Management Change and Innovation

Key issues in the case study There are a number of key issues that arise from the case of Nestle. One of the major issues that come up is the impact of mergers and acquisitions for large multinationals.Advertising We will write a custom case study sample on Management Change and Innovation specifically for you for only $16.05 $11/page Learn More As a result of its growth Nestle chose to acquire more companies in order to make an impact in its global expansion especially in foreign markets. It struck big financial deals with companies like L’Oreal and Alcon Laboratories Inc and saw acquisition of the two companies. However, not all these big deals go well and in the case of Nestlà ©, L’Oreal was largely in debt and to some extent could have contributed to its financial woes. Another issue is the diversification of the market both in terms of products and market presence. These are seen as key factors in enhancing global expansion as well as profits. Nestle aimed at improving its finances through diversification as well as strategic acquisitions. It therefore made its presence in the U.S market through Alcon Laboratories Inc. It also diversified its products to include cosmetics through L’Oreal and pharmaceutical and ophthalmic products I addition to the original dairy products. This diversification could work for or against the company as it requires more resources on the part of the management. Organizational change is yet another key issue observed in this case. Nestle went through radical changes between the second world war to 1990’s all through to date.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More These changes have come in many faces, for example in the outlook of the companies before 1980 and change in the management of the organization as well as the continuous restructuring. More issues on organ izational change will be brought up in the topics discussed below. Importance of innovation in regard to organizational change is also a key issue. Innovation in terms of technology as well as new markets cannot be overlooked. For long-term continuance of the organization innovation should be consistent with the firm’s objective. New technology and new markets should not be exclusively left be the centre stage of organizational change and growth. Changes in Nestle Nestle went through both the first-order and the second-order changes. First order change is the continuous and incremental change which may call for modifications in processes, structures or even systems; however, does not go into changing the basic strategy, core values of the organization and corporate identity. It is basically meant to sustain organizational order and continuity. Second-order change on the other hand is drastic, transformational and with far reaching implications on the core of the organization. It is aimed at changing the nature of the organization and not developing it. Nestle went through the second-order change in that it carried out activities that had an effect on the nature and strategy of the organization. Although the changes may not have been aimed at changing the nature of the organization entirely, it had far reaching implications. For example; a change in the strategy of global expansion and increase in financial gains saw nestle sail through several acquisitions.Advertising We will write a custom case study sample on Management Change and Innovation specifically for you for only $16.05 $11/page Learn More These acquisitions also meant that nestle was no longer an organization that was based on dairy products. Acquisition of Alcon Laboratories Inc and the cosmetic producers L’Oreal made a move to include cosmetics, pharmaceutical and ophthalmic products as part of nestle. Acquisition as a strategy of growth can also be cons idered as another example of second-order change. These changes effected before 1980 had far-reaching effects on Nestle and that is why they are considered as second-order change. Diversification or investment of Nestle into developing markets is another example of second-order change. Nestle diversified into developing markets not only to continue the organization but majorly increase the profits as well a change to include the organization into a cosmetic producer and supplier. This could also be traced back to when Nestle changed its strategy and started acquiring subsidiaries in foreign markets. Traditionally, Nestle used sales agents in countries that were outside its home market, but it later changed into having their presence in those foreign markets by acquiring some existing factories. Another example of second-order change evidenced in nestle is the transfer of several executive offices offshore to the U.S. this was instigated by the feeling of isolation in home offices, S witzerland and thus calling for the transfer. This move was aimed at increasing the efficiency of Nestle both in productivity and financial efficiency. The purchase of carnation in 1984 is also an example of second-order change after a number of failed acquisitions that left Nestle with many non-profitable and nonstrategic businesses. First-order change for Nestle is evidenced basically in the today’s Nestle in the period after 1990s. However, even before then Nestle sold most of its nonperforming and nonstrategic businesses.