Royal Mail Group: Human Resource Structure

The Royal Mail group belongs to the UK government. It is a public limited company which has seen lot of success in past years. The degree of success was clearly reflected in the account of its annual turnover.Inspite of its success in the past, Royal Mail group have also witnessed higher degree of competition through its years. As it is not the time when King Henry (eight) established Royal Mail back in 1860s, it was very much necessary for the company to grow with the new advancement and sophisticated technology. The strategy they made and implemented was restructured according to the new level of demand and necessity of their customers. It was in 2006 the company first introduced the online postage system in which the customers can pay online. The stiff competition from the competitors sided by the change in status of the monopoly which the company have enjoyed before 2006 weakened the strength of the company. Modernisation was a major necessity to defend the pressure of competition from the competitors but company was not able to procure much fund for restructuring. Company have seen deficits in pension funds too. In 2003, a part of the Royal Mail group was privatised. In 2006, about 14 private operators were allowed to participate in the working of the company.

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An organisation should hold the unique strength of efficient recruiting which steps it out to a new level of development. It should involve group co ordination sided by developing leading power and talent. Innovative ideas should be given room for development and should create an environment to develop that culture. As this sort of organisation requires lot of effort from their staffs to stick on to their strict time lines, HR management should be the top priority management agenda. A company with good reputation helps it to attract the cream of the labour market. Identification of the core requirements by the Royal Mail enabled them to frame a new set of HR strategies from 2005,
HR management in Royal Mail is mainly divided into 3 functional areas. It worked with People and Organisational Development Services.
The organisation mainly focused on developing the prior HRM skills such as leadership quality, diversity and developing the organising talent. Business partners were the HR managers and they were assigned to different business locations. Combining with the strength of HR strategy, Royal Mail believed that they can reap the benefits of identification of the areas where the improvements should be made. Current state of the organisation can be closely studied with evidence based HR management approach.
Employee assessments have been made and their performance was made into account. The findings were as follows which turned to be the organisation’s HR strategy;

HR functions should include some ” hard skills” relating to finance. It is essentially a quantitative aspect of human resource management.HR manager should be successful in knowing the operations which is being done in an organisation. This focuses mainly on calculative aspects.HR manager should prove his credibility in business development too. He should have the ability to manage the employees in a rational manner.
Basic HR function should posses some “soft skills” which is essentially a qualitative aspect of human resource management. It is mainly confined with employee feedbacks, assessing works and reporting their performance. Good leadership is an essential characteristic of soft skill. Good communication with the workers boosts the relationship of manager to the workers to a great extent. Soft skills help to achieve higher work motivation and commitment. Congruence or a state of agreement should be present in the organisation as the workers in the Royal Mail should be fully content with their positions.

The criteria used by Royal Mail organisation for selecting a suitable candidate are as follows;

Through advertisements job vacancies are communicated. Each job has a reference number. In Royal Mail website, using this reference C.V can be uploaded.
If the reference number is unknown then candidate can search through and find out the suitable post to apply.

If there is no job available at a certain point of time, provision for dropping of email id is given as when such vacancies are open, candidates are communicated through mail. It is cheap, focussed and quick mode of selection.
By this method applications are selected, screened and interview is conducted by HR managers for recruitment.
Human resource strategies developed by Royal Mail organisation was subtle. Professional development is given more importance with the effective use of business tools and technical skills. Hence training of the employees is done and performance is monitored. Performance appraisal is regarded as one of the top agenda of HR management. Training is structured in such a way that it includes class room training, seminars, teaching and the specialised coaching of encouraging the employees to understand their potential and hence upgrade their skills.
They have given many supports and services like performance related pay bonuses and pension scheme. They have failed in the implementation of strategies due to the following reasons;

Pressure from the trade unions.
Deficits in pension fund.
Bad communication.
lack of fund to pay salaries.
Inefficiency in managing work force.

To improve the commitment and psychological satisfaction of the work group, monetary considerations were channelized in such a way that it improved the motivation and role perception. Employees are given opportunity to pursue academic study which is seemed to be helpful for their position. They are paid in their study leave too. Financial support is given for the study.
Independent support is provided by the organisation for health of employees in relation to the job, traumas, debt etc. Employee consideration was taken into account while framing the HR strategy.
As one of the topmost organisation in UK, employees got discounts and offers in a wide range of products and services.
The Royal Mail is located in easy location which helps the employees to come to work very easily.While working, some roles are paid shift allowances and mostly in flexible hours.
Pension plan was developed and employees were made to contribute. Based on contribution, employee pension was paid by the organisation.
After joining the Royal Mail, an employee is entitled to 4.5 weeks paid holidays per year and 8 bank holidays for the first five years.Option for purchasing extra holiday is given to employee to raise the entitlement upto 6 week maximum. By framing this sort of relaxation avenues, employees are likely to be more productive in work life devoid of stress.
Flexible timing is developed by the organisation in which the employee can choose the timings as it allows them to adapt the time to meet their family needs too.
The remuneration for the employees was not a standard one as per employee reviews as there was protest from the part of union regarding pay, modernisation and conditions in the organisation.
Apart from the HRM core issues, secondary issues like health and safety, employee welfare etc should be taken into consideration while framing the HR strategies of the organisation. For gaining good competitive advantage, the satisfaction of employees should be reaped and this should be attached to the corporate plans while framing a HR strategy. Royal Mail was not very successful in reaping these benefits due to inefficient strategy formulation and lack of finance. For example: deficits in pension fund made the existing employees very much concerned about their future in the company. Belief in the organisation tends to decline which resulted in lack of motivation and commitment to work. Employee relation based on expectation and understanding failed.
Human resource is the vital component of an organisation. The approach taken for the implementation of HRM should be adapted according to the business environment rather than a traditional defensive mode taken by the Royal Mail organisation as before. According to the economic view of implementation of human resources, Labour input cannot be measured purely in terms of workers employed in a particular job. It is not at all necessary that the labour input is directly proportional to the quantity produced in a production scenario as there is law of diminishing returns.
To acquire the full efficiency of human resources in the organisation, there was some HR planning put into effect in 2005.The organisation was very successful in reducing the money spend on human resources by fifty seven million pounds in just 2 years. It was framed as a part of business transformation which included reducing absence rates, slashing head counts in HR etc.There was a significant improvement in HR to employee ratio from 1:75 to 1:130.
HR planning was fruitfully implemented in the area of education sided with training and improvement in sickness absence. A three point plan was framed to prevent inefficiencies and introducing HR business partners into each area. The job description development and person specification is found to be the unavoidable part of HR planning. The repetition of tasks were monitored and prevented. A central shared service was created which brought all the experts towards the head office human resource team to point on strategies.
The HR structure was restructured with business partnership and management change. In 2008, the Royal Mail organisation has become the toughest arm by employing 200000 plus workers.
Royal Mail was facing competition for many years. Counting from DHL , TNT the Royal Mail organisation has got a long list of rivals. Common complaints about the Royal Mail organisation were the unsatisfaction with the delays of the couriers, very short working hours, low level of customer service and unplanned delivery without a proper tracking system. The competitors in the field utilised these drawbacks and worked on it to made it as their main advantage. They concentrated in building up a business structure which was mainly build upon the basement of customer satisfaction and identification of their need. The work force in the company was trained and developed in such a way that the blend of HR ideas reflected in their working. Group coordination and subtle implementation of business strategy made them more powerful in capturing the market share more easily. Many of large organisations were looking for a better service provider so that their package are delivered in a better and safe way. This became a concern to Royal Mail. For example, TNT managed to get high profile esteemed customers like Centrica and BT within a short span of just 6 years.It is continuously investing more funds in the sorting and processing technology.
The Royal Mail have introduced the online stamp systems as a part of modernisation but the studies on customer reviews made it clear that the idea was subtle but the steps or the procedures involved in the purchase process is horrible. Improper implementation of ideas also counts very bad in the world of business. As now TNT handles more than 270 million items in a month and it is looking for more efficiency by building up a centralised distribution hub. As in the case of Royal Mail, a well established organisation which have a good history is still working on to improve its efficiency in all aspects of its working. Developing a competitive work force was the only solution for Royal Mail to raise from the edge of disaster.
New HR strategies were framed and the focus fall upon the workforce. The need of transformation was identified and HR was a priority for them. Recruiting was done to get the competitive work force and training was given to them to make them adapatable to the changing environment. Expert team was employed to know the weaknesses. The main weakness which was figured out was the lack of customer focus and the dissatisfaction of them derived as a result.
The quality of work and the scaleability of costs were discussed among the executive committee.
The pressure of competition was well known by the Royal Mail groups. To better their current position the trade off between the quality and efficiency were pointed out in the organisation and greater care was invested to perform the task specifically by taking into consideration the scopes and the risk involved in the business.
It was leadership which was given importance to asses and develop operational managers. As a reform to introduce more technical tools, a computer based operational organisation simulation was set up.It identified the needs for development and the steps needed for improving the existing plan or replace the current plan with some other advanced plan.
Next step was the design of leadership workshops which involved mainly scoping the identification of the current market situation and industrial relation for this time.Changes in the business plan of Royal Mail sided by the change in the management approaches and their practical implication was pointed out. These steps which were taken provided the foundation of the approaches they have taken later.
Knowledge about the business and its new scope has to communicated with the managers. Inspite of great competition and regulation, the need for the managers to become more creative and make them ready to face the challenges was necessary.
The operation manager played an important role in the management structure. They are actual backbone of performance. For stimulating high performance in the organisation, more concern was given to capability of the managers. Further concern was focussed on whether they are able to work with the surroundings if they are good in doing their job in high standard. So the need of making the workers more supportive with group coordination was also given attention. New performance standard was set up through lot of research and assessment. The prority was given to regain the operational control.they were investing their time to get the best output.
Assessment is often a tough task in a management structure. There are various tools and methods to find it out. However, the Royal Mail was very much careful in the process as it wanted to be fit “for the purpose” and should involve realistic time demand both for the people involving in assessment and the people who asseses.
The final step was to develop a selection process to fetch new managers as per vacancies. The key qualities was identified and developed. Performance appraisal was well designed to assess the performance level too.
Some sort of changes in approach taken by organisation were as follows,

Protection of the universal service – The need of the customers was taken into consideration and covered issues which ranged from the services provided to customers, its affordability to them the quality of service through efficient use of human resources.
Market analysis – investigation of existence of any failure in operation of organisation.
Regulatory safeguards – Giving more concern to the necessary protections for the people and the other companies in the same field.

Royal Mail made a performance improvement programme which was sponsored by its management and union. Root cause for the operational failure was closely analysed and studied. Based on the studies new methods and approach which has to be used in the three years programme to put in track the new action plans jointly by the Royal Mail group and the union to contribute to greater performance in the working.
Training the internal project teams in the working process was made to build up models for efficient working. Strategic HR solutions was developed in the organisational development, learning and managing talent, development which gives light to business plans. Front line managers, staffs and union members were involved in the business meetings. This contributed to make the employees feel like they are the vital part of organisation which in turn boosted their commitment to the organisation and greater motivation level in working with the group.
A new corporate strategy function was created and implemented. This mainly involved:

coaching of directors.
Planning and integration in the strategic programmes
conducting capability testing on a pilot basis in divisions of management.
Creating more realistic and practical approach to alter the working in various division.

Royal Mail had seen a dramatic down trading in its business in the country. Customers began to abandon the first class post as it was not affordable in recession. Even the Royal Mail organisation had admitted the truth. The recession trends shown the volume of customers sending letters began to shrink at a steady rate or switching on from first class services to second class postal services. The situation had become even worse as the customers were switching on to emails and internet based social networking sites. In addition to the chaos created by the strikes, the recession made the organisation’s position even worse. However a combination of modernisation which accounted in cost reduction and slight price changes sided by good product mix helped the company to increase its profit.
As the company was undergoing a very tight financial position, it was not possible to increase the wages. The reward system existed at the time was unlikely to change. In 2008, the mail market in United Kingdom fell by eight percent. Royal Mail was intending to cut up 16, 000 jobs as a part of huge cost cutting plan. Quality of service of the organisation would be hampered by such a plan.
Royal Mail organisation planned to raise the price of the first class and second class stamps. Another important decision was to cut down the middlemen’s commission. These decisions were prone to pressure from four walls which made the condition of organisation even worse.
The recession had given opportunities for organisational development in the company. The professional development was made possible. Flexibility and the knowledge of the employees was boosted. Training was given to employees at the time of recession so that they got time for skill updating.
Many new developed sorting machines were introduced by which more than eighty percent of the mail were sorted automatically.
Modernisation was given priority which resulted in installation of intelligent letter sorting machines. New technology was introduced to sort more A-4 sized mail which also included magazines and some catalogues. Hand held scanners were introduced which recorded the confirmation of delivery within a short span of time. Reading of bar codes of special delivery was made possible with these scanners.
As a part of nurturing development Heathrow world wide distribution centre was set up which involved high technology facility for the mailing services. The importing and exporting of the mail was done systematically removing the unsatisfaction of the customers which existed before. Flexible working hours was designed so that the workers get greater commitment to work as they get time for their family too. This enhanced their motivation level.
SWOT is the method used to evaluate the strength, weakness, opportunity and threat an organisation possess. SWOT analysis of Royal Mail carves out the following attributes;

Strength – Monopoly it has enjoyed for 350 years count its goodwill and brand name. Good location of organisation, good benefits package that is being provided to the employees.
Weakness –  Inefficient senior management, too much politics, bad communication, bad delivery, delay in delivery due to inefficiency, lack of control.
Opportunity – Lack of opportunity of business development in post mail market. The number of people depending on mail services decline at a faster rate.
Threat – High competition from strong competitors like TNT, DHL etc. Modernisation remained as a question mark as there were deficits in fund for paying salary and pensions.

The financial position of the Royal Mail has become more worse in the time span of 2005 to 2010.It was in 2008, one of the high profile human resource director, Kevin Green walked away from the Royal Mail organisation. Previously it was Tony McCarthy. Lack of healthy interaction with the trade unions resulted in poor industrial relation. Every employee seeks to improve their returns from the organisation and when such promotional aspects are absent in an organisation it is more likely that the employee move from one organisation to another. This might be the thing what happened in Green’s case. Privitisation of the Royal Mail has become a necessity as the mail volumes were falling at a faster pace, low investment, low efficiency and there was huge deficits in the pension fund too. In march 2009 the defecits in the pension had been figured around 10 billion pounds. At the time organisation had about 176000 employees.
The sorting and delivery process were decided to be handled by a new independent firm.It was obvious that outside investors maintained majority of share and the rest was given as a share to Royal Mail staff. This was a good practical application of HR strategy as it helped the employees to work more efficiently as they have to work for their own company. CWU trade unions opposed the privatisation decision as they feared that the plan would devastate the services given by Royal Mail. The trade union was even more concerned about privatisation as there were possibility of job losses for staffs and more pricing for the customers. Still chaos continuous in the Organisation.

