Britain was the richest country in Europe Essays

Britain was the richest country in Europe Essays Britain was the richest country in Europe Paper Britain was the richest country in Europe Paper What Accounts for the fact that Britain was the richest country in Europe in the 1870 1914 period? In the half century or so before the 1914 war . . . if any nation had truly made a bid for world power, it was Great Britain. In fact, it had more than made a bid for it. It had achieved it. 1. By 1914, Britain was considered as the worlds greatest power; it controlled the worlds largest empire, a fifth of the worlds land surface and a quarter of the worlds population. The British navy was the worlds finest; it was even more powerful and larger than the next two navies combined.In its zenith, Britain was the manufacturing workshop of the world, with one third of all manufactured goods coming from her shores; it produced two thirds of the worlds coal and half of the worlds cotton, cloth and iron2. From this position, it conducted over one quarter of the worlds trade and in 1914; the registered shipping tonnage was more than the whole world combined. Not only was Britain considered economically rich but also politically and socially, she had one of the worlds highest living standards, healthiest population and most progressive governments.The period 1870 1914 in Britain, conjure images of power and expanding empire, however it was these years, which are associated with the beginning of Britains one hundred year decline. This period saw growth in industrial production decrease, as did her share in worlds manufacturing capacity, Germany became the worlds centre of manufactured goods and by 1914 her share in world trade decreased by almost a third of 1870. This period saw Britain caught napping3 whilst the rest of the world was catching up, she had rested on her laurels and did little else aside from watching those laurels begin to wilt.However, although Britain was showing signs of decline this essay shall illustrate that she was still the richest country in Europe and the reasons for this. In 1870, British businessmen looked back at years of unstained economic expansion. At home, British industry moved into a period of remarkable prosperity where growth had averaged 3-4% per annum; agriculture enjoyed a similar Golden age known as high farming and abroad Britannia ruled the seas and the empire brought untold riches to the British homeland.Britain had the worlds most democratically progressive governm ents and the legislation brought forward by government made British society one of the most dynamic and zestful societies of Europe. The end of 1914 had truly established Crown imperial; British assets abroad were enormous. The end of the ninetieth century saw incredible growth, with an extra 60 million people and 4. 5 million square miles added to the empire. The total land under the Raj, was astounding, the dominions of Canada in the West and Australia in the East, India and much of Africa.Every important point on the globe was coloured pink; the Suez Canal safeguarded trade routes to India, Gibraltar guarded the meditation and the British in Aden controlled the mouth of the Red Sea. Britain controlled all of the seas, the Pacific was controlled through naval bases in Singapore and Hong Kong and islands sprinkled all over it, the Atlantic was controlled from the West Indies, Canada and West Africa and the tips of Africa and south America were safeguarded by colonies in Cape Town a nd the Falklands respectively.Kuwait, which was added to the empire in 1899, added control of the Middle East. These colonies not only brought enormous prestige but also enabled Britain to own much of the worlds mineral wealth either directly through the empire, as in the tin of Malaya and the diamonds of South Africa, or indirectly through British companies such as British Companies in South America. London was the worlds financial capital and Britains overseas investment totalled 40% of the world total. The whole world was under the dominance of Great Britain.An example of Britains power and wealth, or even brashness is the buy out of the Egyptian share of the Suez Canal in 1875. The khedive of Egypt looked to sell his 44% share in the Suez Canal, the French government whose companies owned the majority of shares were interested. However, before the French could react, Disraeli had promised Egypt i? 4 million tomorrow. The deal was successful and Britain became the largest shareho lder in the Suez Canal that was so essential to her trade.Disraeli commented the French government has been out-generaled, this illustrated to the rest of Europe that Britain possessed the money, backing and resolve to do whatever she pleased. The Queen was made Empress of India in 1876, as lord Curzon the viceroy to India once stated, as long as we rule India we are the greatest power in the world, if we loose it we shall drop straight away to a third rate power4. Although India was the major market for British cotton imports, Curzon was not referring to this.He like much of the British public felt that Britains economic loftiness lay upon her empire, which instead of being the cause of her power was the consequence of power; the cause being British industrial and economic dominance. The foundations of this economic and colonial bliss had been the mercantile policies followed by politicians for the last 250 years. Since the fifteenth century, Britain had followed a policy of laisse z faire and trade in primary commodities within a world market based upon colonies.This continued throughout the 1870 -1914 period where Tariffs in the UK were 0% compared with Frances 20% and Germanys 13%5 This