Pizza Hut strategic plan Essay

Executive Summary This proposal describes Pizza Hut and the introduction of a new product called â€Å"The Extreme.† A brief history of Pizza Hut is provided at the beginning of this proposal along with an analysis of the fast food industry. Current trends in demographics and eating habits are included. A SWOT analysis has been done to identify Pizza Hut’s strengths, weaknesses, opportunities, and threats so that these factors can be taken into consideration in deciding whether or not to launch the new â€Å"Extreme Pizza.† Some of the key elements of our marketing plan first describe the â€Å"Extreme Pizza.† It will be the largest pizza on the market, with double the cheese and double the toppings. We will target the X and Y Generations, which is the fastest growing segment in America. This segment has been successfully targeted before using the â€Å"extreme† angle. This segment is has been a segment that hasn’t been targeted to the level that they should in this industry and we plan on changing that. We have used past financial data to establish reasonable goals for the product and have set limits on promotional spending. We will be using a high/low pricing strategy, pricing this new pizza at $9.99. Our main sales promotions will be offering the Extreme Pizza bundled with Mountain Dew to target Generation X and Generation Y. We will be using direct channel distribution as well. This pizza will be available through dine-in, carry-out, delivery, and ordering on the Internet. 1)Introduction Pizza Hut was started in 1958, by two brothers in Wichita, Kansas. Frank and Dan Carney had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959, the first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza Hut would be serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on the New York Stock Exchange under the ticker symbol PIZ. In 1986, Pizza Hut introduced delivery service, something no other restaurant was doing. By the 1990’s Pizza Hut sales had reached $4 billion worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and launched their famous campaign â€Å"The Best Pizzas Under One Roof.† In 1996, Pizza Hut sales in the United States were over $5 million. Out of all the existing pizza chains, Pizza Hut had the largest market share, 46.4%. However, Pizza Hut’s market share has slowly eroded because of intense competition from their rivals Domino’s, Little Caesar’s and newcomer Papa John’s. Home delivery was a driving force for success, especially for Pizza Hut and Domino’s. However, this forced competitors to look for new methods of increasing their customer bases. Many pizza chains decided to diversify and offer new non-pizza items such as buffalo wings, and Italian cheese bread. The current trend in pizza chains today is the same. They all try to come up with some newer, bigger, better, pizza for a low price. Offering special promotions, and new pizza variations are popular today as well. For example, chicken is now a common topping found on pizzas. In the past, Pizza Hut has always had the first mover advantage. Their marketing strategy in the past has always been to be first. One of their main strategies, that they still follow today is the diversification of the products they offer. Pizza Hut is always adding something new to their menu, trying to reach new markets. For example, in 1992 the famous buffet was launched in Pizza Hut restaurants worldwide. They were trying to offer many different food items for customers who didn’t necessarily want pizza. Another strategy they used in the past and are still using is the diversification of their pizzas. Pizza Hut is always trying to come up with some innovative way to make a pizza into something slightly different – different enough that customers will think its a whole new product. For example, let’s look at some of the pizzas Pizza Hut has marketed in the past. In 1983, Pizza Hut introduced their Pan Pizza, which had a guarantee of being ready to eat in 5 minutes when dining at Pizza Hut restaurants. In 1993, they introduced the â€Å"BigFoot,† which was two square feet of into 21 slices. In 1995, they introduced â€Å"Stuffed Crust Pizza,† where the crust would be filled with cheese. In 1997, they marketed â€Å"The Edge,† which had cheese and toppings all the way to the edge of the pizza. Currently, they are marketing â€Å"The Big NewYorker,† trying to bring the famous New York style pizza to the whole country. Lastly, Pizza Hut has always valued customer service and satisfaction. In 1995, Pizza Hut began two customer satisfaction programs: a 1-800 number customer hotline, and a customer call-back program. These were implemented to make sure their customers were happy, and always wanted to return. In our plan, we will first give a situation analysis of current and relevant environmental conditions that affect our plan. Next, we will give a brief analysis of the current fast food industry, and any trends or changes that might occur in the future. Also, a SWOT analysis of Pizza Hut will be included. Identification of current and potential competitors will be discussed in the SWOT analysis as well. Next, we will list our marketing objectives for this plan and our rationale for the selection of these objectives. 2) Situational Analysis A number of demographic and societal trends in the United States contributed to increased demand for food prepared outside the home. The divorce rate is almost 50%, and there is a growing trend showing that people are choosing to get married later in life. Because of these factors and many others, the single-person household represented about 25% of all U.S. households in 1998, up from 16% in the 1970’s. There has also been a trend in the 1990’s showing that individuals are choosing to eat out more often than eat at home. Another factor to consider is the increased number of women working outside the home. In 1998, 59% of all married women had careers. As a result of more women in the workforce, household incomes are now combined and are much higher than previously. According to Restaurants and Institutions magazine, more than one-third of all households had incomes of over $50,000 in 1996. The combination of higher incomes and dual-career families result  in less time! in the home, therefore less time to cook food at home. Also due to higher incomes, consumers have more disposable income, allowing them to eat out more often. However, in the early 1990’s, the growth of traditional fast food restaurants slowed down because the U.S. market had become saturated. The slowdown in growth intensified competition for market share and lead to consolidation. Many chains found that their market share could be increased by buying an existing company rather than building new units. Mergers and acquisitions had a powerful effect on the fast food industry. The top ten fast food restaurant chains controlled over 60% of fast food sales in the U.S. 3)Industry Analysis’ According to the National Restaurant Association, food service sales were $320 billion for the 500,000 restaurants in the U.S. in 1997. The U.S. restaurant industry grew 5.2 percent in 1997. Six major segments make up the fast food segment of the food service industry. Sandwich chains, like McDonald’s and Wendy’s are the number one segment, followed by dinner houses, such as Applebee’s and Red Lobster. Pizza chains are ranked third. Out of all the pizza chains, Pizza Hut has the largest market share, 46%, followed by Domino’s with 21.7%. International sales have become more and more important to the fast food industry. In 1998, Pizza Hut was the number one global chain with units in 88 different countries. In 1990, Pizza Hut opened two restaurants in Moscow where 20,000 customers were served a week, about the amount serviced by 10 American Pizza Huts. As profitable as the fast food industry is, there has always been one problem that many fast food companies cannot seem to overcome. Because of America’s large aging population, greater awareness and interest in health issues have resulted. Nutritional value of fast food is a huge problem. For many people, fast food automatically means low nutritional value. As a result of this, many chains have introduced items that are â€Å"low calorie† and â€Å"low fat.† Despite their efforts, many critics and consumers feel that their efforts were not satisfactory in providing a healthy meal. 4)SWOT Analysis Pizza Hut has many different strengths. Name recognition is an obvious strength for Pizza Hut. Pizza Hut has been around for a long time, and consumers know the name well. Another big strength and even a competitive advantage is the fact that they have a full service restaurant as well as delivery services. Most of Pizza Hut’s competitors do not have restaurants. Because of the restaurant, Pizza Hut can market to many different segments that other pizza chains cannot. For example, Pizza Hut can market to families much easier than Domino’s or Little Caesar’s. Pizza Hut offers a sit-down, conversational type restaurant where families can take their children for birthday parties for example. Pizza Hut’s broad selection of products also makes it easier for them to market to different market segments. However, the fact that Pizza Hut does have a restaurant to run is also a weakness. Pizza Hut has higher overhead costs, due to the restaurant that other competitors don’t have to deal with. Another result of higher overhead costs is higher prices Pizza Hut must charge. Obviously, Pizza Hut is not the low cost producer. They rely on their quality pizza and good service to account for their higher prices. An indirect weakness that Pizza Hut has is that they have lost a lot of their customers and market share due to such intense competition with competitors. Pizza Hut’s opportunities are almost endless. They can increase revenue with their new innovative pizzas, and increase brand loyalty with good customer service. Another opportunity that Pizza Hut has is their new ordering online system. Anyone with Internet access can order whatever they wish and get it delivered to their house without even speaking to someone. This program has just been started, so we do not have any numbers to support whether or not it will be a success. Pizza Hut’s number one threats are from their competitors. Currently, their closest competitor is Domino’s Pizza. Domino’s main competitive advantage  over Pizza Hut is their price. It is generally lower than Pizza Hut. Also, Domino’s was very profitable when they ran the promotional deal of delivering a pizza within 30 minutes. However, many lawsuits have been filed against Domino’s in the past for reckless driving by their drivers, so Domino’s withdrew the promotion. Little Caesar’s is another one of Pizza Hut’s competitors, right behind Domino’s in market share. Little Caesar’s is famous for offering large quantities of pizza for less money. Other competitors include Papa John’s, Sbarro, and Pizza Inn. A problem facing all of the pizza chains is that each of their individual competitive advantages are pretty much everyone’s competitive advantages. Most if not all the top pizza chains offer free delivery, and always have some sort of promotional deal offering large ! pizzas at reduced prices. Other competitors to take into consideration are frozen pizzas and make-it-yourself pizzas that are purchased in grocery stores. Some examples of these are Tombstone Pizzas, Boboli, and Di’Gornio pizzas. 5)Marketing Objectives Being that Pizza Hut holds the most market share in the pizza industry, the perceived quality and service of the company will help to ensure a better than average chance at a successful introduction of a new product. The pizza industry firms are famous for introducing new products to spark short-term sales. Pizza Hut as stated earlier has been very successful at accomplishing this. The introduction of a product that keeps with today’s trends is also important to reduce the risk of failure. In recent years there has been an increase in the marketing of products with an extreme twist to them. Mountain Dew, which is a brand name owned by Pizza Huts parent company, Pepsico, has been very successful at repositioning itself to this segment of the market, which has sparked new interest in the soft drink. Many other imitators have followed in there footsteps and have been successful as well. Pizza Hut has the resources available to research and implement a new product with great succe ss. Pizza Hut is the leader in innovative products and this new product that we  are proposing will surely be a success, given Pizza Huts track record. With high competition from the other top firms in the industry, the introduction of a new product is necessary to keep one step ahead of the competition. We propose that Pizza Hut introduce the Extreme Pizza. This pizza will be larger than the competitors at twenty-inches and have twice the toppings that the competitors have. Pizza Hut will market this product along side other extreme products such as Mountain Dew, to help Pizza Hut capture part of this new segment of the market. The selection of pizza’s offered by the competition have been significantly less creative than that of Pizza Hut in the past and Pizza Huts reputation of offering high quality, new products will allow this new product to move into the market as other new offerings have in the past. With the introduction of a new product, one of our main objectives is to create recognition for our product. Our goal is to reach 85% recognition of the new product in our target market. As with all businesses, the most important goal of a company is to increase revenue and profits. With the introduction of this new product we hope to increase the overall sales of the company by 7%. If we can in fact reach our goal of 85% recognition of the product, through a successful promotions mix, then the increase in sales should be easily acquired. 6)Target Markets With the introduction of the Extreme Pizza from Pizza Hut, the name itself is an indication of the target market sought. In today’s world of adrenaline junkies and extreme sports, a products affiliation with the world of the extreme has grabbed the attention of the younger generations. These generations range from the age of 12 to 30. These generations are affectionately referred to as the Y and X generations. For many years marketers ignored this segment and simply stereotyped them as slackers or losers. However, this has not been the case in recent years. With extreme sports making an entrance into pop culture in the early 90’s, many companies have realized the potential for high returns by targeting this highly diverse segment of the market. In America today, there are 71 million Americans that fall between the ages of 12 and 30, making generations X and  Y the two fastest growing segments of society. The overall spending power of this segment is 300 billion dollars a year, with a large percentage of that money spent on non-essential items. The reason for the high amount of spending in this segment has been associated to the times that they have grown up in. Unlike the baby-boomers, there has been no times of risk or economic depression in their lives. This is a generation with a â€Å"spend now, pay later† attitude, which has made for high spending averages on a per person basis. In 1997, The National Longitudinal Survey of Youth, found that the median amount of cash that children receive from their parents for auxiliary spending is $50 dollars a week. This kind of spending money that children are given is what Pizza Hut wants to target with the Extreme Pizza. However, children living at home are not the only o! nes to have extra money to burn. A study on the spending habits of college freshmen also indicates a high percentage of money being spent on non-essential items. The results showed that an average of $56 is spent monthly on eating out. This information on this segment of the market, gives Pizza Hut a window to offer a product that will attract these customers who not only have the money to spend on such things as pizza, but who have done so in the past. In the past Pizza Hut has not specifically targeted the younger generations with products. They have created a more generic marketing plan, to attract a wide variety of customers. In order for this marketing strategy to work, Pizza Hut needs to target this one segment of the market. The advertising and promotion needs to be very specific to their needs, in order for the money spent on advertising to be worthwhile. Many products have failed in this segment because they have tried to treat the segment as one group. This segment is made up of many groups and many individuals. This is part of the reason for society labeling generation X and Y members as loser’s and slackers. So with this in mind our advertising campaign must follow the same ideas by realizing that even within this segment there are many other segments. One characteristic of these two generations, that makes them a prime target for our new Extreme pizza, is the amount of time that these age groups spend with friends in groups. With the lack of responsibilities that teenagers have, and the lack of home cooked meals while away at college, pizza is a  quick alternative for dinner, and a fun way for friends to eat together. Pizza has long been targeted to families, because of the convenience that is present when serving pizza to a group. Teenagers and young adults spend quite a bit of time with friends in groups, whether it be in a dorm room or at parties. This gives Pizza Hut an outlet to sell a pizza that will fulfill the needs of this younger generation with a product that is designed just for them. With the total number of Generation X and Y members being so high and the money they spend on non-essential items being as much as it is, this segment could make this product a huge success. However, this is a hard market to target since everyone is so different, but they all have one thing in common, there love for pizza. The most important factor in making this a success will be to design advertising that is able to attract all of the individual segments of these generations. 7)Marketing Mix A)Product Pizza Hut should offer a new product called â€Å"The Extreme† pizza. â€Å"The Extreme† is a twenty-inch pizza with twice as much cheese and toppings as Pizza Hut’s other pizzas. This new pizza will have many different competitive advantages. The first competitive advantage of â€Å"The Extreme† is that it is the largest pizza on the market. No other pizza restaurant offers a twenty-inch pizza. The second competitive advantage is that it has more cheese and toppings than any other pizza on the market. Another competitive advantage is the Pizza Hut brand name. Pizza Hut has built a brand name that means quality products and services. Since Pizza Hut will be introducing â€Å"The Extreme,† customers will automatically think this is a high quality product. The final competitive advantage is that this product will be the first pizza to target America’s youth. â€Å"The Extreme† pizza will target Generation X and Generation Y or people between the ages of 12 and 30. This market purchases a lot of pizza each year, but very few pizza restaurants actually target them. â€Å"The Extreme† will be introduced on Super Bowl Sunday, 2001. During the introduction stage of the product life cycle, Pizza Hut will try to establish a market for the product and persuade early adopters to buy. During the growth stage, Pizza Hut will try to build sales and develop a preference for the product. Pizza Hut will try to seek  differentiation during the maturity stage. â€Å"The Extreme† is expected to begin to decline after one year on the market. B)Price In the past, Pizza Hut has successfully used the high/low pricing strategy when setting the retail price of its products. The high/low retail pricing strategy allows Pizza Hut to charge a price that is above the competition, but also promote frequent sales to lower the price below them. The retail price of â€Å"The Extreme† pizza should be set at $9.99, which is higher than Pizza Hut’s competitors. Several sales promotions and coupons will be used to lower the price below those competitors. Since both Pizza Hut and the beverage Mountain Dew are Pepsi subsidiaries, bundle pricing will be used. Customers can purchase â€Å"The Extreme† for $9.99 and receive a two-liter bottle of Mountain Dew for free. Pizza Hut will be able to sell two products together at a single price to suggest a good value. The high/low pricing strategy has several advantages. First, this pricing strategy will help segment the market. Different groups of customers are willing to pay different prices for the same product. Pizza Hut can sell â€Å"The Extreme† to the customers who will pay the higher price to be the first to buy and also to the bargain hunters. The high/low pricing strategy will also create excitement. Customers will be able to try something new when they purchase â€Å"The Extreme† and this exciting experience may bring those customers back to purchase other products. Finally, this strategy will emphasize product and service quality. Pizza Hut sets a high initial price for its products to send a signal to customers that its products are quality and the service is excellent. C)Promotion The main theme that will be used to promote â€Å"The Extreme† is youth. Fun, excitement, danger, and even the term â€Å"extreme† all appeal to our target market. Mountain Dew, which has already successfully appealed to this target market, will be included in â€Å"The Extreme† promotions. The main promotion will be a coupon to purchase â€Å"The Extreme† for $9.99 and receive a free two-liter bottle of Mountain Dew. The objectives of this promotion are to introduce a new product, stimulate demand, change the short-term behavior of the customers, and encourage repeat or greater usage by current customers. This promotion will be distributed mainly by mail, but also by  fliers on college campuses around the country in order to reach the target market. â€Å"The Extreme† will be introduced on Super Bowl Sunday, 2001, in a television commercial. Although Super Bowl television ads are expensive, Pizza Hut has enough financial resources for one. This commercial will be similar to the current Mountain Dew advertising campaign. Several young people will be performing exciting, high-risk activities such as snowboarding, rock climbing, and bungee jumping. The young people will then eat â€Å"The Extreme† and drink Mountain Dew. There will also be similar ads in magazines that are popular with the target market such as Surfer, Snowboarding, YM, and Maxim. This advertising campaign will create awareness of the new product in our target markets. D)Distribution The type of distribution channel used by Pizza Hut is the direct channel. The direct channel is successful when there is an extremely large market that is geographically dispersed. The direct channel is also useful when there are a large number of buyers, but a small amount purchased by each. Pizza Hut uses three different methods of selling its products directly to the market. The first method of distribution used by Pizza Hut is delivery. Customers can call Pizza Hut ahead of time, place an order, and the order is delivered to the customer’s home. Another method of distribution is for customers to dine-in. Customers can go to the nearest Pizza Hut, place an order, and either leave with the order or eat at the restaurant. One of Pizza Hut’s largest competitive advantages is its restaurant style facility. Pizza Hut offers a clean place to sit down and enjoy the variety of pizzas, salads, and sandwiches in a fun, family atmosphere. The third method of dist ribution is! online ordering. Customers can now go on the Internet and place an order. This method is useful because it allows customers to view the entire menu, download any special coupons, and order without having to disclose any credit card numbers. The market coverage for â€Å"The Extreme† will be nationwide. Customers all over the country will be able to order â€Å"The Extreme† by one of the three distribution methods. 8)Control Stage First, we will address who will be responsible for the control measures we plan to take. The Marketing Vice President in the Corporate Headquarters, the local/regional Marketing Vice Presidents and the Pizza Hut restaurant managers will all play a role in being responsible for the control. Our success or failure will be determined in a couple of ways. One main way is to compare results to our objectives. If our objectives are not met, steps to meet them will be taken in the future. We will also look at profits, sales revenue, unit volume of the â€Å"Extreme Pizza† promotions used. If our budget allows, perhaps we could give a survey to our customers and get some direct feedback about our new pizza. Ongoing research is essential for our success. Since our plan is for one year, we feel that every 3 months we should do some type of evaluation and control to see how we are doing. Also, during the maturity state of the product life cycle, we will improve the quality and distinguis h ourselves well from competitors. Hopefully, this process of control will be monitored on a monthly basis. 9)Summary and Conclusion Pizza Hut has a successful history of introducing new products to increase sales and reach new customers. This introduction of new products to the market on a regular basis is what makes Pizza Hut the leader in their industry. The level of success that the â€Å"Extreme Pizza† will bring Pizza Hut depends heavily on the correct promotions mix. As we had stated earlier, the segment of the market that we have targeted is a very diverse group. This means that the promotion of the product must be done in a diverse fashion. This will result in a more expensive advertising campaign than in past campaigns, but the potential for a successful product will cover the costs and bring in substantial profit. The advertising campaign is going to be budgeted to use 8% of projected sales. We are forecasting that the introduction of the Extreme Pizza will increase sales by 7%. This forecast is based upon other new products that Pizza Hut has introduced and the impact that they have had on Pizza Huts revenues. A 7% increase in sales for Pizza Hut will bring a total of $547 million dollars in revenue, making the advertising budget $43.76 million.  This kind of advertising budget will allow for a mass media blitz of promotions featuring our new â€Å"Extreme Pizza†. Our target market spends many hours a day in front of the TV and computer, so the constant messages being played will allow our product to generate a high level of awareness. The advertising of the product is very important but the promotion of this product along side Mountain Dew will help to put our product in a more specific category. Mountain Dew has targeted our target market for several years and is by far one of the leaders in this market. With this in mind promotions with Mountain Dew will be crucial to the success of the â€Å"Extreme Pizza†. With competition being so strong in this industry the threat of imitation products will surely be a problem to be dealt with. Pizza Hut will however have the first mover advantage with this product. With the entry of imitation products into the market, Pizza Hut will have to adjust its mixes to accommodate change. The promotions may have to be bigger and better than the competition, or the product may need to be altered to give it that little bit of an edge over the competition. For example stuffing the crust with cheese or giving a free topping with the purchase would help give Pizza Hut an edge over the competition. Basically, Pizza Hut will need to remain flexible in the maturity stages of the product life cycle in an attempt to continue to be the market leader. Overall, this is a product that is not much unlike any of the other new pizza’s that Pizza Hut has introduced. What makes this new product so exciting is the marketing plan that is directing the product at a new segment. We are taking a large pizza with a lot of toppings and marketing it as an â€Å"Extreme Pizza† to a generation of younger adults that are consumed by this marketing tool. This is what will make this a success. The mix of promotion and advertising we will be using will target a very profitable, sometimes overlooked market segment known as generations X and Y.