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This was basically meant to keep the organization going forth despite the losses. Under the management of Brabeck-Letmathe is seen to be leaning more on the first-order change rather than second-order. This could be due to the past failures as a result of aggressive acquisition and needed for expansion. When the CEO insists on ensuring the longevity of the organization without necessarily dwelling on short-term profits then this is first order. The change according to him is also meant to be gradual and slow is evidence that nestle is going into first-order change. As a result, it has developed approaches like corporate growth and a â€Å"corporate culture† that will ensure that longevity and continuity. Incremental approach to change Incremental approach to change is arguably the most effective method of change. Brabeck-Letmathe has to some extend used incremental approach in implementing change. One of the ingredients used is identifying the strengths of the organization an d trying to come up with ways to improve. This does not only dwell in strengths but also in weaknesses, opportunities and threats and trying to work on them. Incremental approach to change is also focused and conscious. It ensures a slow injection of change and at the same time trying to maintain internal balancing. A focus on the long term goals of the organization without laying much effort on the short-term profit motives is one of the factors key to incremental approach to change. This ensures the continuity of the business without involving radical measures that could be more destructiveness to the organization. Brabeck-Letmathe has used two vital tools that steer this type of change. These are entrenching a corporate culture and mechanisms for corporate growth. This approach ensures that Nestle establishes strengths that are not easily swayed. This is made much better by the fact that the managers have been incorporated into that corporate culture. However, there are some aspe cts of Brabeck-Letmathe approach that do not concur with incremental approach to change. For instance the complete wipe out of the executives was too radical a move. However important it may be to have managers who are well entrenched in corporate culture, we cannot ignore the fact that there is a need to listen to people or employees before creating an organizational change. In addition, we cannot ignore the role of technology in incremental corporate approach. Brabeck-Letmathe appears reluctant in embracing technology which is instrumental to growth. Though he is right on not making it the central strategic pivot point of growth his reservations are uncalled for. Brabeck-Lameck does not value social preferencing as a key aspect of incremental approach. This could be a better approach in dealing with the change managers. He seems put and as already having structures that is necessary for change. Additionally, his measures are too qualitative to fit in incremental approach to change because; this approach majorly builds on measurable quantitative aspects that become its key limitation. Implications for change managers Change managers in Nestle should have acumen in coming with the approaches that can well meet the needs of nestle. One of the key issues in consideration is the need to ensure longevity and continued existence of Nestle regardless of short operating profits. Another challenge lies with the fact that Nestle is a multinational company that has over 80 factories in different countries. This calls for efficiency and increased productivity. This increased efficiency and productivity should ensure that it doesn’t use measures that are too radical that could plunge Nestle into another financial difficulty. Restructuring process is another possible source of implication for change managers. It is costly ($300 million yearly) and a slow process that requires a lot of patience. Nestle management may have reacted to the need to sustain the longevity of Nestle by identifying factors that threatened its efficiency. For instance dropping out all non-profitable acquisitions as well as concentrating efforts on one line of products, probably dairy products. Change managers should also focus on ensuring that all the 80 factories are productive to avoid a scenario where they are servicing unproductive outlets. Therefore monitoring and evaluation should be done using the yardsticks of long-term goals of the company. In the quest of bringing change and restructuring, they should be careful to avoid strategies that may eat into company’s growth in the long run, as in the case of prior acquisitions. A similar challenge could be easily brought up by overemphasis on technology at the expense of sustainable growth. It is also beneficial for the change managers to come up with restructuring strategies that are less costly Three examples of lessons from the front line of Nestle case and possible solutions Three issues come up from the fr ontline of this study case. One of the major issues is the numerous sub branches of Nestlà © and the impact of aggressive acquisitions and mergers to penetrate foreign markets. Another subject of discussion is the diversification of products as varied as chocolate, milk products, cosmetics and pharmaceutical products. The third aspect is long-term performance or longevity of an organization Vis a Vis the short-term profit performance. Nestle just like many other big organizations used acquisition approach as a vehicle to global expansion and productivity. However, they did not consider the factors behind the deal or the financial position of the subsidiary company. This led to financial problems that saw its bad days kick in just like many other huge deals. Secondly, the need to diversify into many other foreign markets and with new products is likely to cause diseconomies in terms of management and finances. It is important for managers to weigh these implications and put structur es to deal with them before hand. Finally, many organizations and managers tend to overlook the long-term being and prefer high short term profits using very aggressive second-order approaches with great economic implications. This case study on Management Change and Innovation was written and submitted by user Cailyn Lee to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here. Management change and innovation Every organization needs positive change at one time or the other since it is inevitable. However it is natural for people within an organization to resist change. They will not readily accept new procedures that may be introduced and are ready to frustrate the management efforts in an attempt to maintain their status quo.Advertising We will write a custom essay sample on Management change and innovation specifically for you for only $16.05 $11/page Learn More