resulted in British industry being able to buy cheap raw materials and flood the world market with its cheap manufactured goods. Britain was the first nation to industrialise and utilised this with an intelligent division of labour based upon the exchange of primary products for manufactured goods. There was little competition from abroad and therefore European countries were, just as British colonies were, important buyers of British manufacturers.For the early part of the 1870-1914 period, Britain kept at the forefront of technological fields. New processes in the metal industry such as Bessemers converter system, which could produce steel at much lower prices and Siemens open-hearth process, which could produce a stronger type of steel, encouraged growth in engineering in dustries. This combined with the increase in population caused the demand for manufactured goods at home to increase dramatically. Noticeably the railway industry saw enormous injections of investment; the railway boom resulting in a total of 14,510 miles of track in 1880.This not only created extra jobs but also created a large market for the iron industry; coal industry and most importantly enabled the transportation of manufactured goods of all kinds to ports much more quickly. This coupled Britains strangle hold on the seas in merchant shipping played a vital role in the increase of British exports. The great spurt of industrialisation meant Britain not only longer dominated the world economy through its navy and its extensive colonies, but now more importantly through its productivity of its leading industries.

Building Sentences With Absolute Phrases

Building Sentences With Absolute Phrases Among the modifiers that are used to add information to sentences, the absolute phrase may be the least common but one of the most useful. Identifying Absolute Phrases An absolute phrase is a word group that modifies an entire sentence. It consists of a noun plus at least one other word, as shown here: The hunters rested for a moment in front of the shack, their breaths white in the frosty air. The noun (breaths) that begins this absolute phrase is followed by an adjective  (white) and a prepositional phrase (in the frosty air). In addition to adjectives and prepositional phrases, adverbs and participles can also follow the noun in an absolute phrase. As the sentence above shows, an absolute phrase lets us move from a description of a whole person, place, or thing to just one or more parts: from hunters, for instance, to their breaths. Building and Arranging Absolute Phrases Consider how the sentence might be broken down into two sentences: The hunters rested for a moment in front of the shack.Their breaths were white in the frosty air. The second sentence can be turned into an absolute phrase simply by omitting the linking verb were. As we have seen, the absolute phrase may appear at the end of a sentence: The hunters rested for a moment in front of the shack, their breaths white in the frosty air. The absolute phrase may also appear at the beginning of the sentence: Their breaths white in the frosty air, the hunters rested for a moment in front of the shack. And occasionally an absolute phrase is positioned between the subject and verb: The hunters, their breaths white in the frosty air, rested for a moment in front of the shack. Notice that an absolute phrase, like a participle phrase, is usually set off from the rest of the sentence by a pair of commas. NEXT: Revising Sentences with Absolute Phrases

Assumptions and Contribution of the Strategic Choice Theory Essay

Assumptions and Contribution of the Strategic Choice Theory - Essay Example The researcher states that the use of the strategic choice analysis also contributes to helping the organization and its management in optimally utilizing the existing resource base to gain needed a competitive advantage. The organization would thus become ready to potentially adapt to the external changes in the technological, social and politico-economic environment. Further, the aspect of strategic choice also highlighted the need for generating an effective interrelationship between the organization and the managerial framework. It aims to effectively integrate the organizations and its individuals in that the same contributes to a generation of the right strategic choice to exploit the existing resource base in a generation of needed competitive potential. It thus endeavors to reduce the aspect of tension both relating to the internal and external organizational framework which in turn enhances its efficiency to counter changes in the external environment. Strategic Choice Theor y relates to the actions or roles played by organizational leaders in making concerned choices to enhance the competitive advantage of the business organization against external political, demographic, social, economic and technological changes. Further, the strategic choice theory is also observed to generate tension relating to agency and structural elements. The relation of an agency to structure and further to the external environment makes the theory of strategic choice more dynamic and applicable to different settings. This reflects that the strategic choice theory not only serves the competing needs of the organization but also tend to depict an evolutionary approach based on external needs and changes. Strategic Choice Theory also reflects on the manner in which the business organizations gradually adapt to the changing needs to help gain needed a competitive advantage. The concept of ‘Strategic Choice’ relates to the process through which the authoritative bodi es in an organization tend to incorporate to help in taking of strategic actions.

