tab fall 2014

2.7521

Inside This Issue

Message from the Dean of School of Business 2

Best Student Paper Award 2

Counterfeiting: An International Crisis, Joseph Dauber 3

Celebrity Endorsements, Josh Friedman 14

The Impact of Culture on Advertising, Adina Linn 19

The Result of Cause-Related Marketing on Consumers’

Attitude & Brand Loyalty, Elisheva Florence 24

Sweet Manipulation, Danielle Reifer 30

Mahna Mahna, Shevi Gartner 33

The History of the United States Monetary System, Rachel Morris 36

Investment Principles, Eric Lehmann 44

Equity Portfolio for the 21st Century, Rafi Mahilnitski 56

Sports Apparel Licensing, Simcha Himmel & Abraham Weiser 64

Revenge of the Machines, Dena Brookler 77

Adherence to Ethical Behaviors, Faygie Rakower 80

The Importance of a Creative Work Environment, Joseph Gomez 85

Is There an Optimal Time to Sell Equity?, Professor Eliezer Goldberg 91

Submission Requirements 99

Lander College of Arts and Sciences, Division of Touro College

TAB JOURNAL

ARTICLES

Spring 2012

Touro Accounting and Business Journal

WELCOME

Journal

Lander College of Arts and Sciences, Division of Touro College

TAB JOURNAL Spring 2014


TAB Journal

Message from the

Dean of School of Business

Dr. Barry Bressler

I am very pleased that we have exceeded our

expectations and have received many more

outstanding papers qualifying for the inclusion of

the TAB journal than ever before. Not only have we

increased the quantity of refereed publishable

papers, but also we have expanded the purview

and range of topics. On behalf of Dr. Michael

Szenberg and myself, I want to commend the

students for their superlative work, the faculty,

(specifically Professor Tendler of LCW and

Professors Teich, Rovt, & Bigel) for their

encouragement of students and to our student

editorial staff consisting of Sol Lerner, Shimon

Krieger, & Lilian Hamadani for decoting their time

to assisting in the editorial process. Above all, we

thank our lead editor, Dr. Julita Haber, who

painstakingly read ever word of every paper and

was the final arbiter. Finally, there are no words to

adequately thank Esther Widroff for coordinating

every single detail of the editing process as well

general and specific overseeing of all aspects of

the journal.

Active participation in a student journal is a

reflection of a dedication to learning, academic

development, and striving for recognition and a

successful career. The manuscripts in this TAB

Journal contain theoretical analysis with real world

application covering major Business disciplines:

marketing, finance, economics, management and

strategy. Students demonstrate that they are able

to conduct inquiry research and extrapolate

principles of Business from the course material

into well-structured analysis of Business and its

ramifications.

Best Student Paper

Counterfeiting: An International Crisis

by Joseph Dauber

This edition of TAB is awarding $100 American

Express Gift Card to the Best Student Paper. The

TAB Editorial Board has evaluated all submissions

according to the content depth, analysis, research,

practical implication, paper organization,

structure, format, style, and grammatical rigor.

Based on the overall ratings, the board decided to

award Joseph Dauber for the manuscript titled

“Counterfeiting: An International Crisis” under the

direction of Professor Teich.

We hope to nominate many more worthwhile

manuscripts in the upcoming editions of TAB. All

Touro College students are encouraged to follow

this student’s footsteps by writing and conducting

research to produce high quality papers for future

submissions by their faculty. Congratulations

again to Joseph!

TAB Journal

Counterfeiting: An International Crisis

Joseph Dauber

The Agreement on Trade-related Aspects of

Intellectual Property Rights defines “counterfeit

trademark goods” as any goods, including

packaging, bearing a trademark without

authorization. This authorization is identical to

the trademark validly registered in respect of such

goods, or which cannot be distinguished in its

essential aspects from such a trademark, and

which thereby infringes upon the rights of the

owner of the trademark in question under the law

of the country of importation. Furthermore,

“pirated copyright goods” are defined as any

goods made without the consent of the right

holder or person duly authorized by the right

holder in the country of production and which are

made directly or indirectly without an infringement

of copyright under the law of the country of

importation (Wiedmann, Hennigs, & Klarmann,

2012).

