of F-Statistic is as follows: F = Explained Variation / (k-1) Unexplained Variation / (n-k) Where: F = critical value k = number of independent variable n = number of observation If the computed F-Statistic is greater than F-Statistic value at certain significant level, then reject H0. It is a vice versa when the computed F-Statistic is lower than F-Statistic value at certain significant level, then accept H0. F-Computed > F-Critical Value, accept H1 F-Computed DURBIN WATSON STATISTIC Durbin Watson is used to test the presence of auto correlation. It is appears when time series data are used. Auto correlation gives a downward bias to the standard error of the estimated coefficient (t-value are exaggerated) and hence the estimated coefficient is concluded to be significant when in reality they are not. There are three possibilities where the auto correlation problem might arise: When the independent variables are duplicated When some of the independent variables are miss specified When some important variables are found missing in the model When successive residuals are positively auto correlated, the value of D will be approach zero. If the residual are not correlated, the value of D will be closed to zero. If there is a negative auto correlated, the value of D will be greater than two and could even approach its minimum value of four. Equation of Durbin Watson Statistic (D) is defining as: D = PEARSON CORRELATION ANALYSIS Pearson correlation analysis is a statistical analysis to see the direction and to describe the strength and significance of the relationships between the dependent variables and the independent variables. According to Pearson correlation analysis, the result can be ranked as follows: Less than 0.30 = Week Relationship 0.30 to 0.49 = Moderate Relationship 0.50 to 0.69 = Strong Relationship 0.70 to 0.99 = Very Strong Relationship 1.0 = Perfect Relationship CHAPTER FOUR ANALYSIS AND FINDINGS This chapter provides the findings which are obtained from the Statistical Package for Social Science (SPSS). Through SPSS, the relationship between Money Supply (M3), Inflation Rate and Exchange Rate with KLSE Composite Index can be identified. The researcher used regression in order to measure the linear relationship between dependent variable and independent variables. Coefficient of determinations (R2), T- statistic and F- statistic are the methodologies that being used by researcher to interpret the multiple regressions. All the data were calculated on monthly basis for 60 months period (5-year), which are from January 2006 to December 2010. Table1: Data gathered from monthly statistical bulletin BNM YEAR KLSE M3 INFLATION EXCHANGE Jan-06 914.0100 679276.3000 3.2500 3.7510 Feb-06 928.9400 686040.7000 3.2400 3.7135 Mar-06 926.6300 690830.2000 4.7600 3.6860 Apr-06 949.2300 697329.4000 4.5500 3.6255 May-06 927.7800 699037.4000 3.9100 3.6290 Jun-06 914.6900 700537.8000 3.9000 3.6750 Jul-06 935.8500 705585.5000 4.1100 3.6535 Aug-06 958.1200 717140.9000 3.2800 3.6770 Sep-06 967.5500 716265.6000 3.2700 3.6845 Oct-06 988.3000 725351.2000 3.0700 3.6480 Nov-06 1080.6600 737229.6000 2.9600 3.6180 Dec-06 1096.2400 760301.6000 3.0500 3.5315 Jan-07 1189.3500 776100.8000 3.2400 3.5015 Feb-07 1196.4500 789147.0000 3.1400 3.5060 Mar-07 1246.8700 789222.5000 1.5500 3.4560 Apr-07 1322.2500 796487.8000 1.5500 3.4230 May-07 1346.8900 799238.9000 1.4500 3.4045 Jun-07 1354.3800 788610.8000 1.4400 3.4545 Jul-07 1373.7100 799902.2000 1.6300 3.4540 Aug-07 1273.9300 801630.3000 1.9200 3.5035 Sep-07 1336.3000 804248.7000 1.8300 3.4170 Oct-07 1413.6500 807425.8000 1.9200 3.3418 Nov-07 1396.9800 808446.5000 2.3000 3.3585 Dec-07 1445.0300 832737.8000 2.3900 3.3065 Jan-08 1393.2500 867682.2000 2.2800 3.2360 Feb-08 1357.4000 876225.7000 2.6600 3.1890 Mar-08 1247.5200 884372.9000 2.7600 3.1875 Apr-08 1279.8600 893619.3000 3.0500 3.1580 May-08 1276.1000 898652.6000 3.8100 3.2435 Jun-08 1186.5700 899120.0000 7.6900 3.2665 Jul-08 1163.0900 912693.3000 8.5100 3.2630 Aug-08 1100.5000 904562.2000 8.5000 3.3895 Sep-08 1018.6800 912780.0000 8.2100 3.4575 Oct-08 863.6100 900442.6000 7.6300 3.5625 Nov-08 866.1400 909230.6000 5.7100 3.6175 Dec-08 876.7500 931864.7000 4.3900 3.4640 YEAR KLSE M3 INFLATION EXCHANGE Jan-09 884.4500 946005.1000 3.9100 3.6085 Feb-09 890.6700 944320.5000 3.7100 KLSE Relationship with Inflation and Exchange Rates KLSE Relationship with Inflation and Exchange Rates Capital market is a financial market which is for long term investment funds with the maturities greater than one year. In USA, capital market was controlled by security exchange and it was established in 1934. While in Malaysia, Bank Negara Malaysia (BNM) capital market has been developed since 1980s. It is a market where securities such as common stock, preferred stock and bonds are issued or traded. Companies, government and other organizations use capital market in order to raise funds for their operations. In other words, capital market helps organizations or institutions whether in public and private sector to gain capital. Besides that, capital market also traded an investment funds like debt, equity