What Is The Cost Of Capital Structure Finance Essay

The cost of capital is the cost of a company’s funds (both debt and equity), or, from an investors point of view “the expected return on a portfolio of all the company’s existing securities”. It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet.

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In order to be a worthwhile investment, the expected return on equity is greater than the cost of capital. The capital cost of the return to capital is expected to earn in an alternative investment with similar risk. If a project similar to the average risk to the company’s business, it is reasonable to use the company’s average cost of capital underlying the ratings. The company’s securities are typically in the debt and equity, the expected, both because of the cost of debt and equity costs of determining the company’s capital.
The cost of debt is relatively simple to calculate, since the interest rate is paid. In practice, the interest rates paid by the company modeled as a risk-free rate plus a risk component (risk premium), which also includes the expected probability (and the amount of recovery given default). For companies with similar credit risk or the interest rate is largely exogenous (to be explained by the use of “external” in this context).
The cost of equity is more challenging to calculate as capital is not a fixed return to investors. Than the cost of the loan, the cost of equity, broadly defined as the estimated risk-adjusted returns that investors require, which yields a barely known. The cost of equity, therefore, conclude by comparing the investment and other investment (like) with similar risk profiles to determine the “market” cost of equity.
If the cost of debt and equity costs have been established, a combination of the weighted average cost of capital (WACC), calculated. The WACC is then used to estimate the discount rate for project cash flows.
In this paper I will explain, first, 1 chapter, the “capital” as well. From the second chapter, “Sources of Capital”, and finally, 3 chapter, “capital” will be explained.
Capital, the most basic conditions for the money. All companies need capital to purchase assets and maintain operations. Corporate capital is available in two main forms: debt and equity. Debt refers to loans and other loans to be repaid in the future, usually with interest. The capital, however, generally do not impose a direct obligation to repay the amount. Instead, investors have a rule in the form of ownership shares in the company.
The capital, wage describes the various means by which the capital of the people who save money for businesses that need money. Such transfers can be direct, which means that a company sells shares or bonds directly to investors, who own a business in return. Transfer of capital can also be made indirectly by investment bank or a financial intermediary such as a bank, broker or an insurance company. The indirect transfer through an investment bank, is selling the business assets of the bank, which in turn sells them to investors. In other words, the easy flow of capital investment bank. The indirect through a financial intermediary, however, a new form of capital, which is actually created. The intermediary bank or fund raise capital to invest and issue its own securities exchange. Then the broker uses the funds to buy stocks and bonds of companies.
1.1 Capital Structure
Because of the small business capital is expensive, it is particularly important for small business owners to define the structure of the target company’s capital. The share capital structure of debt and equity is achieved. Trade-offs are involved: increases the risk of liability to the company’s revenue, which tends to reduce the company’s stock. However, the debt lead to a higher expected return, which tends to increase a company’s share price. As Brigham stated, “The optimal capital structure is the one that strikes a balance between risk and return and thereby maximizes the price of shares and simultaneously reduce the cost of capital.”
Capital structure decision depends on several factors. One of the company’s business risks and risks related to operations, which the company participates. Companies in the hazardous industries, such as high technology, lower than the optimal level of debt than other firms. Another factor in the company’s capital structure involves tax situation. Since interest on debt is tax deductible, debt is usually better to use the company tax rate is high, and not many are able to protect income from taxation.
The third important factor is the company’s financial flexibility, or ability to raise capital in less than ideal conditions. The companies that are able to maintain a strong balance sheet resources generally can be more reasonable terms as other companies in the economic downturn. Brigham suggested that each company has a power reserve borrowing to defend themselves in the future. In general, tends to a stable level of sales, assets, collateral for loans to be good, and the high growth rate using a higher debt than other firms. On the other hand, the companies that have conservative management, high profitability, or poor credit ratings that they want to rely on equity instead.
1.2 The Modigliani and Miller Theorem
1.2.1 Definition
The Modigliani-Miller theorem states that if there are no taxes, bankruptcy costs and asymmetric information, the efficient market, the company’s value affects how it is financed with the equity shares or bonds, or a combination thereof, or what is the dividend policy. The kit is also known as capital structure is essentially irrelevant.
A number of principles underlying rate, which agrees with the adoption of the tax and no taxation. The two main principle is that, firstly, if there is no tax, thus increasing the benefits of power does not create value, and second, that if there are taxes, the benefits in the form of interest tax shield occurs when you leverage and / or elevated.
The price compares to the two companies – one unlevered (ie, funded entirely of their own capital) and the second levered (ie, partially financed by equity and partly debt) – and says that if the same value in all other ways the two companies are identical.
For example, why it must be true, it is assumed that an investor buys a company or a levered or unlevered company. The investor buys shares in the company’s levered or unlevered firm buys shares in a loan of an equivalent amount of money borrowed from the levered company. In both cases, the return on investment should be the same. Thus, the cost of the levered firm is the same as the unlevered firm minus the price of borrowed money, with the value of the levered company’s debt. There is an implicit assumption that the investor’s cost of borrowing money is the same as the levered company, which is not necessarily true in the presence of asymmetric information, or in the absence of efficient markets. A company that is risky debt, as debt-equity ratio increases, the weighted average cost of capital is constant, but there is a higher return on equity, due to a higher risk for shareholders in the company’s debt.
1.2.2 Advantages and Disadvantages of Modigliani and Miller’s Theorem
Advantages: In practice, this can be said that none of the assumptions are met in the real world, but we teach the lot, that capital structure is important because one or more assumptions will be violated. Using mail-equations, economists find the determinant of an optimal capital structure and see how these factors affect the optimal capital structure.
Disadvantages: Modigliani-Miller theorem, which justifies virtually unlimited economic power has been used to increase the economic and financial activities. However, its use also led to increased complexity, lack of transparency and greater risk and uncertainty in these activities. The global financial crisis of 2008, which saw a number of highly leveraged investment banks, has been partly attributed to the excessive leverage concepts.
2.1 Debt Capital
Small businesses can obtain debt capital from various sources. These sources can be divided into two broad categories, public and private sources. Private sources of debt financing according to W. Keith Schilit in The Entrepreneur’s Guide for Preparing a winning business plan and venture capital, such as friends and relatives, banks, credit unions, consumer finance, commercial finance companies, trade financing, insurance, factor companies and leasing companies. Public sources of debt financing from a number of loans granted by the state and federal governments to support small businesses.
Many types of debt financing to small businesses, including a private placement of bonds, convertible debentures, industrial development bonds and leveraged buyouts, but by far the most common type of debt financing in the conventional loan. Credits include the long-term (longer than a year) and short-term (maturity of less than two years), or the loan (for more immediate borrowing needs). These may be approved by the signatory, as the government, or secured to the property, debts, stocks, savings, life insurance, stocks and bonds, and purchased the product on the loan.
In the evaluation of a small company, a loan, Jennifer Lindsey said in his book Guide to the contractor in the capital, the lenders prefer to have a two-year operating history, stable management team, a desirable niche in the industry, market share growth, strong cash flow and the ability to get short-term loan to supplement the funding from other sources. Most lenders require a small business owner to prepare a full proposal for a loan or credit application. The lender will then determine the application taking into account several factors. For example, the lender will consider the small business credit card, and look for evidence of their ability to repay the loan in the form of previous earnings or revenue forecasts. The lender will also consider how much equity in the business, and that management has sufficient experience and skills to function effectively. Finally, the lender seeks to determine whether the small firms in a reasonable amount of guarantee for the loan.
2.1.1 Cost of Debt
The cost of debt is estimated by the risk-free interest rate bonds, whose length is equal to the yield curve for corporate debt and then add a default premium. This is the standard premium will increase in debt increases (since all else being equal, “all other factors,” increased the risk of increasing debt). Since in most cases, the debt burden of the deductible expense is the cost of after-tax cost of debt is expected to be comparable to the cost of equity (after tax). Thus, profitable companies, is debt at a discount. The formula can be written as:
(Rf + credit risk rate)(1-T)
where T is the corporate tax rate and Rf is the risk free rate.
2.2 Equity Capital
Equity capital for small businesses is also available from many sources. Some possible sources of equity include the Farmer family and friends, private investors (the general practitioner, to groups of local business owners to wealthy entrepreneurs known as “angels”), employees, customers and suppliers, former employers, venture capital companies , to investment banking firms, insurance companies, corporations, and government-backed Small Business Investment Corporation (SBIC).
There are two main methods that small businesses use to obtain equity finance: the private equity investors or venture capital firms, public stock issues. The private placement is easier and more common for young companies or start-ups. Even if the stock still closed with a number of federal and state securities laws, does not require formal registration with the Securities and Exchange Commission. The main requirements for private equity that the company did not advertise the offer, and you have to do the transaction directly to the customer.
However, the public stock offering includes a lengthy and costly registration process. Indeed, it charges, the public stock offering in more than 20 percent of the capital. As a result, public stock offerings are generally a better choice for mature companies, as a starter. Bids may benefit from intervention maintaining control of a small company, but also expand the participation of different groups of investors, but by concentrating it in the hands of a venture capital company.
2.2.1 Cost of Equity
Cost of equity = Risk free rate of return + Premium expected for risk
Expected Return
The expected return (or required rate of return for investors) can be calculated with the “dividend capitalization model”, which is:
That equation is also seen as: Expected Return = dividend yield + growth rate of dividends.
“The capital required for a productive, as with any other factor is that there is a cost” by Eugene F. Brigham’s book Fundamentals of Financial Management. In this case, the cost of debt capital the interest which the company must pay to borrow. In the capital cost shall be repaid to investors in dividends and capital gains. Since the amount of available capital is often limited, it is distributed in various companies on the basis of price. “Business is the most profitable investment opportunities are willing and able to pay most of the capital and thus attract out inefficient firms, or those for which such goods are not in demand,” Brigham explained. The good thing is that in most industrialized countries (eg USA, Germany, Japan, Britain, etc.), there are agencies that help individuals or groups of loans on favorable terms. Among those eligible for such assistance to small businesses, certain minorities, and the company is willing to build plants in areas with high unemployment.
As usual, the cost of capital for small businesses tend to be higher than the big, established companies. Because of the higher risk for both service providers and charge a higher price for equity funds. Several researchers found that small stock portfolios have consistently achieved the higher average returns than large company stocks, it is called the small business impact. In fact, it’s bad news for small firms, where small companies effect means that the market requires a higher return on capital stocks of small companies than otherwise similar stocks of large companies. Therefore, the cost of equity is higher for small businesses. The weighted average cost of capital of the company’s return that investors expect the various debt and equity issued by the company, according to Richard A. Brealey and Stewart C. Myers, in his book, “Principles of Corporate Finance.”
Table 1 – Cost of Capital
3.1 Capital Asset Pricing Model
Capital Asset Pricing Model (CAPM) is used to determine the economics of the theoretically appropriate price of the asset as security.
3.1.1 The Expected Return on Equity According to the Capital Asset Pricing Model
Market risk is generally characterized by β-parameter. Thus, investors would expect (or demand) that:
Es: The expected return of security
RF: The expected risk-free rate in this market (bonds)
Î’s: Sensitivity to market risk to the safety
RM: The historical performance of the stock market / stock market
(Rm-rf): The risk premium in the market risk-free assets in the assets.
The expected yield (%) = risk-free interest rate (%) * + sensitivity to market risk (the historical performance (%) – risk-free interest rate (%))
Other expected yield (%) = yield of the bonds closest to the concept of the project or the project’s safety + beta * (market risk premium)
historically the market risk premium of 3-5%
The models show that investors expect a return on risk-free rate plus a market risk sensitivity of the security times the market risk premium.
A truly risk-free rate is the lowest offer price for the bonds market, such as government bonds.
The risk premium varies over time and space, but some developed countries in the twentieth century, an average of around 5%. The real stock market returns are roughly the same as the annual real GDP growth. The gains in the Dow Jones Industrial Average is 1.6% per year over the period 1910-2005. The dividend increased by all the “real” return on average equity in the double, about 3.2%.
Sensitivity to market risk (β) is unique to each company and depends on the management to every business and capital structure. This value is not known “ex ante” (beforehand), but may not be retrospective (past) experience with similar guarantees and undertakings.
3.2 Cost of Retained Earnings/Cost of Internal Equity
We must remember that the profits from the component of equity, and thus the cost of retained earnings (internal equity) equal to the cost of equity capital as described above. The dividends (income paid to investors, and should not be) part of the return on capital to shareholders, and to influence the capital cost of the mechanism.
3.3 Weighted Average Cost of Capital
What makes the weighted average cost of capital – WACC does this mean? This estimate is the company’s cost of capital, which is weighted in proportion to their capital. Each source of capital – ordinary shares, preference shares, debentures and other long-term debt – include the WACC calculation. Each equal to the WACC of a company increases the return on equity beta and the woman, and notes a reduction in the WACC increases and a higher level of risk.
The total value of equity (for a company that no outstanding warrants and is the same as the company’s market capitalization) plus the cost of debt (the cost of debt should be continually updated as a result of changes in the cost of debt interest rate changes). It should also be noted that “justice” in the debt-equity ratio of the total market value of equity, no equity on the balance sheet. To calculate the weighted cost of capital, we must first calculate the cost of some funding sources, namely:
cost of debt
Cost of Preference Capital
cost of capital.
WACC is calculated by an iterative procedure that requires an estimate of market value of equity.
WACC formula is:
[Rd x D / V x (1-5)] [Re x E / V]
Rd = Bond yield to maturity (Y / Y Calculator)
D = Market value (NPV) of debt
(1 – T) = 1 – tax shield on interest deduction for interest expense =
Re = shareholder return requirements
V = value of total capital (debt equity)
Generally, a company or assets financed by debt or equity securities. WACC is the average cost of financing sources, each weighted by its use in a given situation. By taking a weighted average, we see that much interest the company must pay for every dollar it finances.
Since a company’s WACC is the overall expected return on the company as a whole, and as such are often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers. This is the appropriate discount rate to use the cash flow risk similar to the entire company.
3.3.1 Example of Weighted Average Cost of Capital (WACC)
“A” Corporation issued 10,000 units of the bonds, which currently sells for 98.5. The coupon rate of 6% this year bonds, the interest semi-annually. The remaining period of these bonds is 3 years.
The company’s current share price of two million common shares for $ 10 a share. The stock beta 1.5, a 4.5% risk-free rate on government bonds and the expected return on equity of 14.5%.
The tax rate is 30%
Table – 2 Bond and Stock Calculations
Bond Calculations
Stock Calculations
N = 3 x 2 = 6
I/Y = ? (Rd)
PV = 0.985 x 10,000 x $1000 = $9,850,000 (D)
PMT = (-10,000,000 x 0.06) / 2 = $-300,000
FV = $-10,000,000
P/Y = 2
C/Y = 2
Solution: I/Y = 6.56%
Re = Rf + B[Rm – Rf]
Re = 0.045 + 1.5 [0.145 – 0.045]
Re = 0.045 + 0.15 = 0.195 (19.5%)
Market Value of Equity = E
Stock price x common shares O/S
$10 x 2,000,000 = $20,000,000
V = Total Capital Structure
V = 9,850,000 (bonds debt) + 20,000,000 (equity of common shares)
V = 29,850,000
3.4 Cost of Capital in Islamic Banking
Proper use of investment criteria is important for industry and agriculture as well. Although the assessment can be used for both public and private sectors of the economy, should the public sector in its own special problems considered complementary, because the social costs and benefits. Therefore, we will participate in the private sector and the problems of evaluating investments in various industrial projects.
Contradictions abound in the relative merits of different methods of investment valuation. But the most important points with different match.
It is worth noting that almost every economist in the treatment “discounting” as a method of evaluation, as the only possible way to choose between different investments. Essentially two methods frequently used economists, namely the net present value (NPV) and the enlarged internal rate of return (IRR). The concept of internal rate of return (IRR) was JM Keynes (perhaps better known as the marginal efficiency of capital MEC) schedule, called the marginal efficiency of investment (MEI). It is defined as the rate at which the present value of future income exactly equal to the market price for the project. In other words, this is Return on capital employed. It is, committed while the return of the project. NPV of the project is formally defined as the value today of the surplus that the company can do in addition to the investor’s own marginal.
IRR on the basis of the extended to the negative cash flows are discounted back to the company’s cost of capital as long as it does not outweigh the positive cash flow. Both methods (the extended NVP and IRR) on its own common deficiencies, such as non-IRR NVP can be used either in the usual way that the correct ranking of projects in situations where the entrance is a rationing system. But there are ways to eliminate gaps and allow them to appropriate methods of investment evaluation.
We will have a higher degree of internal rate of return, which is simply called the internal rate of return. A simple rule of decision in cases where the decision is “all or nothing” about which projects should be chosen from the various investment options, to implement all the projects whose IRR exceeds the cost of capital.
Cost of capital, the capitalist system, the rate that a loan company and the investment is likely to be, which is simply the “interest”. In other words, that “cut – off rate”, in relation to the internal rate of return regulation, which are also found in the literature as a “barrier percentage”. Note that the NPV approach to investment decisions, it is essential that decision-making, that there is no explicit prior discount rate, which, as already mentioned, is nothing more than to get money market rates. But they did not have a pre-determined percentage of the IRR method, except when it’s time, where debt capital is rationed in the various projects. This makes it completely independent of the IRR method is very appropriate rate and can be used for investments in the Islamic interest-free option and follow the debate.
In the case of capitalism, is the internal greater than or equal to the market, the project will be implemented. The project also encourages companies to maximize profits, which last carried out the project’s internal rate of return equal to interest. Apparently, the internal time of a declining function of investment, more projects, which would reduce the internal rate of return (in the same trade, of course).
Already adopted (the Western economists) that the interest rate plays a decisive role in determining which projects will be implemented and also how much capital to be invested in various projects. Roll the relationship between these two terms seem to be exaggerated. Since only one project, the established criteria are quite valid and applicable as the optimal size of equity should be considered. As the number of projects increases, the IRR should be calculated for each project will increase so much. Moreover, it happens to all nodes in the two IRR’s. This complicates the problem, and this will reduce the importance of interest, especially if interest rates happen to be far from the IRR to the last possible projects.
Given that an investor’s risk-taking entrepreneurs, he is usually in front of the chains of investment options from which to choose allegedly, the first of the highest IRR. Assuming that you know, a lot of project finance, there may be dozens of projects whose IRR is higher than the going rate. There is no doubt that these projects are attractive, but to varying degrees, the contractor and will be selected in descending order rate. This is the case in the real economy, the role of interest rates is rather passive, even useless. This is because in such circumstances, the project IRR rate range. This is beyond that point to the role that a reasonable interest rate, and the role of the cut-off ratio. In other words, it is a long process before the existence of the interest rate becomes irrelevant, because the IRR for a couple of projects related to each other because of the interdependence refers to the ratio of investment is not at all.
Exogenous real interest rate in the sector (especially investment), it is ironically suggested the capitalist system and then used to determine the optimal level of investment. In addition, the speculators, who needs money market interest in the products, allowing decisions to lead the business, whose activities are so important to the economy. It seems reasonable to link the contrary, ie, because of the interest, but we assume it to be the real sector, led by the monetary sector, if any.
The abolition of an Islamic state, it would not be an external variable such as interest, what type and level of investment. Investment projects, in this framework are competing with each other, and the investment will be needed to achieve full employment, that is, until there are idle production factors in the economy.
This is particularly true of human resources make it necessary and inherent meaning, as we see in Islam, the authorities should not keep the unemployed, for the sake of the interests of capitalists.
Can easily be shown that in an Islamic context, for each part of the money (ie, the potential capital) that comes out of the interest-free banks to finance various projects under various types of contracts, it becomes possible to go directly to the products and / or services.
Is a term, and it is: a prerequisite for an Islamic state is strictly prohibited, and appear to prevent speculation in any market (be it either money or goods). It has long been a misunderstanding among some Islamic scholars in the financial support that speculation can take place, and the abolition of interest is permitted. Easy to show that one-to-one correspondence between the interest (rate), and speculation. Interest rate (rate) is necessary and sufficient condition for the speculation that takes place. Although the lack of clearly illegal-frame-rate, if speculation is allowed in any market, you will definitely be of interest in its own nature. Therefore, the prohibition of interest leads logically to a ban on speculation. This interdependence between interest and speculation is not only very rarely in the economic literature, but also its negligence was the source of serious misunderstandings. Economic relations are rarely a single direction.
A collection of the IRR can be measured both by an Islamic bank, Islamic banking sector, an independent agency authorized to appropriate guidance on the nature and viability of the project. This measure is to be used so that the expected profits can be divided into an Islamic bank and finance company demanding. The matrix is very useful for determining how much funding should be allocated to projects that are in the priority list for economic development. To determine the company’s share of the profits, various factors, such as the following may be considered: the risk premium, the rate of poverty in different parts of the country’s priorities for economic development plans, the degree of capital intensity, taxes, employment considerations of the burden of rates and the like. All of these factors, or a combination thereof may affect the company’s demanding (my fiancee) share of the profits that can be safely manipulated without interfering with the market mechanism. It gives interest-free banking system, the IRR method, the absolute advantage of the artificial manipulation of interest rates, which is quite often the case in capitalist countries, and an obvious interference with market mechanisms. This contrasts with the situation are often held in the Western economists who argue that market mechanisms should be avoided. Add to this the expected negative correlation between interest and investment as both a classical and Keynesian economists have empirically demonstrated that infertile. This is so, while the bill may be taken into account the positive correlation between the rate of profit and investment. This bill provides not only the interest cost of the capitalist system, but also that profit maximization is consistent with the aims of each company. Surprisingly, however, this goal is at the micro level, the capitalist will change textbooks without a logical explanation for the negative correlation between interest investment at the macro level.
Using the IRR method of an Islamic state is not only compatible with the goal of maximizing profits (if proof was not suitable for such a system) – and to avoid interfering with market mechanisms – but it is an absolute advantage in another, so the opportunity cost of capital to zero. The logic is simple. This lack of interest, all projects compete with each other (with due regard to their own priorities), internal rate of return. Also, the fact that the investment projects against each other at each other and there is no reason to ensure that any external factors to determine the same extent as the cost of capital for each project. The capitalist system, the current interest rate to be logically “the next best alternative”, or the cost of capital for each project. The logic of the independence of the IRR for the project.
The second best option “not to report to the IRR for a project according to an account must be seen as the opportunity cost of capital. This is because of the interdependence of all projects do not meet any of the BMR in another appropriate opportunity cost of the project, otherwise it would cost hundreds of alternatives to the capitalist framework, while the interest rate will be to measure the opportunity cost of all capital investment. In other words, to allow costs to be met independent state. Failure to consider the interdependencies between projects and independent degree of internal rate of investment has led to that many writers to form the misconception about the opportunity cost of capital.
This lack of interest, there is nothing to compare the IRR of the various projects (with the exception of the IRR of the project by themselves). Interdependent and common to the Islamic banks, these proje