As the technology and global infrastructure

improve, counterfeiting has become a rampant

problem. By the year 2015, analysts at the

International Chamber of Commerce (ICC)

estimate that the value of counterfeit goods will

reach more than 1.7 trillion dollars. Counterfeiting

is a very profitable business with low barriers to

entry; it requires minimal investment, and

consumer demand for counterfeit goods is high.

Apparel, shoes, and handbags account for an

estimated 29% of all counterfeit items (“Magnitude

of Counterfeiting”, 2009). Whether it is the latest

Gucci purse or Lacoste shirt, counterfeiters try to

capitalize on brand recognition.

This paper explores the topic of counterfeits in the

apparel, shoe, and handbag industries, focusing

on consumer decision process of purchasing

counterfeits and strategies companies can

implement to fight counterfeiting. In order to fully

understand the severity of the issue at hand, one

must fully understand the business of the

counterfeiting industry. As such, this paper

provides extensive background information on

this subject matter, current statistics, reasons why

consumers purchase counterfeit goods, why

consumers should not purchase counterfeit

goods, as well as other topics. When there is a

core understanding of the counterfeit business, it

will be easier to understand the need for retailers

to strategize against this pervasive issue.

This is an issue that has spread like wildfire with

the advent of technology and globalization. It is

important to educate people on this matter

because it is something that should be at the

forefront of company policy. Studies have

estimated, for example, that between 1994 and

2004, the worldwide market for counterfeit and

pirated goods increased by 1,100%. Astonishingly,

figures from 2004 also suggested that counterfeit

goods accounted for seven percent of global

trade. This number will continue to rise if nothing

is done to quell the problem (“Business Action to

Stop Counterfeiting”).

The apparel, shoe, and handbag industries are

interesting to study with regard to counterfeit

goods because of the unique aspects these

specific markets offer. First, knockoff brand

named clothing, shoes, and handbags give the

consumer the same self-expressive and symbolic

look as an authentic product. A study by Nia and

Zaichkowsky (2000) showed that all respondents

found luxury products fun and worth the amount

of money spent, whether they were original or

counterfeit. Despite feeling that luxury products

were_more_worthwhile, participants_were_unable_

Joseph is a student at Lander College for Men and is majoring marketing.

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to_distinguish_between the real and the

counterfeit product. Someone who purchases a

product strictly for its practical use, such as

medicine, however, may be able to tell the

difference more readily between authentic and

counterfeit goods. Furthermore, the counterfeit

apparel market is interesting to examine because

studies suggest that up to 73% of apparel-related

purchases are non-deceptive purchases, meaning

the consumer is knowingly purchasing a

counterfeit (Bian & Moutinho, 2011). Therefore, if

marketers can implement defensive strategies to

make counterfeits less desirable and offensive

strategies to keep current consumers brand loyal,

serious steps could be taken to mitigate the sale

of counterfeit goods.

Background

Counterfeiting is not a new phenomenon.

Economists claim that it is the second-oldest

“profession” in the world. There is evidence dating

back as early as 800-400 B.C.E. proving there was

counterfeit Greek pottery sold in the Roman black

markets. In France, there is also evidence from 27

B.C.E. of counterfeit wine stoppers being sold on

the black market. More recently, the British

counterfeited American currency during the

American Revolution. In the 21st century, various

products have been plagued by counterfeiters,

including cigarettes, candy, medicines,

automobiles, and clothing (Yi-Chieh, 2009).

Advancements in technology and global

communication, as well as globalization, have

made the development of counterfeit goods easier

and more efficient. Technology allows

counterfeiters to quickly imitate and manufacture

high quality knockoffs, even replicating a

product’s labeling and packaging. The Internet has

also allowed for more efficient communication

between suppliers and consumers. With more

widely available Internet access and the evolution

of more intricate trade networks, counterfeit

suppliers from overseas are quickly and

professionally able to connect to buyers and drop-

shippers. The Internet allows for illegal suppliers

to look professional and legitimate, as well as to

remain anonymous. Counterfeit apparel suppliers

can be found in a mere instant by doing a Google

search for “wholesale Lacoste polos” or “wholesale

Ralph Lauren dress shirts”. Thousands of

knockoffs can also be found on Chinese business

to business websites, such as www.alibaba.com.