and mortgage loan. The central bank, Bank Negara Malaysia (BNM) also played a very important role in develop and care of this market. Kuala Lumpur Stock Exchange or more popular known as KLSE is the only one stock market in this country. All the listed securities in Malaysia are done by KLSE since the KLSE is a self-regulatory. Based on this study, KLSE Composite Index are represented by the stock market, money supply represented by M3, consumer price index represented the inflation rates and exchange rates represented by the Malaysian Ringgit (RM) against the US Dollar. In KLSE it has their own rules where buyers and sellers trade their transaction with each other. Since KLSE was established, there were ups and down movement of KLSE causes by many variables. To measure the performance of stock market, stock index is used. Besides, it can be used by all investors as a benchmark for them to evaluate the performance of holding shares. KLSE Composite Index is comprised of 100 companies listed on the exchange. The movement of stock prices can be triggered by the movement in financial sector in particular, that is the money supply. From this situation, there might be a relationship between KLSE Composite Index with money supply. A negative relationship between stock market and inflation in India and by previous study that also comes out with the same result might support the relationship between KLSE Composite Index with inflation rates. The motivation of this study is to find out whether there is a relationship between KLSE Composite Index with the level of money supply, inflation rates and exchange rates. Thus, if the Malaysian economic are facing with inflation, the stock price will be low and vice versa. 1.2 BACKGROUND OF THE STUDY Kuala Lumpur Stock Exchange (KLSE) is a formal stock market and it is widely constructed such as the composite index, EMAS index, and the various sector indices of tin, plantation, hotel, services, automobile, industrial and properties. KLSE is a self-regulatory organization and has emerged as one of the top performing bourses in developing countries in 1992. Based on the previous study, stock index is used to measure the performance of all stock market. KLSE calculate the index for each main sector traded however, mostly it will use the KLSE Composite Index because it will comprise the stocks traded on the KLSE. Since it is the only stock market in Malaysia, the monitoring and supervising do by Minister of Finance (MOF) and by Securities Commission (SC). KLSE Composite Index has been introduced on 1986 where one stock index was needed which can act to stock market performance and Malaysia economy. All the data that has been calculated electronically by KLSE can be taken by brokers companies and other customers at any time since the index is base on minute to minute. KLSE are really a well known stock market in the world. In 1970s and 1980s, KLSE had major development until it had become one of the largest market capitalization bourses in South-East Asia. However, when Singapore out from Malaysia in 1965, the Stock Exchange of Malaysia then, known as the Stock Exchange of Malaysia and Singapore. In spite of, in 1973 when the currency exchange between Malaysia and Singapore drop, again it changes the name and become Kuala Lumpur Stock Exchange and Stock Exchange of Singapore. In 2004, KLSE has changed it name and now it is known as Bursa Malaysia Berhad. This Bursa Malaysia focused to improve the products and services that they conduct. While in year 2005, Bursa Malaysia was listed on the Main Board of Bursa Malaysia Security Berhad. While in KLSE Composite Index, it has been accepted as a local stock market barometer when it was introduced in 1986. From the investor side, the major factors that determine the stock market are the climate of economic. This study investigates the impact of inflation rates, exchange rates and money supply towards stock market. Based on the previous study, there are several researches that have been handled to investigate this dependent variable and independent variables. 1.3 PROBLEM STATEMENT This study is to analyze whether there are significant relationship between KLSE Composite Index as a dependent variables with the money supply (M3), inflation rate and exchange rate as an independent variables. Malaysia stock market performance nowadays has staged at an encouraging recovery and gain in selected blue chips and this can be proved when in 2007, Malaysias economy placed the third largest economy in Southeast Asia. Malaysian stock market is able to provide profitability investment since strong domestic spending give benefit sector trading in Kuala Lumpur Stock Exchange (KLSE). The movement of KLSE Composite Index Inflation depends on many economic factors. For this study, researcher tries to figure out whether the economic factors could affect the performance of KLSE Composite Index. The economic factors for this study refer to money supply, inflation rates and exchange rates. Researcher also tries to figure out, whether the economic factors could be major elements of stock investments. Inflation