Streptococcus Lactis: Structure and Applications

The following paper describes the bacteria Lactococcus lactis previously referred to as Streptococcus lactis. Lactococcus lactis is used in the making of dairy products. The most common of these products are milk, cheese, and yogurt. Researchers are also looking at the potential of Lactococcus lactis to be used in conjunction with vaccines. I chose to write about this microbe because of the many uses and interesting facts. Lactococcus lactis has served humanity in the past; presently it remains useful in many ways and has the potential to be even a greater asset in the future.

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Lactococcus Lactis
Lactococcus lactis (L. lactis), is a lactic acid bacteria (LAB) that is nonpathogenic and Gram-positive. The genus Lactococcus is closely related to the genus Streptococcus and is used extensively in the fermenting of milk. It is also the best-characterized lactic acid bacterium (Bolotin, Wincker, Mauger, Jaillon, Malarme, Weissenbach, Ehrlich, & Sorokin, 2001). By nature, L. lactis inhabits a function connected to plant and animal surfaces and the gastrointestinal tract of the animal. On plant surfaces, it is inactive but it is believed to reproduce in the gastrointestinal tract after being swallowed (Bolotin et al., 2001). In comparison, researchers have termed what they call a “domesticated” species of L. lactis. This species is used in the making of dairy products such as cheese, buttermilk, and yogurt. It also serves a different function that is identified by the use of technology such as “fast growth and rapid production of lactic acid in milk” (Bolotin et al., 2001).
Cell Morphology
Streptococcus lies under the Domain Bacteria. The term strepto means chained and the term coccus means round, therefore streptococcus cells are spherical and occur in pairs or chains that can be short or long in length (Breed, Murray, & Smith, 1957, p. 508). Up until 1985, L. lactis was originally classified under the genus Streptococcus (MicrobeWiki, n.d.). They are non-motile, do not produce spores and have a “fermentative metabolism” (Bacteria Genomes, n.d.). They also have no pigment; however, in some strains a brick-red or yellow pigment may occur under certain environments (Breed et al., 1957, p. 508). “A fermentable carbohydrate or polyhydroxy alcohol is essential for suitable growth in artificial media” (Breed et al., 1957, p. 508). “The average coccus is small about 1 μm in diameter” (Engelkirk & Engelkirk, 2011), which may vary from rough to smooth to mucoid” (Breed et al., 1957, pps. 508-509). “Carbohydrate fermentation is homofermentative with dextro rotator lactic acid as the main end result. Carbon dioxide is produced in very small amounts or not at all from sugar fermentation” (Breed et al., 1957, p. 509). With respect to their nutrition, all streptococci are particular and “and require a number of the B vitamins and amino acids for growth” (Breed et al., 1957, p. 509). Species have their own nutritional requirements. “Streptococcus is generally found wherever natural substances that contain sugars are accumulated. They occur regularly within the mouth and intestines of humans and animals, in dairy and other food products, and in plant juices that are fermenting” (Breed et al., 1957, p. 509).
Genome Properties
“The genome of L. lactis is a circular chromosome with 2,365,589 base pair, where 86% of the genome code for protein, 1.4% for RNA, and 12.6% for noncoding region. 64.2% of the genes code for known functional proteins and 20.1% of the genes for known protein with unknown function. The remaining 15.7% of the genes are unidentified proteins that may be unique to the Lactococcus” (MicrobeWiki, n.d.). According to Todar, (2011), the subspecies of L. lactis are used extensively as models in lactic acid bacteria research. One subspecies, Lactococcus lactis ssp. cremoris is characterized by the laboratory strains LM0230 and MG1363, and it is best preferred for the making of hard cheeses. The other subspecies, Lactococcus lactis ssp. lactis is considered the “workhorse strain” and is represented by IL1403 (Todar, 2011). This subspecies is best preferred for the making of soft cheeses. Todar (2011) also suggests that “beginning in 2001, these strains have been sequenced”. In other words, there is a better understanding of how these bacteria are associated with their function.
Finally, the ability to compare genomes has led to more knowledge of how the variety of Lactococcus strains adapt to their environments. This ability to compare has also lead to unanticipated findings. It has been suggested that this “bacterium can perform aerobic respiration and can undergo horizontal gene transmission by the process of transformation” (Todar, 2011). With that, it is possible that Lactococcus lactis can be used to improve minuscule things such as “flavor, texture, and preservation of 10 million pounds of cheese that is produced annually” (Todar, 2011).
It is important to be able to examine and decipher the characteristics of bacteria in order to “provide data for identification and classification” (Engelkirk & Engelkirk, 2011).
Unique Properties
As previously mentioned, Lactococcus lactis (L. lactis) is “one of the most important micro-organisms in the dairy industry” (Bacteria Genomes, n.d.). It is essential in the development and production of products by this industry. When L. lactis is added to milk, “the bacterium uses enzymes to produce energy molecules (called ATP) from lactose. The byproduct of ATP energy production is lactic acid” (Bacteria Genomes, n.d.). This lactic acid that is produced by the bacterium causes the milk to curdle and separate to produce curds, which is then used for cheese and whey (Bacteria Genomes, n.d.). The specific types of dairy that use L. lactis for its manufacturing include the cheeses Cheddar, Colby, Camembert, Roquefort, Brie, cottage cheese, cream cheese, and other dairy products such as butter, buttermilk, sour cream, and kefir (Todar, 2011). It is also accepted as a source of vegetable fermentation for pickled cucumbers and sauerkraut and for other fermented liquids such as beer and wine.
L. lactis has also been considered for the development of delivering vaccines. “The bacterium can be genetically engineered to produce proteins from pathogenic species on their cell surfaces” (Todar, 2011). This is done by injecting an animal with a modified strain of the bacterium by way of a nasal spray. An immune response to the strain is obtained which provides an eventual immunity to the pathogen (Todar, 2011).
Because L. lactis is non-pathogenic and non-colonizing it is a promising candidate for delivering biologically active proteins by mucosal routes. In a report by Chinese researchers it is described that “recombinant L. lactis is applicable for the development of live mucosal vaccine against hepatitis B virus (HBV)” (Zhang, Zhong, & Huan, 2011). In a lab test mice were given an oral immunization and it induced both mucosal and systemic immune responses against HBV at the same magnitude. These results indicated that the lactococci-derived vaccines could be attractive candidates as alternative HBV vaccines for preventing hepatitis B” (Zhang, Zhong, & Huan, 2011). The increased research of L. lactis would be beneficial to people in underdeveloped countries and where sickness and other diseases is high.
In conclusion, the bacterium Lactococcus lactis appears versatile. The current research suggests that, with more exploration, L. lactis can be used to improve the quality of dairy products as well as the health of individuals by way of vaccines.