Counterfeiters also give customers the ability to

purchase their goods on the local streets instead

of having to go into a store, although that option

is also available. As a case in point, walking

around 34th Street and Broadway in Midtown New

York, pedestrians will be bombarded by peddlers

seeking to lure in the customers with their

counterfeit products. Globally, counterfeit

products are also relatively easy to come by. One

can visit the famous Silk Street in Beijing, or the

Arab Shuk in the Old City of Jerusalem, or

Indonesia’s Harco Glodok, for example, and

effortlessly purchase all sorts of counterfeit

apparel.

There are three main methods of counterfeit

production used when producing apparel, each

having unique characteristics. The most common

technique used when producing designer label

knockoffs is the procurement of authentic items

by the counterfeiter, who then produces his own

version in his illegal factory or warehouse. Another

manner in which counterfeit apparel is produced is

by subversive employees of legitimate suppliers

who produce ‘over-runs’ or unauthorized goods

during nonoperational hours. Companies such as

Lacoste and Ralph Lauren will have contractual

agreements with overseas manufacturers they

trust to produce apparel exclusively for their

company. Dishonest plant managers will take

huge kickbacks, usually in the

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form of cash or drugs, and agree to run ‘night

shifts’, to produce “over-runs”. These are unique

counterfeits because the same company on the

same production line produces them, but due to a

breach in contractual agreement, law deems them

as counterfeits. The most uncommon

counterfeiting technique is whereby counterfeiters

produce plain clothing, without trying to replicate

an authentic version, and just add the designer’s

logos, tags, and labels. These are usually very easy

to recognize, as they are usually of inferior

quality.

When analyzing a country’s production of

counterfeit goods, precise data is often difficult to

obtain due to the covert nature of the business.

Extrapolation from a sample of websites, peddlers,

and stores is not an accurate measure of the

magnitude of the counterfeit industry. First, there

are thousands of web pages, peddlers, and stores,

and they are too numerous and varied to quantify.

Second, quantity available for purchase is usually

not publicly available information. In fact, it may

be in the sellers’ interest to underestimate

quantities available, both in order to drive up the

selling price and in order to protect themselves

from the scrutiny of policing authorities.

Furthermore, because counterfeiters are always

trying to work one step ahead of the authorities,

they will be selling the same merchandise through

many different mediums. Finally, in order to get

the best estimates on the number of counterfeit

goods, one must delve into the yearly customs

reports produced by each nation’s border police

and account for the number of confiscated

packages in their analysis. There are a lot of

confounding variables in making such calculations

and estimations. Official estimates of the number

of counterfeit goods produced vary significantly,

and it seems that the only thing various officials

really agree on is the escalating nature of the

counterfeit goods market. The 2012 European

Union (E.U.) Customs Enforcement of Intellectual

Property Rights Report claims 90,473 cases of

counterfeits were seized at the borders, with a

total estimated value of €896,891,786 (the

equivalent of approximately $1.2 billion dollars).

In 2012, U.S. officials claimed that the United

States Department of Homeland Security seized

counterfeit goods valued at over $1.25 billion, a

number comparable to that of the E.U. Sixty

percent of counterfeit goods seized by customs

agents in the E.U. and U.S. originated from China,

Thailand, Hong Kong or Malaysia.

U.S. customs agents have seized millions of

counterfeit apparel items. All types and all styles

of apparel have been counterfeited. Statistics from

last year show last that $25.3 million dollars of

shoes were seized. Most of the shoes confiscated

were Nike knock-offs. However, counterfeiters

also managed to counterfeit other highly popular

and exclusive national brands like Uggs, Christian

Louboutin, Air Jordan, and Jimmy Choo. $14.8

million dollars of counterfeits seized were

designer clothing. The retail value of those goods

was over $126.3 million. Seized goods included all

categories of clothing, with a preponderance of

national brands such as Guess, Ralph Lauren,

Lacoste, Burberry, Armani, and Hugo Boss.

Additionally, $8.4 million dollars of seized goods

were watches, with a retail value of over $112

million dollars. Watch brands included Rolex, Tag,

Breitling, as well as many others.

Damage from Counterfeiting

The fact that 73% of Americans purchase

counterfeit apparel with the knowledge that it is

counterfeit indicates that Americans feel that

purchasing counterfeit apparel is acceptable.