Character Analyzation “The guest” Albert camus Essay

Albert Camus’ story â€Å"The Guest,† takes place in the rough terrain of Algeria at the end of World War II. Algeria, under French control at the time, was very tense due to civil unrest of the Arabic people. The protagonist of the story is Daru, a solitary French schoolteacher who lives at a school on a remote plateau that has been deserted due to a freak snowstorm after eight months of drought. Two minor characters, a French policeman, Balducci, and an Arab prisoner arrive at the school. Balducci commands Daru to deliver the prisoner to nearby authorities but Daru has a conflict over the decision of whether or not to take the Arab to prison. In the end, Daru leaves the decision up to the Arab. The Arab, being a flat and seemingly static character, somehow contributes significantly to the existentialistic nature of Daru’s character and his actions. The author, an existentialist, tells the story with an indirect presentation. The central idea appears to be there is an inherent conflict between what different cultures view as morally right. We will analyze how the round/flat and dynamic/static qualities of the characters as well as the presentation affect the story’s central idea. Daru’s character, as the protagonist, is very round. In this story, Daru lives at a remote and solitary schoolhouse plagued by silence. Daru is confronted by the decision of whether or not he should deliver an Arab prisoner to the French authorities. We learn the prisoner is in custody for murdering his cousin over grain owed. The flat character, Balducci, represents the French authority and its moral code; while the Arab’s culture seems to permit this act: â€Å"His village was beginning to stir; they wanted to take him back† (105). Balducci gives his fellow Frenchman Daru an obligation to deliver the prisoner. Daru, who is utterly disgusted by the actions of the Arab, does not want to take him to police headquarters because of his existentialist beliefs: â€Å"Every bit of this disgusts me, and first of all your fellow here. But I won’t hand him over† (106). â€Å"That man’s stupid crime revolted him, but to hand him over was contrary to honor† (110). We can see that Daru is torn between what is actually right or wrong. He wants the Arab to run because he doesn’t want to make the choice himself. â€Å"He was amazed at the unmixed joy he derived from the mere thought that the Arab might have fled and that he would be alone with no decision to make† (107). Daru’s character is very dynamic. At first he refuses to bring the Arab to justice due to his existentialist beliefs. We can tell that Balducci looks down on the Arab while Daru, views him more humanely. Daru insists that the Arab doesn’t need to be tied up. Balducci’s character is static. He claims he doesn’t like putting ropes on prisoners but concludes by saying â€Å"But you can’t let them have their way† (106). Daru insulted Balducci by not wanting to comply with him. Later remembering Balducci’s farewell, he reveals â€Å"He had hurt him, for he had sent him off in a way as if he didn’t want to be associated with him,† and â€Å"he felt strangely empty† (110). The Arab’s character remains somewhat static throughout the story. The Arab got up several times the night before, as if almost wanting to escape, but came back in. With the task of delivering the prisoner at hand, Daru’s final choice is t o let the Arab choose his own fate, which was totally not what Balducci intended. The Arab does what he feels is right, or what he feels the governing society feels is right. He complies with French law, while ironically, Daru didn’t. The presentation is also very important in supporting the central idea of this story. A major revolt against the French colonists was about to take place. French control and law was in question. Should one culture be able to dictate laws upon another culture just because it is temporarily the governing body? In the meantime, Daru cooked for the Arab and ate with him, showing him trust and compassion. The Arab was surprised that Daru was eating with him. We can tell the Arab was scared and wanted Daru to go with him. During bedtime, Daru slept naked near the prisoner. This shows that Daru was letting down his guard: â€Å"Men who share the same rooms, soldiers or prisoners, develop a strange alliance as if, having cast off their armor with their clothing† (109). He watched as the prisoner quietly crept out of bed. The Arab was very nervous and got up several times, but Daru didn’t do anything. He was still hoping the Arab would escape so he wouldn’t have to deal w ith the whole situation. The next day the two hiked down the plateau towards the jailhouse. There, Daru showed the Arab the path to the prison, but also showed him the way towards pasturelands where nomads lived: â€Å"They’ll take you in and shelter you according to their law† (111). The Arab  ultimately chose the fate that French law had dictated. When Daru went back to the schoolhouse, he read a message on the chalkboard, â€Å"you handed over our brother, you will pay for this† (111). Here again, we see a conflict of views. Daru, upon not making a choice, inadvertently committed a crime amongst those people. Throughout the story, Daru referred to the Arab as the â€Å"guest.† The irony of this story is Daru is actually the stranger in a strange land while we might perceive the Arab as the â€Å"guest.† In conclusion, we see that different cultures have conflicting views about what is right and what is wrong. As an existentialist, Daru let the Arab decide his own fate. Daru felt if he took the Arab to jail, it would be wrong. He also felt if he told him to go free, it would be wrong against the French authority. Because Daru acted by not acting, he unintentionally committed a crime against the Algerian people. Ironically, Daru was in a catch 22.