is happen when a country has printed too much money which will increase the rate of consumer price and also will affect the cost of living. Good news for inflation is, the last report of inflation rate in Malaysia is about only two percent which is in November 2010. There was a negative relationship between inflation rate and stock price. This is because during inflation, cost of living and cost of production will increase and investor will not invest as before inflation happen. Exchange rate refers as a payment or change for person that want to do exchange in currency from one country to currency of other country. While for the study in relationship with exchange rate, it also showed a negative relationship. When there is an increment in level of currency, the charges for each exchange also will be affected. This means they have to change the currency in a large amount and it might affect their money. Therefore, the rational of doing this research is to find out, whether KLSE Composite Index are linked to economic condition in level of money supply, inflation rate and exchange rate? 1.4 OBJECTIVES OF THE STUDY This study is to figure out the relationship, movement and performance of dependent variable and independent variables. It has divided into two types of objectives. The objectives of this study are: 1.4.1 GENERAL OBJECTIVES The major objective of this study is to identify the relationship between dependent variable (KLSE-CI) and independent variables which are money supply, inflation rates and exchange rates in order to know whether there is any positive or negative relationship. 1.4.2 SPECIFIC OBJECTIVES To determine the relationship between inflation rates and KLSE Composite Index To determine the relationship between exchange rates and KLSE Composite Index To identify whether changes in variables are significant in affecting the movement of KLSE Composite Index 1.4.3 NULL HYPOTHESES (H0) There is no significant relationship between KLSE Composite Index (dependent variables) with money supply, inflation rates and exchange rates (independent variables). 1.5 SCOPE OF THE STUDY This research paper is to examine the relationship between Kuala Lumpur Stock Exchange Composite Index with level of money supply (M3), inflation rates (CPI) and exchange rates (Ringgit against US Dollar). The data for this study are gathered a period for 60 months (5 years) from 2006 to 2010. As been stated, the multiple regression analysis is used to measure the relationship between dependent variable and independent variables with monthly basis issued by Bank Negara Malaysia (Central Bank of Malaysia). 1.6 LIMITATION OF THE STUDY There are some limitations in conducting this research. The limitations that have been highlighted are as follow: Limited variables chosen make it difficult to interpret the relationship of dependent variable and independent variables and it been conclude as not really efficient. The data collected are mostly from internet, journals, newspapers and economic reports. Unreliable collected data will lead to unreliable results. The data for this study is gathered for monthly collective data which taken from Bank Negara Malaysia. Only three independent variables (money supply, inflation rates and exchange rates) have been chosen since there are too many internal factors that can classify the relationship and can affect KLSE Composite Index. This study cover period for 60 months (5 years) 2005 to 2010, are considered quite a short period compare to other research. The finding might not be perfectly accurate. For this research, only one country is focused which is Malaysia in order to limit the scope of research. The limitation for this research can be more reliable if the data taken based on weekly basis. Since best research comes with accurate data from weekly or daily basis data. 1.7 SIGNIFICANCE OF THE STUDY This study provides some useful information about the relationship between KLSE Composite Index with levels of inflation rates, exchange rates and money supply. The significant of this study is to build better understanding for readers and useful information to investors in making good investment decision. In addition, this study provides two important aspects in Malaysia economy (exchange rates and inflation rates) which can help companies in Malaysia to make decisions to issue their shares during the period of good economic and during the economic when it face with high inflation. Studies examining the relationship between money supply, inflation rates and exchange rates under Malaysian experiences are very limited, and it is hope from the available findings from this study, it can be use as a direction or reference for further research. CHAPTER 2 2.1 LITERATURE REVIEW According to Ooi Beng Hooi (2011), entitled The Relationship between KLCI and Ringgit Malaysia against US Dollar, he would like to explain the relationship between stock price and currency exchange rate. Researcher had done his research in four years starting from July 2005 until July 2009. Last, he comes out with the conclusion that state that a significance and strong