The adoption of common language poilcies in companies Essay

The adoption of common language poilcies in companies - Essay Example It tends to spawn behaviors and emotions resulting to inefficiencies and poor collaborative efforts hence, leading to poor performance and low company productivity. These inefficiencies tend to be overlooked since the companies direct their attention to the benefits of linguistic integration in order to fit in the globalizing market. The main reason English is being adopted fall under the pressure from the external global players who seem to be well equipped with the English language and its application in the business field. In addition, there is too much diversification of tasks related to a company among countries. If the corporate goals rely on departments within different countries that are working harmoniously, language becomes a significant element. Implementation of language mandate has revealed challenges in the transition from diverse languages to a common language2. The experience that employees have had when working using another language or engaging with a non-native speaker has proved difficult. GlobalTech, FrechCo, Global Moves, Carco and ChipCo are some of the companies that have tried or rather have implemented the language mandate. All of the companies are from different countries of origin; Germany, French, Japanese, United States and United States respectively. The language mandate was put into test, and the impact analyzed that shows that it resulted to psychological and emotional impacts to the employees3. GlobalTech introduced English to the German Employees, and this resulted to ineffective communication. FrenchCo had employees who were non-native speakers who were originally from France, but experienced challenged in having to communicate in English since some lacked sophisticated language skills. The same case is evident for GlobalMoves, Japanese Company where much time was wasted in a task that could have been done easily. For

History Of Skills Demonstrations Children And Young People Essay

History Of Skills Demonstrations Children And Young People Essay There have been many theorists which have influenced todays early childhood education. From as early as 1698 with John Comenius to the most mentioned Jean Piaget in the 1920s? John Comenius was one of the first producers of the childrens picture books. Comenius paved the way for subsequent development in education. His understanding of learning through the senses and of the holistic nature of learning remains the cornerstone of educational theories today. Friedrich Froebel also believed that teachers should not teach by rote but should encourage self-expression through play. He believed that the education of young children was a vital part of their development as individuals. Froebel was the 1st theorist to articulate a theory on how children learn and gave detailed instruction for putting this theory into practice. This was the first teacher training programmer for young children. Rudolf Steiners theory is centered on all aspects of growth and development, which included spirituality. He wanted to create an education which gave children a balanced experience. The teachers attempts to engage the childs whole being in what they do, in as an artistic way as possible, by providing a warm and joyful environment in which the child can feel nurtured and at east, happy to explore and play, be busy and be still. The room is painted and in a warm colour has few hard rectangular corners, and is often furnished with soft muslins to mark off a different area or draped over a window to give a softer quality of light. The quality of sound is that of human voices rather than of mechanical toys. The materials in the room are natural and are at childrens level and are stored in aesthetic containers such as simple baskets or wooden boxes which may themselves be incorporated into the play (Drummond, MJ. Lally M. And Pugh, G. (EDS) (1989) Page 59) (Working with Children: Developin g a Curriculum for Early Years). This theory and concept of teaching has influenced many types of early learning frameworks and curriculums. But his belief in the non-introduction of print to children prior to the age of 7 years remains a controversial part of his theory. As we are aware today, young children have a huge understanding of print, not just from books but from their environment. Maria Montessori was one of the most influential theorists. Her aims were to harness childrens natural ability to learn and then offer defined experiences and materials to explain abstract principles. She wrote the child can only be free when the adult becomes an acute observer. Any action of the adult that is not a response to the childrens observed behaviour limits the childs freedom (cited by MacNaughton in Shaping Early Childhood) (Open University Press, 2003). She developed a range of equipment and materials to help develop the childrens daily living skills such as number concepts, language development, education of senses and exploration and science. Today these methods are still widely used and have been some of the most popular methods of early childhood education in the modern day. Jean Piagets theories dominated developmental psychology in the 1960s and 70s. Like Sigmund Freud, Piaget identified stages of development but while Freud concentrated on the emotional and sexual development, Piaget focused on intellectual development. He identified these 4 stages as Stage 1: Sensorimotor, which was between the ages of 0 2 years. Stage 2: Preoperational, came from the age of 2 to 6/7 years. Stage 3: Concrete Operational, identified itself at age 7 years to 11 years. The final stage, Stage 4: Formal Operations, begins at the age of 12 and continues through into adulthood. His theories were covered during teacher training and influenced the education of young children during the 1970s. Today his theories are still taught but as part of a range of theories. He was created a sense of curiosity about how children learn but his emphasis on logic mathematical thinking resulted in his experiments being over-generalised from a narrow range of subjects. His theories were most influential to the modern curriculum of Highscope. ACTIVITY 1 A Using Highscope within