Night World : Daughters of Darkness Chapter 1

Rowan, Kestrel, and Jade,† Mary-Lynnette said as she and Mark passed the old Victorian farmhouse. â€Å"Huh?† â€Å"Rowan. And Kestrel. And Jade. The names of thegirls who're moving in.† Mary-Lynnette tilted herhead toward the farmhouse-her hands were full of lawn chair. â€Å"They're Mrs. Burdock's nieces. Don't you remember I told you they were coming to live with her?† â€Å"Vaguely,† Mark said, readjusting the weight of the telescope he was carrying as they trudged up the manzanita-covered hill. He spoke shortly, which Mary-Lynnette knew meant he was feeling shy. â€Å"They're pretty names,† she said. â€Å"And they must be sweet girls, because Mrs. Burdock said so.† â€Å"Mrs. Burdock is crazy.† â€Å"She's just eccentric. And yesterday she told meher nieces are all beautiful. I mean, I'm sure she's prejudiced and everything, but she was pretty definite. Each one of them gorgeous, each one a completely different type.† â€Å"So they should be going to California,† Mark saidin an almost-inaudible mutter. â€Å"They should be posing for Vogue.Where do you want this thing?† he added as they reached the top of the hill. â€Å"Right here.† Mary-Lynnette put the lawn chairdown. She scraped some dirt away with her foot so the telescope would sit evenly. Then she said casually, â€Å"You know, I thought maybe we could go over there tomorrow and introduce ourselves-sort of welcome them, you know†¦.† â€Å"Will you cut itout?†Mark said tersely. â€Å"I can organize my own life. If I want to meet a girl, I'll meet a girl. I don't need help.† â€Å"Okay, okay. You don't need help. Be careful withthat focuser tube-â€Å" â€Å"And besides, what are we going to say?† Mark said, on a roll now. â€Å"‘Welcome to Briar Creek, where nothing ever happens. Where there are more coyotes than people. Where if you really want some excitement you can ride into town and watch theSaturday night mouse racing at the Gold Creek Bar†¦.'† â€Å"Okay. Okay.† Mary-Lynnette sighed. She-looked at her younger brother, who just at the moment was illuminated by the last rays of sunset. To see him now, you'd think he'd never been sick a day in hislife. His hair was as dark and shiny as Mary Lynnette's, his eyes were as blue and clear and snapping. He had the same healthy tan as she did; thesame glow of color in his cheeks. But when he'd been a baby, he'd been thin andscrawny and every breath had been a challenge.His asthma had been so bad he'd spent most of his second year in an oxygen tent, fighting to stay alive. Mary-Lynnette, a year and a half older, had won dered every day if her baby brother would ever come home. It had changed him, being alone in that tent whereeven their mother couldn't touch him. When hecame out he was shy and clingy-holding on to theirmother's arm all the time. And for years he hadn'tbeen able to go out for sports like the other kids. That was all a long time ago-Mark was going to bea junior in high school this year-but he was still shy. And when he got defensive, he bit people's heads off. Mary-Lynnette wished one of the new girls would be right for him, draw him out a bit, give him confidence. Maybe she could arrange it somehow†¦. â€Å"What are you thinking about?† Mark asked suspiciously. Mary-Lynnette realized he was staring at her. â€Å"About how the seeing's going to be really good tonight,† she said blandly. â€Å"August's the best month for starwatching; the air's so warm and still. Hey,there's the first star-you can make a wish.† She pointed to a bright point of light above the southern horizon. It worked; Mark was distracted and looked, too. Mary-Lynnette stared at the back of his dark head.If it would do any good, I'd wish for romance for you, she thought. I'd wish it for myself, too-but what would be the point? There's nobody around here to be romantic with. None of the guys at school–except maybe JeremyLovett-understood why she was interested in as tronomy, or what she felt about the stars. Most ofthe time Mary-Lynnette didn't care-but occasionally she felt a vague ache in her chest. A longing to †¦ share. If she hadwished, it would have been for that, for someone to share the night with. Oh, well. It didn't help to dwell on it. And besides,although she didn't want to tell Mark, what they were wishing on was the planet Jupiter, and not a star at all. Mark shook his head as he tramped down the path that wound through buckbrush and poison hemlock. He should have apologized to Mary-Lynnette beforeleaving-he didn't like being nasty to her. In fact, she was the one person he usually tried to be decent to. But why was she always trying to fix him? To the point of wishing on stars. And Mark hadn't really made a wish, anyway. He'd thought, if I was making a wish, which I'm not because it's hokey and stupid, it would be for some excitement around here. Something wild, mark thought-and felt an innershiver as he hiked downhill in the gathering darkness. Jade stared at the steady, brilliant point of lightabove the southern horizon. It was a planet, she knew. For the last two nights she'd seen it moving across the sky, accompanied by tiny pinpricks of light that must be its moons. Where she came from, nobody was in the habit of wishing on stars, but this planet seemed like a friend-a traveler, just like her. As Jade watched it tonight, she felt a sort of concentration of hope rise inside her. Almost awish. Jade had to admit that they weren't off to a very promising start. The night air was too quiet; there wasn't the faintest sound of a car coming. She wastired and worried and beginning to be very, very hungry. Jade turned to look at her sisters. â€Å"Well, where is she?† â€Å"I don't know,† Rowan said in her most doggedly gentle voice. â€Å"Be patient.† â€Å"Well, maybe we should scan for her. â€Å"No,† Rowan said. â€Å"Absolutely not. Remember what we decided.† â€Å"She's probably forgotten we were coming,† Kestrel said. â€Å"I told you she was getting senile.† â€Å"Don't saythings like that. It's not polite,† Rowan said, still gentle, but through her teeth. Rowan was always gentle when she could manageit. She was nineteen, tall, slim, and stately. She had cinnamon-brown eyes and warm brown hair that cascaded down her back in waves. Kestrel was seventeen and had hair the color of old gold sweeping back from her face like a bird's wings. Her eyes were amber and hawklike, and she was never gentle. Jade was the youngest, just turned sixteen, and she didn't look like either of her sisters. She had white-blond hair that she used as a veil to hide behind, and green eyes. People said she looked serene, but she almost never felt serene. Usually she was either madly excited or madly anxious and confused. Right now it was anxious. She was worried about her battered, half-century-old Morocco leather suitcase. She couldn't hear a thing from inside it. 00 â€Å"Hey, why don't you two go down the road a little way and see if she's coming?† Her sisters looked back at her. There were few things that Rowan and Kestrel agreed on, but Jade was one of them. She could see that they were about to team up against her. â€Å"Now what?† Kestrel said, her teeth showing just briefly. And Rowan said, â€Å"You're up to something. What are you up to, Jade?† Jade smoothed her thoughts and her face out and just looked at them artlessly. She hoped. They stared back for a few minutes, then looked at each other, giving up. â€Å"We're going to have to walk, you know,† Kestrel said to Rowan. â€Å"There are worse things than walking,† Rowansaid. She pushed a stray wisp of chestnut-colored hair off her forehead and looked around the bus stationwhich consisted of a three-sided, glass-walled cubicle,and the splintering wooden bench. â€Å"I wish there was a telephone.† â€Å"Well, there isn't. And it's twenty miles to BriarCreek,† Kestrel said, golden eyes glinting with a kind of grim enjoyment. â€Å"We should probably leave our bags here.† Alarm tingled through Jade. â€Å"No, no. I've got allmy–all my clothes in there. Come on, twenty milesisn't so far.† With one hand she picked up her cat carrier-it was homemade, just boards and wiresand with the other she picked up the suitcase. She got quite a distance down the road before she heard the crunch of gravel behind her. They were following: Rowan sighing patiently, Kestrel chuckling softly, her hair shining like old gold in the starlight. The one-lane road was dark and deserted. But notentirely silent there were dozens of tiny night sounds, all adding up to one intricate, harmonizing night stillness. It would have been pleasant, except that Jade's suitcase seemed to get heavier with everystep, and she was hungrier than she had ever beenbefore. She knew better than to mention it to Rowan, but it made her feel confused and weak. Just when she was beginning tothink she would have to put the suitcase down and rest, she heard a new sound. It was a car, coming from behind them. The engine was so loud that it seemed to take a long time to get close to them, but when it passed, Jade saw that itwas actually going very fast. Then there was a rattling of gravel and the car stopped. It backed up and Jade saw a boy looking through the window at her. There was another boy in the passenger seat. Jade looked at them curiously. They seemed to be about Rowan's age, and theywere both deeply tanned. The one in the driver's seat had blond hair and looked as if he hadn't washed ina while. The other one had brown hair. He was wear ing a vest with no shirt underneath. He had a toothpick in his mouth. They both looked back at Jade, seeming just as curious as she was. Then the driver's window slid down. Jade was fascinated by how quickly it went. â€Å"Need a ride?† the driver said, with an oddly bright smile. His teeth shone in contrast to his dingy face. Jade looked at Rowan and Kestrel, who were just catching up. Kestrel said nothing, but looked at the car through narrow, heavy-lashed amber eyes. Rowan's brown eyes were very warm. â€Å"We sure would,† she said, smiling. Then, doubtfully, â€Å"But we're going to Burdock Farm. It may be out of your way†¦.† â€Å"Oh, hey, I know that place. It's not far,† the onein the vest said around his toothpick. â€Å"Anyway, anything for a lady,† he said, with what seemed to be an attempt at gallantry. He opened his door and got out of the car. â€Å"One of you can sit up front, and I can sit in back with the other two. Lucky me, huh?† he said to the driver. â€Å"Lucky you,† the driver said, smiling largely again. He opened his door, too. â€Å"You go on and put that cat carrier in front, and the suitcases can go in the trunk,† he said. Rowan smiled at Jade, and Jade knew what she was thinking. Iwonder if everybody out here is so friendly? They distributed their belongings and thenpiled in the car, Jade in the front with the driver, Rowan and Kestrel in the back on either side of the vested guy. A minute later they were flying downthe road at what Jade found a delightful speed, gravel crunching beneath the tires. â€Å"I'm Vic,† the driver said. â€Å"I'm Todd,† the vested guy said. Rowan said, â€Å"I'm Rowan, and this is Kestrel. That'sJade up there.† â€Å"You girls friends?† â€Å"We're sisters,† Jade said. â€Å"You don't look like sisters.† â€Å"Everybody says that.† Jade meant everybody theyhad met since they'd run away. Back home, everybodyknew they were sisters, so nobody said it. â€Å"What are you doing out here so late?† Vic asked. â€Å"It's not the place for nice girls.† â€Å"We're not nice girls,† Kestrel explained absently. â€Å"We're trying to be,† Rowan said reprovingly through her teeth. To Vic, she said, â€Å"We were waiting for our great-aunt Opal to pick us up at the bus stop, but she didn't come. We're going to live at Burdock Farm.† â€Å"Old lady Burdock is your aunt?† Todd said, removing his toothpick. â€Å"That crazy old bat?† Vic turned around to look at him, and they both laughed and shook their heads. Jade looked away from Vic. She stared down at the cat carrier, listening for the little squeaking noises that meant Tiggy was awake. She felt just slightly †¦ uneasy. She sensed something. Even though these guys seemed friendly, there was something beneath the surface. But she was toosleepy-and too light-headed from hunger-to figure out exactly what it was. Rowan was still looking polite and puzzled, but Kestrel looked at the car door on her side thoughtfully. Jade knew what she was looking for-a handle.There wasn't one. â€Å"Too bad,† Vic said. â€Å"This car's a real junkheap; you can't even open the back doors from inside.† He grabbed Jade's upper arm so hard she could feel pressure on the bone. â€Å"Now, you girls just be nice and nobody's going to get hurt.† They seemed to drive a long time beforeVic spoke again. â€Å"You girls ever been to Oregon before?† Jade blinked and murmured a negative. â€Å"It's got some pretty lonely places,† Vic said. â€Å"Outhere, for example. Briar Creek was a gold rush town, but when the gold ran out and the railroad passed it by, it just died. Now the wilderness is taking it back.† His tone was significant, but Jade didn't understand what he was trying to convey. â€Å"It does seem peaceful;† Rowan said politely from the backseat. Vic made a brief snorting sound. â€Å"Yeah, well, peaceful wasn't exactly what I meant. I meant, take this road. These farmhouses are miles apart, right? Ifyou screamed, there wouldn't be anyone to hearyou.† Jade blinked. What a strange thing to say. Rowan, still politely making conversation, said, â€Å"Well, you and Todd would.† â€Å"I mean, nobody else,† Vic said, and Jade could feel his impatience. He had been driving more and more slowly. Now he pulled the car off to the side of the road and stopped. Parked. â€Å"Nobody outthere is going to hear,† he clarified,turning around to look into the backseat. Jade looked, too, and saw Todd grinning, a wide bright grin with teeth clenched on his toothpick. â€Å"That's right,† Todd said. â€Å"You're out here alone with us, so maybe you'd better listen to us, huh?† Jade saw that he was gripping Rowan's arm with one hand and Kestrel's wrist with the other.

Writing Fitness Research Paper Example | Topics and Well Written Essays - 750 words

Writing Fitness - Research Paper Example In writing, choose the active voice over the passive. As Bonnie Trenga said in her book, The Curious Case of the Misplaced Modifier: How to Solve the Mysteries of Weak Writing, the active voice is â€Å"the clearest and most direct way to present your ideas.† â€Å"In an active sentence,† she adds, â€Å"the subject performs the action, the object receives it.† Passive voice or writing, on the other hand, is â€Å"vague, wordy writing that confuses or bores readers. â€Å"It confuses them because they encounter verbs such as was and were over and over.†Ã‚  Ã‚   Writing is, above all, a form of communication. So use simple words. Do not use utilize when you can use or say masticate when you can say chew. Also, look for redundancies like ATM machine or HIV virus; the shorter the sentence the more easily understand it is. Take this for example: â€Å"What is incredible about the new processor is its speed.† This sentence has a lot of unnecessary words in it and is in the passive voice. Whereas, â€Å"The new processor’s speed is incredible,† delivers the same information as the first, but more directly and clearly. Writing is not easy. If you believe otherwise, then chances are you use a lot of clichà ©s, which nobody would like to read or say anymore. The higher the creativity of your paper, the better the chance it will get the attention you want for it. While rules in effectively writing memos do not differ from other nonfiction writing’s, here are a few more things to consider: a) Two short sentences are better than a long one. b) Use bullets — easier to see and read. c) A superior deserves the proper tone of voice even in written communication. d) Memos to the client, copy your supervisor — never the other way around. e) Initiate follow-ups. Include the details of your follow-up in the memo.   Business people have a lot less time to read than normal folk, so remember to: a) State your purpose at the very start of the letter. b) Be concise but strike the proper tone — courteous and diplomatic. c) It sells your company. So be sure to follow your company’s presentation style and that the paper is error-free.

Developmental psychology Essay Example | Topics and Well Written Essays - 1500 words - 1

Developmental psychology - Essay Example In the preoperational stage, the child is in a later stage of development, early childhood, and they tend to be more and more focused on the world around them. In the concrete stage, â€Å"accommodation increases. The child develops an ability to think abstractly and to make rational judgements about concrete or observable phenomena, which in the past he needed to manipulate physically to understand† (Piaget, 2010). And the stage of formal operations can be roughly equated to adolescence. There are various tasks that Piaget attributes to each stage; for example, in the conservation task of the concrete stage, â€Å"They also see that when one of the vessels is emptied into a taller and thinner receptacle, the level of liquid is higher in the thinner vessel than in the other original vessel. Pre-Concrete Operations stage children conclude that there is more liquid in the thinner vessel† (Conservation, 2008). The results of this task may be that the child is not able to d ifferentiate between different volumes in vessels of different shapes. Although, as mentioned, some argue that there are confounding variables, Piaget has general support in today’s society. Piaget’s concepts of assimilation and accommodation are important to consider in the construction of a childs schema. Accommodation is the tougher concept, in terms of the cognitive effort that the child has to put forth. In assimilation, it is basically like the child taking in new information that fits into a sort of pre-fabricated place in their brain—it is new information that fits seamlessly with old information. Accommodation, however, is more about conflict and compromise. â€Å"In accommodation, the internal world has to accommodate itself to the evidence with which it is confronted and thus adapt to it, which can be a more difficult and painful process.   In the database analogy, it is like what happens when you try to put in information which does not fit the

Personal code of ethics for the IT Professional Research Paper

Personal code of ethics for the IT Professional - Research Paper Example This code of ethics should guide one as a professional in the field to do the right thing and deliver quality services. Ethics is a term used to refer to a standard of telling apart right from wrong and applying the result, or the distinction consciously and unconsciously. In information technology, the issue of privacy is crucial to the provision of service, where one needs to ensure utmost discretion (Mingers and Walsham, 2010). This is concerning the relationship between the professional and the client, where the privacy of the client should be preserved at great lengths as is the case done with transactions in banks. In banks, information technology experts ensure privacy by encrypting the data transacted by the banks’ clients to servers and do not leak the information they may have access to. As a result, clients can rest assured that there is no cause for concern in their details on personal information getting out to the world. This is in addition to having their inform ation used for personal gain by the professionals as they have access to all the information that the bank has. As a result, of this, it is important to inculcate privacy concerns in ethics, where as a professional one should not poke their noses where they do not belong. Another moral to consider and include in the code of ethics is involvement in cybercrime, which works hand in hand with the privacy concerns. This is such that cybercrime works towards violating privacy rights of clients, where one can easily use the information to which they have access for fraudulent means such as hacking of accounts. With the penetration rates of information technology, protecting the needs of clients and clients themselves from cybercrime is an important thing that a professional should do. As such, a professional should not use his or her skills for personal gain through fraudulent means, which cybercrime entails. This is as seen in cases of stealing intellectual property using one’s kn owledge and skills in the field; thus, leading to loss of revenue to the actual owners. With this in mind, cybercrime involves hacking and plagiarizing intellectual property, which an information technologist should stay away from. In addition, following the use of information technology to bring down other people’s abilities and services should not be done, as it is also malicious use of skills and knowledge. For this reason, it is only ethical to combat cybercrime with relevant authorities and refraining from engaging from such activities. Cybercrime also covers spread of illegal and inappropriate content over networks and through digital media, which IT professionals are prone and vulnerable to doing. Taking responsibility in these issues should be a high order priority to prevent such occurrences, especially in unintentional spreads of infections through network infrastructure (Taddeo and Vaccaro, 2011). With this in mind, responsibility for one’s actions duties sh ould be practiced as it ensures reliability and accountability on the side of clients towards professionals. Therefore, being responsible should, be included amongst one of the contents in the code of ethics. Accountability as part of ethics also ensures that quality work is done for clients and that the professional is satisfied with what he or she has done; thus deserves the pay received. It is because of this that development in the field is achieved and quality is assured provided accountability is