relationship are explained in both KLCI and Ringgit Malaysia against US Dollar. The results of this research are really useful and in can be us as references for future study. According to Noor Azlinna Azizan and Hasyaliny Sulong (2011), entitled The Preparation Towards Asean Exchange Link between Malaysia Stock Market and Asia Countries Macroeconomics Variables Interdependency, they investigated the interaction between stock prices and macroeconomic variables in Asia countries include Malaysia, Indonesia, Singapore, Thailand, India, China, South Korea, Japan and Taiwan to view the interdependency of our stock market to other Asia countries macroeconomics variables. As a result, the researcher found out that only stock price and exchange rates have the most impact to our stock market. According to Oguzhan Aydamer (2009), with the topic of The Relationship Between Stock Prices and Exchange Rates Evidence From Turkey, he disclose the relationship between macroeconomics variables such as money supply, inflation rates, exchange rates, interest rates and stock price. This research is done for 8 years from February 2001 to January 2008 which focuses in one country that is Turkey. After all the research has been made, he then concludes that there is a negative relationship between exchange rates and all stock market indices. Besides, he also stated that other variables are also having negative relationship. According to Aisyah Abdul Rahman, Noor Zahirah Mohd Sidek and Fauziah Hanim Tafri (2009), a research on Macroeconomic Determinants of Malaysian Stock Market, are investigates the relations between selected macroeconomic variables and stock prices for the case of Malaysia. In addition, this research highlights that Malaysian stock market has weak interaction with money supply, exchange rates and interest rates as compared to the industrial production index. Sara Alataqi and Shokoofeh Fazel (2008), with topic Can Money Supply Predict Stock Price said that, when they refer to other previous researcher, most of them come with the same result which a positive casual relationship between money supply and stock prices is frequently hypothesized by some financial analysis. While for both of these researchers, Sara Alataqi and Shokoofeh Fazel theier belive are against with that statement. From the research they have made, the results that they get are totally different with the previous study. They have proved the reason and all the calculated data in their research. As a result, they strongly explained that there is a negative relationship from money supply to stock price and also a negative relationship from interest rate to stock price. Paritosh Kumar (2008), Is Indian Stock Market Related with Exchange Rate and Inflation, said that short-term foreign assets are fully exposed to exchange risk and exchange rates movement might affect the domestic companies. He also strongly believes that, a relationship between exchange rates and stock prices do exists but it just does not rule out any relationship between them. The end result for this research is he admit that there is a significance relationship even though it shows a negative sign which means to a negative relationship. According to Shamail Arzu (2008), Relationship Between Exchange Rates and Stock Prices comes to the conclusion which changes immediately in currency can absolutely affect ups and down in the stock index. Besides, he found that fluctuation in currency rates and movement in stock exchange is negatively will affect imports and exports in a country as well. Koffie Nassar (2005), Money Demand and Inflation said that by doing an analyzing data on the relationship between money supply, prices, inflation and income in Madagascar, it comes to the result which state that a negative correlation do exist and inflation expectations are largely determined by every past events. By controlling inflation in the short run, most of the broad money growth can be effective. It concludes that the variables are not strongly significance with the dependent variable. Ramin Cooper Maysami, Lee Chuin Howe and MohamadAtkin Hamzah (2004), Co-integration Evidence From Stock Exchange of Singapores All-S Stock Indices said that the objective of their research is to examine the relationship between selected macroeconomic variables with Singapore Exchange Stock Indices. The result highlighted that the majority of the macroeconomic variables includes broad money, exchange rates and other factors are much more seriously have strong casual relationship with Singapore Exchange Stock Indices. According to Chandran V.G.R and Norazman Shah Abd Rahman (2004), entitled Causality between Money Supply and Stock Prices: A Preliminary Investigation on Malaysian Stock Market, help the researchers in order to observed the relationship between money supply and stock prices. However, based on this study, researchers are using a simple bivariate Granger causality to test the Malaysian stock market. It shows that by predicting the changes in money supply, thus it may afford for better understanding in stock prices. Ming-Yu Cheng and Hui-Boon Tan (2002), entitled Inflation in Malaysia, sait that the objective of this study is to identify either it contribute to the significance relationship or not. Both researchers come to the same conclusion where based on the variables that they have been discussed, it still significance but it cannot be calssified as strong significance. According to Professor J.P.Gupta, Professor Alian Chevalier and Fran Sayekt (2000), entitled The Casuality between Interest Rate, Exchange Rate and Stock Price in Emerging Markets: The Case of the Jakarta Stock Exchange highlighted that stock market are very complex and it can be very sensitive to exchange rates and interest rates. Any movement in stock market will totally affect the economy. When interest rate and exchange rates are fluctuating, it will cause a bad effect. Other than that, they agreed that interest rate and stock prices are independent series for most of the time and it a same result found in exchange rates which have strong relationship with stock price. Both variables are significance relationship towards stock price. CHAPTER THREE RESEARCH METHODOLOGY To find the result on this research, there are certain methods that can be used in order to determine the information data of relationship between the given variables. In this study, to determine the relationship between dependent variables (KLSE Composite Index) with independent variables (Inflation Rates, Money Supply and Exchange Rates), an analysis named the Multiple Regression Analysis and Statistical Package of Social Science (SPSS) is applied in order to analyze data and enhance better understanding for the result. This study covers the period from 2005 to 2010. These methods are the most applicable because it will evaluate the relationship between the variables. SPSS is used to interpret a result in research while Multiple Regression Analysis is used to measure the linear association between dependent variable and independent variables 3.2 DATA SOURCES Most of the data for this study are come from the secondary data. The closing prices of KLSE Composite Index at the end of each period were gathered and the data were achieved from Quarterly closing prices KLSE Composite Index over the period 2005 to 2010. Data for the independent variables, which are money supply (M3), inflation rate (CPI) and exchange rate were achieved from Monthly Statistical Bulletin issued by Central Bank of Malaysia (Bank Negara Malaysia) from 2005 until 2010. 3.3 THE DATA Based on this study, all the relevant data are the secondary data. There are: KLSE COMPOSITE INDEX Kuala Lumpur Stock Exchange (KLSE), which now known as Bursa Malaysia Berhad is a place for traders to do trading. It contains many counters where each of the counters is for different companies. Besides, it is a self regulatory organization that administers the conduct of its members and also members of stock broking companies. The data for KLSE were gathered from KLSE Yahoo Finance. MONEY SUPPLY Money supply is a total supply of money circulation use in economy. There are several types of measurement in money supply which known as M1, M2 and M3. In this study, researcher focuses more on M3. M3 which refer to broad money are consists of foreign currency deposits, saving deposits, fixed deposits, negotiable certificate deposit (NIDS) and repurchase agreement (Repos). The foreign currency deposits refer to deposit of foreign currencies hold by commercial banks, merchant bank and non-bank Malaysian residents. In this research, the data were taken from Monthly Statistical Bulletin of Bank Negara Malaysia. INFLATION RATES In economics, the inflation rate is a measure of inflation. In this study, the data were obtained from Monthly Statistical Bulletin of Bank Negara Malaysia. EXCHANGE RATES Exchange rate or also known as foreign exchange rate shows the relationship of currency between one country with others. In this research, researcher focuses on Malaysian (MYR) currency with US currency (USD). Increase in Malaysia ringgit means a decrease in the cost of exchange of Malaysian currency with other currency. The data for exchange rate were taken from Monthly Statistical Bulletin of Bank Negara Malaysia. THEORETICAL FRAMEWORK In this study, KLSE Composite Index is chosen as dependent variable and money supply, inflation and exchange rates are classified as the independent variables. This means that the changes in KLSE Composite Index actually depend on the changes in money supply, inflation rates and exchange rates. The diagram of the relationship between both dependent variable and independent variables are being showed below: Money Supply Inflation Rates Kuala Lumpur Stock Exchange Composite Index (KLSE-CI) Exchange Rates Dependent Variable Independent Variable HYPOTHESES This study consists of Null Hypotheses (H0) and Alternative Hypotheses (H1). The hypotheses are as showed below: Hypotheses 1 H0: There is no relationship between money supply and KLSE Composite Index. H1: There is a relationship between money supply and KLSE Composite Index. Hypotheses 2 H0: There is no relationship between inflation rate and KLSE