the creche, I can identify many features from Steiner, McMillan, Froebel, Piaget and Melanie Klein. Froebel theorised about the importance of outdoor experience. In our creche we ensure that all the children get outside to play every day. This is an important part of the daily routine, Froebel emphasised nature walks and gardening. The creche has limited outdoor space and the children have plenty to play with, which encourages their gross motor skills. Because of the safety flooring, we have little aspects of gardening outdoors. Melanie Klein believed that children use play to express and show their experiences. This is emphasised within the creche as the majority of the childrens learning/teaching is play-based and to manage challenging behaviour, we re-enact situations through play scenarios, i.e. puppets or stories. But we do not single children out, only observe them in group situations. BC Rudolf Steiners theory concentrates on the child as a whole, balancing the childrens experiences. I can see through observations and toy selection that this is the thesis of our creche. As a supervisor, I see every child as unique. They may go through particular stage but not always at the same time! Each child needs to have positive and constructive experiences which develop their mind, emotions and will. We allow the children freedom of choice and support needed to help them make those choices. With group-time we give them the freedom to speak which builds self-worth and their listening skills. We encourage them to problem-solve which builds their confidence and teaches them patience and respect. But unlike Steiners belief in not introducing them to the printed word, we show the books and flash cards from the babyroom up! McMillan brought the importance of hygiene and nutrition to the forefront. Within the creche we encourage the children to be aware of self-care. Through role-play and story time, we show the children the importance of cleaning hands and face, of brushing their teeth and self-grooming. This is also taught to them through example (staff washing hands regularly, etc.). The creche has a daily well balanced and nutritious menu for the children. We liaise with parents to show them the importance of well balanced meals. Maria Montessori had many contributions to creche curriculum but the one I see regularly in our creche is her theory and observations. The creche revolves around observing the children and planning their routines around that. Adults need to see what the children are interested in and how to enhance that so that their experience is full! Also when observing the children staff can see problems or issues which arise through play situations, i.e. social issues, developmental delays or problems. But we do not use any of the Montessori equipment as we use as much natural material as possible. D Although I can see concept from each theorist, I feel that Steiner/Piaget theories would be the most influential with the creche. Steiners theory about development of the child as a whole person is strong and his emphasis on the importance of play and imitation play a large part in the creche. Piagets theories of development were very influential to the Highscope approach which is used throughout the creche. PART 2 Children love to play! It is an important part of their development. Play offers children the chance to be in control and to feel both confident and competent within relevant and open-ended experiences which are meaningful to them. It helps children make sense of the world around them. Children gain an understanding of their emotions. When children play it involves the exploration of ideas, feelings, relationships, materials and their environment. Play encourages creativity and imagination, and offers the children a chance to explore at their own pace and developmental stage without restriction or expectations. There are different types of play which can overlap and lead into each other. These are symbolic play: The child can use this type of play to reinforce, learn about and imaginatively alter painful experiences. Children mimic parents or pretend to be heroes theyve seen on T.V. or read in a book. This type of play helps children cope with fears. Expressive play: This gives children opportunities to express their feelings by using many different types of materials. Physical play: This has a large social aspect to it because it generally involves other children and it provides exercise which is essential for normal development. Dramatic play: This can be spontaneous or adult-guided. The children act out situations which they feel may happen or are fearful of or may have witnessed. Manipulative play: This starts in infancy. Children control and manipulate their environment and people around them. Children manipulate and move objects to better understand how they work. Familiarisation play: This is when children handle materials and explore experiences in an enjoyable way. Surrogate play: This is when an incapacitated child watches and enjoys through other children or adults. Therapeutic play: This is guided play used by professionals to help children understand their feelings and show them through play. There are three main stages of play which are: (0 2 years) Solitary Play where a child plays alone to explore. (2 3 years) Parallel Play where a child will play alongside other children but not join in. (3-5 years) Sharing Play where children co-operate and use conversation when playing games. This also involves children taking turns and using imagination. Our role as Early Years workers is to facilitate and support each child in play. Through observing practitioners can plan for play. Planning a daily routine and planning the environment around the childs play is important as through planned play a practitioner can best support the children. No matter the age group of the children they need adult support during play. By talking to the children about their play, recognising and supporting their choice of play (without interference) gives children a sense of competence and self-worth. Only participate in childrens play when invited or if you can help them develop the skills of playing. Practitioner can also support by acting as mediator teaching children skills such as problem solving and