Proficient Key Tree Structure for Secure Dynamic Groups

Secure Group Communication ensures forward secrecy and backward secrecy of the data. It is the responsibility of the Group Center (GC) to disallow new members to have access to previous data called backward secrecy and existing members who have left the group to have further access to data called forward secrecy. Forward and backward secrecy can be ensured by updating the keys whenever a join/leave request is handled. This process is called as re-keying. The tree structure is appropriate for maintaining keys. Most of the schemes use binary tree structure for maintaining keys. The Key tree structure uses three kinds of keys such as Traffic Encryption Key (TEK), Key Encryption Key (KEK) and Individual Key (IK). TEK is the top level key called Group key, KEKs are the intermediate level keys called subgroup keys and IKs are the leaf level keys.

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Figure 3.1 shows the binary tree with 3-levels, which keeps keys at all levels. Based on the number of levels in the binary tree, the height of the tree (H) is calculated. Therefore the height H is 3 since there are three levels in the binary tree. Multicast group members are inserted into the tree only at leaf level. The number of nodes is 2n+1-1 and group members are 2n where ‘n’ is the number of levels in the tree.
Here, there are eight members in the multicast group and are represented by M1 to M8. The top level key K0 is the TEK, K1 to K6 are KEKs and IK1 to IK8 are the member’s private keys.

Figure 3.1 3-level Binary Tree
In the key tree based group key management, the Key Centre (KC) delivers new keys to the group members by encrypting them with older keys. Then, the group members have to decrypt the encrypted keys with their old keys. All these encryption and decryption computations amplify the load on KC, resulting in delay to espouse the group key. It also increases power consumption to acquire the new group key.
All keys must be stored in the memory of communication devices and group members have to accumulate the group keys in a secure memory like Universal Subscriber Identity module (USIM) to safeguard from various kinds of attacks and intrusions. Also, each program requires memory to reserve their secure keys. Since the memory space is limited, the number of keys to be stored must also be minimised. Keeping these constraints in sight, this work suggests the proficient key tree structure, considering the efficiencies of computation and storage costs.
The proficient key tree structure consists of two parts in which the lower part constitutes of binary trees to minimise the communication cost and the upper part consists of flat trees up to 2 levels to alleviate the key computation and key storage costs. The TEK is directly connected to the KEKs on the top part of the tree so that it is a subset of the level homogeneous tree.

Figure 3.2 Proficient Key Tree Structure with 1 flat level
Figure 3.2 shows the proficient key tree with 1flat level and 1 binary level. A Flat tree is used for reducing the computation and storage costs. From the binary key tree, one TEK, 6 KEKs and 8 IKs are stored for 8 members at three levels. Compared to the 3-level binary key tree, l-flat level PKS maintains all 8 members at 2 levels and it requires 1 TEK, 4 KEKs and 8IKs. The number of KEK is reduced if flat tree is used. This reduces key storage and key computation costs. In case of 2 flat levels and 1 binary level, 1 KEK, 16 KEKs and 32 IKs are maintained for 32 members at 3 levels.
Figure 3.3 shows the proficient key tree with 2 flat and 1 binary level. Joining and Leaving are two important operations in a multicast group.

Figure 3.3 Proficient Key Tree Structure with 2 flat levels and 1 binary level
If the member M24 wants to leave the group, some key updates are required for maintaining confidentiality and integrity of data. The keys K0, K3 and K16 should be updated as a part of re-keying process. The Key Centre selects a key for encryption of the new key and this new key must be kept secret from the leaving member. This ensures the property of forward secrecy.
3.1.1 Batch Re-keying
When multiple members want to leave from the multicast group, the key updates are done as a batch called batch re-keying (Li et al 2001). In batch re-keying, the interval for which key server waits, is termed as re-key interval. The entire join and leave requests are collected during this re-key interval to generate new keys. Moreover, it also constructs a re-key message and multicasts it.
Batch re-keying improves efficiency because the number of re-key messages to be signed is reduced. One message is signed for a batch of requests unlike one for each. Batch re-keying takes advantage of the possible overlap of new keys for multiple re-key requests.
3.1.2 Join Operation
When a new member (Ui) wishes to join the group, the member has to send a request. In addition to the information of existing group members, the Key Distribution Center requires the new level K’ to insert the member into the tree (Figure 3.4). If the performance of the joining member is worst, then the new level K’ should be smaller than the level of present key tree structure (K). The following steps are followed to join the member in the multicast group.
Step 1: Receive join request from the new member to the multicast group
Step 2: Determine the level of the current tree, K and new level required K’
Step 3: If K’ is greater than or equal to K, check whether the tree is complete
Step 4: If the tree is a complete tree, broadcast the remove key message that are on the same level K
Step 5: If K’ is less than K, set K as K’ and check whether the tree is complete.
Step 6: If the tree is complete, broadcast remove key messages that are on a higher level than or same level as K’ else broadcast that are on a higher level than K’.

Figure 3.4 Key tree updates when user joins
From the first part of the Figure 3.4, eight members are on the leaf level and the height of the lower part of the tree K is 2. If the member U9 joins into the tree, it is inserted at the leaf level. It requires one more level since the tree is complete. Therefore, the new level K’ is 3. In order to make the tree into a PKS tree, it needs to maintain the same level and the flat level is to be introduced. Therefore, the existing key tree structure is to be updated and it looks like the second part of the Figure 3.4. K1 and K2 are removed and the top level node is directly connected to K3, K4, K5 and K6 nodes after adding the new member at the leaf level.

Figure 3.5 Join Operation in the PKS tree
If K’ is greater than or equal to K, the KC need not to change the key tree level, excluding the case when the present key tree is a complete K-level PKS. In case of complete PKS, the key tree structure needs one more level to accommodate new members and to do so, KC should broadcast the remove key message to exterminate the KEKs in level K as in Figure 3.5.
If K’ is less than K, it indicates that the height of PKS needs to be lowered from K+1 to K’+1 in order to support the new member. As lowering the height increases the communication cost depends on KC whether to accept the new join request or not. If such addition increases the communication cost, then Key Centre can reject the request. If the tree is complete PKS, KC has to broadcast the remove key message for removing the KEKs on same or higher level than K’.
3.1.3 Leave Operation
If a group member wants to leave, it has to send a ‘Leave Request’ to the Key Centre. After receiving the request from the member(s), KC has to update the subgroup keys to maintain confidentiality and secrecy of communication. After updating the group keys, it may be a case that the height of the tree is changed due to the empty positions created as a result of leaving members. In such scenarios, height is recalculated for the tree structure’s lower part i.e. K”. In addition to this, if a group member leaves the group then the height of the tree is updated. Thus, a newly required level K’ is determined by considering the memory space and computation power of the remaining members.
The following steps are followed to leave the member into the multicast group.
Step 1: Receive a leave request from the member
Step 2: Update new KEKs
Step 3: Recalculate the height of the changed tree, K’’
Step 4: Determine a new required level K’
Step 5: If both K’’ and K’ are not equal and heightening the level of the tree, create levels from K’’+1 to K’.

Figure 3.6 Key tree updates when a user leaves
From the Figure 3.6, the member U9 wants to leave the multicast group. K is 2 and the height of the lower part of the changed key tree K” is 1. If K” is smaller than K, the KC decides to heighten the height of the tree. If it so, it generates new KEKs on level two.
If K” is equal to K’ then the height of the changed key tree is same as the height of key tree which is required for communication. In this scenario, no changes will be done in the height of the key tree structure. If K”
Figure 3.7 Leave operation in the PKS tree
The performance of the PKS tree structure is evaluated in different aspects of costs such as Key computation, Key storage.
3.2.1 Key Computation Cost
In a key tree structure, three keys are considered. They are group key (TEK), subgroup key (KEK) and Individual Keys (IK). As the level in a key tree structure increases, the number of keys for the group or member also increases. The depth of a binary tree equals to the integer part of log2n, where‘n’denotes the number of nodes on the balanced tree. The PKS tree maintains two types of levels. They are the flat levels (fl) and binary levels (bl). The height (H) of the tree is the number of flat and binary levels, i.e., H=fl+bl. Each member has one key on each level. Therefore, the number of key computations is same as the height of the key tree.
3.2.2 Key Storage Cost
Key storage cost is defined as the number of keys stored by each member in the multicast group and KC. Each member has to store one key on each level. Therefore, it is the height of the tree ‘fl+bl’ for the PKS tree and ‘bl’ for the binary tree.
Proficient tree based re-keying algorithm is proposed so that it reduces the number of re-keying operations per join/leave request. The Proficient Key Tree Structure has two parts in which the lower part constitutes of binary trees to minimise the communication cost and the upper part consists of flat trees to alleviate the key computation and key storage costs.
The time efficiency of all key tree structures is based on the height of the trees. The height is the number of binary levels of the binary tree and the height of the PKS tree is based on the number of flat and binary levels. It is concluded that the time efficiency of the PKS tree is less than the binary tree since the height of PKS is lesser than the binary key tree for the specified number of members in the multicast group.
Thus, the proficient key tree structure for re-keying is proposed in this chapter. It gives the complete picture about joining and leaving of users in the multicast group and the key computations during re-keying operations. Multilevel encryption and decryption using graceful codes are discussed in the following chapter.

Skin Functions, Structure and Relationship with the Body

The main function of the skin, its structure and the relationship between the skin, circulatory and nervous system

Draw a label diagram of the skin and describe its structures and key parts

(See diagram attached)
The skin is the largest organ in the human body. It has three layers; the epidermis, dermis and subcutaneous layer.
The epidermis
Google images (2016)
“The upper or outer layer of the two main layers of cells that make up the skin. The epidermis is mostly made up of flat, scale-like cells called squamous cells. These cells produce melanin, which gives the skin its colour” ( 2016).
The epidermis is the outmost layer of the skin, the skin we can see. This layer differs in thickness; it is thinner on the eyelids and nipples than it is on the soles of feet and palms of hands. This layer has water resistant properties and protects us from cuts and injuries. The epidermis contains the pigment melanin which gives us our skin tone.
The dermis
Google images (2016)
“Lying underneath the epidermis-the most superficial layer of our skin-is the dermis. The dermis is a tough layer of skin.” ( N/D).
The dermis is the layer beneath the epidermis; this layer is attached to the blood and nerve supply. It consists of sweat glands and hair follicles and connective tissues.
The subcutaneous layer
(Google Images 2016)
“The bottom layer of skin is the subcutaneous fat layer.” (American Academy of Dermatology 2016).
The subcutaneous layer is made up of fatty tissues or bundles of adipose tissue. This layer is responsible for retaining heat in the body. The smaller these bundles of adipose tissue are, the less over weight you are likely to be.
Functions of the skin

Protection: The skin helps to protect us from things such as dehydration, harmful microorganisms, bacteria and UV rays from the sun.
Absorption: The skin can absorb substances that the body need such as oxygen and nitrogen. Some medications/ointments may be applied to and absorbed by the skin for muscle pain, for example, deep heat or oriental tiger balm.
Sensation: Receptors in the skin allow us to touch and feel pain, heat and cold.
Temperature Regulation: Sweating begins at around 37°C. The sweat comes to the surface of the skin and evaporates, causing the body to reduce the heat, as well as this, the hair on our arms lie down to allow the heat to escape. When we are cold the opposite happens: the hairs stand up and goose bumps form to trap any heat in the body in order to warm us up again.
Immunity: The skin and the immune system work together to make the immune to microorganisms and bacteria.
Movement and growth: The skin is stretchy because of its elastic properties and this allows the covering of the whole body and the movement of the individual.
Excretion: The skin allows materials such as urea, excess water and ammonia out of the skin. By-products that aren’t wanted or needed by the skin are released through sweat glands in the form of sweat. Excretion is an important function to note about the skin (New Health Advisor 2014).
Vitamin production: Upon exposure to ultraviolet light (the sun), the skin produces vitamin D. This is important for the growth and strengthening of bone (Curran 2016).

The relationship between the skin, circulatory system and the nervous system.
The skin
The skin is the largest organ in the body and is wide spread throughout the whole body. The skin absorbs essential nutrients and oils through the pores and this provides moisture to the skin. The skin consists of three layers: The dermis, epidermis and subcutaneous layer.
The dermis is the layer beneath the epidermis; this layer is attached to the blood and nerve supply. It consists of sweat glands and hair follicles and connective tissues.
The epidermis is the outmost layer of the skin, the skin we can see. This layer differs in thickness; it is thinner on the eyelids and nipples than it is on the soles of feet and palms of hands. This layer has water resistant properties and protects us from cuts and injuries. The epidermis contains the pigment melanin which gives us our skin tone.
The subcutaneous layer is made up of fatty tissues or bundles of adipose tissue. This layer is responsible for retaining heat in the body. The smaller these bundles of adipose tissue are, the less over weight you are likely to be.
Functions of the skin

Protection: The skin helps to protect us from things such as dehydration, harmful microorganisms, bacteria and UV rays from the sun.
Absorption: The skin can absorb substances that the body need such as oxygen and nitrogen. Some medications/ointments may be applied to and absorbed by the skin for muscle pain, for example, deep heat or oriental tiger balm.
Sensation: Receptors in the skin allow us to touch and feel pain, heat and cold.
Temperature Regulation: Sweating begins at around 37°C. The sweat comes to the surface of the skin and evaporates, causing the body to reduce the heat, as well as this, the hair on our arms lie down to allow the heat to escape. When we are cold the opposite happens: the hairs stand up and goose bumps form to trap any heat in the body in order to warm us up again.
Immunity: The skin and the immune system work together to make the immune to microorganisms and bacteria.
Movement and growth: The skin is stretchy because of its elastic properties and this allows the covering of the whole body and the movement of the individual.
Excretion: The skin allows materials such as urea, excess water and ammonia out of the skin. By-products that aren’t wanted or needed by the skin are released through sweat glands in the form of sweat. Excretion is an important function to note about the skin (New Health Advisor 2014).
Vitamin production: Upon exposure to ultraviolet light (the sun), the skin produces vitamin D. This is important for the growth and strengthening of bone (Curran 2016).

The nervous system
The nervous system consists of the brain, spinal cord and all of the nerves that connect to these organs to the rest of the body. The cells in the nervous system are known as neurons and they transmit impulses along the nerves to carry messages between the brain and the body via the spinal cord. When the brain receives the information, it processes it before sending out the demands for the body. Neurons contain a long axon which is protects by myelin sheath as well as tiny branches called dendrons which branch out into smaller parts called dendrites ( BBC 2017).
(BBC 2017).
The autonomic nervous system regulates some body processes like blood pressure and breathing which work without any effort from the person. The somatic system consists of the nerves that are connected to the receptors in the skin. This is the system that protects us form getting burnt when holding or hand on a hot surface because the brain sends signals via the spinal cord to tell us to lift the hand off the surface.