Composite Index. H1: There is a relationship between inflation rate and KLSE Composite Index. Hypotheses 3 H0: There is no relationship between exchange rate and KLSE Composite Index. H1: There is a between exchange rate and KLSE Composite Index. MULTIPLE REGRESSION ANALYSIS Data for this study were being analyzed by using the Statistical Package of Social Science (SPSS) Software. Hypotheses are used to determine the relationship between dependent variables (KLSE Composite Index) and independent variables (money supply-M3, inflation rate, exchange rate). In order to determine the influential of money supply, interest rate and exchange rate towards KLSE Composite Index, a Multiple Regression Analysis is applied. This multiple regression analysis used the independent variables to predict the dependent variables. The Estimated Regression Model as follows: Y = c + ÃŽ ²M + ÃŽ ²F + ÃŽ ²X + ÃŽ µ Where: Y = Dependent Variable (KLSE Composite Index) c = Constant Term ÃŽ ² = Regression Coefficient (Beta Measurement) M = Independent Variable (Money Supply-M3) F = Independent Variable (Inflation Rate) X = Independent Variable (Exchange Rate) ÃŽ µ = Error Term COEFFICIENT RELATIONSHIP Researcher used R2, T-Statistic and F-Statistic to determine the relationship between money supply, inflation rate and exchange rate towards KLSE Composite Index. COEFFICIENT OF DETERMINATION (R2) Coefficient of Determination or known as R2 is the most usually used in linear regression. R2 present how well the regression model describes changes in the value of dependent variable (Y) that can be explained by the independent variables. It shows how the line fits the data. The value of R2 is range from zero to one. The range indicates whether the correlation is strong or not. If R2 is zero, the equation explains that there is no relationship between the dependent variable and independent variables. While if the R2 is 1, the equation explains the relationship between dependent variable and independent variables are do exist. The higher the value of R2, the better the regression equation will be. When value of R2 is higher, the exploratory power will increase and be more accurate for forecasting purposes. An equation of R2: Total VariationR2 = Total Explain Variation This equation are used when researcher decide to calculate by manual. However, in this study, researcher has chosen Statistical Package of Social Science (SPSS) in order to calculate all the data that are gathered from Bank Negara Malaysia for the 60 months periods. The result of this R2 will be shows and explains in analysis and findings. It also will conclude whether all independent variables will explain the dependent variable or it will not. T – STATISTICS ( T-STAT) T- Statistic is used to decide whether to accept or reject the null hypotheses and also to analyze the significant relationship between dependent variable and independent variables. The value in t-table will be compared with the calculated t-value. T is critical value at certain significant T = (n – k – 1) n = number of observations / years k = number of independent variables If the computed t-statistic is greater than t-critical value at certain significant levels, thus reject H0. If the computed t-statistic is lower than t-critical value at certain significant levels, thus accept H0. T-Computed > T Critical Value, accept H1 and reject H0 T-Computed F – STATISTICS (F-STAT) Researcher is also using F-Statistic in order to know the consistency of overall regression equation. F-Statistic will evaluate the significant of each individual component of entire regression model. Equation of F-Statistic is as follows: F = Explained Variation / (k-1) Unexplained Variation / (n-k) Where: F = critical value k = number of independent variable n = number of observation If the computed F-Statistic is greater than F-Statistic value at certain significant level, then reject H0. It is a vice versa when the computed F-Statistic is lower than F-Statistic value at certain significant level, then accept H0. F-Computed > F-Critical Value, accept H1 F-Computed DURBIN WATSON STATISTIC Durbin Watson is used to test the presence of auto correlation. It is appears when time series data are used. Auto correlation gives a downward bias to the standard error of the estimated coefficient (t-value are exaggerated) and hence the estimated coefficient is concluded to be significant when in reality they are not. There are three possibilities where the auto correlation problem might arise: When the independent variables are duplicated When some of the independent variables are miss specified When some important variables are found missing in the model When successive residuals are positively auto correlated, the value of D will be approach zero. If the residual are not correlated, the value of D will be closed to zero. If there is a negative auto correlated, the value of D will be greater than two and could even approach its minimum value of four. Equation of Durbin Watson Statistic (D) is defining as: D = PEARSON CORRELATION ANALYSIS Pearson correlation analysis is a statistical analysis to see the