Print Email Download Reference This Send to Kindle Reddit This
submit to reddit

World tea production

Question 1

According to FAOstat, world tea production had achieved 3.6 million tones in 2006 whereas there are 3.8 million tones in 2007. The world tea production has increased 2 million tones in these two years. In these two years, five major countries have produced almost 80% of the world's tea. Those countries include China, India, Sri Lanka, Kenya and Turkey. China is the country that produces the most tea in the world. In 2006, China has 1028 million kg of production and 1094 million kg of production in year 2007. India is the second large production in the world. There are 928 million kg of production in year 2006 and 945 million kg of production in year 2007. The third country is Kenya where they have 311 million kg of production in year 2006 and 370 million kg of production in year 2007. On the other hand, Sri Lanka produces the same quantity with Kenya that is 311 million kg of production in year 2006 and only 305 million kg of production in year 2007. The last country is Turkey; they have 204 million kg of production in year 2006 and only 191 million of production in year 2007. Tea export in these five countries also consider in a large quantity.

In exportation, Kenya is the country that exports more than other countries. Kenya has exported 314 million kg in year 2006 and 346 million kg in year 2007. The second countries that export more are Sri Lanka that has exported 315 million kg of tea in year 2006 and 294 million kg of tea in year 2007. The next country is China, where they exported 287 million kg of tea in year 2006 and 298 million kg in year 2007. India was the fourth country that exported 219 million kg of tea in year 2006 and 179 million kg of tea in year 2007. The last country was Turkey; they exported only 2.7 million kg in year 2006 and 3.3 million kg in year 2007.

The global consumption in the world are 3.64 million tones in year 2006 and there are some increase in year 2007 that is 3.68 million tones with increase 0.04 million tones in two years time. In year 2007, Sri Lanka has 1.2kg of consumption per capita. However, Turkey has 2.7kg of consumption per capita in year 2007. In domestic consumption, China has 776000 tones in year 2006. India has 771 million kg during the same year and 786 million kg in year 2007 according to India tea board. At last is Kenya with 17 million kg in year 2007. (FAO Report 2008)

India export many teas in a year to the whole world. In 2006, India exported 219 million of tea and exported 179 million of tea in year 2007. Compare to other country, India consider export many teas in a year. Therefore, if the productions of supply decrease, which means that the export decrease, the price of tea may keep increase and the demand will still increasing. This will lead that consumer who always drinks the tea from India have to pay higher price to drink those teas. On the other hand, if the prices of tea keep increase, consumers will tend to change the flavour of tea like drink the tea from China or Kenya and the exportation of India will decrease. This would not only influence the income of India but also influence the sales of tea.

There are two main transnational corporations in the tea market, which are Tata tea and Unilever. Tata tea is the second largest manufacturer and distributor for value-added tea. In India, Tata tea has interest in engineering, hotels, communications, automobiles, steel and chemicals. Currently, Tata tea manufactures 70 million kg of tea in India and 54 tea estates. Tata tea in India also has 10 tea blending and packaging factories as well as 59,000 employees among the whole world. However, in Russia market, Tata tea plays roles that they will provide customers with a wider choice of tea products of the highest standards.

On the other hand, Lipton tea that owned by Unilever is the one of the world's great refreshment brands and best-selling brands of the tea. Lipton was creating at the end of the 19th century that is 1980 in Scotland. Today, Unilever employed 174,000 people in 100 countries worldwide. Unilever had annual sales of around 300,000 tonnes that accounts for 12% of world volume of black leaf tea. Recently, eight South Indian farms and four estates in Indonesia have gained certification from Rainforest Alliance Certified farms. The typically family businesses of around 300 to 500 hectares and 3,500 workers and their dependants are support them together.

Question 2

Demand curve is a curve that shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same. However, supply curve is a curve that shows the relationship between the quantity supplied and the price of a good when all other influences on producers' planned sales remain the same.