Every organization has to be creative in order to remain relevant and competitive in the market as observed by Karp. This was evidence in the coca cola case as they were forced to change by the trends that affected their business in a negative way. Karp provides some statements which he argues that they constitute â€Å"creative counters† to resist change. In the case of Coca Cola Company, they had to apply innovation as well as change in their product development so as to cater for the requ ired health standards in the market in regards to their products. Coca Cola management had to provide sufficient leadership in their organization so as to recognize their business as one dedicated to health of their customers. This was one way of influencing people’s perceptions in regards to Coca Cola products bearing in mind that it would be the key determinant on how they would respond to the proposed change. The management at Coca Cola had to undertake some mental imagery in developing its new products that is, by partnering with Nestle (a Swiss company) in order to produce a drink that is tea based. In order to achieve this, they had to visualize the task they were undertaking in terms of success and not failure. The main challenge in this case was how Coca Cola would develop an acceptable process by all their employees. In addition, the company would be obliged to assess the impact of change on its employees. This would be one of the most gainful ways of introducing cha nge into the company with minimal side effects. How to deal with resistance and management responses A great deal of attention should be given to the way recipients view change. Hence, much of the focus should be geared towards the techniques used so that company employees may reframe their minds and accept change in a positive way. Partnership is a form of strength in achieving change in an organization.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Despite the numerous ways employees in an organization may come up with excuses such as ‘we have always done it this way’, it is up to management to remain firm and steadfast for any positive development to take place. To achieve success in the implementation of a certain task, there is a need for clearly spelt-out rules. For instance, Coca Cola was relying on the expertise of Nestle Company so as to produce a product that was he althy to the market. This was achieved by well defined rules and also by forging a sustainable partnership. Managers should not assume that resistance of change is purely an artifact of misconception by recipients of change. It is imperative to note that the effective self- regulation of cognitions can be learned or developed in an organizational setting. For example, an individual’s pattern of negative thinking can be altered. This can only be possible by provision of clear instructions. However, Abraham in his prescription of managing resistance emphasized on the detrimental effects of fatigue. He argued that techniques to be used should help people reframe a situation more positively. In the case of Coca Cola, they still use the image of youth, passion and action in their company. To recap it all, it is vital to mention that resistance should be appreciated and dealt with in a sober way. The Maurer’s fundamentals of success to change should be used. This essay on Management change and innovation was written and submitted by user EdwardF0rrester to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Term Vs Whole Life Essays - Life Insurance, Whole Life Insurance

Term Vs Whole Life Essays - Life Insurance, Whole Life Insurance Term Vs Whole Life TERM VS WHOLE LIFE If you're like most people, there's nothing more important to you than your family. As difficult as it is for you to imagine not being there for them, it's a risk we all face. To help be sure your loved ones have the financial protection they'll need, it's important to not only think about the unexpected, but to plan for it. If you were gone, who would provide for your loved ones? Who would help... Provide cash for family income? Cover the cost of raising your children? Pay off your mortgage? Pay off your debts? Life insurance can help give your family the protection they need while providing you with peace of mind. It can help provide continuing income and help pay the billskeeping your family's hopes and dreams alive even after your death. or to find out if you're approved for up to $150,000 of immediate 10-year term life insurance that could save you up to 30%.* Coverage starts today with no medical exam if you're approved.** Or, get more information on other life insurance coverage offered through U.S. Bancorp Insurance Services: in higher coverage amounts for maximum coverage at the lowest premiums that can be designed for long-term protection while providing flexibility in terms of premium payments and cash value accumulation. Applying for 10- and 20-year underwritten term and universal life insurance involves an interview and a medical exam (including blood and urine samples). Term Insurance Advantages Initially, premiums are lower than those for various forms of whole life insurance, thus allowing you to purchase higher amounts of insurance coverage. It is good for covering specific needs that will disappear in time, such as mortgages and other loans. Disadvantages Premiums will increase as you grow older and at the end of the term of the policy you purchase, such as 10 year term. In the 11th year the premiums will increase. Eventually, coverage may lapse due to the expense of the policy the older you do get.Generally, the policy does not have cash value. Permanent Insurance Advantages As long as the necessary premiums are paid, the life insurance policy is guaranteed to be there for your entire life. Your premium can be fixed or flexible to meet your own personal needs. The policy accumulates a cash value that you can borrow against. Loans would need to be paid back with interest or your beneficiaries will receive a reduced value of benefit if you pass away prematurely. If you ever needed to have your premiums