Interestingly, it is not only illegal to sell

counterfeit goods, but it is also illegal to purchase

counterfeit goods (Bian and Moutinho, 2011).

Governments have made buying and selling

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counterfeit apparel illegal in order to protect

legitimate retailers and patents and to protect the

unsuspecting consumer, as well. Furthermore,

counterfeiting can damage the economy and the

public welfare in general. Counterfeit rings have

been linked to all sorts of illegal activity including

terrorism, organized crime, and drug trafficking.

Counterfeiters also do not pay taxes on their

goods. They usually do not pay their employees

fair wages and often provide extremely harsh

working conditions.

Counterfeits may destroy brand value and firm

reputation, and can detract from the incentive to

innovate. Counterfeit sales reduce the ability of

companies to develop new products. Companies

may not be willing to invest as much in new styles

and ideas if potential profits are minimized

because counterfeiters are taking a portion of

them.

Counterfeiters can also affect the consumer more

personally. Purchasing knockoffs from

counterfeiters’ web sites may put the consumers

at risk for identity theft; when dealing with

unscrupulous people, who knows where they draw

the line? Counterfeiters may be more than happy

to use customers’ credit card information at their

disposal to commit other fraud. Furthermore,

counterfeit apparel may be made with dangerous

materials that are hazardous to one’s health. A

recent study published by the American Consumer

Institute (“Intellectual Property”, 2013), surveyed

1,000 U.S. adult citizens to assess consumer

opinions on the effects of counterfeit goods. One

of the findings of the study was that 89% of

respondents saw the sale of counterfeit and

pirated goods as negatively affecting American

jobs and 90% believed that the sale of counterfeit

goods is bad for the U.S. economy. Additionally,

91% of participants supported strong enforcement

of laws to protect against the sale of counterfeit

goods. The results demonstrate that consumers

really know the detrimental effects of purchasing

knockoffs. Nonetheless, a large number of

consumers, as mentioned above, continue to

purchase counterfeits goods. When there is an

understanding of why consumers continue to

purchase these goods despite their seeming ill-

will against them, it may help give marketers ideas

about how to fight counterfeiting (The American

Consumer, 2013).

Literature Review 1

Counterfeits and branded products (CBP): effects

of counterfeit ownership. Explored the impacts of

counterfeit branded products (BP) on branded

goods, and explored the determinants of CBP

purchase intentions of both CBP owners and non-

owners. Bian and Moutinho (2011) ran a study to

try to answer three simple questions. They wanted

to know if consumers favored BP over CBP, if the

ownership of CBP would alter their perceptions of

CBP or BP, and if current CBP ownership interacts

with perceptions of CBP in determining CBP

purchase intention. This article investigates non-

deceptive purchase, where a buyer knowingly

purchases the counterfeits. Bian and Moutinho

explained the uniqueness of luxury apparel

counterfeits, whereby the product attributes tend

to serve less of a utilitarian function and more of a

symbolic or “self-expression” function, and thus a

counterfeit good may accomplish the same task as

the authentic good. The authors pointed out that

consumers realize that an authentic product is

usually of better quality, and comes with excellent

service, which allows the manufacturer to demand

a higher price in the market. To help understand

consumer behavior, they attempted to limit the

purchase of counterfeit goods to consumers who

shared certain demographic characteristics. The

article concluded based on previous research from

Bloch (Bloch, Bush, & Campbell, 1993), that age

and household income were not significant criteria

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for consumers who chose to purchase counterfeits

instead of authentic items. Nia and Zaichowsky

(2000) found that respondents believed the value,

satisfaction, and status of the original brand

names were not diminished by counterfeit goods.

Bian and Moutinho (2011) choose the U.K. because

it is a major recipient of counterfeit goods in the

market. They interviewed one in every ten

consumers 18 years or older who walked into a

pre-approved supermarket. Research was done

over a period of 14 days, including both weekdays

and weekends. Just in case consumers had not

previously purchased counterfeit goods, the

authors showed them an authentic Rolex as well

as a counterfeit Rolex and asked them to fill out a

survey, taking into consideration the watches in

front of them.

Results from the 430 consumers that were

surveyed revealed people found significant

differences on all traits except for brand

personality. In other words, people did not care

whether the Rolex was authentic or not! The

results indicated consumers were aware of the

superiorities of BP over counterfeits in many

aspects of the product itself, as well as the brand.