Diagram 1 shows that increase in demand curve and decrease in supply curve of tea. The equilibrium price for tea is state at P0 and the quantity of tea is Q0. Assume that the income of consumer increase, they will tend to buy more tea to drink. Therefore, the demand will increase and shift the curve to the right. The price of tea will increase from P0 to P1 and the quantity of tea will increase from Q0 to Q1. However, supplier will reduce their production during bad weather. This will lead the supply decrease and shift the supply curve to left. The price will increase from P1 to P2 due to lack of tea supply and the quantity will decrease from Q1 to Q0. The quantity will become uncertain impact and could not calculate properly.

Since year 2005, the tea prices in India keep increasing. The price in year 2005 is Rs.58.05, year 2006 is Rs.66.01, year 2007 is Rs.67.27, and year 2008 is Rs.86.99. From year 2005, the productions of tea in India keep decrease and lead the tea price increase. Some factors that cause the production decrease and the price of tea increase.

Bad weather is the main factors that influence the production of tea. India is affect badly by bad weather recently. Workers could not harvest those teas and lead the production keep decrease. Sometimes India will face dry spell and cause teas harvest delay. This cause had affected the harvest of teas many times in a year. However, teas also cannot harvest in rainy day because of lower moisture content in the tea. With those limited supply, growers and supplier forced to increase the price to buy more fertilizer. In addition, consumers demand keep increase but supplier cannot provide tea them. Therefore, supplier also forced to increase the price to maintain their income.

Secondly, the tea productions decrease is because of labour wages. If the prices of tea increase, workers do not have ability to work if their wages do not increase too. Since they dun have the ability to work, they would not harvest more tea. This will lead the production decrease and other teas will dried up if they did not harvest at that time. On the other hand, some workers will choose to have a strike on the company to show their dissatisfied. When those workers did not work, the production will decrease too.

The other factor that causes the price of tea increase is demand of consumers. When consumers have more money, they willing to pay more to drink tea. Since them willing to pay more, they will request to drink more tea or high quality of tea. Growers will increase the tea price at this time when the demand is increase. According to tea board of India, some consumers willing to pay more by bidding the price to get a good quality of tea. This is because the best quality of tea is limited and the demand for those teas is high, supplier had to sell for consumers by bidding the higher price.

Another reason that influences the production of tea is the cost of production. Mainly, the fuel and electricity prices are rise causes the factories suffer. They forced to increase the price to maintain their income. Not only fuel and electricity but also labour cost, firewood, cost of leaf transport and produce transport. Since the cost is increase, factories tend to decrease the production and increase the tea price. This maybe a risk for those factories, but they forced to do that to survive in the market.

In conclusion, in order to survive in the tea market, many firms have to take risk on it. On the other hand, factories should increase their production during good weather and keep stocks to sell for those consumers.

Question 3

The changes of tea price will lead many effects on the economies. For examples: employment rate, income, income per capita, inflation, and export revenue. When the price increase, many people will leave others market and join into tea market. Therefore, the employment rate will increase and nearly full employment. When full employment, employer will pay less to the employees and decrease their income. The income of individual decrease will decrease the income per capita too.

In addition, if the tea market is nearly full employment, the inflation will occurs and lead to a misallocation of resources and a lower rate of economic growth. Therefore, the export revenue will decrease due to full employment because many people will join the tea market during the increase price of the tea. Many firms will open at the same time and the export revenue for each firm will decrease. When many firms start to export their tea, the quantity will be limited because many firms compete with each other.

Competition is a open market rivalry in the seller tries to get what their competitor are looking at the same time by offering the consumers the best price, quality as well as service. Schiller stated, "In a competitive firm, the firm is without the market power but with no ability to alter the market price of the goods that produces by itself. Whereas, competitive market is a market in which no buyer or seller has market power." (128) When a large number of small firms join the market, the homogeneous products will increase and will become no barriers to entry and exit the market.

Market power is the ability to alter the market price of a good or services. For example, growers have no market power to increase the tea price but manufacturers have the power to do so. When demand increase or bad weather, the price of tea will increase because the supply of tea is limited. Large number of small firms will decrease the market power to control the tea price. The entire price will decide by manufacturers.