paid for with you existing cash value, you can. If you surrender your policy, the cash value will be returned to you. Disadvantages The required premiums may make it to expensive to purchase the necessary amount of insurance you and your family needs. It may cost more than term insurance if you do not keep the policy long term. I think I would take the whole life insurance because it will adjust to your personal need as the term wont it is just a fixed rate but the whole life also has a fixed rate but it will fluxuate to fit your personal needs at the time that your in that would be why I pick whole life over term life. TERM VS WHOLE LIFE If you're like most people, there's nothing more important to you than your family. As difficult as it is for you to imagine not being there for them, it's a risk we all face. To help be sure your loved ones have the financial protection they'll need, it's important to not only think about the unexpected, but to plan for it. If you were gone, who would provide for your loved ones? Who would help... Provide cash for family income? Cover the cost of raising your children? Pay off your mortgage? Pay off your debts? Life insurance can help give your family the protection they need while providing you with peace of mind. It can help provide continuing income and help pay the billskeeping your family's hopes and dreams alive even after your death. or to find out if you're approved for up to $150,000 of immediate 10-year term life insurance that could save you up to 30%.* Coverage starts today with no medical exam if you're approved.** Or, get more information on other life insurance coverage offered through U.S. Bancorp Insurance Services: in higher coverage amounts for maximum

Assignment Essay Example | Topics and Well Written Essays - 750 words - 19

Assignment - Essay Example There are many Companies, providing different services in the field of communication, but such leaders as Century Link, are the perfect examples of high-quality services, ability to be reliable and gain a public trust. These objectives are reached through completion of exact tasks. The company provides the users with high-speed Internet. It is interested in providing the customers with security and PC support services, IPTV, DISH Network, MobiTV and DirecTV services (Century Link). Consequently, Century Link is one of the leading companies, providing the clients not only with high-quality phone and data networking equipment, but also the Company, which is able to develop appropriate solutions. The Company establishes its relations with the customers on the basis of fairness and trust. The employees of the Company are protected, compensated and promoted in an equitable manner.  Business partners are pleased with cooperation of CenturyLink. This can be explained by the fact that the Company develops its policies in accordance with the following statement: â€Å"Treat others as you would like to be treated† (Century Link). Moreover, there is no doubt that Century Link would justify its name and it is interesting to look at the history of the Company. There are many characteristics of this Company, but the point that it is brave and innovative cannot be denied for sure. Thus, Century Link is defined as â€Å"the largest Independent Telecommunications Provider and fourth largest wire line telecommunications provider in the United States - based on access lines - serving 33 states with 7.5 million access lines, 2.1 million broadband customers, 450,000 video subscribers and a nearly 17,000-mile core fiber network† (Century Link). These figures are impressive, aren’t they? Nevertheless, in order to delve into the depths of this success, it is appropriate for the audience to know that the Company was established in 1930! The Company

Steps of Hometown Deli to Move in the 21st Century Technologically Case Study

Steps of Hometown Deli to Move in the 21st Century Technologically - Case Study Example This paper illustrates explores how to bring Hometown Deli into the 21st Century technologically by adding new computer equipment, wireless routers, and Wi-Fi hubs, and staying in tune with our customers through social media sources such as Facebook and Twitter. We feel that a move to 21st Century technology not only with hardware but with software as well can, not only make us more efficient, but more profitable as well. The loan was given to Hometown Deli by the bank to help pay for the equipment which will be implored be Hometown Deli for their everyday business uses. Further resources will come from extra revenue allocated to help pay for the new hardware and software that will be used to help run the business. The deliverables coming to Hometown Deli will include the new automated inventory system which will allow the restaurant to be able to keep a closer track on their current inventory and what they need to order to make sure that they have enough supplies in the stores at al l time. Furthermore, additional deliverables will include updates to the programs and hardware as well as supplies to help keep the store running at the technological peak performance. The Systems Development Life Cycle is a seven-stage process whose purpose is to identify the information technology needs of a business that is cost effective while also meeting the company's current and future needs. The planning phase for Hometown Deli allowed the owner’s grandson to find out that the restaurant was in dire need of updating for the 21st Century technologically. Thus, we decided that to bring in more customers and retain the ones that we currently have is to update the restaurant to bring out the best that it can be. During this phase, we checked out what would be needed in order to execute our plan in bringing Hometown Deli into the 21st Century. We found out that the whole restaurant would have to be rewired in order to handle the workload that we were going to need from the new networks we are going to establish within the restaurant to set up our Wi-Fi hotspot for our customers and the wireless network going to be used for our business needs.