to be respectful of others feelings. Practitioners knowledge of equality and diversity will protect children from harm in play intervening in satiations that could be potentially harmful for children. Further to practitioners planning and supporting them also need to review play. Observing the children during play can show how the equipment materials and the environment is supporting or maybe hindering the childrens abilities to continue or to progress in the play. Children today are growing up in a society where they are over-protected and parents are fearful of allowing them to play outside and explore houses are made so safe that children are stifled in their development. Things that we did to have fun and play developed our gross motor skills. We problem solved situations so as to stay out longer but today children have a lot of house based games such as PlayStation, etc., which are generally play solely and are intellectually based. I think children coming to an Early Years setting enjoy playing. Having materials and space which is suited and facilitates their interests, means they can express themselves freely and helps them explore and understand the ever changing world around them. As Froebels theory highlighted, children should be allowed to be children and enjoy the things that children enjoy. 1) What is the current framework available in Ireland? Siolta and Aistear are the most recent frameworks developed by the Centre for Early Childhood Development and Education (CECDE). Now the responsibility of Sioltas implementation lies with the Department of Education and Science. Aistear is the Early Childhood Curriculum Framework. 2) What will the Framework for Early Learning do? Siolta focuses on all areas of quality within ECCE settings for children aged from birth to six years old. Aistear plays its part in giving children opportunities to learn based on their interests, strengths, culture and specific needs. 3) Who will the Framework be for? The framework covers children from birth to six years old. This includes all Early Years settings, childrens own homes and infant classes in primary school. 4) How does the Framework consider the children? Our society today has become more diverse. In allowing the children to learn to their abilities. It will give them quality interactions with other children and an enriched environment that encourages play indoors and outdoors, adult/child interactions, exploration, conversation and observation. 5) What themes are included in the Framework? a) Well-being b) Communication c) Exploration and thinking d) Identity and belonging 6) What are Siolta and Aistear? 7) How can you as an Early Childhood Supervisor promote a quality Framework in your service? Introducing the National Framework to the service involves educating both the staff and the parents. Training the staff and supporting them as a supervisor with the transition is very important. Aistear will broaden the range of strategies the staff will have for interacting with the children. Introducing new assessments and methods which will progress the childrens learning across the curriculum. The staff must support the children in the learning experiences by observing, listening and interacting, when invited by the child or if intervention is required. The involvement of the parent is essential. To help them understand the benefits to the children of quality play time and helping them understand the limitations paperwork can have with children, as most parents like to see their childrens progress through pictures or writings. The introduction of project books for the children as a group and as individuals is a great way to review activities and allows the children express themselves through pictures and photos. PART 4 Highscope and National Curriculum The curriculum used at my service is Highscope. This was developed by Dr. David Weikart to serve children at risk of failing school. It originated in the USA in 1962 and is now used in many countries around the world. It can be used throughout the childcare setting with children aged from birth to six years. Staff encourages children to become decision makers and problem solvers. This helps them to develop skills that enable them to become successful students as they grow and progress through school. The central principles are given through a Wheel of Learning. At the centre the active learner (the child) and surrounding that the principles that will support the child while learning these are adult/child interaction: learning environment: daily routine and assessment. These give staff and management a base on how to provide an environment and daily routine that will enrich a childs experiences within my service. My vision is to have a quality service that children will run into every morning with smiles on their faces and at the end then to watch them become fully rounded, capable children as they make the transition to national school. I want my staff to enjoy coming to work, feeling satisfied that they have made a difference in each childs life. That they have helped each child reach their full potential and have positive experiences in the setting. I want parents to feel secure in entrusting their children to my service, that they know that their children will be nurtured and encouraged positively during every step of the day. They feel still included in every part of their childrens day, even while they are away from them. I feel that the new National Framework can slot in easily to a service that is High scope-based, as there are a lot of similarities. Aistear curriculum can be used during a Highscope daily routing as both are play-based, learning and emphasise the value of observations to plan routines and activities. Because of this, I feel the transition to national school should be smooth. The children have built up the abilities to problem solve and make decision and choices for themselves. This builds confidence both socially and academically. I feel the largest problem for children when progressing initially to national school is more social than academic and if a child is confident, self-aware and happy in themselves, the transition can bring more positive experiences than negative which sets a good base for a child to progress successfully as a student.