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The circulatory system
The circulatory system consists of the heart, blood containing oxygen and carbon dioxide and the blood vessels including veins, arteries and capillaries. These blood vessels have muscles inside their walls in which the blood flows through and these muscles are controlled by the nervous system. The circulatory system is responsible for providing blood, hormones, nutrients and oxygen to all the cells in the body. This system also fights infection through white blood cells and antibodies and aid in the clotting of blood through platelets which form scabs on the surface of the skin when cut and exposed to oxygen.
(Google Images 2017)
The relationship between the skin, nervous system and circulatory system
The skin, nervous system and circulatory system work together in order to ensure the body is functioning the way it should. The somatic nervous system works with the central nervous system to protect the skin. It does this by telling us to lift our hand off a hot surface to avoid burning ourselves. The nervous system and circulatory system are connected by the lymphatic system and work together to maintain blood pressure and regulation of the heart. The nervous system “tells” the circulatory system to pump blood around the body. The nervous system and circulatory system needs to function correctly and work together to ensure the rest of the body is functioning properly. The nervous system controls all functions of the body. The circulatory system provides blood flow and regulates body temperature. The skin works together with it to regulate the body temperature. When too hot the blood vessels dilate, the hairs lie down and we sweat to allow excess heat to escape the body. When we are too cold the hairs stand up and goose bumps form to trap any heat in the body. If blood flow is restricted, the skin becomes pale. If one of these systems became damaged in any way, the body would have abnormal functioning (Curran 2017).
(iii) Using the table format give examples of viral, bacterial, fungal skin diseases.






Athletes foot

Common cold


Cutaneous Candidiasis


Food Poisoning

Tinea Versicolor

Cold sores



Chicken Pox


Tinea Capitis




(Native Remedies 2016)
(On Health 2016)
(Remedies health communities 2016)    

Semantics And The Structure Of Sentence

Semantics is the study of meaning. It typically focuses on the relation between signifiers, such as words, phrases, signs and symbols, and what they stand for. Linguistic semantics is the study of meanings that humans use language to express. Other forms of semantics include the semantics of programming languages, formal logics, and semiotics.
The word “semantics” itself denotes a range of ideas, from the popular to the highly technical. It is often used in ordinary language to denote a problem of understanding that comes down to word selection or connotation. This problem of understanding has been the subject of many formal inquiries, over a long period of time, most notably in the field of formal semantics. In linguistics, it is the study of interpretation of signs or symbols as used by agents or communities within particular circumstances and contexts. Within this view, sounds, facial expressions, body language, proxemics has semantic (meaningful) content, and each has several branches of study. In written language, such things as paragraph structure and punctuation have semantic content; in other forms of language, there is other semantic content.
The formal study of semantics intersects with many other fields of inquiry, including lexicology, syntax, pragmatics, etymology and others, although semantics is a well-defined field in its own right, often with synthetic properties. In philosophy of language, semantics and reference are related fields. Further related fields include philology, communication, and semiotics. The formal study of semantics is therefore complex.
Semantics contrasts with syntax, the study of the combinatory of units of a language (without reference to their meaning), and pragmatics, the study of the relationships between the symbols of a language, their meaning, and the users of the language. In international scientific vocabulary semantics is also called semasiology.
This theory is an effort to explain properties of argument structure. The assumption behind this theory is that syntactic properties of phrases reflect the meanings of the words that head them. With this theory, linguists can better deal with the fact that subtle differences in word meaning correlate with other differences in the syntactic structure that the word appears in. The way this is gone about is by looking at the internal structure of words. These small parts that make up the internal structure of words are referred to as semantic primitives.
A linguistic theory that investigates word meaning. This theory understands that the meaning of a word is fully reflected by its context. Here, the meaning of a word is constituted by its contextual relations. Therefore, a distinction between degrees of participation as well as modes of participation are made. In order to accomplish this distinction any part of a sentence that bears a meaning and combines with the meanings of other constituents is labeled as a semantic constituent. Semantic constituents that can not be broken down into more elementary constituents are labeled a minimal semantic constituent.
Computational Semantics is focused on the processing of linguistic meaning. In order to do this concrete algorithms and architectures are described. Within this framework the algorithms and architectures are also analyzed in terms of decidability, time/space complexity, data structures which they require and communication protocols. Many companies use semantic technologies to create commercial value. The fundamental point is that you cannot create much value from content that you do not understand. Once you understand, then you can interrogate more effectively, create explicit relationships between content around topics and issues, inform contextual advertising and product placement, and build a standard method of sharing structured data between publishers.

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Halliday (1987) describes some syntactic and semantic differences between the spoken and written modes of communication. Hoey (1986), Van Valin (1984) and Winter (1977) describe the syntax and semantics of clause connection, focusing largely on several English registers According to the traditional grammar, sentences consist of words, but not every string of word constitutes a sentence as we can see in the following example: Lion cage this less in dangerous is the. A possible analysis is that if we look at this example we know the meaning of the individual words, but the sequence as a whole does not make sense, so we cannot consider this structure a sentence. Thus, we can affirm that if a sequence of words is to constitute a sentence, it must he meaningful, for instance: The lion is less dangerous in this cage.
The network of relations between the words of a sentence is called its structure. There are many different aspects that influence the structure of a sentence. A very important one is word order. The different order of the words in a sentence can bring by a difference in its meaning, as in the following example: Did he say who he was?= Who did he say he was?
But a difference in word order does not always imply a difference in meaning. Sometimes it simply entails a difference in emphasis: John ran away //A way ran John .
In relation with the words, the structure of the sentence also depends on the individual meaning of the words or word-groups making up the sentence; in the following example the difference of structure is not due to word order but to the relationship between the words:
Peter was waiting for seven friends. //Peter was waiting for seven minutes.
Then this kind of Grammar deals with the concept of Ambiguous sentences and explains that the structure of sentences is not always unambiguously derivable from overt marks like word order, lexical items etc… Sometimes we come across sentences to which more than one structure can he assigned, having therefore, more than one meaning. This type of sentence receives the name of Ambiguous Sentence, as in the following examples: George likes Susan more than Joan // Visiting relatives can be boring.
Only through the context in which these sentences may appear can we know which of the two possible meanings is intended. According to the Transformational Grammar, it deals with the idea that a sentence has a syntactic structure, and it follows this term in order to develop its theory. The first important point deals with the idea that the evidence for claiming that sentences have a syntactic structure in language comes from the native speaker’s intuition about the structure of sentences in his language. These structural intuitions which native speakers have about the Syntax of their languages are two types:
1. The constituents: intuitions about how sound-sequences in sentences are structured into larger structural units.
2. Categories: intuitions about whether structural units belong to the same category or not. So, the following example is going to illustrate this fact:
To analyze the concept of sentence we can do the following analysis: words are grouped into lower constituents. For example “incredibly” modifies “intelligent”, so the sequence [incredibly intelligent] is a phrasal constituent of the sentence. Also, following the analysis, ‘this” modifies “pupil”, so the sequence [that pupil] forms a single structural unit, a constituent of the sentence. The same happens in the sequence [that teacher]. But furthermore also the sequence [to that teacher] is another constituent. To the transformational grammar, the phrases [incredibly intelligent] and [to that teacher] both modify “seem”, then the whole sequence [seem incredibly intelligent to that teacher] is also a constituent. Thus, all this information can he represented as we see before in diagrammatic form, that is a tree diagram. Each point in the tree is called a node, and each node represents a constituent. But, however, since nodes are predictable, later they were suppressed in subsequent tree-diagrams. But a tree-diagram does not provide any representation of our intuitions about which constituents are constituents of the same type. The traditional way of describing the similarities and differences between constituents is to say that they belong to categories of various types. And the same happens with the phrases. Finally, to this type of grammar, the whole sequence [that pupil must seem incredibly intelligent to that teacher] is a special type of constituent traditionally termed a clause or sentence.
3. Conventions to Be used in the analysis of a sentence, the constituents aNd its levels
Every sentence can he analysed at four distinct form levels: the word-level, the phrase-level, the clause-level and the sentence- level. And this is called the rank scale. Later, after the explanation of the constituents of a sentence we will see the different levels and how they can he analysed following the same example. Thus, a diagram as this provides a visual presentation of the categorial constituent structure of the sentence. It shows us how sentence is structured out of its constituent phrases, and how each of the phrases is structured out of its component words, and also it provides a visual presentation of the phrase structure of sentence. The type of labelled tree- diagram used here is referred to as a Phrase-marker (P-marker) because it marks the hierarchical grouping of words into phrases, and phrases into sentences.
Another method of visual display used in the linguistic literature is to make use of labelled bracketing. Within this system, we could represent the categorial status of the words in the structure mentioned before as in the following example:
[D This] [N pupil] [M must] [V seem] [Adv incredibly] [A intelligent] [P to] [D that] [N teacher]
We could use this system of labelled bracketing to represent the fact that [this pupil] and [that teacher] are noun phrases, that [to that teacher] is a prepositional phrase. That [incredibly intelligent] is an adjective phrase, that [seem incredibly intelligent to that teacher] is a verb phrase, and that [this pupil must seem incredibly intelligent to that teacher] is an “S” = clause. As follows:
[S [NP [D this] [N pupil]] [M must] [VP [V seem] [AP [ADV incredibly][A intelligent]] [PP [P to][NP [D that] [N teacher] ] ] ] ]
Then the two diagrams represented here contain the same information. Many linguists prefer tree-diagrams as a form of visual representation of syntactic structure because they are easier to read, and the reason for that is that the information they contain is less condensed. Thus, diagrams like these provide a virtually complete representation of the syntactic structure of the sentence. Also we can find partial tree-diagrams or partial labeled bracketing: for instance if we take the sentence mentioned before, we can see that it contains three major constituents:
According to grammarians, it can be said that there is a hierarchical order. That is to say, sounds are the constituents of words, words are the constituents of the phrases and phrases are the constituents of sentences or clauses. Then as a conclusion to this point, we can say that sentences are not just unstructured sequence of sounds; rather they have a hierarchical constituent structure in which sounds are grouped together into words, words into phrases, and phrases into sentences. On the other hand, it is important to point out the main features of the different categories although they have not been explained in this assignment. That is to say, when we talk about sentences, it is absolutely necessary to know the features of the categories as constituents of the own sentence. In a nutshell, it can be said that Radford’s book, Ouhalla´s work and the linguistics dictionaries are a useful guide for the student in the sense that they make easier the comprehension of grammar. It is due to the fact that they give us (as students) clear information by using simple examples.

Organizational Structure of AirAsia

1.0 Introduction
Nowadays, the use of information technology plays a vital role for businesses to compete and succeed. According to Laudon and Laudon (2010), almost the all firms and organizations use information technology to survive; they invest in information technology and systems because these investments will return a lot of advantages, such as; an increase in productivity, a decrease in costs and an increase in revenue. Information systems provide information for managers which help them to make better decisions and improve operations. This assignment will look at the largest low cost carriers in Asia Pacific region – AirAsia Berhad, which is known as AirAsia. In this work we will analyse how organization has successfully used information technology and systems to improve their business. In addition, this paper will look to IT strategies of Air Asia and to some businesses processes within organization where information systems were successfully implemented.
Organization background
If you want to understand today, you have to search yesterday. (Pearl Buck)
Generally, without past, there is no future and everything in our life has his history. Thus, it is brief Air Asia’s background:
First of all, AirAsia was founded in 1993 by Malaysian government as a second airliner to the major national air company MAS (Malaysian Airlines) and AirAsia started operating after three years on 18th November 1996.During the following 5 years, AirAsia failed every year to bring profit, as a result; AirAsia had a great debt of about USD $ 37 million in 2001. However, this time is the time when the real story of the largest low-cost airlines began. In 2001, Dato’ Sri Dr Tony Fernandes with partners Dato’ Pahamin Rejab (former chairman of Air Asia), Dato’ Kamarudin Meranun, and Dato’ Aziz Bakar purchased the AirAsia from Malaysian owner HICOM Holdings Berhad (now known as DRB-HICOM Berhad), for a symbolic price RM1 (USD 0.25 cents), and agreed to close the debts of the company. (AirAsia Annual Report, 2008, p.3)

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They started with an innovative goal to make air travel cheaper and more affordable to people that “Now Everyone Can Fly”. AirAsia was re-branded and re-launched and started new life with two Boeing B737 planes, approximately 250 staffs and had only five destinations to Kota Bahru, Kota Kinabalu, Kuching, Labuan, Langkawi and Penang. According to AirAsia website, today after 10 years Air Asia has around 100 air planes and flies to more than 60 destinations from 23 countries. Additionally, Air Asia operates more than 3,500 flights a week and has around 8,000 staffs. In 2009 AirAsia ferried more than 22 million passengers and AirAsia is ASEAN (Association of South Asia Nations) carrier. (AirAsia Annual Report, 2009, p.4)
It can be clearly seen that AirAsia has made a tremendous success in airline industry and it is interesting to know what and how managers of AirAsia use to achieve this fantastic outcome. It will be described later in following chapters.
Organization Vision and Mission.
Nowadays every organization has mission and vision statements, which show what organization is – (mission) and a view of what organization wants to be – (vision). (Harrison and John, 2009) In addition, the mission statement of the organization must be broad because it is an umbrella which encompasses organization’s programs and services. (Angelica, 2001)
1). AirAsia’s Vision:
Continue to be the lowest cost airline in every market we serve.
2). AirAsia’s Mission:

To be the best company to work for whereby employees are treated as part of a big family
Create a globally recognized ASEAN brand
To attain the lowest cost so that everyone can fly with AirAsia
Maintain the highest quality product, embracing technology to reduce cost and enhance service level (AirAsia website)

Business Strategies and Success factors.
“Without a strategy the organization is like a ship without rudder, going around in circles”. (Joel Ross and Michael Kami)
Air Asia Success factors.
AirAsia has achieved a tremendous success since its “renovation”. Because of some success factors AirAsia gets some competitive advantages in airline competition. By using it AirAsia is the best lowest cost airline company in South Asia. The key point of Airasia’s success factors is to deliver low fares is to consistently keep costs low. Providing low costs needs the high efficiency in every part of the business. Thus, every part of organization, every system process, everything must incorporate best industry practices. AirAsia’a success factors can be analyzed in the core values of the organization. AirAsia gets competitive advantages and makes their business successful by using these key strategies:
Safety First – Safety is the most vital criteria in every part of the organization operations; safety is the area where AirAsia will never compromise on. All conditions, which determine by regulators in the countries where AirAsia operates, are complied by the largest low fare airline. Furthermore, partnering with the world’s most renowned maintenance providers to be ensured that AirAsia’s airplanes always in the best condition.
High Aircraft Utilisation – The AirAsia airplane captains’ ability, to make a fast turnaround of 25 minutes which is the fastest in the region, is more convenient for customers to travel. It has resulted in high aircraft utilisation, better airline and staff productivity and lower costs.
Low Fare, No Frills – Providing to guests to have the choice of buying exclusively prepared meals, snacks and drinks from in-flight service at an affordable price.
Streamlined Operations – The important key of the AirAsia’s success is to make processes are simple as possible.
Leans Distribution System – Offering a wide and innovative range of distribution channels to make booking and travelling easier.
Point to Point Network – Applying the point-to-point network keeps operation simple and lower costs. Most of the AirAsia’s flights are short haul (four-hour flight radius or less) which helps to keep lower costs.
Company Business Strategy.
The Business Strategy of AirAsia is “To continue to be the lowest cost short-haul airline in every market it serves, delivering strong organic growth through offering the lowest airfares at a uprofit”.
This strategy focusing in six main strategic thrusts:
Leanest Cost Structure