Tootsie Roll Paper Essay Example for Free

Tootsie Roll Paper Essay Tootsie Roll Industries Inc. Loan Package The financial statement of Tootsie Roll Industries provides insightful details into the  financial activities of the decades old organization. A financial statement is the â€Å"summary report that shows how a firm has used the funds entrusted to it by its stockholders and lenders, and what is its current financial position† (Financial statement, 2012). The company is known for products such as Tootsie Rolls, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Blue Razz, Cella’s chocolate covered cherries, Mason Dots, Mason Crows, Junior Mints, Junior Caramels, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, CryBaby, Nik-L-Nip and El Bubble (Kimmel, Weygandt, Kieso, p. A-2, 2009). Strong financial statements aid Tootsie Roll Industries in the submission of a loan package to increase company’s total liabilities by 10%. A loan package requires research to ensure that all details are met as well as a ratio analysis of liquidity, solvency, and profitability ratios. The company must justify the reason for the need of the loan, such as expansion, inventory purchases, or debt retirement. Finally, Tootsie Roll Industries must provide an explanation of how the company plans to use the proceeds from the loan as well as how loan approval might affect the company. â€Å"A loan package is the collection of documents associated with a specific loan application† (Loan package, 2012). Loan packages are instrumental in the startup and growth of many small businesses because it provides initial funding and support. The process begins typically with a cover letter, which  includes the business background, business nature, loan amount, loan purpose, repayment terms, loan benefits, business profile, and management experience (U.S. Small Business Association, n.d.). The borrower must provide proper documentation including Form 4: Application for Business Loan, Form 4-a: Schedule of  Personal History, Form 1624: Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Lower Tier Covered Transactions, and Form 1846: Statement Regarding Lobbying (U.S. Small Business Association, n.d.). Lenders and borrowers must work together in order to apply for the most applicable loan to the business. According to U.S. Small Business Association (n.d.), â€Å"Borrowers should provide complete financial statements for the last three years including balance sheets, income statements, and a reconciliation of net worth as well as a current (no more than 90 days old) interim financial statement† (Business Financial Statements). The borrower must also provide projections to the creditor. The projections predict a year out or the positive flow of cash, which includes earnings, expenses, and the reasons behind the projections (U.S. Small Business Association, n.d.). The borrow should include documentation to assist in the predications such as contracts of lease proposals, franchise agreements, purchase agreements, articles of incorporation, plans, specifications, copies of licenses, letters of reference, letters of intent, and contracts partnership agreement (U.S. Small Business Association, n.d.). If the borrower does not provide the proper documentation to the creditor, then the borrower is not likely to receive loan approval. Financial statements are key supporting documents to the loan package.

College - Is it Worth it? :: Argumentative Persuasive Essays

College - Is it Worth it? Right now in our society a college education is no longer an option or privilege, but rather a necessity. We are practically raised and conditioned to believe that one needs higher education in order to succeed in life. There is a saying that says "if you think education is expensive, try ignorance." But as technology is constantly advancing and computers are running almost anything, is a college education really necessary? There are people whom have never set foot in a college and are doing better than people who have their master's degree. There are views from both sides that contain a valid argument. The main reason why people go to college is not because they want to but because they have to. Most high school seniors are pressured by their guidance counselors and parents to go to college because it is "the right thing to do." In the essay that Caroline Bird wrote "College is a Waste of Time and Money", she states that students go to college because " . . . Mother wanted them to go, or some other reason entirely irrelevant to the course of studies for which college is supposedly organized." (481) The student may have different ideas about what he or she wants to do in life, but because they think that these "mentors" know what is best for them, they probably end up doing something they do not want to do, resulting in being miserable and resentful. Let's face it, going to college is socially prestigious. Most people go to college only for the title of being called a college student. " For some young people, it is a graceful way to get away from home and become independent without losing the financial support of their parents." (Bird 484) They do not want to be looked down upon so they do what would look best in the eyes of society. It is practically beat into our heads that in order to be a productive citizen of society, you should have some sort of college education. Being a college student is perhaps a more respectable role than being, for example, a janitor or a garbage man because of the negative connotations such jobs receive.

Critically Evaluate the Debates Surrounding the Continuity