Manufacturers are very limited in the whole world, which means that monopoly will occurs in the market. They have a greater power to control the tea price. When the tea prices increase by the manufacturer, the growers are force to increase the price too in order to maintain their profit. In a competitive market, growers have less power to increase the price and control the price in the tea market. Additionally, they will increase the price of tea to consumers and this may make the demand decrease. Therefore, the manufacturers have to increase the price with reasonable.

On the other hand, the wages of the workers in the tea industry does not increase because of the full employment rate. The employers have the power to employed new workers if other workers do not have ability to work. In assumption, no workers have the ability to work because the tea price increase, the employers will have to increase the wages too. Workers will think that the tea industry keeps making profit but their wages are remaining the same. The ability of workers will decrease and they will ask for more wages or increase their wages from the employers.

In conclusion, manufacturers having the big market power to influence the price in the market. Inflation and full employment may increase when the tea price increase. If many small firms appear in the market, competition will increase too. However, prefect competition will influence the market if too many small firms join the market.

Question 4

The Competition Commission of Singapore (CCS) is a new statutory body established on 1 January 2005 under the Competition Act (Chapter 50B) to administer and enforce the Act. It comes under the purview of the Ministry of Trade and Industry. CCS has a mission that is championing competition for growth and choice. On the other hand, CCS has two visions that is a vibrant economy with competitive markets and innovative businesses and a leading competition authority known for its professionalism.

The CCS aims to promote competition in the market for the benefit of the consumer and the industry. They also take enforcement action against anti-competitive activities that prevent, restrict or distort competition. It is common for prices to move up or down closely, especially if the product is a homogeneous commodity. When competitors increase prices at about the same time, it may or may not be a result of price fixing among the competitors.

Therefore, simple observation of parallel price movements is not acceptable evidence of anti-competitive behaviour. However, if there are reasonable grounds to suspect that market players are colluding to fix prices, CCS wills no doubt to conduct further investigation.

A cartel is an agreement between businesses not to compare with each other. The agreement is usually secret, verbal and informal. A cartel also can known as a combination of independent business organisations formed to regulate production, pricing, and marketing of goods by the members. The aim of cartel is to maximize joint profits and act as if the market was a pure monopoly.

Cartel member may agree price fixing, bid rigging, output quotas and market sharing. Price fixing is the price they will charge or the discounts or credit terms they will offer their customers for goods and services. Bid rigging is a form of cartel that may arise when awarded by competitive tender. Every member will agree with each other on who should win a particular contact and at what price. Output quotas will limit the levels of products or services supplied to a marker in order to increase the price. At last, market sharing choose the customers or geographic areas they will supply or preventing competitors from entering the market.

Diagram 1 shows that collusive oligopoly in formation of cartel. Before collusion, the market equilibrium will D equals to S that is point E. The equilibrium price before collusion is Pe and the equilibrium quantity is Qe. With collusion, the cartel member will aim to keep the price at P* and limits the supply at S'. This will lead the new supply curve to SNS' and limit the quantity at Q*. On the other hand, if the competition without cartel, the price will stick at P* and the quantity supplied at Q1.

The CCS indicate that six pest control companies was engaged in fixing of prices through collusive tendering or bid-rigging in the provision of termite control and treatment services by using Agenda, a termiticide, for properties in Singapore. The six companies are as follow:

By using the Agenda, the companies colluded to submit tenders or quotations for termite proceeding projects, which is a pesticide. The projects including:

Agenda is a termiticide manufactured by Bayer Environmental Science ("Bayer") and entirely distributed by Bentz Jaz Singapore Pte Ltd ("Bentz Jaz"). The Agenda approved for use in Singapore by the National Environment Agency ("NEA").

In each of the projects, one of the companies that name as the first company provide pest control services or recommends the use of Agenda to the customer. Through email, phone or SMS, the first company inform some or all of the other companies to request them to submit bids at prices higher than its own bid, so that the chances of winning the job will increase. The first company would let other companies to know the price of its bid. The others companies would either agree to the request, or they would just submit higher bids to giving the first company the assurance that there would be no competition.