Harnischfeger Corp Essay

I. Introduction In 1984 Harnischfeger Corporation was a leading producer of construction equipment. During the decade of the 1970s the company experienced tremendous growth. Annual sales grew from $150 million in 1970 to $646 million in 1981. However the company began to experience financial trouble in 1979. This was caused by a variety of factors: the company wasted a large amount of resources on an unsuccessful merger, the government of Iran defaulted on a $20 million order of equipment after the fall of the Shah, and the U.S. economy was in a period of recession with double digit rates of inflation. The company posted an operating loss in 1979 for the first time since 1938. The company’s financial difficulties continued until 1984. At this time management decided that restructuring was necessary if the company wanted to survive. (Harnischfeger, 1985) II. Restructuring Strategy The overriding objective of restructuring the company was to return to sustained profitability. The goals of the plan were four-fold: managerial/personnel changes, production cost reduction, change in overall business focus (e.g. in foreign joint ventures, and high technology areas), and a restructuring of debt (Palepu, 2000). The new executive position of Chief Operating Officer was created. Two new members of the executive team were hired in order to help push the company in a new strategic direction. As a result, engineering, manufacturing, and marketing divisions underwent significant changes in order to cut costs and reorient the company’s product offerings toward more profitable markets. (Palepu, 2000). The company started to focus its business on more overseas markets, where demand for mining and construction equipment remained strong. A relationship was established with Kobe Steel, Ltd., in which Harnischfeger agreed to source all of its construction cranes for sale in the US through the Japanese company. In addition, a contract to sell $60 million worth of mining shovels was entered into with the People’s Republic of China (Harnischfeger, 1985). Lastly, the company restructured its debt into three-year loans that required the company to maintain certain levels of cash, receivables, and net worth (Palepu, 2000). Accounting Strategy The new management at Harnischfeger implemented aggressive changes in accounting policy in an effort to make the company appear more profitable. The major areas in which accounting policy was substantially effected were in: changes in depreciation methods on assets, the use of LIFO liquidation in inventory valuation, the restructuring of the employees’ pension plan, a change in the way some types of sales were recognized, and a change in the fiscal year for foreign subsidiaries. (Palepu, 2000). In addition, management significantly altered the percentage of sales allocated to allowance for bad debt. Analysis shows that management exercised a great deal of flexibility allowed under GAAP in order to raise net income for 1985. Motivation for Accounting Strategy The new management has two long-term goals in mind. First, to increase the company’s presence in high-tech areas such as aerospace and pharmaceuticals and second, to make the company more global. These goals seem to require the company to pursue an aggressive earnings management strategy. In the short term the company needs joint ventures to survive. These joint ventures will provide Harnischfeger access to many new foreign markets and could be a potential source for cheaper labor. Effective earnings management could convince partners like Kobe Steel to be more receptive to investment in Harnischfeger. In addition the company needs cash to be able to participate in joint ventures that may require cross investment to build factories, hire foreign employees etc. Cash is also needed to invest in high tech industries which usually require large capital outlays in research and development. Management had strong motivation to show a profit in 1984. First, the company was preparing for its 100th anniversary celebration, and therefore needed a quick turnaround. As trivial as it sounds, this consideration probably sped up the timetable to recovery via aggressive accounting policy. Second, and more tangible, the restructuring plan included a provision which would award top executives an additional 40% of their base salary if the company achieved its financial goals for the year. Amazingly, management could receive another 40% of salary if the company outperformed those goals! III. Accounting Changes Effect of change in Sales Calculation Effective November 1, 1983, Harnischfeger incorporated products purchased from Kobe Steel, Limited and then re-sold by the company, into its net sales. During previous accounting periods, only the gross margin on these products was recognized as sales. As a result, both aggregate sales and cost of sales increased by $28 million. This accounting change did not have material impact on the overall net operating income as stated in the financial statement, however, it did have an influence on the