| 3. Critically evaluate the debates surrounding the continuity of Bretton Woods’s institutions. Which of these institutions would you recommend to be discontinued? Justify your choice. While preparing to rebuild the international economic system after WWII, 730 delegates of the 44 allied nations met in New Hampshire, United States, to form the Bretton Woods agreement. The aim was to set up rules and regulations to stabilize the global monetary system and ensure the free movement of capital goods through a global market.The agreement established two regulatory institutions, firstly the International Monetary Fund (IMF) to control the exchange rates and bridge temporary imbalances of payment. Secondly, the International Bank of Reconstruction and Development (IBRD), later known as the World Bank, which was founded to finance the reconstruction of post war Europe. In 1947 the Havana Charter proposed a third regulatory institution, the International Trade Organization (ITO) that transformed into the World Trade Organization (WTO).This essay will critically evaluate the performance of the three Bretton Wood? s institutions, giving recommendations to operational changes for the IMF and the WTO, and argue to discontinue the WB as it operates currently. The IMF was one of the key institutions that stabilized the world economy after WWII. Its initial goal was to regulate and stabilize exchange rates and assists the reconstruction of the world’s international payment system. One of the key objectives of the IMF was to prevent the devaluation cycle.Through joining the IMF in the post War period, countries surrendered their economic rights, especially on setting its exchange rate, in return they were guarantied â€Å"exchange stability, avoidance of competitive exchange depreciation and a liberal regime of international repayments† (deVries, 1986). Essentially the original conception behind the IMF, was to control the behaviour of countries that joine d the IMF, â€Å"spelled out in a code that was administered by an international institution†. The 1970s oil crisis was a turning point for the role that the IMF played.Third world countries were most affected by the oil crisis, since their economies became dependent on oil and the increasing prices accumulated large amounts of debt. The IMF agreed to lend money, and rose to †new prominence, with new functions and greater powers of control over even more dependent countries† (Peet, 2009). The main change in the IMFs mission, is the shift of lending to first world countries, in order to reconstruct the world payment system using expansionary policies, to lending to third world countries, accompanied by â€Å"conditionality’s†, which restrict countries fiscal and monetary policies.Anne Kruger, managing director of the IMF, said; â€Å"Much of what we do is very different from the way the Fund operated in those early years. It has to be. The world econ omy has changed beyond recognition. But we still apply those same core principles, international financial stability and the prevention of crises† (Kruger 2004) The IMF became subject to severe criticism, one of the main critics is Joseph Stiglitz. He argued that the IMF has failed its mission to sustain global economic stability.The main point of his argument is that the IMF has diverged its initial mission â€Å"based on the assumption that markets did not always work perfectly, that is, there were times when intervention might be needed to secure a stable global economic order â€Å"(Stiglitz, 2002) Now, he argues, the IMF operates largely on the untenable ideology that markets should be left to operate on their own, with no need of intervention. The Washington Consensus largely influenced the change in economic policies of the IMF. The Consensus was based on Latin American countries, were growth was not sustained.The belief of the Washington Consensus was that this had h appened as a result of excessive government intervention in the economy. The Consensus therefore recommended policies such as capital market liberalization, fiscal austerity and the privatisation of public companies. Furthermore, critics say; â€Å"the IMF frequently argues for the same economic policies regardless of the situation. † (Pettinger, 2008) The IMF blindly imposed the same â€Å"conditionality’s† to all its loans. What policies might have worked for one country might make matters even worse in others.The Argentinean financial crisis (1999-2002), underlines that the policies imposed by the IMF can lead a country into a severe recession. The IMF convinced the Argentinean government to maintain its fixed rate of exchange: one peso for one U. S. dollar. This made imports artificially cheap but exports too expensive. Consequently, Argentina had a severe trade deficit. Secondly, in order to maintain the overvalued currency, a country needs large reserve of dollars. The IMF lent $40 billion to support the Argentina peso, enhancing the debt of the country.On top the IMF made its loans conditional to a „zero deficitâ€Å" policy. „Argentina's implosion has the IMF's fingerprints all over it. â€Å" (Weisbrot, 2001) However the IMF has also been the last opportunity for many countries to avoid a default. Most currently, the IMF has given Greece a 1. 6 billion euro loan, to keep the Greek economy floating, and stabilize the euro zone. Another criticism of the IMF is that decisions made on which countries have the right to borrow money are made by a handful of nations who have the main rights.Out of the 24 board members in the IMF, only 10 are occupied by developing countries, holding only 26% of the shares. America in comparison has nearly 18% of the shares in the IMF. This inequality in the board of the IMF shows that decisions are mainly focused in developed countries. Stiglitz argues that the IMFs decisions were driven by the collective will of the G7. Wealthy, industrialized nations, and the commercial and financial interests within those countries dominate the IMF. The IMF was not falsely criticized, however the existence of the IMF is still important and inevitable.The current financial crisis has shown that supranational organizations such as the IMF still play a key role in stabilizing countries economies. However in order for the IMF to prosper in future and efficiently operate in economically developed and less developed countries, several changes will have to be adopted. Firstly the board members will have to split up more evenly. It is understandable that larger countries with more economic output have slightly more voting power than smaller ones. However developed countries, holding 74% of voting power, solely make decisions.Since the IMF largely gives loans to less developed countries, they should have enough members on the board to able to make decisions, on loan agreements. Secondly the IMF has to make detailed analyses of each country they borrow too, and based on that give consultancy on economic policies. History has shown that countries can prosper with different economic policies. While the western economy has largely grown on a liberalized free market, the Asian Tigers have managed to grow, ignoring the neoliberal economic policies the IMF imposed on them.Therefore the IMF must acknowledge that not every country can develop successfully under the same economic policy. The World Bank is the second institution founded at the Breton Woods