In late September 2006, the CCS received a complaint that PestBusters, Aardwolf and Rentokil had employed in collusive tendering or bid-rigging practices tender for termite treatment at Raffles Hotel. The CCS commenced formal investigations under the Act and authorised its officers to enter the premises of PestBusters, Aardwolf and Rentokil under section 64 of the Act. On 23 November 2006, the CCS carried out unannounced visits concurrently at these premises of the six companies. The CCS also issued notices to their present and ex-personnel involved in the various projects requiring them to produce information, documents, and interviewed them.

On 2 October 2007, the CCS issued a proposed infringement decision to those companies and gave them six weeks to make written representations. The six companies do not challenge or dispute the findings of infringement. Big rigging is a serious infringement of the section 34 prohibition against anti-competitive agreements and is considers by the CCS. The companies that had sought the support of the other companies were award from four out of the six projects. The value of the contracts for these four projects ranged from S$14,950 to S$349,000. The other two projects were awarded by other companies, which not part of the cartel and had been invited to tender.

The financial penalties levied on the six companies are:

  1. Aardwolf Pestkare (S) Pte Ltd (S$53,173.59);
  2. Alliance Pest Management Pte Ltd (S$36,553.45);
  3. Elite Pest Management Pte Ltd (S$4,332.28);
  4. Killem Pest Pte Ltd (S$18,872.88);
  5. PestBusters Pte Ltd (S$57,192.96); and
  6. Rentokil Initial (S) Pte Ltd (S$92,634.50)

The total of financial penalties is S$262,759.66. During the investigations, the CCS took into account the co-operation rendered by the companies in fixing the appropriate amount of financial penalty. All companies must pay their penalties to the CCS by no late than 5p.m. on 10 March 2008. If any of the companies does not pay the penalty within the deadline, and no appeal against the imposition, the CCS may apply to register the direction to pay the penalty in a District Court.

In conclusion, the Commission is to avoid the cartel, monopoly, and merger as well. However, many companies that need more profit and make an agreement between businesses not to compare with each other that are cartel. The all pest companies are the best example to show that cartel occurred in the market and the Commission had fined them with the financial penalties that cost S$262,759.66.

Question 5

In a firm, shareholders and managers aims many objectives but their aims and objective are different. The objective of shareholders is to maximize the profit; they have higher power in the organisation and set the maximum profit level. On the other hand, managers have their different objectives with shareholders. Manager tends to get the best remuneration package that is good salary, higher bonus, and others. Managers also look for maximisation of sales revenue.

Marris believes that owners and managers have a common goal, which is maximum growth of the firm. Managers seek a growth in demand for products or services of the firms to raise power or status. Owners seek a growth in the firm's capital values, to increase personal wealth.

In order to get growth maximisation, retention ratio is required to know the percentage of earnings credited to retained earnings. Therefore, high retention ratio needed to distribute less profit and retained more profits for investment; this will lead the growth of the firm increase. However, shareholder may be less content because they will face lower share price and the risk of a takeover bid will increase too. The drawback of high retention ratio is conflict between shareholders and managers. Because both of them have different aims and objectives, shareholders tends to take low risks in the organisation but managers tends to retained more profit for investment. As maximising the rate of growth of the firm's capital and firm's demand ('balanced growth') that seems by Marris is subject to an acceptable retention ratio.

Firms may use product diversification to produce more than one product. They can produce some product by themselves and do not rely to third party of supplier. In addition, firms can reduce their cost of sale by manufacture with it own.

Tesco is the world's third largest grocery retailer with operations in 12 international markets. Tesco's purpose is to create value for customers to earn their lifetime loyalty, no matter how people choose to shop or what they choose to buy. They playing their part in talking some of the social and environment challenges they face by putting community at the heart of what they do. Some indicators show the growth of Tesco in year 2008.