Efficient and simple point to point operations 
Attracting and retaining hardworking and smart people 
Passion for continuous cost reduction

Maximise Shareholders’ Value

Resilient profit growth through our lower cost base 
Expansion of the AirAsia network in a prudent and disciplined manner 
Invest and enhance the AirAsia brand to increase investors’ returns


Comply with the highest International Aviation Safety Standards and practices
Keep operations simple and transparent 
Ensure the security of our People and Guests

Passion for Guests’ Satisfaction

Maintain simplicity in every application 
Practice the unique and friendly AirAsia experience at every opportunity 
Recognize the linkage between guests’ satisfaction and long-term success


Transparency in decision-making and information sharing 
Optimum disclosure – higher than industry norms 
Timeliness in disclosing information

Human Capital Development

Invest in both hard and soft skills 
Recognize all our People as contributors to our success 
Reward excellence and individual contributions
Maintaining one brand across the Group

Analysis of the current Business Environment.
Industry Analysis – Porter’s Five Forces Model.
1. Bargaining Power of Supplier
First of all, it can be clearly seen that the main AirAsia’s supplier is the airplane suppliers. Generally the power of airplane suppliers is very strong because of monopolisation in airplane manufacturers; there are only two types of airplanes Boeing and Airbus. The switching cost for airplane suppliers is very high due to expensive needs to change airplanes, for example: it will be very costly for AirAsia to change airplanes and train employees to be used of new airplanes. To be honest, nowadays, only several airline manufactures exist in airline industry, thus the power of airplane suppliers is very fantastic. If we look to other suppliers, such as, fuel, food and other suppliers, it is clear that their power is not so strong because AirAsia can change them and it will not affect to costs. The increase in price can be risky for these suppliers because AirAsia can quit working with them.
2. Bargaining Power of Buyer
Generally, the power of customers is always high because there is no any switching cost for customers to change from one airline company to another, however; in this case, it can be thought that the output of AirAsia is very unique and fantastic in South Asia region. In addition, there will be switching cost for customers who want to change AirAsia to another airline company, as a result; the bargaining power of buyers is low.
3. Threat from Substitutes
In South Asia region there are several possible substitutes for airline industry, such as; trains, buses, cars or ships. However, the prices for other substitutes are more expensive or at the same level, comfort, time spending and other factors during the travelling are more worse than in irline travelling. Nowadays, air travelling is faster, cheaper and more comfortable, as a result; threat of substitutes is respectively low.
4. Threat from New Entrants
Airline industry is very expensive for new organizations to entrance into this industry. New organizations must have a big capital, strong support from government and must correspond for some requirements for airline organizations. There are difficult barriers for new organizations, for instance; cost advantages of existing airline organizations, brand loyalty of customers, high switching costs for customers and government restrictions. Therefore, the threat from new entrants is low.
5. Rivalry Intensity
In general, the competition between airline organizations in Malaysia is not very strong. There is only one competitor for AirAsia in Malaysian airline industry is Malaysian Airlines (MAS) which can be considered as a “friendly” rival. Thus, the intensity of rival is low in Malaysian airline industry.
3.3 AirAsia Competitive Advantage.
The strategic positioning has several ways in which the company can achieve competitive advantage. For instance, offering similar benefits for a lower cost to customers or retain cost but offer greater benefits for customers. In the case of Maybank, the strategy used by the company is to preserve the value of banking products and services, while offering great benefits and value, as well as the good quality of their products and services.
Focusing on the variety and quality of their products and services, Maybank exercise their competitive advantage. In particular, through its subsidiaries Maybank provides a wide and diverse range of products and services. That allows its customers to use multiple services in one banking group. By entrusting their money to the time-tested bank, whether it be insurance, private banking or assets management. All this, along with high quality services and highly professional staff of the bank create convenience for customers, thereby increasing competitive advantage.
One of the important factors in achieving competitive advantage of Maybank is to improve the quality and speed of services through the introduction of information technology. Maybank since its inception is looking for ways to make life easier for its customers, through improving the quality of its services. Information technologies have played an important role in this. Maybank always has been the first to introduce new technologies, thus providing greater benefits and opportunities for its customers.
4.0 Analysis of the Current IS/IT Strategy Environment and IT solutions of Maybank.
Yield Management System (YMS)
It is also known as Revenue Management System; it understands, anticipates and reacts to the behavior of customer to maximize revenue for the organization. This takes into account the operating costs and aids AirAsia to optimize prices and allocate capacity to maximize expected revenues. The optimization is done on two levels in AirAsia:
Seat (Every seat is considered an opportunity to maximize revenue. Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier – for the same seat)
Route (By adjusting prices for routes/destinations that have a higher demand when compared to others). The effective method however is to combine these two levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights.
AirAsia has realized increased revenue (3-4%) for the same number of aircrafts by taking advantage of the forecast of the high/low demand patterns, effectively shifting the demand from low period to high period and by charging a premium for late bookings. Over the past couple of years, AirAsia have actually lowered prices (essential for LCC) as the YMS has given them the window to increase their revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times. (Voneche, n.d).
Computer Reservation System (CRS)
AirAsia’s CRS (Open Skies by Navitaire) has helped it to grow at a dramatic pace in the past couple of years
“Navitaire’s Open Skies technology has truly enabled Airasia’s growth from 2 million passengers to 7.7 million passengers in less than two years. Open Skies scaled easily to accommodate our growth.”
– Tony Fernandes –
CEO – AirAsia
Source: Navitaire (
It is an integrated web-based reservation and inventory system. It includes Internet, call center, airport departure control and more. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales commissions that need to be paid to them. Centralized customer data is also maintained by Open Skies and this helps AirAsia to track booking and schedule flight activities with real-time, on-demand reporting feature. The vast booking information that is provided online to the customers acts as a force that brings more customers to use the website thus reducing the customer support costs. An important feature is that Open Skies seamlessly integrates with the already implemented YMS so that the systems can be used in unison for pricing and revenue maximization (by providing information on bookings, schedules etc) and driving down the costs of operation at the same time. This CRS enabled AirAsia to introduce the first ticket less travel option and also provides features such as advanced boarding passes in addition to online booking that enabled the growth of AirAsia as these features attracted customers that did not have the time for purchasing tickets from counters and coming in 1 hour early for securing a seat on the aircraft. AirAsia have proposed to implement a Wireless Delivery System
(WDS) to expand its reach via mobile phones. With this, potential customers will be able to book tickets via their mobile phones. This is a strategic move for growth as the Asia-Pacific region has a larger population of mobile phone users rather than internet users.
Enterprise Resource Planning System (ERP)
AirAsia has recently (May 2005) opted for a full fledged ERP system implemented by Avanade consultants. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and data retrieval processes. (Microsoft Malaysia)
4.1 IT and IS deployed by Maybank.
It can be said that Maybank has been always be on the way to improve quality of their products and services, thereby satisfy all the needs of their customers. In other words Maybank has been always innovated its products and services by implementation of IT. If to look back to the past we can see that Maybank was the leader to introduce new technologies to the market. For instance, Maybank was the first to embark on a computerisation programme, First to implement the use of ATMs and establish a shared ATM network with its subsidiaries, First to introduce Phone banking and First to introduce Internet Banking.
In 1981, Maybank was first Malaysian bank to set up Automated Teller Machine (ATM) services.(annual report, 2009). Since that time Maybank increased the number of ATMs, with each year. ATMs give a lot of opportunities and benefits to the customers of the bank. Such as, access to own account 24 hours/7 days a week, fast cash withdrawal, cheque book and statement request, fund transfer between own accounts and funds transfer to third party accounts. Furthermore, Maybank was first domestic bank to implement MAS electronic Ticketing at their ATMs, this enable Maybank customers ticketless air travel in Malaysia on Malaysia Airlines. Later, due to its expansion to the South Asia markets Maybank launch the Maybank RegionLink Service. RegionLink Service allows Maybank customers in Malaysia, Singapore, Brunei and Philippines to access ATM transactions at any Maybank ATM in these four countries. To effectively usage and managing its ATM network as well as to enable their customers to have a better service, Maybank uses automated teller machine management software from Diebold Inc.
Without a doubt, the Internet is one of the most important technological advances of recent years. The rapid development of information technologies have created vast opportunities for companies to reduce operating costs, increase speed and quality of their services, as well as the creation of additional benefits for their customers. Because of this and to create competitive advantage Maybank launch its Internet Banking.
Basically, Maybank launch Internet Banking through its online financial portal in 2000. This portal bring the convenience of online banking for its customers, who can open an account, check balances, transfer funds, settle bills and shop online via this site, which employs 128-bit SSL security technology. Later in 2001, Maybank launch its E-bills service, which can be used only by their customers. At that time there were 325 business organisations that were able to accept payment through internet banking. Conducting funds transactions over the internet has been convenient and quick. This allowed the company to reach RM 500 million monthly total average transaction. In 2003, Maybank launched Internet Banking Kiosks. It enable their customers to undertake internet banking transactions in provided terminals at its branches.
To maintain its leadership position in internet banking services, in 2006, Maybank launch Mobile Banking services in collaboration with Celcom and Maxis. It was the first mobile banking in Malaysia . It allowed Maybank customers to access to the three most popular applications of bill payment balance enquiry and fund transfers. From that time, Maybank customers have the convenience of undertaking selected banking transactions in real time via the mobile phone.
In order to improve its efficiency and service MayBank concluded a series of deals with companies such as CSC and Microsoft.The main objective of IT infrastructure outsourcing agreement with CSC was to improve their IT services to position it for global economic growth and, in the case of major disasters, to reduce its recovery time from three days to less than eight hours. The data center was moved from Maybank’s headquarter to a secure and modern CSC facility. In addition, CSC set up separate data center for disaster recovery that fully duplicates all of the banks critical data across all platforms. CSC also provide simultaneous connection between bank branches, the main data center and disaster recovery center. This deal allowed the company to reduce response time, to increase productivity and transactional speed.
An Enterprise Subscription Agreement with Microsoft Malaysia to adopt a common software toolset for Maybank’s desktop applications has given Maybank the ability to promote greater communication among employees and customers and to enhance cost efficiency. One of the results of this agreement was increasing efficiency and productivity of the employees.
4.2 Impact on the usage of IS/IT by Maybank.
In general, the use of information technology has a significant impact on the work of the enterprise. Effect of IT can be both at the organization, its efficiency, as well as to clients and their relationship to the company.
In the case of Maybank, IT was one of the essential factors of growth and continued leadership of the bank. Maybank always has been a pioneer in the introduction of the use of IT, which allowed the company to achieve certain benefits. These benefits include competitive advantage, achieving the goal of the company, better service for customers and increase profits and market share.
Maybank was able to improve their service through the use of information technology and information systems. Provision of banking and financial services through a network of ATMs and internet banking has allowed its customers to access their accounts anytime and anywhere in the world. Also, the IT/IS have an impact on the reduction of transaction costs and the time spending on transaction, that is convenient for customers. Customer relationship management system has been significantly influenced by information technologies. Increasing the ways of interaction between the company and customers, has given Maybank opportunity to increase and improve understanding of the needs and desires of customers. All this resulted in improved service and customer satisfaction, as well as the obvious convenience for customers of Maybank.
Paying great attention to the use and implementation of IT, Maybank thus creating conditions for improving efficiency and productivity of their employees, as well as facilitating a repository of knowledge and being able to share this knowledge across the organization. In Maybank firmly believe that effective knowledge sharing is a source of competitive advantage. Also providing new products and services Maybank has a competitive advantage. At the same time, it is a temporary competitive advantage, because competitors can later enter the market with similar products and services. Therefore Maybank is always on the way to improve its service.
On the other hand, Maybank as a pioneer in the introduction of the usage of IT has the “first-mover advantage”. This has a significant impact on enlarging market share. Also, the IT/IS has an impact on the reduction of transaction costs and human capital costs. All this has allowed Maybank to increase profits and market share.
Increased profits and market share, competitive advantage and better service has given Maybank an opportunity to achieve its goal. Namely to become a leading banking group in Malaysia, and set the following goal to become a leading regional banking group by 2015.
5.0 Conclusion
Technical progress is coming more quickly than ever before, thus, affecting all aspects of a typical company. Today, it is vital to the company to use information technology in order to work. It is become crucial factor for the Maybank to employ IT/IS in order to compete in digital world, where almost everyone use IT. Nevertheless, it is important to remember that the most important factor still is the people and companies such as Maybank also need to invest their money in staff training, in order to be competitive enough or even to create competitive advantage. Because it is the people who create it.

Kidneys: Function and Structure

The kidneys are essential for regulating the volume and composition of bodily fluids. This page outlines key regulatory systems involving the kidneys for controlling volume, sodium and potassium concentrations, and the pH of bodily fluids.
A most critical concept for you to understand is how water and sodium regulation are integrated to defend the body against all possible disturbances in the volume and osmolarity of bodily fluids. Simple examples of such disturbances include dehydration, blood loss, salt ingestion, and plain water ingestion.
How water balance is regulated by ADH
Water balance is achieved in the body by ensuring that the amount of water consumed in food and drink (and generated by metabolism) equals the amount of water excreted. The consumption side is regulated by behavioural mechanisms, including thirst and salt cravings. While almost a litre of water per day is lost through the skin, lungs, and feces, the kidneys are the major site of regulated excretion of water.
One way the kidneys can directly control the volume of bodily fluids is by the amount of water excreted in the urine. Either the kidneys can conserve water by producing urine that is concentrated relative to plasma, or they can rid the body of excess water by producing urine that is dilute relative to plasma.
Direct control of water excretion in the kidneys is exercised by vasopressin, or anti-diuretic hormone (ADH), a peptide hormone secreted by the hypothalamus. ADH causes the insertion of water channels into the membranes of cells lining the collecting ducts, allowing water reabsorption to occur. Without ADH, little water is reabsorbed in the collecting ducts and dilute urine is excreted.
How the kidney uses a counter current mechanism
Because the human body does not maintain a constant water volume, the kidneys have to compensate for the lack of or excess of water consumed. The kidneys use a transport system called the counter-current mechanism to accomplish this (Hoppensteadt et al, 186). The name is based on the fact that concentration first increases in the direction of flow, then decreases as flow continues through the ascending parallel loop. The mechanism relies on the adjacent, parallel loops of Henle and vasa recta.
In the ascending loop, Na+ or any solute is actively pumped out of the tubule. Because water is impermeable in the ascending loop, the volume at the bottom of the loop is the same as that entering the distal tubule. At the bottom of the loop, the tubular and interstitial concentrations are equal.
In the descending loop, the concentrations inside and outside the tubule are increasing with the current, with the maximum concentration being reached at the bottom of the loop. The increased concentration is the result of the passive diffusion of Na+ into the tubule and water out of the tubule. When the filtrate reaches the distal tubule, a net loss of Na+ and water has occurred through the loops of Henle.