Stage 1 Essay Example | Topics and Well Written Essays - 1500 words

Stage 1 - Essay Example It is from this perspective that adolescent girls become an important subject of discussion due to the fact that adolescent girls have been found to be easily influenced by socialization, social influences, peer pressure, and social acceptability (Koplan, Liverman and Kraak, 2005). In effect, adolescent girls are more likely to make purchases of particularly food and nutrition products not necessarily because of the personal experience or education they have with the food, cosmetic or drug but because of the influences they receive from peers to purchase. It has even been established in research that due to the physical and biological changes that these girls experience at adolescence, they become more concerned about their bodies at teen ages and thus look for every means possible to appear as they find pleasing in their own eyes (Lackey and Kaczynski, 2009). Because of some of the key variables discussed about teen girls and for that matter female adolescents on their physical and biological changes and the quest for most of them to achieve a perceived perfect body appearance, this group has often become the target group for most advertisers in the food and nutrition industry. Due to the existing delight from the girls themselves, the advertisers often portray their food, cosmetic and drugs to have the potential of making these girls achieve the perfect bodies that they require or desire for themselves. As reflected in the second research question that seeks to answer the question of ways that advertisements influence the perception of girls on food products and services, Hindin, Contento & Gussow (2004) note that food products and services advertisements do not always represent the holistic truth about what they seek to portray. Rather, they target the intuitions of their audience such that what only things that when audience hear that will draw them to making purchases are represented in advertisements. This means that the case is not always holistic or tru e in what the girls are told in advertisements. Where there is lack of holistic presentation of information, the advertisers have been accused of keeping key information on products that has to do with side effects and risk effects of their food, cosmetic and drugs (Luder, Melnik and DiMaio, 2008). Based on the review above, the second research question will be particularly important in answering because it will open the understanding of girls on the purpose for advertisements and the need for more holistic approach to be taken towards the making of purchases rather than basing sorely on what is presented in advertisements. Once this is done, the aim for the first research question will be achieved because girls are going to be offered more and more options and bases for taking decisions on purchases. Where the accusation is also with false advertisement, the reports have been that what advertisements present is not what the products or services can really offer. In some other cases , advertisers have resorted to over emphasis of the true potency of what products and services being advertised can do, thereby portraying perfect body images that are not really as they are in the real world. But most of these girls take

Biology and the body Essay Example | Topics and Well Written Essays - 500 words

Biology and the body - Essay Example l to explain that the female anatomy has been made to support this model where the Vagina is an interior penis, the uterus is the scrotum and the ovaries are the testicles (Laqueur 28). However, this theory of one sex is criticised especially on the womb, which in the ancient times was thought to be the belly, which was common to both men and women. Another theory that Thomas Laqueur put forward and that followed the one sex model is the two sex theory says that the body determines the gender disparities and the female has a completely different anatomy from a male with dissimilar parts of the anatomy functions and feelings. He explained that there is no sex is a monopoly, Laqueur further went ahead and argued that science would only invent new ways of speaking and not to liberate one gender from another, he put out that destiny is anatomy. The film is it a boy or a girl that Phyllis Ward of the intersex society of North America advocates for intersex people goes into deeper analysis on what biologically determines the gender of an individual. The biological differences between the genders help us further understand how the sex of an individual, which is biologically determined before birth, enables one to play his gender role. For instance, what causes a woman to be a woman biologically and how she is wired to perform the activities that involve the gender and her role in sexual intercourse due her having a vagina. The body is at the centre of any understanding regarding gender as the various anatomical processes in the body determine the gender and the anatomical role the gender plays. However according to the one sex model that there exists a monopoly of gender and that the woman was an imperfect man, then it would be accepted that for a man the larger or bigger the penis is the manlier he is presumed to be. However, that idea is fallacious since even in those times of philosopher Aristotle they preferred a small penis, which was thought of as having a higher

Implementing & Executing Strategy in the Global Marketplace Essay

Implementing & Executing Strategy in the Global Marketplace - Essay Example Aside from the key reasons for outsourcing, other benefits are also evident in applying this practice to one's business. Most notable of these is the advantage of getting a higher level of experience. The subcontracted business revolves around giving high quality services provided by experts. They need to constantly upgrade their services to maximize their potentials and lead the competition. Instead of employing experts to do the jobs of minimal importance as compared to the really significant ones, through outsourcing, businesses can now avail quality services on its non-core operations (Ouzts, 2003). This is the very reason why the founders of ODW Logistics, Inc, based in Columbus, Ohio, established a business that capitalizes on the need of their client's outsourcing needs. They have been offering "excellent logistics services to billion dollar companies" since 1972. Their product line includes warehousing and product distribution. They boast of devising "efficient and cost-effective material handling solutions" and supply "facilities, staffing, warehouse management systems, and all the rolling stock operating equipment" (ODW Logistics Website, 2006). Given the nature of outsourcing and the list of their service, ODW Logistics can definitely help in global firms' vision of gaining competitive advantage. If it is committed enough to produce excellent quality warehousing services, their clients will really feel ODW's excellent contribution enhancing their performance. Solving warehouse problems of most companies is probably the most significant contribution they can give. Materials handling is a very tedious and costly task that usually belongs outside the core operations of most companies. Unless a company is in the retailing and other industries where effective warehousing is extremely important, warehousing consumes huge amount of money and effort that should have been spent in improving the performances in other core operations. With 30 years of experience in this industry, ODW Logistics has proven to be one of the most trusted names in providing warehousing solutions to other companies. Another issue concerning warehousing in other companies is the lack of affordable warehousing space. Procuring and maintaining considerable amount of space for product inventory is a problem for most companies. Aside from the cost of maintaining the warehouse site they likewise need manpower and technology that they are not familiar with. With its Ohio campus that spans 82 acres, six buildings, 170 dock doors and a 400-trailer capacity yard. The campus also offers a 150,000 square foot container freight station as well as rail service, food grade facilities. All in all, ODW Logistics has 2 million square feet of distribution facilities all over the United States, it has enough resources to give hands-on and practical solutions to their client's warehousing problems. Another service feature that would give to its clients is the state-of-the-art technology that ODW Logistics uses in its operations. Its Warehouse Distribution Logistics System (WDLS) efficiently monitors inventory movement

Business Law Case Study Example | Topics and Well Written Essays - 250 words - 1

Business Law - Case Study Example During the exam, Grothe asked Eelbode to do an exercise and during it Eelbode experienced immediate sharp and burning pain in his lower back and down the back of his right leg. Consequently, Eelbode filed a suit in a Washington state court against Grothe and Chec, claiming that he was injured because of an improperly administered back torso strength test. Based on the exculpatory document signed by Eelbode, Grothe and Chec filed a motion for summary judgment. The issue is whether the court should grant the motion and consider the exculpatory clause valid. RULE:Â   An adhesion contract is a legally binding contract, presented by one party to the other in a standardized form which contains clauses written exclusively by one party, without them being properly negotiated with the other party. This is the result of unequal bargaining power and causes unfair consequences to the adhering party. APPLICATION: The agreement signed between Norbert Eelbode and Grothe and Chec is an adhesion contract which did not offer Norbert the opportunity to negotiate its clauses. Norbert did not have a choice to sign or not to sign the exculpatory clause as he needed to pass the medical exam in order to get a job at Travelers Inn. Therefore, he was forced by the circumstances to sign the contract. Agreeing to that clause would not have been a problem if the physical injuries suffered by Norbert would not have occurred during the improper strength test. The exculpatory clause signed by Norbert actually forced him to give up any legal method of protecting his rights and repairing the suffered damages. This is unfair to Norbert, and, therefore, the agreement signed by him and Grothe and Chec is an adhesive one and should not be enforced. CONCLUSION: The court should consider the agreement signed by Norbert Eelbode an adhesive one and should not enforce it. Therefore, the exculpatory clause should not be considered

Persuasive Speech-Skin Cancer Essay Example | Topics and Well Written Essays - 750 words

Persuasive Speech-Skin Cancer - Essay Example What makes cancer lethal is the fact that an inflicted individual wouldn’t feel its negative effects until it the abnormal cells have already grown so much. Skin cancers, for example, may appear on normal skin, or may develop from moles that were present at birth. For such diseases that only physically manifest in its deleterious stages, one should know the risk factors predisposing us to developing them, the steps that can be taken to ensure that we do not have them, and the treatment options once we are positive for having the disease. In battling any kind of diseases, prevention is always better than cure. To avoid melanomas, one must first know whether he or she is more likely to develop the skin lesion than others. Skin cancers can happen at any age, but elderly individuals are more susceptible to developing melanomas than younger people do. Caucasians, who have fair skin, blue or green eyes, and red or blond hair, also have a higher tendency to develop the skin disease. On the other hand, the type of melanoma commonly seen on soles, palms, or under the nails usually develops in African Americans. Aside from the abovementioned predispositions, it is also especially important for individuals with a past medical history of blistering sunburns, family history of melanomas, occupation requiring prolonged sun exposure, residence in high altitude places or sunny climates, immunodeficiency, or multiple birthmarks, to watch out for skin cancer. For people at risk, it is necessary to avoid tanning devices, arsenic, coal tar, and creosote. Because melanomas can appear on anyone, it is important to distinguish from all other body marks the one most likely to be cancerous. Early detection of a cancerous growth is vital in the success of treatment, and subsequent survival of the patient. Fortunately, self-examination can be performed using the following easy-to-remember ABCD symptoms of melanoma: A for asymmetrical, B for undefined borders, C for mixture of colo rs, and D for diameter of more than 6 mm. Self-examination using these symptoms should be conducted monthly, and an in-depth, formal skin exam by a dermatologist should be requested yearly. Once a suspicious body mark has been found, there is no reason to be depressed. Medical procedures are already present to ensure that individuals with melanomas can combat these cancer cells successfully. First, a biopsy, or removal of the whole or part of the mass, sentinel lymph node biopsy, X-ray, and or CT scan will be done to determine the extent of migration of melanoma. These medical procedures determine the extent of the growth of cancer cells. This is important to allow the patient have an informed decision with regards to the means by which the cancer cells are removed from the body. Through the years, treatment options for skin cancer has steadily increased and improved. Surgery is the treatment of choice for melanomas that have not yet migrated to other parts of the body. If cancer ce lls were found to other parts of the body, chemotherapy or radiation therapy may supplement the surgery to ensure that no cancer cell mass is left inside. These treatment options have high success rates, especially when melanomas are detected in its early stages. In addition, patients can participate in experiments testing novel drugs for cancer. With the continuing advancement of

Essay on reality Essay Example for Free

Essay on reality Essay Recently I attended a comedy festival and chose to go see one of the comedians shows with a friend of mine. This specific comedian had based his jokes around making fun of different people in certain countries. I had found the entire show completely amusing- it was very entertaining. However, when I questioned my friend about how she found it she was absolutely bewildered. She had found the jokes very offensive and humiliating towards the people of the ethnic groups that were mocked. It was a surprise to me that her perception of the show was entirely different from mine. The same event we had both experienced had seemed to produce different reactions. The situation made me realise that the window through which we perceive reality cannot be objectively verified due to the subjectivity of a persons feelings, thoughts or memories. After youve heard two eyewitness accounts of an auto accident, you begin to worry about history, was written by an unknown author. Hence the perception of reality can be seen through many windows. This circumstance made me question the validity of an objective reality in any situation and to what degree can certain factors influence the way we perceive reality. Variations in the perception of reality can indeed be affected by the age and what has been experienced by the individual during their maturation process. Overtime one persons perception of reality changes in that their initial knowledge of reality is entirety different from the reality they may perceive years later. The difference between the perceptions of reality of a forty year old adult to a ten year old child will vary greatly. A child has not yet been subjected to or experienced any major events; so their view on reality has not yet properly matured. As an individual matures, it is evident that they have encountered diverse situations that influence the way which they recognise reality. The perception of reality of a young child is still one of perplexity which is also experienced by the young Robert whose views on the world around him are not quite developed as is apparent in the memoir, The Shark Net. Roberts perception at the time of arrival into Perth was of complete awe and excitement, Everything I saw was the great unknown, whereas Dorothys perception was, it might as well be Africa. So you see, the perception of adventure of a young boy differs significantly to that of the perception of fear and insecurity of an isolated and foreign region of an adult. Hence reality can be seen through a series of lenses. The process of growing up in a certain environment involves the introduction of moral values whereby ones view on reality begins to form. By living in that area you grow up with views and values that are first instilled into you by your parents but then later on you are open to a wide range of views you can apply to any person, place or event. As can be seen the novel To Kill a Mockingbird, the young character Scout is growing up in an environment where her father, a lawyer, is defending a black man. Therefore, the character is being subjected to certain views and values that will later influence the way in which she perceives reality. Also, Roberts environment comprised of Saturday movies, bumpers, sparrows, moral agents and boiling brains and this was all part of his reality. Indeed, these themes formed the basis of Roberts reality. So it can be inferred that peoples personal feelings and thoughts that they have accumulated in their maturation process prevent the production of an objective reality; rather the creation of multiple realities to one situation. David G. Myers of Social Psychology once wrote There is an objective reality out there, but we view it through the spectacles of our beliefs, attitudes, and values. The environment you have been surrounded by, beliefs and moral values you have held all play a pivotal role and influence the way in which we perceive reality. The past of an individual and the memories experienced during their past plays a significant role in the way in which they perceive reality. Memories and experiences basically shape our understanding of what is important to us and what is not. Hence these are the formations of different perceptions. Roberts tunnelling craze was decided by Royce that the boys habit must have been picked up from parents and grandparents, who had experience as a bomber pilot and obviously felt no harm in the situation. On the other hand Dorothys reaction was distraught and angry. She couldnt believe mothers allowed their children to go to school barefoot, much less risk suffocation by burrowing underground. This indicates that these two perceptions of the reality of the situation are fuelled by the dissimilar experiences felt by both parents. Also, considering the latest tragic reality of the bushfires; a child who had lost their home and entire possessions would now hold a different perspective on reality due to their experiences and memories to that of a bystander to the horrific events. Indeed, ones own experience can affect the way in which they perceive a certain reality. It is shown that even the same event can have two conflicting realities perceived by two different people with various experiences. Though we may encounter the same event, person or place there are external and internal factors that can influence the manner in which we perceive a specific reality. The windows that allow sight into perception have numerous layers. It is impossible to view reality from an objective perspective due to the personal life we have created around us. From being a small child to an adult has shown to be a factor influencing the knowledge of reality. Therefore, along the path of our lives we are provided with certain views and values that contribute to our home and external environment and the experiences and memories we come across make a person perceive a situation in a different lens. As Bryan Singer once said, We dont live in a world of reality; we live in the word of how we perceive reality.