direction and to describe the strength and significance of the relationships between the dependent variables and the independent variables. According to Pearson correlation analysis, the result can be ranked as follows: Less than 0.30 = Week Relationship 0.30 to 0.49 = Moderate Relationship 0.50 to 0.69 = Strong Relationship 0.70 to 0.99 = Very Strong Relationship 1.0 = Perfect Relationship CHAPTER FOUR ANALYSIS AND FINDINGS This chapter provides the findings which are obtained from the Statistical Package for Social Science (SPSS). Through SPSS, the relationship between Money Supply (M3), Inflation Rate and Exchange Rate with KLSE Composite Index can be identified. The researcher used regression in order to measure the linear relationship between dependent variable and independent variables. Coefficient of determinations (R2), T- statistic and F- statistic are the methodologies that being used by researcher to interpret the multiple regressions. All the data were calculated on monthly basis for 60 months period (5-year), which are from January 2006 to December 2010. Table1: Data gathered from monthly statistical bulletin BNM YEAR KLSE M3 INFLATION EXCHANGE Jan-06 914.0100 679276.3000 3.2500 3.7510 Feb-06 928.9400 686040.7000 3.2400 3.7135 Mar-06 926.6300 690830.2000 4.7600 3.6860 Apr-06 949.2300 697329.4000 4.5500 3.6255 May-06 927.7800 699037.4000 3.9100 3.6290 Jun-06 914.6900 700537.8000 3.9000 3.6750 Jul-06 935.8500 705585.5000 4.1100 3.6535 Aug-06 958.1200 717140.9000 3.2800 3.6770 Sep-06 967.5500 716265.6000 3.2700 3.6845 Oct-06 988.3000 725351.2000 3.0700 3.6480 Nov-06 1080.6600 737229.6000 2.9600 3.6180 Dec-06 1096.2400 760301.6000 3.0500 3.5315 Jan-07 1189.3500 776100.8000 3.2400 3.5015 Feb-07 1196.4500 789147.0000 3.1400 3.5060 Mar-07 1246.8700 789222.5000 1.5500 3.4560 Apr-07 1322.2500 796487.8000 1.5500 3.4230 May-07 1346.8900 799238.9000 1.4500 3.4045 Jun-07 1354.3800 788610.8000 1.4400 3.4545 Jul-07 1373.7100 799902.2000 1.6300 3.4540 Aug-07 1273.9300 801630.3000 1.9200 3.5035 Sep-07 1336.3000 804248.7000 1.8300 3.4170 Oct-07 1413.6500 807425.8000 1.9200 3.3418 Nov-07 1396.9800 808446.5000 2.3000 3.3585 Dec-07 1445.0300 832737.8000 2.3900 3.3065 Jan-08 1393.2500 867682.2000 2.2800 3.2360 Feb-08 1357.4000 876225.7000 2.6600 3.1890 Mar-08 1247.5200 884372.9000 2.7600 3.1875 Apr-08 1279.8600 893619.3000 3.0500 3.1580 May-08 1276.1000 898652.6000 3.8100 3.2435 Jun-08 1186.5700 899120.0000 7.6900 3.2665 Jul-08 1163.0900 912693.3000 8.5100 3.2630 Aug-08 1100.5000 904562.2000 8.5000 3.3895 Sep-08 1018.6800 912780.0000 8.2100 3.4575 Oct-08 863.6100 900442.6000 7.6300 3.5625 Nov-08 866.1400 909230.6000 5.7100 3.6175 Dec-08 876.7500 931864.7000 4.3900 3.4640 YEAR KLSE M3 INFLATION EXCHANGE Jan-09 884.4500 946005.1000 3.9100 3.6085 Feb-09 890.6700 944320.5000 3.7100

Comparison Of Bureaucratic And Non Bureaucratic Organisations Commerce Essay

Comparison Of Bureaucratic And Non Bureaucratic Organisations Commerce Essay The Style of bureaucratic organization has totally different structure as compare to the non bureaucratic organizations. The bureaucratic style is preferred due to its technical style of administration but for the new and small and medium size organizations no bureaucratic style is most popular. Here are comparisons between these two: Suitability: Bureaucratic style is more suitable for large organization but for new small and medium size organization the non bureaucratic style is more suitable Utilization of Human resources : In the non bureaucratic the human resources are more effectively and efficiently used by the organization as compare to the other style. Creativity and Innovation: As the non bureaucratic organizations is more flexible environment so the more chances o creativity and innovation is in non bureaucratic as compare to bureaucratic organizations. (Stamm V B: 2008), Operational control: In the bureaucratic organizations the control command for operations are distributed while in non bureaucratic there is a centralised command of control for the operations of the organization. Time Saving: In bureaucratic organizations there is very long chain of command and when the order is given by the higher authority from top to down level it takes more time to communicate while in the non bureaucratic direct orders are given from the higher authority to the subordinates in order to get the spontaneous response. It takes less time and more time to work is devoted. Motivational level: The level of motivation is very high in non bureaucratic style because the direct orders are given from the top level and more rewards and appreciation is given by higher level to the subordinates directly while in bureaucratic style the top level has rarely communicate directly to the subordinates. (Sapru R.K: 2006) Structure: Non bureaucratic structure is more volatile as compare to the bureaucratic structure. Communication and policies and procedures: In bureaucratic there is poor level of communication while in non bureaucratic the level of communication and passing information from top to down is much quicker and faster. However, In bureaucratic