In year 2008, Tesco had employed more than 440,000 people and serving millions of customers every week. David Ried, the non-executive chaiman of Tesco stated that the team has worked harder than ever in year 2008 to deliver an even better shopping trip for customers and their latest staff viewpoint results show that morale is strong. The number of stores of Tesco is keep increasing since year 2004. Until year 2008, Tesco have 3,728 stores and outlets in the whole worlds those country including Asia, Europe, United States and United Kingdom.

According to Tesco annual report 2008, the diluted earnings per share was 26.62pence, which is increase 14.2% compare to year 2007. On the other hand, The Directors recommend the payment of a final dividend of 7.70 pence per ordinary share to pay on 4 July 2008 to members on the Register at the close of business on 25 April 2008. The dividend per share was 10.90pence and that is clearly showing that increase 13.1% compare to year 2007. The final dividend will paid on 4 July 2008 to shareholders on the Register of Members at the close of business on 25 April 2008. Through a Dividend Reinvestment Plan, shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing Tesco shares in the Company. This scheme replaced the scrip dividend at the time of the Interim Results in 2006 and this scheme was introduce to reduce dilution from new share issuance and improve earnings per share.

The group sales that including the value added tax on year 2008 was £51,773million. It show that 11.1% increase compare to last year. Tesco have a total profit that is net of tax and interest from joint ventures and associates for year 2008 was £75million. Tesco Personal Finance (TPF) profit was £128million, of which their share was £64million. In addition, the net finance costs of year 2008 were £63million. Tax has been charged at an effective rate of 24.0% and this reduction in tax rate is primarily due to a one-off tax reimbursement, reflecting overpayments in prior years.

Compare to Tesco's rival, which is Carrefour, Tesco have to do more and more hard work to increase its market size. The annual report of Carrefour asserts that they are number one retailer in Europe and world's second largest grocery retailer. Carrefour has more than 495,000 of employees in the whole world. Carrefour operates their retailer in 31 countries but Tesco only operate in 12 countries. Although Tesco had tried hard to get more stores, but Carrefour had reached 15,430 stores and outlets in year 2008 among the whole world.

In year 2008, the net sales of Carrefour had achieved 87million. The earning per share from recurring operation has reached 1.83euros. Not only the sales increase, Carrefour have to buy more assets to others stores and outlets and increase some assets. During year 2008, the assets of Carrefour have 52,082million and this clearly shows in financial report of Carrefour that the assets of Carrefour are kept increasing.

Currently, Tesco had diversified their product in to many areas such as clothing, consumer electronics, financial services, telecoms, home health, car insurance, dental plans, retailing and renting DVDs, CDs, music downloads, Internet services and software.

In conclusion, Tesco is the third largest grocery retailer among the world. However, Carrefour, which is their competitor are stronger than Tesco because Carrefour have huge amount of employees, retailer, and outlet in the whole world. Their sales are even higher than Tesco in the year 2008 because Carrefour starts their business earlier than Tesco. Therefore, if Tesco want to get more sales, they have to open more retailers in the whole world to increase the sales. Tesco will more focus on the non-food products that paramount to the future growth plans. Tesco is mainly involved into new regions and areas, planning and modelling, and new business opportunities.

Question 7

GlaxoSmithKline (GSK) is the world's second largest pharmaceutical company. GSK focused on facilitating work-life balance, recognizing its staff and providing programs that encourage a healthy lifestyle. GSK also consider as a committed to improving the quality of human life by enabling people to do more, fell better and live longer. As we know, GSK is a huge company and it sure has its own risk. According to GSK's report 2008, GSK face many risk and them trying to reduce all the risk. The risks are including financial risk, competition risk, reputation risk and risk on third party.

The major financial risk that GSK face is their accounting standard. New or revised accounting standards, rules and interpretations circulated from time to time by an international standard setting board. This could result in changes to the recognition of income and expenses that may adversely influence GSK's reported financial results. The market valuation of certain financial instruments that change the international standard are reflected in GSK's report results before those gains or losses are actually realised and could have a significant impact on the income statement.