The Lady Of Shalott: An analysis

The Lady Of Shalott: An analysis Alfred Lord Tennyson wrote The Lady of Shalott in 1832. Tennyson was known for his visual aspect and was able to create images that correspond to mood, situation and emotion. The Lady is in love with Sir Lancelot but she is doomed to life in the tower due to the curse. The Lady of Shalott takes place in a tower on the island of Shalott, in a river near Camelot. The Lady is a beautiful woman who is under a curse and must constantly weave a magic web without looking directly out at the world. The Lady can only look into a mirror which reflects the busy road and the people of Camelot who pass by her. When she sees Sir Lancelot passing by the tower, the Lady breaks free from the curse to pursue him and profess her undying love. Unfortunately, she dies before she is able to meet her dear love. Lancelot remarks upon discovery of the Ladys body that she had a lovely face, she has a lovely face, God in his mercy lend her grace, the Lady of Shalott (Tennyson 169-171). How can one comprehend t his? The Lady can be seen as an artist that avoids all contact with the world and does not want to face reality. For an artist like Tennyson, it is his duty to construct beauty, not to become entwined with reality. Both the Lady and Tennyson appear to share a commonality that they are both constructing something beautiful. On the other hand, a reverse contemplation occurs to me, does disregarding reality lead to death? Can the lady create her own ending or is it fate that is cruel to her? With that being said, in this essay I will purpose that Tennyson is going against dispelling myths because he is a believer of them. First, I will prove how it is a myth. Second, I will explain how and why it is bad luck for a mirror to shatter. And thirdly, I will explain why it has to be a myth, because no natural cause killed the Lady, only the mirror breaking alone had killed her. Tennyson is against dispelling myths because he is a firm believer in them. The Lady only sees reflection and shadows of the world around her because she looks at the real world through a mere mirror. In the poem, an example of Tennyson believing in myths is when he writes in part two, A curse is on her if she stay (Tennyson, 40). He is interpreting that the curse will come to her if she stops weaving her magical web. In the poem during part one, it states Four gray walls and four gray towers (Tennyson 15). I believe he is saying that in order for one to live their life, being isolated does not help. It shows that the tower is extremely dangerous, which happens to be a spell known as a curse. In part three, the Lady à ¢Ã¢â€š ¬Ã‚ ¦left the web, she left the loom, out flew the web and floated wide, the mirror crackd from side to sideà ¢Ã¢â€š ¬Ã‚ ¦ (Tennyson 109-115). This shows that the myth is in fact true and a journey of a disaster begins for the Lady. The journey of disaster began with the magic mirror shattered. It is well known that a mirror that is shattered is bad luck. The mirror is not an entrance into the heavenly world but rather it resembles more of a demon with a mind of its own. Breaking a mirror would give a free rein to restless and evil spirits formerly trapped in the mirror. In some cultures, a broken mirror signifies a death in the family within the year. This alliance of mirrors in the company of death is common in myths, a certainty that the soul could be spellbound in the mirror, and cause death to the one looking in it. A broken mirror will have a drastic and negative effect on the future of the person who is involved. The Lady was in this position as stated in the poem in part three, The mirror crakd from side to side; The curse is come upon me (Tennyson, 115-116). This approved right of entry of spirits from the other side into her world and the curse is in action. The mirror can give horrific news, whereas i n the Ladys case she was able to escape this curse by her imminent death. That itself was the horrific news brought on by the mirror. The cracked mirror symbolized that her soul would be trapped inside the world far from the one in which she once gazed at freely. To all intents and purposes, the broken mirror produced a broken soul for the Lady, which resulted in her broken health leading to her death. I always assumed that when you believe something is bound to happen, then you bring curses and a hex upon yourself. This gives proof that the Lady knew she was going to die right when the mirror cracked, so it happened as she left the tower and ran towards the boat; she instantly died. If good things happen after an action, the action is perceived to be lucky and vice versa. In this case, the lady was to stay in the tower and weave due to her curse; instead she disobeyed and followed her heart. She was deep in love with Lancelot and as a result, ended up facing the drastic consequence s of her actions. No natural causes killed her as is evident in the poem. The only way she could have died is through the mirror breaking. The mirror breaking alone appeared to have murdered her. It is clear that the Lady was not shot, nor did she fall and break part of her body; or committed suicide. It is a common myth among people even to this day, that breaking a mirror brings bad luck. Such is the case for the Lady in The Lady of Shalott. Everything that the Lady uttered, believed, thought, and dreamt of, was a myth. Due to the fact the Lady was summoned to spend her life in the tower, she desperately wanted to make sense of her life and her own existence. In Part four of the poem, it states, In the stormy east-wind straining, the pale yellow woods were waning (Tennyson 118-119). This indicates her emotions were reflected by the color yellow, which signifies sickness and waning signifies that the woods were dying. This in turn signifies that the Lady was near her death. Her death came slowly like the à ¢Ã¢â€š ¬Ã‚ ¦the pale yellow woodsà ¢Ã¢â€š ¬Ã‚ ¦. The nature is a direct effect of the fact that the Lady is on the verge of leaving Earth. As she dies, everything is getting dimmer and her death is occurring slowly, ..till her blood was frozen slowly (Tennyson 147). However, it is evident in Tennysons world and ours today that even as great tragedies occur around us, people still continue with life. This poem had many meanings, which I have attempted to bring out in this essay. The Lady is under a curse, but not in a regular sense. However, the Lady is not content with a life in the tower and with the grim prospect of Lancelot never seeing her again. Therefore, death was her only escape from her confinement. Due to the curse being bestowed on her, she makes a decision that it is healthier to die than to carry on a life where she cannot participate in the real world. Myths are not about other people, but are stories on the subject of ourselves. Myths have a tendency to include intense characters with dark and gloomy pasts but the Lady is none of that. Instead she is a wondrously beautiful woman. The web she weaves is a symbol of her pain as she is confined to the tower while the world continues on below. The Lady must continue to weave the web without involving herself in the world due to her curse. I can see her pain and grief as she lives out her curse because shes powerless. I t is mentioned in part two, she is half-sick of shadows (Tennyson 71) meaning the Lady is tired of her existence in this world of contempt. This poem clearly proves that Tennyson follows myths religiously and believes in them. Tennysons poem represents his beliefs in myths and his desire to keep them in our realm. On a general not, myths teach us about the way diverse individuals see the world. However, we have to become conscious and respect the fact that myths are only myths if you do not believe in them. This legend was told in cultures of ancient times to help gratify their inquisitiveness on how the world functioned. Mirrors give the impression to posses a power beyond the natural, a reflection of the truth, and so it had been assigned as mystical and supernatural ideas.