Results further showed consumers who had

purchased counterfeits did not have a less

favorable impression of the counterfeit brand

name product, especially the brand image. It is

important to note that the results showed

counterfeit product owners had more favorable

impressions of counterfeits in all categories across

the board than non-owners. Specifically, the

results revealed that compared with non-owners,

counterfeit owners were more likely to consider

that CBP provide good choice of size, good style,

good value, can bring image benefit, and are fun.

Results indicated that counterfeit owners’ and

non-owners’ perceptions of authentic

merchandise do not differ significantly. In

conclusion, from a perception perspective,

counterfeits might not devalue the brand equity of

authentic products.

Analysis

Insight into how consumers think about

counterfeits can help marketers understand

consumer buying behavior, and perhaps this

information can be used to help deter

counterfeiting. Marketers should note from this

study that consumers perceived a higher level of

social risk in relation to CBP over BP. Another

noteworthy result is that, in addition to social and

financial risks related to the purchase of CBP and

BP, consumers also perceived a security concern

when purchasing a counterfeit. In terms of a

purchase intention, the critical dependent

construct of consumer behavior, the findings

clearly indicate that consumer purchase intention

of CBP can be predicted through the effects of the

perceived competence personality, perceived

satisfaction benefit, perceived social risk, and

perceived functional attribute. Therefore,

marketers must create a strategy incorporating

these facts to convince consumers to purchase

authentic items.

The research findings of this study, although not

conclusive, represent a step toward resolving the

ongoing debate as to whether the presence of CBP

damages BP brand equity. The majority of genuine

luxury brand owners believe that brand equity will

be adversely affected by the CBP, because it will

decrease the value of the BP, the satisfaction

derived from it, and the status of the genuine

luxury brands. This article suggests CBP users

evaluate BP as positively as CBP non-users;

however, CBP users evaluate CBP more positively

than CBP non-users. Although there is room for

conflicting interpretations, this study seems to

indicate that there may not be an immediate loss

of sales of BP. This research suggests that

marketers should consider how the brand

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meaning they construct through promotional

activities influences CBP consumption. The

research findings indicate that consumers’ CBP

purchase intention is predominantly determined

by perceived CBP brand personality. Thus, the

prevalence of advertisements linking luxury

brands to an aspirational personality may actually

encourage purchase behavior of CBP. To inhibit

the demand for CBP, marketers need to adopt

image-based advertisements that not only

communicate a positive brand meaning of BP but,

equally importantly, project negative brand

personalities of CBP.

Limitations

A limitation of this article is that results are not

applicable to other luxury apparel. After all, this

research only investigated one brand of one

product category in the context of non-deceptive

counterfeiting. It is possible the counterfeit Rolex

they showed participants was an unusually good

replica, which may have given them more

favorable outlook toward counterfeit goods. Other

counterfeit products, such as polo shirts or jeans

may not look as legitimate, which may cause

consumers to have less favorable outlook toward

them. In addition, consumers perceive brands

differently, even within the same product

category; therefore, results might not have been

the same if another watch brand, such as Tag or

Breitiling, had been tested.

Further Research

Future research could involve analyzing the extent

to which price plays a role in the consumers’

decision to purchase counterfeit items. The article

dismissed the likelihood that a price is the main

contributing factor in a consumers’ decision and

cited numerous other factors, such as novelty

seeking, risk taking, self-image, and product

importance. Price is likely the biggest factor

influencing the purchasing of CBP. Future research

could address different grades of CBP and more

visible and heavily counterfeited products

consisting of clothing, handbags or sunglasses.

The present study could be expanded by including

brands from different product categories.

Literature Review 2

Sahin and Atilgan (2011) explain why consumers

prefer to purchase counterfeits. The price-quality

perception of consumers toward counterfeit

products, social effect and brand loyalty for

luxury-branded products, thoughts about ethical

issues for purchasing counterfeit branded

products, and purchase intentions for the

counterfeit versions of luxury brands, are all

variables investigated in this study. There are four

hypotheses developed. Hypothesis one states

there is a positive relationship between

consumers’ perception of counterfeit brands as

having high quality-price ratio and their purchase

intentions toward counterfeits of luxury brands.