conference. It was formally named the International Bank for Reconstruction and Development (IBRD). The initial role was to help in the reconstruction of post-war Europe, hardly mentioning the issues of global poverty reduction. Now, however the World Bank operates as a development agency, providing loans to developing countries, in order to reduce poverty and increase living standards.In its mission statement the bank says, à ¢â‚¬Å"Our dream is a world without poverty†. The size of the World Bank has also changed dramatically, starting with 38 members in 1946, to 187 members currently. The World Bank comprises two main institutions, the IBRD and the International Development Agency (IDA). The IBRD provides loans to creditworthy middle-income countries, charging an interest rate of around 1%. It raises money through bond sales in the international capital market.These bonds have a triple A rating, since they are backed by member states share capital. The IDA, on the other handy, focuses on providing long-term, interest-free loans â€Å"to the world's 78 poorest countries, 39 of which are in Africa†, (World Bank official website, 2011) addressing issues such as primary education, basic health services clean water supply and many others. â€Å"Resources to fund IDA loans are raised through subscriptions from wealthy members such as United States, Japan and Germany† (Hill, 2002)The IBRD f inanced several successful projects in various areas in the developing world and was able to improve the living conditions and reduce the poverty rate in some areas. The IBRD, for example, largely funded the education system in Mexico. The WB funded over 18,000 schools under the â€Å"Quality Schools Programâ€Å" in rural areas of the country. Recently the WB has granted a 300 million US dollar loan, to further support Mexico’s School Education System (Educacion y Cultura, 2012). The IDA has also successfully reduced poverty and improved infrastructure in some areas of the world.A notable example is the „Highway Programâ€Å" in Azerbaijan, which focuses on â€Å"improving international and domestic road networks for stimulating economic growthâ€Å" (World Bank Official Website, 2011) The highway project reduces travel time by 33%, stimulates trade and business along the rural area and created over 20,000 jobs. However the World Bank has faced some severe critici sm as well. One of the strongest criticisms has been the negative environmental impact of some the World Bank projects. For instance, the construction of the Yacyreta dam in the 1990s in Argentina, which was largely funded by the World Bank.As a result of the dam, over 40,000 people have been displaced, and the majority of them were not compensated for their losses (The Whirled Bank Group, 2002). Furthermore, because of the dam construction several children failed to reach their school. The dam also had negative impacts on biodiversity, and due to the calm waters, diseases such as malaria and the dengue fever started to spread. Another controversial aspect of the World Bank has been its undemocratic governance structure, which is dominated by the main developed nations. These countries choose the leadership and senior management of the World Bank, and so their interests dominate the bankâ€Å" (Cornell University Press, 2006) Similarly to the IMF, the US holds the most voting power with 15. 8%, additionally all World Bank presidents have come from the US. Japan and China follow with only 7% and 6% voting power correspondingly. This large voting power inequality shows how voiceless most of the developing countries are, although nearly all loans affect their economies. The last, and arguably the most important criticism of the World Bank, are the neoliberal policies that World Bank imposed on lending nations.The ideas that were created in the Washington Consensus, including the deregulation and liberalization of markets, privatization and the downscaling of government, were seen as they key policies to promote development. However, what might have worked for the western economies might not be the best solution for developing nations. Usually the World Bank imposes structural adjustments to countries to which they lend money. These adjustments include reduced state support, and the liberalization of markets. Studies have shown that these policies have led to int ensified poverty and a slowdown in the economy, especially in African nations.Richard Peet claims that the austerity policies attached to the World Bank have â€Å" declined the per Capita income by 25% in sub-Saharan Africa, and the removal of food and agricultural subsidies caused prizes to rise and created food insecurity† (Peet, 2003). The policies have not only exacerbated poverty, but due to the imposed decline of health expenditures of governments, HIV and other diseases spread rapidly, causing the life expectancy of Africans to drop by fifteen years during the last two decades.In the Millennium Development Goal 6, the World Bank states, â€Å"to reverse the spread of HIV/AIDS, through prevention, care, treatment, and mitigation services for those affected by HIV/AIDSâ€Å". Although the WB has been successfully fighting AIDS in some African nations, spending over 3,000 million USD in the construction of HIV testing and teaching sites, it has worsened the situation i n other areas through imposing neoliberal economic policies on countries. Overall the â€Å"World Bank is an institution out of time and place† (Rich, 1994).The IBRD claims to be a development agency, however the institution is funded through issuing bonds on the capital market, creating a conflict of interest. Due to the fact that numerous shareholders own the IBRD, they will always have the pressure to create shareholder value, and cannot focus their attention solemnly on poverty reduction. Furthermore, the World Bank has largely overlapping interest with the IMF, especially the IBRD. They both focus on the same core neoliberal policies, and impose these on the countries they lend money to.These policies have mostly ended in poverty and economic failure in developing countries. Consequently, the IBRD should be discontinued, and the capital that the IBRD holds could be transferred to the IDA. The IDA could then be reorganised as a subgroup of the IMF. This would not only giv e the IMF a better image, but also infuse new ideas into the organisation. The IMF can still give similar loans as the IBRD did, since they have the capital and the power to credit those loans. There is no