quality of earnings, which is reflected by profit margin. Profit margin dropped to 1.44% from 1.55%, reflecting a 7.1% change in profit margin, after such a change was in place. The management claimed that this change â€Å"reflected more effectively the nature of the Corporation’s transaction with Kobe,† (Palepu, 2000, p.3-39) and we agree with the management’s view for two major reasons. First, Harnischfeger was operating in a macro business environment in which the company had to significantly reduce cost to survive. Outsourcing, an effective way of transferring production cost to more effective producers, could make the Harnischfeger focus on its core strength in product development capability and high brand power penetration. Second, Harnischfeger did phase out its own manufacture of construction cranes in Michigan and enter into a long-term agreement, under which Kobe would supply construction cranes. Also, effective November 1, 1983, Harnischfeger adjusted some subsidiaries’ ending period to September 30 instead of the previous ending July 31. This had the effect of lengthening the 1984 reporting period for these companies from 12 months, to 14 months, and increased sales by $5.4 million. Assuming these companies had the same profit margin as the parent, the change increased cost of sales by $4.3 million. We agree that the influence on net income is immaterial and that this change reflects more effectively the subsidiary’s business operation. But it does represent a one-time event which should be corrected for during analysis of the company’s potential for future profitability. Effect of Changes in Depreciation Method In 1984, Harnischfeger changed its depreciation policy for financial reporting purposes to a straight-line method from a principally accelerated method. A net income of $11 million was realized for 1984 when the straight-line method was applied retroactively to all assets depreciated under the accelerated method. The management viewed this as an approach to match the company’s standard with that of industry peers. We agree with the management in a way that this approach provides comparable standard. However, the timing of this action is questionable. This approach artificially improved the company’s financial strength in the short run and helped Harnischfeger negotiate its debt restructuring process with bankers. In the long run, however, the straight-line method will reduce profit in the years to come. Also, it was too aggressive to realize this income just in a one-year period, which reflected the incentive for management to achieve profit. In addition, Harnischfeger extended its estimated depreciation lives on certain US plants, machinery and equipment, and increased residual value on certain machinery and equipment. These changes resulted in an increase of $3.2 million in net income in 1984. Again, this reflected incentive for profit realization. The then-current high interest rate environment was supportive for residual value upward-adjustment, however, there were great risks involved. First, interest rate was on a down-trend after it peaked in 1982. Second, the liquidity of Harnischfeger machinery, for heavy-machinery manufacture, was low. Also, extension of depreciation lives would increase the maintenance costs and reduce profit in the years to come. Therefore, we suggest that Harnischfeger’s depreciation policies be closely watched when the economic environment changes Effect of LIFO Inventory Liquidation Harnischfeger reduced its inventory level in 1984, 1983 and 1982, resulting in a liquidation of LIFO inventory. This liquidation process led to gains when inventory, acquired at a lower cost in the earlier years, were sold at a higher price, resulting from higher inflation. Net income in 1984 increased by $2.4 million (in the form of gains), and liquidity was improved on the balance sheet. We view this as a sound business decision when the management can reduce operating cost by decreasing inventory level. Effect of Changes in Allowance for Doubtful Accounts Harnischfeger, for some reasons, adjusted its allowance for doubtful accounts to 6.7% of sales for 1984 from 10% of sales in 1983, resulting in $2.9 million in operating income for 1984. The company might try to increase sales by aggressively extending credit to doubtful customers, risking losing all of relevant sales. This is very skeptical as Harnischfeger gives no explanation. Effect of Changes in R&D Expenses Harnischfeger significantly cut its research and development expenses to $5.1 million in 1984, from $12.1 million in 1983 and $14.1 million in 1982. In 1984, operating profit was pumped up by $9.1 million when Harnischfeger didn’t follow the same level of R&D activities in 1983, reflected in the percentage of R&D as of sales. This is controversial to management’s strategy of focusing on the high technology part of its business and will damage its strength in the future. We conclude, therefore, that the management managed to increase profit by reducing R&D expenses on purpose. Effect of Changes in Pension Plan The company states, in the footnotes of its 1984 financials, that its salaried employee pension plan was well over-funded. The policy of Harnischfeger was to â€Å"fund at a minimum the amount required under the Employee Retirement Income Security Act of 1974.