style there are written documents of policies and procedures and if any problem comes they can resolve it by using that policies and procedures while it is absent in non bureaucratic organization. As in bureaucratic organizations there are more policies and procedures which are followed by the employees and they feel no freedom and less motivated environment as compare to on bureaucratic organizations where people are more motivated and more efficient to make the organization more successful. Preferred Organization: As discuss earlier that the non bureaucratic organization style is more suitable for small and medium sized organization while for higher or big organizations the bureaucratic style is more suitable. While I have seen that in non bureaucratic style the flexibility of work, communication from top to down and motivational level of the employees are high so they chase easily chase the goal of the organization. However every organization has its own style and structure and it is not easy to decide for a particular organization that which structure is best for them. After critical analysis I will choose non bureaucratic style because the motivational factor involved in it is the main point for my organization and as motivation brings innovation and creativity in the organization. As in 1995 Herzberg says During work the different factors which motivate people and different from those which create dissatisfaction **The factors which are usually involved in doing the job related to job satisfier while the factors which define the job context usually relates the job dissatisfies.** Advantages and Disadvantages: Every organization has its own style and every style has its own advantages and disadvantages. So these are as follows: Advantages of Non-Bureaucratic Organization: Non bureaucratic organization style is more flexible and easy to adopt the changes in any organization. As the authority has direct communication to the subordinates so the fast communication makes the response quicker and efficient. There is no long chain of command which saves the time and efficient use of human resources at its potential. Employees are more motivated by rewards and appreciation by the higher authorities directly which bring the innovation and creativity in any organization as the decision and working environmental are more flexible so more quicker to adopt the global changes which keeps the employees more responsive and responsible to chase the organizational objectives. As there is no long hierarchy so any employee can be given work without any time limit and position burden. So the employees can take their own initiatives and make decision in order to complete the task without waiting the higher authority permission. Disadvantages of non-Bureaucratic Organization: The main disadvantage is that the structure is very informal there are not any hard and fast rules, policies and procedures in the written form. There is lack of standardisation so the problems arise in the organization on the same issues cannot be solved so the workforce are involved to put their input to solve the problem. As the centralisation of command of control make the employees to depend only on the top authority or single person to fulfil the operations or tasks of the organization. However every new small and medium organization will look forward to be expanding in the future so this non-bureaucratic style should be changed into the bureaucratic style in order to handle the tasks and operations of the organization in more effective and efficient way. Due to the absence of proper procedures and policies in the written form sometimes its very hard for the organization to fulfil the requirements. Conclusion: According to me the non bureaucratic style has some edge over the traditional bureaucratic style as it is more flexible and easy to adopt changes in this modern style of era. Although every organization has aits own structure according to its requirements and size. Although the non bureaucratic has some disadvantages like lack of standardisation and absence of written policies and procedures but still it is suitable for the small and medium size organizations. However while choosing the style of an organization its all depend on the nature and size and the main operations which is carried out by the organization. At the end every non bureaucratic is turn into bureaucratic as it grows and capture more market shares. So in the start of any new business the non bureaucratic style is adopted while it expand than there should be written rules, policies and procedures which should be followed by the employees in order to solve the problems and to attain the major objectives and goals of any organization. This is a world of changes and future is uncertain so there should be some sort of innovation and creativity in the organization and its workforce should be satisfied with their work level and responsibilities. Thus the main purpose is to purse the organizations objectives and goals whether it is bureaucratic or non bureaucratic in style because both have their own advantages and disadvantages.