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How the PH is controlled by the kidney
The secretion of further substances not required by the body may take place in the distal convoluted tubule, e.g. hydrogen and hydro carbonate ions. This is very important in the control of plasma Ph, which must be maintained at 7.4. If the pH plasma falls, hydrogen ions are excreted by the kidney; if the plasma pH raises hydrogen carbonate ions secreted.
Active Transport
Active transport is the energy-demanding transfer of a substance across a cell membrane against its concentration gradient, i.e., from lower concentration to higher concentration.
Special proteins within the cell membrane act as specific protein ‘carriers’. The energy for active transport comes from ATP generated by respiration (in mitochondria).
Major examples of Active Transport such as:

Re-absorption of glucose,
Amino acids
Salts by the proximal convoluted tubule of the nephron in the kidney.

A mechanism of active transport which move potassium ions into and sodium ions out of a cell along with protein (or enzyme) channel. It is found in all human cells, but is especially important in nerve and muscle cells.
The sodium-potassium pump uses active transport, with energy supplied by ATP (adenosine triphosphate) molecules, to move 3 sodium ions to the outside of the cell for each 2 potassium ions that it moves in. One third of the body’s energy expenditure is used in this process.
Buffer system
The kidneys and the lungs work together to help maintain a blood pH of 7.4 by affecting the components of the buffers in the blood. Therefore, to understand how these organs help control the pH of the blood, we must first discuss how buffers work in solution.
Acid-base buffers confer resistance to a change in the pH of a solution when hydrogen ions (protons) or hydroxide ions are added or removed. An acid-base buffer typically consists of a weak acid, and its base (salt). Buffers work because the concentrations of the weak acid and its salt are large compared to the amount of protons or hydroxide ions added or removed.
When protons are added to the solution from an external source, some of the base component of the buffer is converted to the weak-acid component (therefore, using up most of the protons added); when hydroxide ions are added to the solution (or, equivalently, protons are removed from the solution; protons are dissociated from some of the weak-acid molecules of the buffer, converting them to the base of the buffer (and therefore replenishing most of the protons removed).
However, the change in acid and base concentrations is small relative to the amounts of these species present in solution. Hence, the ratio of acid to base changes only slightly. Thus, the effect on the pH of the solution is small, within certain limitations on the amount of H+ or OH- added or removed.
Other buffers perform a more minor role than the carbonic-acid-bicarbonate buffer in regulating the pH of the blood. The phosphate buffer consists of phosphoric acid (H3PO4) in equilibrium with dihydrogen phosphate ion (H2PO4-) and H+. The pK for the phosphate buffer is 6.8, which allows this buffer to function within its optimal buffering range at physiological pH.
The phosphate buffer only plays a minor role in the blood, however, because H3PO4 and H2PO4- are found in very low concentration in the blood. Haemoglobin also acts as a pH buffer in the blood. Protein can reversibly bind either H+ (to the protein) or O2, but that when one of these substances is bound, the other is released (as explained by the Bohr effect).
During exercise, haemoglobin helps to control the pH of the blood by binding some of the excess protons that are generated in the muscles. At the same time, molecular oxygen is released for use by the muscles.
The symptoms of kidney failure:
There are two types of kidney failure; one of them is acute renal failure and the other type is: Chronic renal failure.
Acute renal failure.

Blood loss, causing a drop in blood pressure.
Vomiting and diarrhea, causing dehydration.
Crush injuries. If large amounts of muscle are damaged there is a release of toxic protein substances that are harmful to the kidneys.
Sudden blockage of urine drainage.
Chronic renal failure

The damage to the kidneys is usually ‘silent’ and not noticed at an early stage. It may be discovered incidentally from blood or urine tests done for other reasons. High blood pressure very commonly occurs with it. Symptoms are uncommon unless kidney failure is far advanced, when any of the following may be present:
The symptoms of Chronic renal failure

Loss of appetite
Nausea and vomiting
Fluid retention, shown as ankle swelling

The importance to the body to maintain acid base levels
All the cells that make up the human body are slightly alkaline and the alkalinity must be maintained in order to function and remain healthy. However, their cellular activity creates acid and this acid is what gives the cell energy and function. As each alkaline cell performs its task of respiration, it secrets metabolic wastes and these end products of cellular metabolism are acid in nature.
Although these wastes are used for energy and function, they must not be allowed to build up. An example of this would be the lactic acid which is created through exercise. The body will go to great lengths to neutralise and detoxify these acids before they act as poisons in and around the cell, ultimately changing the environment of the cell.
The human body is very intelligent; as the human body become more acidic the body starts to set up defence mechanisms to keep the damaging acid from entering our organs. It’s known as that the acid gets stored in the fat cells. However, if the acid does come to contact with an organ the acid has a chance to eat holes in the tissue which may cause the cell to mutate (change in a chromosome or a gene).
The oxygen level drops in this acidic environment and calcium begins to be depleted. So as a defense mechanism, our body may actually make fat to protect us from our overly-acidic self. Those fat cells and cellulite deposits may actually be packing up the acid and trying to keep it a safe distance from our organs to safe them from damage.
The effect of exercise on body fluid requirements
Optimal pH of the blood is 7.2, the body will do everything it can to maintain that pH. This is necessary to run the entire body’s biochemical pathways for detoxification, building, and general maintenance. The body has several control mechanisms to keep it at this pH and they include getting rid of excess acid or base by-products through the lungs, saliva and urine.
When the body is sick in any way this pH is disrupted. Most times your body is trying to keep up with the extra acid produced. Acids are produced from lack of oxygen, eating an imbalance of protein and carbohydrates and other acid producing foods, and by cell breakdown and production of metabolic waste.
During exercise, the muscles use up oxygen as they convert chemical energy in glucose to mechanical energy. This O2 comes from hemoglobin in the blood. CO2 and H+ are produced during the breakdown of glucose, and are removed from the muscle via the blood. The production and removal of CO2 and H+, together with the use and transport of O2, cause chemical changes in the blood. These chemical changes, unless offset by other physiological functions, cause the pH of the blood to drop.
If the pH of the body gets too low (below7.4) this result in a condition known as acidosis. This can be very serious, because many of the chemical reactions that occur in the body, especially those involving proteins, are pH-dependent. Ideally, the pH of the blood should be maintained at 7.4. If the pH drops below 6.8 or rises above 7.8, death may occur. Fortunately, we have buffers in the blood to protect against large changes in pH.
Production of CO2 is a result of normal body metabolism. Exercise will increase the production of CO2 through increased respiration in the lungs. When oxygen (O2) is inhaled and CO2 is exhaled, the blood transports these gases to the lungs and body tissues. The body’s metabolism produces acids that are buffered and then excreted by the lungs and kidneys to maintain body fluids at a neutral pH. Disruptions in CO2 levels and HCO3 -create acid-base imbalances. When acid-base imbalances occur, the disturbances can be broadly divided into either acidosis (excess acid) or alkalosis (excess base/alkali).
Urine becomes increasingly acidic as the amount of excess acid retained by the body increases. Alkaline urine, usually containing bicarbonate-carbonic acid buffer, is normally excreted when there is an excess of base or alkali in the body. Secretion of acid or alkaline urine by the kidneys is one of the most important mechanisms the body uses to maintain a constant body pH. As we exercise the urine pH becomes more acidic because the condition which known as acidosis have occurred and this results from a build-up of carbon dioxide in the blood, as well as starvation and dehydration.
As we exercise the temperature increases, and the amount of O2 released from the haemoglobin. Heat is a bi product of the metabolic reactions of all cells and the heat released by contracting muscle fibers tends to raise body temperature. Metabolically active cells require more O2 and liberate more acids and heat.
If we have an increase in temperature, it causes the rate of respiration to increase too. Because O2 tends to be released from the haemoglobin compared to when the weather is cold. This explains why during fever, a person will breathe faster than normal person.
In contrast, during hypothermia (lowered body temperature) cellular metabolism slows and the need for O2 is reduced, and more O2 remains bound to haemoglobin.
Body Adjustment to improve fitness levels
Exercises help our body to adjust and improve its capacity for physical activities. In order to increase our overall fitness level we have to concentrate on three different areas:

Cardiovascular training
Strength training
Flexibility training

Cardiovascular training
Cardiovascular training is aerobic exercise that involves the large muscles like legs and helps make the heart and lungs stronger. Cardiovascular exercise has lots of health benefits like lowering the blood pressure, and also it can burn lots of calories.
This type of exercise leads to improvements in the heart’s ability to pump blood through the body to the working muscles and improves overall cardiovascular health. It is also linked to a number of health improvements including a decreased risk of many diseases, decreases in total cholesterol, blood pressure and levels of body fat.
Strength training
In order to improve our strength, a change is needed to be made, otherwise if we simply lift the same weights, the same way, then we will stay the same – our training is maintenance based. If we want to improve our strength training, then we will need to apply a number of different variations into our workout routines to avoid letting the body become adapted to the current strength training workouts.
A muscle will only strengthen when forced to operate beyond its customary intensity (overload). Overload can be progressed by increasing the:
(1) Resistance e.g. adding more weight. (2) Number of repetitions with a particular weight. (3) Number of sets of the exercise. (4) Intensity, i.e. reducing the recovery periods
Flexibility training
Flexibility is a joint’s ability to move through a full range of motion. Flexibility training, also called flexibility stretching that helps balance muscle groups that might be overused during exercise or physical activity. There are many benefits to flexibility training. Some of the benefits are:

Improved Physical Performance.
Decreased Risk of Injury.
Increased Blood and Nutrients to Tissues.

Stretching increases tissue temperature, which increases circulation and nutrient transport. Increased circulation and nutrient transport allows greater elasticity of surrounding tissues and increases performance.
Maintaining Fluid Balances
Fluid balance defines the state where a body’s required amount of water is present and proportioned normally among the various compartments; this state is inseparable from electrolyte balance. Under normal conditions water loss equals water gain and a body’s water volume remains constant. Avenues for water loss include the kidneys, skin, lungs, feces, and menstruation. Water is sourced mostly from dietary intake; this is called preformed water.
Water is not produced by the body to maintain homeostasis; metabolic water production is simply a by-product of cellular respiration. The body regulates water intake via the thirst reflex which stimulates us to drink. When water loss is greater than water gain the body reaches a state of dehydration, and dehydration stimulates the thirst reflex in three ways:
The level of saliva drops resulting in a dry mucosa in the mouth and pharynx;
There is an increase in blood osmotic pressure which stimulates osmoreceptors in the hypothalamus;
There is a drop in blood volume, which leads to the renin/angiotensin pathway stimulating the thirst centre in the hypothalamus.
When the blood looses excessive fluid dehydration occurs and the blood becomes more viscous (reduce ability to flow). This results in insufficient blood supply to the working muscles. After exercise, a drop in body fluid results in an increase in blood tonicity and a decrease in blood volume which in turn causes the release of renin in the kidneys and stimulation of osmoreceptors in the hypothalamus.Therefore after exercise, the exerciser must focus on the following areas:
Effect of drinks
Cardiovascular and thermoregulatory responses to fluid ingestion
Carbohydrates feeding and exercise performance
Sports drinks must be formulated to taste best when people are hot and sweaty so that they can drink as much as they possibly can. The sports drinks are absorbed faster than plain water during exercise and rest. During exercise fluid consumption is vital for two primary purposes – safe guarding health and optimizing performance
Therefore, we need to consume more carbohydrate which helps maintaining blood glucose and increases carbohydrate oxidation, assure skeletal muscle and CNS sufficient supply of energy.
Sources Used
Essential AS Biology by( Glenn and Susan Toole)
AS Biology by (Pete Kennedy and Frank Sochacki)

Dehli’s History, Infrastructure and Political Structure

Delhi,also known as the National Capital Territory of India is a metropolitan region in India. Due to urban expansion in India its growth has expanded beyond the NCT to incorporate towns in neighbouring states and it can count a population of nearly 27 million residents as of 2014. The NCT and its urban region have been given the special status of National Capital Region (NCR) under the Constitution of India‘s 69th amendment act of 1991. The NCR includes the neighbouring cities of Gurgaon, Noida, Ghaziabad, Faridabad, Greater Noida, Alwar, Bharatpurand other nearby towns.