† (Palepu, 2000, p.3-38) This probably meant, in light of recent financial difficulties, that the company intended to fund at the minimum. Over-funding most likely came about as a result of the company reducing its workforce by about 45% in 1983. Harnischfeger terminated its Salaried Employee Retirement Plan in 1984, and created a new plan. This new plan included in increased minimum pension benefit, which probably served to make the pension restructuring more appetizing to employees. Cash resulting from the liquidation of the original plan was divided into two groups: $36.7 million went toward purchasing individual annuities in order to cover the obligations of the original plan, and $39.3 million went into an account called â€Å"Accrued Pension Costs†¦[to be] amortized to income over a ten-year period†¦Ã¢â‚¬  (Palepu, 2000, p.3.42) This pension plan change has three significant effects on the financial statements. First, pension expense was reduced in 1984 by $4 million. Second, net income increased by $3.9 million. Third, and most importantly, the company was able to show a positive cash flow for the year. Without this one-time injection, cash flow would have been ($7.6 million). Bottom Line: Financial Performance, Net of Accounting Changes The purpose of our analysis is to arrive at an estimated net income based only on the company’s core operations. That is, to determine its financial health without the distraction of one-time events and earnings management. The first step is arrive at a revised sales figure. The next step is to construct a table summarizing our estimation of Harnischfeger’s net income, net of the effects of all the accounting policy changes: Note that our analysis has tax-affected the result of changes in the fiscal year of subsidiaries, and the annual amortization amount for pension fund gains. Critique of Accounting Changes Our issue is not with the fact that Harnischfeger management now has an aggressive accounting strategy and is engaged in earnings management. Indeed, it seems perfectly reasonable to bring all subsidiaries under one fiscal year timetable. This will result in administrative efficiency. Also, the change in recognition of costs and revenues of Kobe Steel equipment is logical. Next, the company claims that all changes in depreciation policy are made to conform with other manufacturers in the industry. Further, the pension plan restructuring was authorized by the Pension Benefit Guaranty Corporation, and we have no other sources of information which cast the move in doubt. It seems logical that cutting the number of employees by 50% should cause a similar change in pension plan funding. In short, these accounting changes may be largely justifiable even though they represent aggressive earnings management. We do take issue with the fact that all of these accounting changes occurred in one year. That is, it seems suspicious that financial stability is neatly restored just in time for the 100th anniversary of the company, when executives stand to make an additional 80% of their salaries if goals are surpassed. As further proof of the validity of this concern, we see a contradiction between the decrease in R&D spending, and the company’s new strategy to explore different high technology product lines and services. Further, extension of depreciation lives for plant and equipment seems like a shameless way to increase net income. Finally, a dramatic decrease in the percentage allowance for doubtful accounts is difficult to justify, especially in a period of rising receivables. In conclusion, it seems that the company is taking a huge risk by betting that this one-time boost in income and cash will allow the company to successfully expand internationally and grow in new high tech areas and become profitable once again. IV. Financial Outlook Rather than a full recovery, it seems 1984 performance may be simply an aberration. Management cannot hide the effects of operations inefficiencies and uncooperative markets for long. We are encouraged by the fact that our estimated net $.41 loss per share far outshines the 1983 loss of $3.49. But we expect to see a negative cash flow in 1985, brought on by the absence of the one-time pension plan change. Contributing to this is a high balance in accounts receivable, which rose by 37.5% from 1983 to 1984. And at the onset of a decreasing interest rate environment, we expect the company to be burdened with high interest expense well into the future. Note, too, that the aggregate effect of the changes in depreciation policy will mean higher depreciation costs in future years. This, coupled with higher maintenance costs as equipment ages, will mean significantly higher operating costs. Finally, we expect the company to show a loss for 1985.

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