On the other hand, developing a new product is a costly, lengthy and uncertain process. The new product candidate can fail at any stage of the process to receive regulatory approval. New product candidate also may appear promising in development but may fail to reach the market or have only limited commercial success after significant investment. In the USA, GSK sells its products through a small number of wholesalers in addition to hospitals, pharmacies, physicians and other groups. According to GSK's report 2008, the sales to the three largest wholesalers amounted to approximately 84% of GSK's US pharmaceutical sales. At 31st December 2008, GSK had trade receivables due from these three wholesalers totalling £1,067million compare to 31st December 2007 the totalling was £915million. GSK is appearing on the outside to a concentration of credit risk in respect of these wholesalers. For example, if one or more of them affected by financial difficulty, it could affect the GSK's financial result by materially and adversely.

Another risk is reputation risk; GSK may make additional significant provisions related to legal proceedings and investigations in the future that would reduce its earnings. GSK is currently involving matters that if proven could give rise to civil or criminal liabilities. Harmful resolution of these and similar future proceedings or investigations may have an effect on GSK's financial condition and result of operations. In the future, GSK may make additional significant provisions related to legal proceedings and investigations that would reduce its earnings.

On the other hand, third parties may perform analyses of published clinical trail results that conducted during the development of potential products to determine the safety and efficacy of products. Although not necessarily accurate or meaningful, it may raise questions regarding safety of pharmaceutical products that may result in product liability claims. Currently, GSK is a defendant in a number of product liability lawsuits including class actions that involve substantial claims for damages that related to GSK's pharmaceutical products. Claims for pain, suffering and punitive damages are frequently assert in product liability actions and can represent potentially open-ended exposure if allowed.

In this high competitive market, GSK have to face many others competitor both from proprietary products of large international manufacturers and producers of generic pharmaceuticals. GSK's operating results may get affect by the competitors with significant product innovations, technical advances or the intensification of price competition. Continued tidy up GSK in the pharmaceutical industry could affect GSK's competitive position, while continued consolidation among GSK's customers may raise their pricing pressures. The GSK faces fierce competition from manufacturers of genetic pharmaceutical products in all of its major markets. Introduction of genetic products typically leads to a rapidly loss of sales and deduct GSK's revenues and margins for its proprietary products. The expiration dates for patents and a description of litigation settlements for GSK's major products may affect the dates on which generic versions of GSK's products may introduced.

GSK has approximately 99,000 employees globally and is subject to laws and regulations concerning its employees that vary significantly from jurisdiction to jurisdiction. GSK faces intense competition for qualified individuals from other pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions. If GSK fail to continue to enrol and preserve the right people and maintain a culture of compliance may have a significant adverse effect.

The last risk that GSK face was risk on third party. Compliance with good manufacturing practice regulations is requires to the manufacture of pharmaceutical products and their constituent. However, compliance failure provide by supplier of key services and materials or GSK own manufacturing facilities could lead to product recalls and illness, interruption of production and late in the approvals of new products pending resolution of manufacturing issues. Fines and disgorgement of profits can result in non-compliance. Any interruption of supply or fines or disgorgement could affect the GSK's financial results. Single sourcing for certain components, bulk active materials and finished products create a risk of failure of supply in the event although GSK undertakes business continuity planning.

Third-party suppliers provide a number of goods and services to GSK's operations. Many of the services are very important to the operations of GSK's business. Materials provided by third-party suppliers are necessary for the commercial production. While GSK does not believe those third-party relationships are individually significant in the context of GSK. If any of the third-party supplier fail to fulfil its contractual agreement in a timely manner may result in delays or service interruption that would restrict the sales of GSK's products.

In conclusion, GSK is a huge company that must have its own risks. However, GSK had thought many solutions to reduce or solve those risks. In addition, GSK may introduce more wholesalers to separate the sales rather than concentrate on three wholesalers. In order to not restrict by third-party or patents, GSK have to find more supplier to reduce the risk.

Referencing

Internet Site

Books

Print Email Download Reference This Send to Kindle Reddit This

Share This Essay

To share this essay on Reddit, Facebook, Twitter, or Google+ just click on the buttons below:

Request Removal

If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal:

Request the removal of this essay.


More from UK Essays