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There are a number of legends associated with the origin of the name Delhi. One is that it is derived fromDhilluorDilu, a king who built a city at this location in 50BC and named it after himself. Another is that the name is derived fromDilli, a corruption ofdehleezordehali—both terms meaning ‘threshold’ or ‘gateway’—and symbolic of the city as a gateway to the Gangetic Plain.
Delhi has been continuously inhabited since the 6th century BC.Through most of its history, Delhi has served as a capital of various kingdoms and empires. It has been captured, ransacked and rebuilt several times, particularly during the medieval period.Delhi was the site of ancient Indraprastha(Khandavprastha), the ancient capital of the Pandavas during the Mahabharata. By 1200, native Hindu resistance had begun to crumble, the dominance of foreign Muslim dynasties in India was to last for the next three hundred years, and Delhi was ruled by a succession of Turkic and an Afghan, Lodhi dynasty. They built a number of forts and townships that are part of the seven cities of Delhi. In 1639, the Mughal emperor Shah Jahan built a new walled city named Shahjahanabad, In Delhi, which served as the capital of the Mughal Empire from 1649 to 1847.Shahjahanabad today is Old Delhi. The greater part of Old Delhi is still confined within the space of Shah Jahān’s walls, and several gates built during his rule—the Kashmiri Gate, the Delhi Gate, the Turkman Gate, and the Ajmeri Gate—still stand. In 1911 the British determined to shift the capital of India from Calcutta to Delhi.The key architect was Sir Edwin Lutyensand it was he who gave shape to the city.The British moved to the partially built New Delhi in 1912, and construction was completed in 1931. A new capital city, New Delhi, was built to the south of the old city during the 1920s.When the British left India in 1947, New Delhi became its national capital and seat of the union government..
Two prominent features of the geography of Delhi are the Yamuna flood plains and the Delhi ridge. The Yamuna river was the historical boundary between Punjab and UP, and its flood plains provide fertile alluvial soil suitable for agriculture but are prone to recurrent floods. The Yamuna, a sacred river in Hinduism, is the only major river flowing through Delhi. The Delhi ridge originates from the Aravalli Range in the south and encircles the west, north-east and north-west parts of the city. It reaches a height of 318m (1,043ft) and is a dominant feature of the region
Delhi features an atypical version of the humid subtropical climate. The warm season lasts from 9 April to 8 July with an average daily high temperature above 36°C. The hottest day of the year is 22 May, with an average high of 38°C and low of 25°C.[59]The cold season lasts from 11 December to 11 February with an average daily high temperature below 18°C. The coldest day of the year is 4 January, with an average low of 2°C.Temperatures in Delhi usually range from 5 to 40°C.The average date of the advent of monsoon winds in Delhi is 29 June.
Delhi is the most polluted[66]city in the world and according to one estimate, air pollution causes the death of about 10,500 people in Delhi every year.The dense smog in Delhi during winter season results in major air and rail traffic disruptions every year.Since the mid-1990s, Delhi has undertaken some measures to curb air pollution – Delhi has the third highest quantity of trees among Indian cities[78]and the Delhi Transport Corporation operates the world’s largest fleet of environmentally-friendly compressed natural gas (CNG) buses.
Delhi has seen major infrastructural changes over the past few years amidst increased foreign investment and economic growth. Delhi’s infrastructure is attracting MNCs and corporate bodies from all over the world. Information technology, BPOs and other IT Services are among the growing industries in Delhi. Recent developments and economical growth in Delhi have put the city on the global map competing with other top cities in the world. Delhi has a much improved infrastructure with new roads, flyovers, bridges, healthcare facilities, sanitation, etc. Education in Delhi has always been the specialty of Delhi with so many good schools and colleges to choose from. Other major initiatives of the government include telecom, housing, power facilities, and transportation.
Sighting the upcoming Commonwealth Games 2010, Delhi is geared up for transforming itself to a world class city.
Transport System In Delhi:
Delhi Transport Corporation or the DTC is the main transportation medium in Delhi. DTC is the world’s largest compressed natural gas bus service. The service has come a long way since its inception in the year 1984. Now all buses have been converted into CNG in order to control the pollution level of the city. Apart from the bus service of the DTC, there are private Blue Line services which are under the private hands.
International Airport of Delhi popularly known as Indira Gandhi International Airport is located 24 kilometers south of New Delhi. It is a two-terminal airport with major Airlines from across the world having flights to and from Indira Gandhi International Airport. Out of the two terminals, one is the Domestic Terminal some 3 kilometers away from the International Terminal. Metro rail service in Delhi has come as a much awaited gift for the people of Delhi which has indeed changed the transport facility of the city. It has become the “life line” of Delhi as people are dependent on Delhi Metro for commuting to different places within the city. Delhi Metro Project has been recognized all over the world for its specialty in terms of a hi-tech rail and better equipped transport system. Other than these, taxis and autos are always in demand for shorter distances
Housing structure
In Delhi 96.98% families live in pucca, 2.01% in semi-pucca, and 1.01% in kutcha type of housing structure. 60.77% stay in independent, 19.02% in flat type dwellings. In 2010 Total number of slums were estimated as 1867 and the households therein were estimated as 3.79 lakhs.
Crime rate
Call it the inefficiency of the Delhi Police or the impact of “liberal registration” of cases, but the Capital recorded two to four times more criminal incidents till March this year as compared to the corresponding period in last year.
Delhi has reported the highest rate of violent crimes in the country. The city reported 29 heinous crimes cases daily in 2013.According to NCRB statistics, the Capital’s daily data of violent crime included 17 incidents of abduction, three robberies and rapes each and a case of murder and attempt to murder between January 1 and December 31, 2013.
The Government of Delhi is the supreme governing authority of the Indian national capital territory of Delhi and its 9 districts.
The Delhi High Court has jurisdiction over Delhi, which also has two lower courts: the Small Causes Court for civil cases, and the Sessions Court for criminal cases. The Delhi Police, headed by the Police Commissioner, is one of the largest metropolitan police forces in the world.[1] The Parliament of India, the Rashtrapati Bhavan (Presidential Palace), Cabinet Secretariat and the Supreme Court of India are located in the municipal district of New Delhi.There is no Cabinet of Ministers in Government of Delhi, as Delhi is under President’s Rule.

How Does Capital Structure Affect the Performance of European Shipping Industry?

Research Topic: How does capital structure affect the performance of European shipping industry?

Table of Contents


Research aims and objectives:

Research question:

Research hypotheses:

Purpose of the research:

Literature Review:

Capital Structure theory:

European shipping industry:



Shipping industry is considered as the lifeblood of the economy around the globe. Most of the industries in the world rely heavy on the shipping industry, either for export or import of goods and services. Shipping industry is therefore considered as a backbone of global economy (Davis, 2012).

Margaritis, & Psillaki (2010) have presented the fact that more than 80% of the world goods are transported through ships. The shipping industry provides benefits such as the greenest mode of transport, and the cheapest transport solution to the global business. It is because of these privileges attached to transportation of goods through ships majority of the global business consider ships as their first choice for transportation.

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The increasing awareness about the benefits of ships as a mode of transport the shipping companies face increasingly fierce national and international competition.  In this scenario, it is important for shipping companies to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively (Drobetz, Gounopoulos, Merikas,& Schröder, 2013).

Capital structure, which means the ratio of debt and equity, is one of the most important aspects for any business. In the case of shipping industry, financing is a sensitive problem. The optimal capital structure has become a serious problem for shipping companies in this fierce global competition. The shipping companies need to produce significant savings from the existing expenditure (cost reduction) and increase competitiveness by increasing the number of fleet. In the theory of Modigliani and Merton Miller (1958), they explained that there was a perfect world (without taxation, without any agency costs, every efficient markets with perfect knowledge and most importantly no bankruptcy distress) because of which there was no relevance of debt and equity or the performance/value of the shipping companies. However the global market is not perfect anymore and in this imperfect market the importance of the optimal capital structure has increased. The shipping companies need to have an optimal mix of capital so that they can maintain the balance between debt and equity. The imbalance (debt more than equity) in the capital structure can lead the shipping company fall behind its competitors (Paun, & Topan,2016).

Research aims and objectives:

The research aims to understand the effect of capital structure on the performance of European shipping industry. With this aim the research looks to achieve the following objectives:

a)     To understand the capital structure in European shipping industry

b)     To understand what makes capital structure optimal in the context of the European shipping industry.

c)     To examine the affect of capital structure on the performance of European shipping industry

Research question:

The main research question of the research is to find out,”How does capital structure affect the performance of European shipping industry?”

Apart from this the sub research questions are:

What are the variables that are included in capital structure?

How the European shipping companies can make the capital structure optimal?

Research hypotheses:

The theory on capital structure and form performance had been discussed since 1958, when Modigliani and Miller proposed irrelevance theory. There have been significant changes in the market and dynamics of shipping industry. The main theories regarding the optimal capital structure can be divided into “trade off hypothesis” and “pecking order hypothesis”. The “trade off hypothesis” states that an optimal capital structure for a company is based on a trade off between tax shield and costs with financial distress while “pecking order hypothesis” states that there is no optimal capital structure for companies because the companies need to establish a continuous balance between internal and external financings based on the need and also availability of the cash flow in the companies (Zeitun, & Tian, 2014).

 In order to reassess these and get the answer for the research questions the following alternative hypotheses are tested:

H1a  The size of the shipping company has positive impact on the financial leverage of  that company

H2a  The profitability of the shipping company has positive impact on the financial leverage of  that company

H3a  The tangible assets of the shipping company has positive impact on the financial leverage of  that company

H4a  The growth potential of the shipping company will decrease the financial leverage of  that company

H5a  The higher non debt tax shield of the shipping company will decrease the financial leverage of  that company

H6a  The higher tax rate of the shipping company will increase the financial leverage of  that company

The null hypothesis are;

H1o  The size of the shipping company has positive impact on the financial leverage of  that company

H2o  The profitability of the shipping company has positive impact on the financial leverage of  that company

H3o  The tangible assets of the shipping company has positive impact on the financial leverage of  that company

H4o  The growth potential of the shipping company will decrease the financial leverage of  that company

H5o  The higher non debt tax shield of the shipping company will decrease the financial leverage of  that company

H6o  The higher tax rate of the shipping company will increase the financial leverage of  that company

Purpose of the research:

The purpose of the research is to understand the effect of capital structure on the performance of European shipping industry. The shipping industry is considered as a sensitive economic sector. The industry requires high capital for investment in the fixed assets such as shops and vessels so that the shipping companies can expand their operations. In order to do so the shipping companies need to establish an optimal capital structure system so that they have important financing sources and financing strategies. Shipping industry is considered as a backbone of global economy and there is a need to strengthen this backbone so that the global economy is not impacted negatively. Apart from this, the shipping companies face increasingly fierce national and international competition, so in an individual level the companies need to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively.

The study contributes to the previous literature of capital structure and performance of firms through the example of shipping companies. The research explains the impact of capital structure on the performance of shipping companies through various variables such as size of the company, profitability, assets, growth potential, non debt tax shield, and tax rate (Xiaoyue, & Xiaodong,2001). 

Capital Structure theory:

The studies of capital structure started with the Modigliani and Miller’s irrelevance theory. They explained that there was a perfect world (without taxation, without any agency costs, every efficient markets with perfect knowledge and most importantly no bankruptcy distress) because of which there was no relevance of debt and equity or the performance/value of the shipping companies. However, there is more and more market imperfection, which is explained, in different variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors (Berger & Di Patti, 2006).

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The shipping industry is considered as a dynamic, capital concentrated and recurrent business. It is because of the dynamic, capital concentrated and recurrent nature of shipping industry this industry need financing alternatives to ensure the availability of important capital resources for longer period of time.  The shipping companies need to produce significant savings from the existing expenditure (cost reduction) and increase competitiveness so that the shipping companies have financing sources to expand and also competitive advantage among their competitors (Majumdar, & Chhibber,1999). The shipping industry has changed a lot in recent times. There is a huge growth in the shipping industry as the shipping companies provide benefits such as the greenest mode of transport, and the cheapest transport solution to the global business. Apart from that the industry is considered as the lifeblood of the economy around the globe as more than 80% of the world goods are transported through ships (Hadi, 2016).

The shipping industry has transformed into more globalised industry, fuel cost sensitive industry, high tangibility of assets, and business with high leverage.  The access of credit is limited to the shipping companies because of the external factors such as financial crisis, and environmental calamities. The banks are financial institutions are reluctant to finance in the adverse economic climate and even the promoters and investors limit their financing during the off seasons. The shipping companies need to have other financing sources so that they can have access to long-term finance. The role of capital structure is very important in getting the shipping companies the access to long-term finance (Bowen, Daley & Huber,2008).

The theory of capital structure as the Modigliani and Miller’s irrelevance theory stated that there is no relationship between a firm’s capital structure and its performance. Modigliani and Miller (1963) further revised their theory and stated that the effect of corporate tax and tax deduction have impact on the performance of the firm. The firm’s performance is increased when the debt of the firm is increased and this increasing amount is also the value of the tax shield. This essentially suggests that the firms will have more benefit from taking more debt as it increases the leverage of the firm. However this theory is applicable only for imperfect market (El-Sayed Ebaid, 2009).

The imperfect market includes various variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors.

The theory of capital structure and performance of firms further developed “trade off hypothesis” and “pecking order hypothesis”.  The “trade off hypothesis” states that an optimal capital structure for a company is based on a trade off between tax shield and costs with financial distress while “pecking order hypothesis” states that there is no optimal capital structure for companies because the companies need to establish a continuous balance between internal and external financings based on the need and also availability of the cash flow in the companies.

After “trade off hypothesis” and “pecking order hypothesis” were developed in Kraus and Litzenberger (1973) and Myers (1984) respectively. Jensen and Meckling (1976) come up with the agency theory. The agency cost theory explained that due to division of control and ownership the agency of firm would not always work for the benefits of the shareholders. When a firm raises the debt there are chances of conflict between shareholders and other party of the firm. The situation of conflict would result into added cost for the firm in operating, investing and financing activities. The increase of debt might help the firm to leverage but the managers who are interested into personal benefits might not be happy leading to a situation of conflict in the firm.

European shipping industry:

The European shipping industry is a global leader in the shipping business. The European union is the home to the world largest shipping. The European shipping industry controls more than 40% of the global tonnage. The industry is also the world’s youngest and the most innovative shipping industry, which has more than 23,000 vessels ((ECSA,2018).

In terms of economic contribution, the European shipping industry contributed more than €145 billion to the GDP (Gross domestic product) of European union (EU) in 2012 . The European shipping industry had also created 2.3 million jobs in EU region in 2012. The European shipping companies transport more than 90% of the products such as clothes, oil, gas, cars, electrical appliances and many other items. Since the European shipping industry not only contributes to the GDP of EU but also create employment for the people of EU , the industry is considered as backbone of not only EU economy but also that of globalised economy (IMDO Strategic Review of Irish Maritime Transport Sector, 2018).

The European shipping industry is not only the cheapest transport solution to the global business but also the greenest mode of transport. The size of the vessels and even improving efficiency in the European shipping industry are the two important factors which allows the European shipping industry to ship at a minimal cost of 2% of the shelf price of any product.

The shipping industry has been the facilitator of trade all these years and in order to remain the facilitator of trade the European shipping industry need to compete among the all the global shipping and establish an effective and efficient capital structure so that the European shipping industry has the access to finance for longer period of time. 


The European shipping industry is a global leader in the shipping business and considered to be the backbone of EU economy because the industry had contributed more than €145 billion to the GDP (Gross domestic product) of European union (EU) and also created 2.3 million jobs in EU region in 2012.  Since the shipping industry has transformed into more globalised industry, fuel cost sensitive industry, high tangibility of assets, and business with high leverage the importance of access of credit has increased. The shipping companies need to produce significant savings by cost reduction and increase competitiveness so that the shipping companies have financing sources to expand and also competitive advantage among their competitors.

The shipping industry is considered as a dynamic, capital concentrated and recurrent business. It is because of the dynamic, capital concentrated and recurrent nature of shipping industry this industry need financing alternatives to ensure the availability of important capital resources for longer period of time. Apart from that the shipping companies face increasingly fierce national and international competition, so in an individual level the companies need to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively.

The shipping industry has travelled a long way from being a perfect market to an impact market. The imperfect market includes various variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors. It is because of these changes in the nature of the business there have been various theories that are proposed to establish effect of the capital structure on performance of firms. From the perfect market to imperfect market there have been various factors such as size of the company, profitability, assets, growth potential, non-debt tax shield, and tax rate that should be considered while examining the e impact of capital structure on the performance of shipping companies.

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