Impact of Exchange Rate Misalignment on Capital Inflows

Impact of Exchange Rate Misalignment on Capital Inflows EXCHANGE RATE MISALIGNMENT AND CAPITAL INFLOWS: AN ENDOGENOUS THRESHOLD ANALYSIS FOR MALAYSIA ABSTRACT This study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables. INTRODUCTION Foreign direct investment (FDI) has served as an important engine of growth via skills and technology transfer, creation of employment opportunities and expanding the capital stock in Malaysia. Since the 1997 Asian financial crisis, Malaysia is no longer the top 10 host for FDI. In fact, the rate of growth of FDI has dramatically decrease compared to that of the early 1990s. This is partly due to reverse investment (Mat Zin, 1999) and declining dependence on FDI to finance growth. However, this may also indicates the declining competitiveness of Malaysia in attracting FDI which warrants empirical research since it would be vital to investigate which factors that contributed to the deterioration of competitiveness. Since early 1980s, real exchange rate misalignment has become a standard concept in international macroeconomic theory and policy (Razin Collins, 1997). Hence, this study focuses on exchange rate misalignment as an indicator of capital inflow competitiveness in the case of Malaysia. Malaysia provides an interesting case as it is one of the largest recipients of FDI amongst its ASEAN counterparts. Another advantage of undertaking a single country study is the ability to delineate the assumption that countries are similar in terms of social, cultural, economic and political background (Sun et al., 2002). Therefore, only relevant economic determinants are accounted for to suit the Malaysian environment. The objective of this paper is to investigate the empirical relationship between capital inflows and exchange rate misalignment. Whilst existing literature focuses on the role of exchange rate, this study takes a step further to examine the impact of exchange rate misalignment on capital inflows. Specifically, we estimate a threshold value at which misalignment begins to significantly affect capital inflows. To the best of our knowledge, no published study has attempted to estimate a threshold value for exchange rate misalignment in Malaysia. Hence, this study intends to fill this gap. Based on the endogenous autoregressive threshold (TAR) model developed by Hansen (2000), we split the sample into high and low misalignment regimes. Results suggest that exchange rate misalignment due to overvaluation is detrimental to the influx of capital inflows. The next section provides a brief overview of FDI in Malaysia followed by a brief explication of the theoretical model and review of liter ature. The fourth section spells out the method pertaining to the objective. The penultimate section provides results and discussion and the final section concludes. CAPITAL INFLOWS IN MALAYSIA: RECENT TRENDS AND INCENTIVES The essence of export oriented-growth nexus somewhat depends on the inflow of foreign capital into the country. In the past, foreign direct investment has been the one of the major conduit for technology transfer, job creation and export-led growth to this country. To pursue this line of interest, the Malaysian government has designed various policies spanning the gamut of industrial specific incentives, taxation, and intellectual property protection to infrastructure support. The company tax rate for example has been reduced from 33 percent in 1987 to 27 percent in 2007 and 26 percent in 2008. Other tax incentives such as the investment tax allowance, tax relief for companies with pioneer status or high technology industries has continued until today with more industries be given the relevant status to reap the benefits of the incentives. Most recently, the government has liberalized bumiputera equity requirements for 27 sectors to further boost competitiveness. With reference to previous information, there was a surge in foreign direct investment (FDI) into Malaysia in the late 1980s and this trend continued until the onset of the 1997 Asian financial crisis. Another acute slump in the influx of FDI occured in 2001 when the economy was in a slight recession but picked up again in 2002 thereafter. With the recent burgeoning world recession following the American sub-mortgage crisis, it is expected that FDI will contract again (IMF, 2009). To capture a more vivid impact of misalignment on capital inflows, this study employs quarterly data from Bank Negara Malaysia (BNM – the central bank of Malaysia) instead of the UNCTAD data which are annual. Foreign capital inflows or investment inflows comprises three items: (i) equity investment, (ii) loans and (iii) real estate. Investment consists of equity investment in Malaysia by non-residents, loans obtained from non-residents and purchase of real estate in Malaysia by non-residents but excludes retained earnings (Source: Bank Negara Malaysia, Glossary, Monthly Bulletin Statistics January, 2009, p. 186-187). This study resorts to a specific measure of FDI, that is, foreign investment inflows. Data starts from 1991:Q1-2008:Q3, partly dictated by availability. THEORY AND REVIEW OF LITERATURE In this study, we rely on the portfolio balance approach to model the determinants of foreign capital inflows. This model has been successfully tested by Goh (2005) for Malaysia. Branson (1968) postulates that the proportion of foreign assets (Kf) in a given stock of wealth is a function of the domestic and foreign interest rates (i and i*), the measure of exchange rate expectation or risk (e) and the stock of wealth (w) expressed as: (1)Darby et al. (1999), augment this concept of exchange rate risk (e) into exchange rate volatility and exchange rate misalignment. Since this study focuses on the role of exchange rate misalignment, we substitute e with misalignment. Expressing the above equation at level yields, (2)Focusing on Z, the literature suggests a number of variables that determines capital flows. The enigmatic relationship between FDI and exchange rate nexus has been widely examined and most of the discussions root back to the work of Kohlhagen (1977), Cushman (1985), Froot and Stein (1991), Goldberg (1993) and Darby et al. (1999). The effect of exchange rate is less straightforward (Benassy-Quere et al., 2001). The mechanisms that exchange rate affects capital inflows can also be viewed via the wealth effect channel and the relative production cost channel (Xing, 2006). A devaluation of the currency of the host country makes local cost of production lower in terms of foreign currency, hence leading to higher returns from export-oriented industries. As for the wealth effect, a devaluation makes local asset cheaper which motivates investors to acquire more. Kohlhagen (1977) static model postulates that following depreciation in host countries, MNEs will increase their production capacity. In a two period dynamic model, Cushman (1985) suggests that adjusted expected real depreciation lowers the production cost which leads to increase in FDI flows. Similarly, Goldberg (1993) illustrates how sectoral profitability, location effects, and portfolio and wealth effects are important factors that determine investment an d their links with exchange rates. In her theoretical model, the direction of investment effects triggered by exchange rate movements is ambiguous, therefore, warrants empirical research. On contrary, in an imperfect information framework, Froot and Stein (1991) show that appreciation induces wealth effect of foreign investors, thus encouraging foreign investors to acquire more local assets. Empirically, there is quite a consensus that a depreciation of the exchange rate in the host country leads to a reduction of the FDI (Klein and Rosengren, 1994; Dewenter, 1995). There is however, a dearth of studies that empirically examine the relationship between FDI and exchange rate misalignment. Empirical attempts include Benassy-Quere et al. (2001) who advocate the benefits of depreciation may be offset by excessive volatility of the exchange rate. Blonigen (1997) illustrates how currency depreciation induces foreign firm to acquire firm-specific assets when markets are segmented. Hasnat (1999) study the impact of misalignment on FDI for five developed nations on annual data ranging from 1976-1995. All of these studies use misalignment as a control variable or a counterpart for exchange rate variability and is measured by a deviation from the purchasing power parity (PPP) values. Furthermore, most of these studies are based on the experiences of industrialized economies using panel data analysis framework. In short, a prolonged misalignment may affect long term business decisions as it affects costs. If the exchange rate is overvalued relative to the e stimated equilibrium level, investors may acquire more domestic assets for future capital gains in host country currency terms (Barrell and Pain, 1996). On the other hand, persistent overvaluation may reduce cost competitiveness of production in the host country, especially for export oriented products. Other traditional determinants of FDI can be demarcated into at least two categories – micro and macro determinants. The list of micro-determinants spans from market size, growth, labour costs, host government policies, tariffs to trade barriers. The macro-determinants include market size (Chakrabarti, 2001; Farrell et al., 2004; Kravis and Lipsey; 1992), openness (Edwards, 1990; Gastanaga et al. 1998; Hausmann and Fernandez-Arias, 2000; Aseidu, 2002), rate of inflation (Bajo-Rubia and Sosvilla-Rivero, 1994; Urata and Kawai, 2000), government budget, taxes (Gastanaga et al., 1998; Wei, 2000) and infrastructure (Wheeler and Mody, 1992; Urata and Kawai, 2000). Financial deepening is also another catalyst for FDI (Borensztein et al., 1998). Liquid liability, private credit and M3 serve as proxies. Increase in money supply fuels inflation which increases the cost of production in the host country rendering a negative relationship. However, increments in money supply supported by g rowth or higher productivity indicate increase in future purchasing power which can benefit market-seeking FDI. Finally, the degree of misalignment is computed based on the difference between the actual and the hypothetical equilibrium exchange rate. Accordingly, the estimation of the hypothetical equilibrium exchange rate relies on the theory advocated by Edwards (1994). This theory postulates that the real exchange rate is a function of several fundamental variables which includes the Balassa-Samuelson effect, trade openness, net foreign assets and government spending. Details are provided in Sidek and Yusoff (2009). METHODOLOGY AND DATA The question of when does misalignment begin to significantly affect capital inflows necessitate the existence of a non-linear relationship between these two variables. Thus, if such non-linear relationship exists, then it is possible to estimate an inflexion point, or a threshold value, at which the sign of misalignment may change or become significant. In the non-linear time series modelling, the threshold autoregressive model (TAR) is more popular since it offers a relatively simple specification, estimation and interpretation compared to other non-linear models. The origins of TAR models roots back to Tong (1980) where the main idea is to approximate a general non-linear autoregressive structure by a threshold autoregession with a small number of regimes. Hansen (1996, 2000) derives the asymptotic distribution of the ordinary least squares (OLS) estimates of the endogeneous threshold parameters which is used in this study. This section explains how equation (2) is estimated to incorporate threshold effect. According to Hansen (2000), threshold estimation is the act of splitting the sample into two regimes when the threshold value is unknown. One necessary precondition is that the threshold variable must be a continuous variable. In this study, the threshold estimation is carried out by splitting the sample into high misalignment and low misalignment regime. Since misalignment is a continuous variable, TAR model would be appropriate to engender the threshold value. Formally, the two-regime threshold regression model takes the form: where is the threshold variable which is used to split the sample into two regimes, is the threshold value which is unknown and must be estimated, denotes the dependent variable (capital inflow), represents a vector of explanatory variables and is the error term assumed to be white noise and i.i.d. Note that if the threshold value is greater than the threshold variable, equation (3) is estimated and vice versa. This allows the regression parameters to change with respect to . In order to write equations (3) and (4) in a single equation, a dummy variable is used which is defined as where {.} is the indicator function, with d=1 when and d = 0, if otherwise; and set , such that (3) and where and . Equation (5) allows all the regression parameters , and to be estimated and switch between the two regimes. The least square (LS) technique is used to estimate through minimization of the sum of squared errors function. To implement this, the model is expressed in matrix notation, hence, equat ion (5) is expressed as: (6) Define, (7) as the sum of squared error function. By definition the least squares estimators which is also the MLE when with i.i.d. , jointly minimize equation (7). This minimization process requires to be restricted to a bounded set . The concentrated sum of squared errors function is written as: (8) where is the value that minimizes . As takes values that is less than n, is uniquely described as: with (9) Focusing on the objective of this section, the first step is to examine whether there exist a threshold effect in the model. This requires the examination between the linear model vis-Ã  -vis the two-regime model, equation (5). The null hypothesis of no threshold effect is tested against an alternative hypothesis where threshold effect is present. Since TAR models have a non-standard distribution, Hansen (1997, 2000) develops a standard heteroscedasticity-consistent Langrange Multiplier (LM) bootstrap method to calculate the asymptotic critical value and the p-value. The second step is to examine whether the derived threshold value is statistically significant. This is done by differencing the confidence interval region based on the likelihood ratio statistic . Based on Hansen (2000), let C represent the desired asymptotic confidence interval (in this study at 95%) and be the C-level critical value and set . Assuming homoscedasticity, as , therefore, is the asymptotic C-level confidence region for . If the homoscedasticity condition is not fulfilled, then a scale likelihood ratio statistics of the residual sum of squared errors is defined as: (10)and the adjusted confidence region becomes such that is robust whether or not the heteroscedasticity condition holds. Simulation is set at 1000 replications as suggested by Hansen (2000). Also, is not normally distributed hence, the valid asymptotic confidence intervals of the estimated threshold values in the no-rejection areas defined as , where is a given asymptotic level; and the no- rejection region of the confidence interval is . If , than the null hypothesis of cannot be rejected. In addition, to examine the possibility of a second threshold value, the same exercise is repeated. Specifically, the empirical model to be tested which is based on equation (2) is defined as follows: (11) where K is capital inflows, Mis, R and M3 denote exchange rate misalignment, interest differentials and financial deepening, and Z represents the other control variables. Table 1 summarizes the description of data, measurement and sources used in this study. Table 1: Determinants of Capital Inflows (1991Q1-2008Q3) Variable Description Measurement Source I Foreign investment Total foreign investment inflow as a percentage of GDP BNM M3 Money supply M2 as a percentage of GDP IFS D Government deficit The difference between revenue and expenditure as a percentage of GDP BNM R Interest differential The difference between Malaysia and US 3-month T-Bill rates IFS T Taxation Government corporate tax revenue as a percentage of GDP BNM LL Liquid Liability Log International liquidity: banking institution liability, line. 7b.d IFS INFRA Infrastructure Log of spending on infrastructure as a percentage of GDP BNM IFS: International Financial Statistics, IMF, UNCTAD: United Nations Conference on Trade and Development, BNM: Bank Negara Malaysia Monthly Statistical BulletinDOS: Department of Statistics, Malaysia (various issues). RESULTS AND DISCUSSION Prior to time series analysis, we test for unit roots in order to avoid spurious regression. Three versions of unit root testing, namely the ADF, PP and KPSS tests are employed to examine whether the variables are stationary on level or otherwise. Table 3 indicates that the order of integration are mixed for a majority of variables. However, this study proceeds to examine the threshold effect by including lagged variables for I(1) variables in the OLS estimation. Moreover, equation (2) derived from the theory requires estimations at level. Table 2: Unit root test ADF PP KPSS Order of Integration Level 1st Diff Level 1st Diff Level 1st Diff I -3.7029* -7.9812* -3.5286* 14.00208 0.9008* 0.2305 I(0)/I(1) M3 -1.2741 -10.0951* -1.3334 -10.4699* 1.0229* 0.3588*** I(1) D -1.6297 -19.7087* -8.8219* -27.3774* 0.3649* 0.0894 I(0)/I(1) R -4.5405* -3.8179** -2.6509 -7.0649* 0.0711 0.0471 I(0)/I(1) INFRA -2.2527 -4.5270* -3.5053* -27.7776* 0.2234* 0.0813 I(0)/I(1) LL -3.0805 -6.5500* -2.4386 -6.7355* 0.1073 0.0607 I(0)/I(1) MIS -3.8075** -9.7442* -3.8076** -9.8483* 0.0662 0.0577 I(0) Note: *, ** and *** denote significance at 1%, 5% and 10% significant level. p-values are in parentheses. For ADF and PP test the null is no unit root (H0: Variable is stationary) whilst the null for the KPSS is the existence of unit root (H0: Variable is not stationary). The baseline regression constitutes the exchange rate misalignment, interest differential and a measure of financial development, M3. We present four additional models with different variables added to the baseline regression, namely liquid liability, government budget deficit, and infrastructure for sensitivity analysis. Hansen (2000) theoretical construct allows for two threshold effects, hence, the first step is to investigate the possible existence of such an effect. Prior to that, a threshold variable needs to be selected. Since the aim of this section is to examine at what percentage exchange rate misalignment actually hurts capital inflows, the appropriate threshold variable is the exchange rate misalignment. Upon choosing the appropriate threshold variable, the next step is to observe any evidence of a threshold effect and whether there exist one or more threshold by employing the heteroscedasticity-consistent Lagrange-multiplier (LM) test for a threshold based on Hansen (1996). To test under the null hypothesis of no threshold effect, p-values are calculated using a bootstrap analog which generates the dependent variable from the distribution , where is the OLS residuals from the estimated threshold model. With 1000 bootstrap replications, the p-values for the baseline threshold models (Table 3) using misalignment strongly suggest the existence of threshold effect at 0.000. Subsequently, this suggests that there is a sample split based on the effect of exchange rate misalignment. Table 3: Threshold Effects for the baseline model Model 1 First Sample Split F-Stats 51.4045 Bootstrap P-Value 0.000 Threshold Estimates -15.0260% 95% Confidence Interval -15.446% , -9.8360% Second Sample Split F-Stats 16.2171 Bootstrap P-Value 0.2890 Note: H0: No threshold effect. The threshold is based on the minimized sum of squared residuals. This illustrates the graph of the normalized likelihood ratio sequence as a function of the threshold in exchange rate misalignment. The estimated is the value which minimizes these graphs which range at =15.02-15.44%. The dotted lines on the graphs present the 95% critical values. For example, in model 1, the asymptotic 95% confidence interval set where crosses the dotted lines. The results suggest that there is ample evidence for a two-regime specification. Also, it is worth noting that 41 of the 71 observations fall into the 95% confidence interval, hence, requires