The second hypothesis states there is a positive

relationship between consumers’ inclination to use

luxury brands as a social affecting tool and their

purchase intentions toward counterfeits of luxury

brands. Hypothesis three states there is a positive

relationship between brand loyalties of consumers

towards luxury brands and their purchase

intentions toward counterfeits of luxury brands.

Lastly, hypothesis four states there is a positive

relationship between the perception of consumers

about purchasing counterfeit products as ethical

and their purchase intentions toward counterfeits

of luxury brands.

Sahin and Atilgan’s survey consisted of 26

questions. The first two questions determined

approximately how many counterfeit branded

products the respondents purchased during the

previous year, and categorized their previous

purchases. Twenty questions focused on

measuring quality-price perceptions, social

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impacts, brand loyalty, ethics, and purchase

intentions for counterfeits of luxury-branded

products (see case study for exact questions).

There were four questions to determine the

respondents’ demographics, such as age,

educational background, income, and gender. Out

of the 404 subjects surveyed, 47.3% were female

and 52.7% were male. 66.6 % of respondents

surveyed were between the ages of 21 and 40.

Results showed a strong positive correlation

between consumers who see the action of

purchasing counterfeit products as ethical, and

their purchase intentions towards counterfeit

products. Respondents, who found purchasing

counterfeits to be ethical, were more likely to have

positive purchasing intentions. Lower price of the

counterfeit item justified the act of choosing it

over the authentic article, thereby eliminating any

ethical dilemma for the consumer and positively

affecting the purchase intention of consumers

towards these products (r=0.536, p<0.001). Also,

the study showed there was a weak positive

relationship between social effect of using luxury

branded products and purchase intention towards

counterfeits of luxury brands (r=0.160, p=0.001).

Also, consumers in the age group of 21 through

30 (mean=2.7826, SD=1.1082) and consumers in

the age group of 41 through 50 (mean=3.4256,

SD=1.3863) showed significant differences in

regard to brand loyalty (p=0.004). The study

showed brand loyalty for older consumers in the

age group of 41 to 50 are higher than the brand

loyalty of consumers at the age of 20 or younger.

The age and ethical factors can be very crucial

when creating a defensive strategy marketing

campaign to convince consumers not to purchase

counterfeits.

What emerges from this study is that when

consumers view counterfeit luxury branded

apparel as having a high quality to price ratio, and

they find it ethically acceptable to purchase such

products; their intentions of purchasing such

products are positively affected. Respondents

show the tendency to purchase these products

since they think that the quality of these

counterfeits is just as reliable, and the properties

are similar to those of the genuine products. Also,

consumers think that if quality-price inference of

counterfeits is high, they do not perceive the

action of purchasing such products as unethical.

Consumers with high education levels believe that

brand is not necessarily a good indicator of quality

and consumers with lower education levels do not

generally share this perception. This suggests

that those with higher education are more likely to

think counterfeits are unethical.

Analysis

This study pointed out that 47.8% of respondents

purchase five or more luxury branded counterfeit

items a year, and 24.8% purchase between six and

ten counterfeits of luxury branded products.

Maybe past experience with counterfeit luxury

brands should be taken into consideration.

Perhaps the reason respondents found it ethical to

purchase counterfeits and viewed the quality of

the counterfeits as on par with the authentic

product is because of the role of their past

experiences with counterfeits. The study states

only 27% of respondents have never purchased a

counterfeit. Therefore, it must be factored into the

results that these respondents were accustomed

to purchasing counterfeits, something that is not

taken into consideration in other case studies.

Limitations

In this research, the factors affecting the intention

of the consumers to purchase counterfeits of

luxury brands are limited to consumers living in

the central districts of Mersin, Turkey. Turkey is

monitored by the United States of America Trade

Representative due to the high number of

counterfeit activity that occurs there. Perhaps the

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study was conducted there because of the

availability of subjects familiar with counterfeit

merchandise. However, in a more ethical or

better-educated society results would vary.