doubt that the IDA is an important institution with the correct core values, ut there is simply no need for two supranational institutions focusing on the same broad goals. On top, over the last decades, there have been increasing inflows of FDI into developing countries and private microfinance, which can boost development and GDP growth. The main role of the IDA should therefore be consultancy, to ensure the private loans are used effectively. An increased cooperation with the United Nations Development Programme (UNDP) and the UN should ensure sustainable poverty reduction. The third supranational institution, originating from the Breton Woods agreement is the World Trade Organization.Initially named the General Agreement on Tariffs and Trade (GATT), it aimed to govern internat ional trade relations, since countries would use tariffs to protect their own economies at the expense of their neighbours. This was seen as a threat to push the economy into a further recession; hence an institution was needed to encourage the free flow of goods and services. The GATT was transformed into the WTO in 1994, under the Marrakech Agreement. Currently, the WTO has 154 members, and embraces 95% of the global market.Its mission still is, to supervise and liberalize international trade. It has two main functions, firstly to provide a forum for negotiations and for settling disputes. If there is a dispute the WTO may direct the „loosingâ€Å" member to take action to bring its laws, regulations or policies into conformity with the WTO Agreements, however there is no punishment enforced. Secondly, it „oversees the implementation, administration and operation of the covered agreementsâ€Å" (WTO official website, 2012). The WTO claims that the introduced trading system has produced several benefits. Listed in the 10 benefits of the WTO) The main benefits are, firstly, that free trade generally cuts the cost of living and gives the consumer more choice. The reduced trade barriers through negotiations results in reduced costs for producers, reducing the price of finished goods and services, ultimately resulting in a lower cost of living. The increased global competition also forces producers to cut costs, again resulting in a benefit for the consumer. Secondly, lowering trade barriers adds to personal income. The WTO claims since the Uruguay Round trade deal between $109 and 510 billion dollars were added to the world income. In Europe, the EU Commission calculates that over 1989–93 EU incomes increased by 1. 1–1. 5% more than they would have done without the Single Market. Thirdly, trade stimulates economic growth, which could lead to increased jobs, if countries have the correct adjustment policies. Lastly, the least criticize d benefit of the WTO, is that the system is based on the rules rather than power. Meaning that voting power is equal for every member, and decisions are largely made by consensus.Rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures. Although the WTO claims that free trade is essentially positive for all nations, critics have targeted the 10 benefits of WTO harshly. Richard Peet argues, that the WTO clearly does not adopt a neutral stance on trade policy. He further says; the WTO â€Å" is passionately against protectionism and just profoundly for trade liberalization† (Peet, 2003). The WTO therefore generally favours some interests while harming others. Furthermore, Peet targets the effect of free trade on workers and unemployment.The fact that the WTO shows no evidence for the increase in employment, stating reliable estimates become impossible, shows that there is little behind this benefit. Quite on the contrary, several workers have lost their job as result of free trade, due to increased competition and the cost reduction of manufacturers. Furthermore, free trade often resulted in developing countries trading more but actually earning less. The reason being, many countries were unable to shift their production from primary commodities to manufacturing. The increased competition between developing countries and dropping commodity prizes meant lower profit margins.Another point of criticism deals with the TRIPs agreement, which sets down minimum standards for many forms of intellectual property. Critics argue that the TRIPS agreement has a detrimental effect on the access of medicine in developing countries. The most controversial issue involves the use of drugs to cure AIDS. For example, Thailand suspended the patents of drugs treating HIV and heart conditions, to make the medicine affordable for poor patients. The EU and the US protested formally and the US even threatened retal iatory actions. The WTOs operations have also been criticised for being biased towards developed nations.While the EU has largely enforced trade protectionist measures, subsidizing the textile and agricultural industry, developing nations have been forced to open their markets. European and US lobbyism plays a great role in the WTO, and explains why the US and the EU were allowed to use these protectionist measures. In general, the WTO has proved to be an extremely useful institution for freer trade, and in some cases successfully enhanced the growth of nations. However several developing countries have felt the downside of free trade, with some of their economies shrinking due to increased competition combined with higher unemployment rates.Nevertheless, according to Ingo Walter an international trade professor at NYU â€Å"the world as a whole is certainly materially better off under free trade than with no trade at all and so is the individual nationâ€Å" (Walter, 2011). The W TO will face several challenges in the future, including trade negotiation between BRIC countries and the EU and US. â€Å"If export-oriented interests mobilize in countries, including the BRICs, they will push for reciprocal market openings† (Schaffer, 2009) The WTO must ensure negotiations are fair, and to ensure that they cannot allow US and EU multinationals to interfere with the WTOs decision making.In conclusion, the critics towards the Bretton Woods institutions have several core similarities. These critics argue that the institutions do not effectively alleviate poverty, they are generally poorly governed and developing countries remain marginal and without influence in decision-making. Those institutions have profoundly affected the developing world and it is time for a reform of these organizations. 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