an examination of the possible existence of a second sample split. Results in Table 3, show that second sample split renders insignificant bootstrap p-value thus, indicating no further regime split. Table 4 presents the results for baseline regression. For comparison purposes, this study provides the linear OLS model without the threshold effect and a two-regime model which accommodates the threshold effect. Basically, the variables confer the correct signs in line with the prediction of the theory. Misalignment has a negative and significant effect on capital inflows in regime 2. Interest differential is expected to confer a negative effect. Results indicate that interest differentials only affects capital inflows negatively in the regime 1 but is insignificant in the regime 2. Similarly, M3 has significant effect in both regime but is positive in the regime 1 but the sign switches in regime 2. Hence, splitting the sample gives a more indepth view of the effects of these basic variables on investment inflows. To reiterate, sample splitting allows the examination of whether the significant effect is present in both regimes or otherwise. The results show that below the threshold value of 15%, exchange rate misalignment may be negative but are not statistically significant. However, above the 15% threshold level, misalignment exerts both negative and significant impact on capital inflows. A 1% increase in misalignment (overvaluation) suppresses capital inflows by approximately 1.19%. The negative effect of exchange rate misalignment on capital inflows is consistent with the findings of Hasnat (1999). Barrel and Pain (1996) argue that an apparent currency misalignment persistent over some length of time may affect investment inflows decisions. A reasonable explanation is that the relative production costs may be higher as a result of such misalignment. If the ringgit is thought to be overvalued relative to its estimated equilibrium level, then foreign production may be discouraged by the prospect of future capital loss in home currency terms. Another issue which emerges after the 1997 financial crisis is that capital inflows must be managed since reversals are likely to cause severe damage to the economy. Reinhart and Reinhart (1998) calls for greater exchange rate flexibility which is meant to introduce two-way risks, therefore, discouraging speculative capital inflows. It is, however, only possible in the context of de facto peg or a tightly managed float. Furthermore, the effectiveness of this policy depends on how much policymakers are willing to allow the exchange rate to fluctuate. A large band denotes greater flexibility but risks having large nominal appreciation which connotes possible overvaluation of the currency. The result of this study suggests that overvaluation is detrimental to capital inflows if this band exceeds 15%. Hence, policymakers should keep exchange rate fluctuations well below this 15% threshold. Table 4: Baseline regression results on the effect of misalignment on capital inflows (1991:Q1-2008:Q3). Dependent variable is capital inflows. Model 1 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0259% Regime 2 > 15.0259% Misalignment -0.4267** (0.2115) -0.3186 (0.2573) -1.1955** (0.5712) Interest Differential -0.0250*** (0.0131) -0.0438* (0.01533) -0.0261 (0.0193) M3 0.2964* (0.0391) 0.2644* (0.0516) -0.5560* (0.1240) Constant 3.0468* (0.2779) 2.5394* (0.2593) 6.7313* (0.6099) No. of Observations 71 42 29 R2 0.3664 0.6484 0.4218 Notes: *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses. Interest rate differential are consistently negative and significant in all specifications and in both regimes in majority of the threshold model. This stresses the role of interest rates in attracting capital inflows into Malaysia. Although the impact may be small, it is significant and the authorities should ensure that interest rates are kept at certain levels to maintain competitiveness of Malaysia as destination for capital investment. In this paper, the estimated impact of a 1% change in interest differential is expected to subdue foreign investment by 0.04 percentage point in the first regime and 0.03 percentage point in the second regime. The proxy for financial deepening, M3 is statistically significant in all models and in both regimes. Again, this signifies the importance of financial development in attracting capital investment into Malaysia. Interestingly, M3 is positive during the periods of low misalignment regime (regime 1) but becomes negative at higher misalignment regime (regime 2). During low misalignment, a 1% increase in M3 is expected to draw in 0.3 percentage point more investment inflow into Malaysia. This shows that in the lower regime, financial depth acts as an impetus to capital inflows. However, the situation reverse with 0.6 percentage point lower investment inflows is expected with a 1% increase in misalignment in the second threshold regime. Montiel (1999) explicitly explains this phenomenon where capital inflows increase reserves which then prompt an increase in the monetary base, M2 and M3. Such increases fuels further increments in domestic demand leading to real appreciation. Thus, any overvaluation of the currency may eventually have negative ramifications on capital inflows. Sensitivity analysis To check for the sensitivity of the estimated threshold value, Table 6 -7 and Figure 3 represents four other models which use different variables in addition to the baseline regression. The addition of taxes yields insignificant results without drastically changing the threshold value. Other additional variables such as government budget deficit and liquid liability are only significant in one of the two regimes . With the inclusion of additional variables, the estimated magnitude of each regressors differ slightly but maintains the same sign and significance level. For example a 1% increase in misalignment (overvaluation) suppresses capital inflows by 1.11-1.55 percentage point. The estimated impact of a 1% change in interest differential is expected to deter foreign investment by 0.04-0.05 percentage point in the first regime and 0.02-0.06 percentage point in the second regime. Similarly, during low misalignment, a 1% increase in M3 is expected to draw in 0.2-0.3 percentage point m ore investment inflow into Malaysia. An estimated 0.49-0.67 percentage point lower investment inflows is expected with a 1% increase in M3 in the second threshold regime. In view of the results, it seems evident that the exchange rate policy has important effect in attracting foreign capital inflows into Malaysia. Specifically, misalignment in terms of overvaluation should be kept lower than 15 percent to ensure that capital inflows remained unhurt. Table 5: Sensitivity Analysis: Threshold Effects Model 2 Model 3 Model 4 Model 5 First Sample Split F-Stats 71.1442 45.9364 53.3722 53.3722 Bootstrap P-Value 0.000 0.000 0.000 0.000 Threshold Estimates -15.4461% -15.0260% -15.0260% -15.0260% 95% Confidence Interval -15.446%, -15.025% -15.446%, -9.836% -15.446%, -0.0984% -15.446%, -0.0984% Second Sample Split F-Stats 16.4917 19.7585 22.9710 22.9710 Bootstrap P-Value 0.5310 0.3800 0.2420 0.2420 Note: H0: No threshold effect. The threshold is based on the minimized sum of squared residuals Table 6: Sensitivity Analysis for threshold estimates (1991:Q1-2008:Q3). Model 2 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.4461% Regime 2 > 15.4461% Misalignment -0.4278*** (0.2216) -0.3497 (0.4143) -1.5593* (0.3135) Interest Differential -0.0250*** (0.0134) -0.0462* (0.0153) -0.0599* (0.0131) M3 0.2966* (0.0414) 0.2732* (0.0488) -0.5609* (0.0744) Liquid Liability -0.0029 (0.1709) -0.0634 (0.1932) 1.1843* (0.2615) Constant 2.9780* (0.2713) 2.5259* (0.2593) 6.1799* (0.3135) No. of Observations 71 41 30 R2 0.3842 0.6503 0.5986 Model 3 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.4472** (0.2038) -0.3800 (0.2460) -1.1171*** (0.6229) Interest Differential -0.0254* (0.0126) -0.0505* (0.0140) -0.0237 (0.0221) M3 0.2844* (7.4922) 0.2521* (0.0472) -0.5391* (0.1477) Deficit -0.7655* (0.3059) -0.7380* (0.3099) -0.1841 (0.7174) Constant 3.0308* (0.2674) 2.5835* (0.2445) 6.6452* (0.7337) No. of Observations 71 42 29 R2 0.4285 0.6829 0.4230 Model 4 Linear Model Threshold Model OL S without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.2852 (0.2181) -0.2582 (0.2720) 1.2490** (0.5612) Interest Differential -0.0275** (0.0128) -0.0419* (0.0165) -0.0311 (0.0204) M3 0.3208* (0.0401) 0.2796* (0.0583) -0.5489* (0.1245) Tax 2.1899** (1.0761) 0.1283 (0.1457) 0.1260 (0.1720) Constant 3.0274* (0.4383) 2.2463* (0.4806) 6.5027* (0.7227) No. of Observations 71 42 29 R2 0.3665 0.6516 0.4300 Model 5 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.3780*** (0.1977) -0.4495*** (0.2602) -1.3190** (0.6059) Interest Differential -0.0203 (0.0123) -0.0433* (0.0152) -0.0308 (0.0212) M3 0.2941* (0.0365) 0.2388* (0.0479) -0.6093* (0.1406) Infrastructure 3.0729* (3.3373) 0.0474** (0.0228) -0.0382 (0.0392) Constant 3.0709* (0.2569) 2.5698* (0.2346) 7.0433* (0.7173) No. of Observations 71 42 29 R2 0.4091 0.6815 0.4384 Notes: *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses. CONCLUSION The objective of this chapter is to examine the impact of exchange rate misalignment on capital inflows. Results provide evidences of the negative impact of misalignment on capital inflows. To reiterate, overvaluation of the ringgit signals that Malaysia is less competitive vis-Ã  -vis other countries. In addition, this paper also estimates a specific threshold value; that is the degree of misalignment after which it begins to hurt capital inflows. By employing a recent technique by Hansen (1996, 2000), this study splits the sample into high misalignment and low misalignment regimes. This study shows that misalignments hurt capital inflows in the high misalignment regime or when misalignment is greater than 15 percent. This study also confirms the work of Goh (2005) who suggests that the portfolio balance model can capture the determinants of capital inflows in Malaysia. In particular, the results suggest that interest differential is an important determinant albeit, small, hence, p olicies should be direc Impact of Exchange Rate Misalignment on Capital Inflows Impact of Exchange Rate Misalignment on Capital Inflows EXCHANGE RATE MISALIGNMENT AND CAPITAL INFLOWS: AN ENDOGENOUS THRESHOLD ANALYSIS FOR MALAYSIA ABSTRACT This study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables. INTRODUCTION Foreign direct investment (FDI) has served as an important engine of growth via skills and technology transfer, creation of employment opportunities and expanding the capital stock in Malaysia. Since the 1997 Asian financial crisis, Malaysia is no longer the top 10 host for FDI. In fact, the rate of growth of FDI has dramatically decrease compared to that of the early 1990s. This is partly due to reverse investment (Mat Zin, 1999) and declining dependence on FDI to finance growth. However, this may also indicates the declining competitiveness of Malaysia in attracting FDI which warrants empirical research since it would be vital to investigate which factors that contributed to the deterioration of competitiveness. Since early 1980s, real exchange rate misalignment has become a standard concept in international macroeconomic theory and policy (Razin Collins, 1997). Hence, this study focuses on exchange rate misalignment as an indicator of capital inflow competitiveness in the case of Malaysia. Malaysia provides an interesting case as it is one of the largest recipients of FDI amongst its ASEAN counterparts. Another advantage of undertaking a single country study is the ability to delineate the assumption that countries are similar in terms of social, cultural, economic and political background (Sun et al., 2002). Therefore, only relevant economic determinants are accounted for to suit the Malaysian environment. The objective of this paper is to investigate the empirical relationship between capital inflows and exchange rate misalignment. Whilst existing literature focuses on the role of exchange rate, this study takes a step further to examine the impact of exchange rate misalignment on capital inflows. Specifically, we estimate a threshold value at which misalignment begins to significantly affect capital inflows. To the best of our knowledge, no published study has attempted to estimate a threshold value for exchange rate misalignment in Malaysia. Hence, this study intends to fill this gap. Based on the endogenous autoregressive threshold (TAR) model developed by Hansen (2000), we split the sample into high and low misalignment regimes. Results suggest that exchange rate misalignment due to overvaluation is detrimental to the influx of capital inflows. The next section provides a brief overview of FDI in Malaysia followed by a brief explication of the theoretical model and review of liter ature. The fourth section spells out the method pertaining to the objective. The penultimate section provides results and discussion and the final section concludes. CAPITAL INFLOWS IN MALAYSIA: RECENT TRENDS AND INCENTIVES The essence of export oriented-growth nexus somewhat depends on the inflow of foreign capital into the country. In the past, foreign direct investment has been the one of the major conduit for technology transfer, job creation and export-led growth to this country. To pursue this line of interest, the Malaysian government has designed various policies spanning the gamut of industrial specific incentives, taxation, and intellectual property protection to infrastructure support. The company tax rate for example has been reduced from 33 percent in 1987 to 27 percent in 2007 and 26 percent in 2008. Other tax incentives such as the investment tax allowance, tax relief for companies with pioneer status or high technology industries has continued until today with more industries be given the relevant status to reap the benefits of the incentives. Most recently, the government has liberalized bumiputera equity requirements for 27 sectors to further boost competitiveness. With reference to previous information, there was a surge in foreign direct investment (FDI) into Malaysia in the late 1980s and this trend continued until the onset of the 1997 Asian financial crisis. Another acute slump in the influx of FDI occured in 2001 when the economy was in a slight recession but picked up again in 2002 thereafter. With the recent burgeoning world recession following the American sub-mortgage crisis, it is expected that FDI will contract again (IMF, 2009). To capture a more vivid impact of misalignment on capital inflows, this study employs quarterly data from Bank Negara Malaysia (BNM – the central bank of Malaysia) instead of the UNCTAD data which are annual. Foreign capital inflows or investment inflows comprises three items: (i) equity investment, (ii) loans and (iii) real estate. Investment consists of equity investment in Malaysia by non-residents, loans obtained from non-residents and purchase of real estate in Malaysia by non-residents but excludes retained earnings (Source: Bank Negara Malaysia, Glossary, Monthly Bulletin Statistics January, 2009, p. 186-187). This study resorts to a specific measure of FDI, that is, foreign investment inflows. Data starts from 1991:Q1-2008:Q3, partly dictated by availability. THEORY AND REVIEW OF LITERATURE In this study, we rely on the portfolio balance approach to model the determinants of foreign capital inflows. This model has been successfully tested by Goh (2005) for Malaysia. Branson (1968) postulates that the proportion of foreign assets (Kf) in a given stock of wealth is a function of the domestic and foreign interest rates (i and i*), the measure of exchange rate expectation or risk (e) and the stock of wealth (w) expressed as: (1)Darby et al. (1999), augment this concept of exchange rate risk (e) into exchange rate volatility and exchange rate misalignment. Since this study focuses on the role of exchange rate misalignment, we substitute e with misalignment. Expressing the above equation at level yields, (2)Focusing on Z, the literature suggests a number of variables that determines capital flows. The enigmatic relationship between FDI and exchange rate nexus has been widely examined and most of the discussions root back to the work of Kohlhagen (1977), Cushman (1985), Froot and Stein (1991), Goldberg (1993) and Darby et al. (1999). The effect of exchange rate is less straightforward (Benassy-Quere et al., 2001). The mechanisms that exchange rate affects capital inflows can also be viewed via the wealth effect channel and the relative production cost channel (Xing, 2006). A devaluation of the currency of the host country makes local cost of production lower in terms of foreign currency, hence leading to higher returns from export-oriented industries. As for the wealth effect, a devaluation makes local asset cheaper which motivates investors to acquire more. Kohlhagen (1977) static model postulates that following depreciation in host countries, MNEs will increase their production capacity. In a two period dynamic model, Cushman (1985) suggests that adjusted expected real depreciation lowers the production cost which leads to increase in FDI flows. Similarly, Goldberg (1993) illustrates how sectoral profitability, location effects, and portfolio and wealth effects are important factors that determine investment an d their links with exchange rates. In her theoretical model, the direction of investment effects triggered by exchange rate movements is ambiguous, therefore, warrants empirical research. On contrary, in an imperfect information framework, Froot and Stein (1991) show that appreciation induces wealth effect of foreign investors, thus encouraging foreign investors to acquire more local assets. Empirically, there is quite a consensus that a depreciation of the exchange rate in the host country leads to a reduction of the FDI (Klein and Rosengren, 1994; Dewenter, 1995). There is however, a dearth of studies that empirically examine the relationship between FDI and exchange rate misalignment. Empirical attempts include Benassy-Quere et al. (2001) who advocate the benefits of depreciation may be offset by excessive volatility of the exchange rate. Blonigen (1997) illustrates how currency depreciation induces foreign firm to acquire firm-specific assets when markets are segmented. Hasnat (1999) study the impact of misalignment on FDI for five developed nations on annual data ranging from 1976-1995. All of these studies use misalignment as a control variable or a counterpart for exchange rate variability and is measured by a deviation from the purchasing power parity (PPP) values. Furthermore, most of these studies are based on the experiences of industrialized economies using panel data analysis framework. In short, a prolonged misalignment may affect long term business decisions as it affects costs. If the exchange rate is overvalued relative to the e stimated equilibrium level, investors may acquire more domestic assets for future capital gains in host country currency terms (Barrell and Pain, 1996). On the other hand, persistent overvaluation may reduce cost competitiveness of production in the host country, especially for export oriented products. Other traditional determinants of FDI can be demarcated into at least two categories – micro and macro determinants. The list of micro-determinants spans from market size, growth, labour costs, host government policies, tariffs to trade barriers. The macro-determinants include market size (Chakrabarti, 2001; Farrell et al., 2004; Kravis and Lipsey; 1992), openness (Edwards, 1990; Gastanaga et al. 1998; Hausmann and Fernandez-Arias, 2000; Aseidu, 2002), rate of inflation (Bajo-Rubia and Sosvilla-Rivero, 1994; Urata and Kawai, 2000), government budget, taxes (Gastanaga et al., 1998; Wei, 2000) and infrastructure (Wheeler and Mody, 1992; Urata and Kawai, 2000). Financial deepening is also another catalyst for FDI (Borensztein et al., 1998). Liquid liability, private credit and M3 serve as proxies. Increase in money supply fuels inflation which increases the cost of production in the host country rendering a negative relationship. However, increments in money supply supported by g rowth or higher productivity indicate increase in future purchasing power which can benefit market-seeking FDI. Finally, the degree of misalignment is computed based on the difference between the actual and the hypothetical equilibrium exchange rate. Accordingly, the estimation of the hypothetical equilibrium exchange rate relies on the theory advocated by Edwards (1994). This theory postulates that the real exchange rate is a function of several fundamental variables which includes the Balassa-Samuelson effect, trade openness, net foreign assets and government spending. Details are provided in Sidek and Yusoff (2009). METHODOLOGY AND DATA The question of when does misalignment begin to significantly affect capital inflows necessitate the existence of a non-linear relationship between these two variables. Thus, if such non-linear relationship exists, then it is possible to estimate an inflexion point, or a threshold value, at which the sign of misalignment may change or become significant. In the non-linear time series modelling, the threshold autoregressive model (TAR) is more popular since it offers a relatively simple specification, estimation and interpretation compared to other non-linear models. The origins of TAR models roots back to Tong (1980) where the main idea is to approximate a general non-linear autoregressive structure by a threshold autoregession with a small number of regimes. Hansen (1996, 2000) derives the asymptotic distribution of the ordinary least squares (OLS) estimates of the endogeneous threshold parameters which is used in this study. This section explains how equation (2) is estimated to incorporate threshold effect. According to Hansen (2000), threshold estimation is the act of splitting the sample into two regimes when the threshold value is unknown. One necessary precondition is that the threshold variable must be a continuous variable. In this study, the threshold estimation is carried out by splitting the sample into high misalignment and low misalignment regime. Since misalignment is a continuous variable, TAR model would be appropriate to engender the threshold value. Formally, the two-regime threshold regression model takes the form: where is the threshold variable which is used to split the sample into two regimes, is the threshold value which is unknown and must be estimated, denotes the dependent variable (capital inflow), represents a vector of explanatory variables and is the error term assumed to be white noise and i.i.d. Note that if the threshold value is greater than the threshold variable, equation (3) is estimated and vice versa. This allows the regression parameters to change with respect to . In order to write equations (3) and (4) in a single equation, a dummy variable is used which is defined as where {.} is the indicator function, with d=1 when and d = 0, if otherwise; and set , such that (3) and where and . Equation (5) allows all the regression parameters , and to be estimated and switch between the two regimes. The least square (LS) technique is used to estimate through minimization of the sum of squared errors function. To implement this, the model is expressed in matrix notation, hence, equat ion (5) is expressed as: (6) Define, (7) as the sum of squared error function. By definition the least squares estimators which is also the MLE when with i.i.d. , jointly minimize equation (7). This minimization process requires to be restricted to a bounded set . The concentrated sum of squared errors function is written as: (8) where is the value that minimizes . As takes values that is less than n, is uniquely described as: with (9) Focusing on the objective of this section, the first step is to examine whether there exist a threshold effect in the model. This requires the examination between the linear model vis-Ã  -vis the two-regime model, equation (5). The null hypothesis of no threshold effect is tested against an alternative hypothesis where threshold effect is present. Since TAR models have a non-standard distribution, Hansen (1997, 2000) develops a standard heteroscedasticity-consistent Langrange Multiplier (LM) bootstrap method to calculate the asymptotic critical value and the p-value. The second step is to examine whether the derived threshold value is statistically significant. This is done by differencing the confidence interval region based on the likelihood ratio statistic . Based on Hansen (2000), let C represent the desired asymptotic confidence interval (in this study at 95%) and be the C-level critical value and set . Assuming homoscedasticity, as , therefore, is the asymptotic C-level confidence region for . If the homoscedasticity condition is not fulfilled, then a scale likelihood ratio statistics of the residual sum of squared errors is defined as: (10)and the adjusted confidence region becomes such that is robust whether or not the heteroscedasticity condition holds. Simulation is set at 1000 replications as suggested by Hansen (2000). Also, is not normally distributed hence, the valid asymptotic confidence intervals of the estimated threshold values in the no-rejection areas defined as , where is a given asymptotic level; and the no- rejection region of the confidence interval is . If , than the null hypothesis of cannot be rejected. In addition, to examine the possibility of a second threshold value, the same exercise is repeated. Specifically, the empirical model to be tested which is based on equation (2) is defined as follows: (11) where K is capital inflows, Mis, R and M3 denote exchange rate misalignment, interest differentials and financial deepening, and Z represents the other control variables. Table 1 summarizes the description of data, measurement and sources used in this study. Table 1: Determinants of Capital Inflows (1991Q1-2008Q3) Variable Description Measurement Source I Foreign investment Total foreign investment inflow as a percentage of GDP BNM M3 Money supply M2 as a percentage of GDP IFS D Government deficit The difference between revenue and expenditure as a percentage of GDP BNM R Interest differential The difference between Malaysia and US 3-month T-Bill rates IFS T Taxation Government corporate tax revenue as a percentage of GDP BNM LL Liquid Liability Log International liquidity: banking institution liability, line. 7b.d IFS INFRA Infrastructure Log of spending on infrastructure as a percentage of GDP BNM IFS: International Financial Statistics, IMF, UNCTAD: United Nations Conference on Trade and Development, BNM: Bank Negara Malaysia Monthly Statistical BulletinDOS: Department of Statistics, Malaysia (various issues). RESULTS AND DISCUSSION Prior to time series analysis, we test for unit roots in order to avoid spurious regression. Three versions of unit root testing, namely the ADF, PP and KPSS tests are employed to examine whether the variables are stationary on level or otherwise. Table 3 indicates that the order of integration are mixed for a majority of variables. However, this study proceeds to examine the threshold effect by including lagged variables for I(1) variables in the OLS estimation. Moreover, equation (2) derived from the theory requires estimations at level. Table 2: Unit root test ADF PP KPSS Order of Integration Level 1st Diff Level 1st Diff Level 1st Diff I -3.7029* -7.9812* -3.5286* 14.00208 0.9008* 0.2305 I(0)/I(1) M3 -1.2741 -10.0951* -1.3334 -10.4699* 1.0229* 0.3588*** I(1) D -1.6297 -19.7087* -8.8219* -27.3774* 0.3649* 0.0894 I(0)/I(1) R -4.5405* -3.8179** -2.6509 -7.0649* 0.0711 0.0471 I(0)/I(1) INFRA -2.2527 -4.5270* -3.5053* -27.7776* 0.2234* 0.0813 I(0)/I(1) LL -3.0805 -6.5500* -2.4386 -6.7355* 0.1073 0.0607 I(0)/I(1) MIS -3.8075** -9.7442* -3.8076** -9.8483* 0.0662 0.0577 I(0) Note: *, ** and *** denote significance at 1%, 5% and 10% significant level. p-values are in parentheses. For ADF and PP test the null is no unit root (H0: Variable is stationary) whilst the null for the KPSS is the existence of unit root (H0: Variable is not stationary). The baseline regression constitutes the exchange rate misalignment, interest differential and a measure of financial development, M3. We present four additional models with different variables added to the baseline regression, namely liquid liability, government budget deficit, and infrastructure for sensitivity analysis. Hansen (2000) theoretical construct allows for two threshold effects, hence, the first step is to investigate the possible existence of such an effect. Prior to that, a threshold variable needs to be selected. Since the aim of this section is to examine at what percentage exchange rate misalignment actually hurts capital inflows, the appropriate threshold variable is the exchange rate misalignment. Upon choosing the appropriate threshold variable, the next step is to observe any evidence of a threshold effect and whether there exist one or more threshold by employing the heteroscedasticity-consistent Lagrange-multiplier (LM) test for a threshold based on Hansen (1996). To test under the null hypothesis of no threshold effect, p-values are calculated using a bootstrap analog which generates the dependent variable from the distribution , where is the OLS residuals from the estimated threshold model. With 1000 bootstrap replications, the p-values for the baseline threshold models (Table 3) using misalignment strongly suggest the existence of threshold effect at 0.000. Subsequently, this suggests that there is a sample split based on the effect of exchange rate misalignment. Table 3: Threshold Effects for the baseline model Model 1 First Sample Split F-Stats 51.4045 Bootstrap P-Value 0.000 Threshold Estimates -15.0260% 95% Confidence Interval -15.446% , -9.8360% Second Sample Split F-Stats 16.2171 Bootstrap P-Value 0.2890 Note: H0: No threshold effect. The threshold is based on the minimized sum of squared residuals. This illustrates the graph of the normalized likelihood ratio sequence as a function of the threshold in exchange rate misalignment. The estimated is the value which minimizes these graphs which range at =15.02-15.44%. The dotted lines on the graphs present the 95% critical values. For example, in model 1, the asymptotic 95% confidence interval set where crosses the dotted lines. The results suggest that there is ample evidence for a two-regime specification. Also, it is worth noting that 41 of the 71 observations fall into the 95% confidence interval, hence, requires an examination of the possible existence of a second sample split. Results in Table 3, show that second sample split renders insignificant bootstrap p-value thus, indicating no further regime split. Table 4 presents the results for baseline regression. For comparison purposes, this study provides the linear OLS model without the threshold effect and a two-regime model which accommodates the threshold effect. Basically, the variables confer the correct signs in line with the prediction of the theory. Misalignment has a negative and significant effect on capital inflows in regime 2. Interest differential is expected to confer a negative effect. Results indicate that interest differentials only affects capital inflows negatively in the regime 1 but is insignificant in the regime 2. Similarly, M3 has significant effect in both regime but is positive in the regime 1 but the sign switches in regime 2. Hence, splitting the sample gives a more indepth view of the effects of these basic variables on investment inflows. To reiterate, sample splitting allows the examination of whether the significant effect is present in both regimes or otherwise. The results show that below the threshold value of 15%, exchange rate misalignment may be negative but are not statistically significant. However, above the 15% threshold level, misalignment exerts both negative and significant impact on capital inflows. A 1% increase in misalignment (overvaluation) suppresses capital inflows by approximately 1.19%. The negative effect of exchange rate misalignment on capital inflows is consistent with the findings of Hasnat (1999). Barrel and Pain (1996) argue that an apparent currency misalignment persistent over some length of time may affect investment inflows decisions. A reasonable explanation is that the relative production costs may be higher as a result of such misalignment. If the ringgit is thought to be overvalued relative to its estimated equilibrium level, then foreign production may be discouraged by the prospect of future capital loss in home currency terms. Another issue which emerges after the 1997 financial crisis is that capital inflows must be managed since reversals are likely to cause severe damage to the economy. Reinhart and Reinhart (1998) calls for greater exchange rate flexibility which is meant to introduce two-way risks, therefore, discouraging speculative capital inflows. It is, however, only possible in the context of de facto peg or a tightly managed float. Furthermore, the effectiveness of this policy depends on how much policymakers are willing to allow the exchange rate to fluctuate. A large band denotes greater flexibility but risks having large nominal appreciation which connotes possible overvaluation of the currency. The result of this study suggests that overvaluation is detrimental to capital inflows if this band exceeds 15%. Hence, policymakers should keep exchange rate fluctuations well below this 15% threshold. Table 4: Baseline regression results on the effect of misalignment on capital inflows (1991:Q1-2008:Q3). Dependent variable is capital inflows. Model 1 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0259% Regime 2 > 15.0259% Misalignment -0.4267** (0.2115) -0.3186 (0.2573) -1.1955** (0.5712) Interest Differential -0.0250*** (0.0131) -0.0438* (0.01533) -0.0261 (0.0193) M3 0.2964* (0.0391) 0.2644* (0.0516) -0.5560* (0.1240) Constant 3.0468* (0.2779) 2.5394* (0.2593) 6.7313* (0.6099) No. of Observations 71 42 29 R2 0.3664 0.6484 0.4218 Notes: *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses. Interest rate differential are consistently negative and significant in all specifications and in both regimes in majority of the threshold model. This stresses the role of interest rates in attracting capital inflows into Malaysia. Although the impact may be small, it is significant and the authorities should ensure that interest rates are kept at certain levels to maintain competitiveness of Malaysia as destination for capital investment. In this paper, the estimated impact of a 1% change in interest differential is expected to subdue foreign investment by 0.04 percentage point in the first regime and 0.03 percentage point in the second regime. The proxy for financial deepening, M3 is statistically significant in all models and in both regimes. Again, this signifies the importance of financial development in attracting capital investment into Malaysia. Interestingly, M3 is positive during the periods of low misalignment regime (regime 1) but becomes negative at higher misalignment regime (regime 2). During low misalignment, a 1% increase in M3 is expected to draw in 0.3 percentage point more investment inflow into Malaysia. This shows that in the lower regime, financial depth acts as an impetus to capital inflows. However, the situation reverse with 0.6 percentage point lower investment inflows is expected with a 1% increase in misalignment in the second threshold regime. Montiel (1999) explicitly explains this phenomenon where capital inflows increase reserves which then prompt an increase in the monetary base, M2 and M3. Such increases fuels further increments in domestic demand leading to real appreciation. Thus, any overvaluation of the currency may eventually have negative ramifications on capital inflows. Sensitivity analysis To check for the sensitivity of the estimated threshold value, Table 6 -7 and Figure 3 represents four other models which use different variables in addition to the baseline regression. The addition of taxes yields insignificant results without drastically changing the threshold value. Other additional variables such as government budget deficit and liquid liability are only significant in one of the two regimes . With the inclusion of additional variables, the estimated magnitude of each regressors differ slightly but maintains the same sign and significance level. For example a 1% increase in misalignment (overvaluation) suppresses capital inflows by 1.11-1.55 percentage point. The estimated impact of a 1% change in interest differential is expected to deter foreign investment by 0.04-0.05 percentage point in the first regime and 0.02-0.06 percentage point in the second regime. Similarly, during low misalignment, a 1% increase in M3 is expected to draw in 0.2-0.3 percentage point m ore investment inflow into Malaysia. An estimated 0.49-0.67 percentage point lower investment inflows is expected with a 1% increase in M3 in the second threshold regime. In view of the results, it seems evident that the exchange rate policy has important effect in attracting foreign capital inflows into Malaysia. Specifically, misalignment in terms of overvaluation should be kept lower than 15 percent to ensure that capital inflows remained unhurt. Table 5: Sensitivity Analysis: Threshold Effects Model 2 Model 3 Model 4 Model 5 First Sample Split F-Stats 71.1442 45.9364 53.3722 53.3722 Bootstrap P-Value 0.000 0.000 0.000 0.000 Threshold Estimates -15.4461% -15.0260% -15.0260% -15.0260% 95% Confidence Interval -15.446%, -15.025% -15.446%, -9.836% -15.446%, -0.0984% -15.446%, -0.0984% Second Sample Split F-Stats 16.4917 19.7585 22.9710 22.9710 Bootstrap P-Value 0.5310 0.3800 0.2420 0.2420 Note: H0: No threshold effect. The threshold is based on the minimized sum of squared residuals Table 6: Sensitivity Analysis for threshold estimates (1991:Q1-2008:Q3). Model 2 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.4461% Regime 2 > 15.4461% Misalignment -0.4278*** (0.2216) -0.3497 (0.4143) -1.5593* (0.3135) Interest Differential -0.0250*** (0.0134) -0.0462* (0.0153) -0.0599* (0.0131) M3 0.2966* (0.0414) 0.2732* (0.0488) -0.5609* (0.0744) Liquid Liability -0.0029 (0.1709) -0.0634 (0.1932) 1.1843* (0.2615) Constant 2.9780* (0.2713) 2.5259* (0.2593) 6.1799* (0.3135) No. of Observations 71 41 30 R2 0.3842 0.6503 0.5986 Model 3 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.4472** (0.2038) -0.3800 (0.2460) -1.1171*** (0.6229) Interest Differential -0.0254* (0.0126) -0.0505* (0.0140) -0.0237 (0.0221) M3 0.2844* (7.4922) 0.2521* (0.0472) -0.5391* (0.1477) Deficit -0.7655* (0.3059) -0.7380* (0.3099) -0.1841 (0.7174) Constant 3.0308* (0.2674) 2.5835* (0.2445) 6.6452* (0.7337) No. of Observations 71 42 29 R2 0.4285 0.6829 0.4230 Model 4 Linear Model Threshold Model OL S without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.2852 (0.2181) -0.2582 (0.2720) 1.2490** (0.5612) Interest Differential -0.0275** (0.0128) -0.0419* (0.0165) -0.0311 (0.0204) M3 0.3208* (0.0401) 0.2796* (0.0583) -0.5489* (0.1245) Tax 2.1899** (1.0761) 0.1283 (0.1457) 0.1260 (0.1720) Constant 3.0274* (0.4383) 2.2463* (0.4806) 6.5027* (0.7227) No. of Observations 71 42 29 R2 0.3665 0.6516 0.4300 Model 5 Linear Model Threshold Model OLS without threshold Regime 1 Â £ 15.0260% Regime 2 > 15.0260% Misalignment -0.3780*** (0.1977) -0.4495*** (0.2602) -1.3190** (0.6059) Interest Differential -0.0203 (0.0123) -0.0433* (0.0152) -0.0308 (0.0212) M3 0.2941* (0.0365) 0.2388* (0.0479) -0.6093* (0.1406) Infrastructure 3.0729* (3.3373) 0.0474** (0.0228) -0.0382 (0.0392) Constant 3.0709* (0.2569) 2.5698* (0.2346) 7.0433* (0.7173) No. of Observations 71 42 29 R2 0.4091 0.6815 0.4384 Notes: *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses. CONCLUSION The objective of this chapter is to examine the impact of exchange rate misalignment on capital inflows. Results provide evidences of the negative impact of misalignment on capital inflows. To reiterate, overvaluation of the ringgit signals that Malaysia is less competitive vis-Ã  -vis other countries. In addition, this paper also estimates a specific threshold value; that is the degree of misalignment after which it begins to hurt capital inflows. By employing a recent technique by Hansen (1996, 2000), this study splits the sample into high misalignment and low misalignment regimes. This study shows that misalignments hurt capital inflows in the high misalignment regime or when misalignment is greater than 15 percent. This study also confirms the work of Goh (2005) who suggests that the portfolio balance model can capture the determinants of capital inflows in Malaysia. In particular, the results suggest that interest differential is an important determinant albeit, small, hence, p olicies should be direc