Compare and Contrast

This journal article was informative, because Sahin

and Atilgan (2011) asked respondents with what

frequency they previously purchased non-

deceptive counterfeit goods. This study also

stated there were certain demographic factors that

help us determine counterfeit purchases. This

needs to be taken into consideration when

devising a strategic marketing plan against

counterfeiters. Lastly, this study was unique

because respondents were surveyed on the streets

close to where counterfeited products were

frequency being sold, and not just upon entrance

to a shopping center (e.g., setting of the first

study). Since surroundings affect people’s actions

and perceptions, respondents in Turkey may have

felt more justified when purchasing counterfeits

because they are so common.

Literature Review 3

A study by Zhang, Hong, and Zhang (2012)

investigated the impact of counterfeits on the

price, market share, and profitability of authentic

products. In this complex study, Zhang et al.

studied consumer decision processes and

attitudes toward purchasing both an authentic

luxury piece of apparel as well as a non-deceptive

piece of counterfeit apparel. The study also

examined a counterfeit’s effects on authentic

products. Zhang et al. did not focus their research

specifically on apparel; instead, they equated all

counterfeit goods within the study. The article

failed to mention the specific brand name of the

apparel used in surveying respondents; it just

mentioned the apparel was from a well-known

designer handbag company. There are different

tiers within designer handbag companies, and I

think that it would have been helpful to provide

that level of information. Zhang et al.

implemented the standard vertical differentiation

model, and unlike the two previous case studies,

they gave respondents their choice of purchasing

an authentic product, a counterfeit, or nothing at

all. They studied subjects’ behavior and came up

with many conclusions. Results showed that

counterfeit goods lower the price and profit

margin of each authentic product, in line with

one’s expectations. To help support this, the

authors collected data from Chinese markets to

find the equilibrium price of luxury handbags.

Furthermore, results indicated the impact of

counterfeits on the profit of brand name products

increases as the quality difference between the

authentic products and their counterfeits narrows.

Ironically, the study also showed counterfeits drive

more consumers to make purchases, and hence

the counterfeits may actually have a promotional

effect on and enhance the popularity of authentic

products. Zhang et al. (2012) also examined a

market with two competing brand name products

and a counterfeit. Results from that study

indicated a counterfeit of one brand name product

can even draw some consumers away from and

damage the profitability of a different brand name

product. Clearly, as Zhang et al. illustrated, there

is a complex benefit/damage relationship between

counterfeit and authentic products.

The study also suggested a strategy for luxury

brands to implement in order to protect

themselves from counterfeiting. It found that a

brand name company had more incentive to invest

in raising the quality level of its own product (an

offensive strategy) rather than reducing the image

and reputation of a counterfeit (direct fighting

strategy). Zhang et al. (2012) asserted it is more

productive for a company to proactively invest in

improving its own product’s quality, rather than

reducing that of the counterfeit’s perceived

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quality. They concluded that a company should

have taken on the counterfeit directly only if they

strongly believed that it was much more effective

to do so.

Analysis

One interesting result of this study is that the

authors showed that non-deceptive counterfeits

may enhance the popularity of the authentic

products and have a positive promotional effect

on the authentic product. Zhang et al. (2012)

suggested that only offensive strategies be

implemented and that it is a waste of company

resources and expenses to implement defensive

strategies to fight counterfeiters head on. I agree

with the researchers in regard to other counterfeit

products, but they incorrectly included the apparel

industry in their suggestion. I would argue that

the apparel industry is different from other

industries because of several unique aspects. First,

studies revealed that up to 73% of counterfeit

apparel is purchased by consumers who know that

the product is a knockoff, as mentioned earlier,

which is a number higher than that of other

industries. Furthermore, counterfeit apparel offers

consumers similar value of a luxury brand at a

much more attractive price. Therefore, apparel

companies must implement defensive strategies

to lessen the risk of having counterfeits damage

the business. This can only be done by directly

attacking counterfeits. Companies can ‘attack’ by

educating the customers as to why they should

not to purchase counterfeit apparel. Marketers

must produce marketing campaigns

demonstrating counterfeits are socially

unacceptable and of lower quality. The target

market should be limited to educated 21- 41 year

old men and women. Companies must also let

counterfeiters know they will be prosecuted to the

fullest extent of the law. Despite being

discouraged by exorbitant legal costs, companies

should understand fully prosecuting unscrupulous

individuals will discourage others from attempting

to counterfeit their products, and counterfeiters

will choose to go after other brands who take a

less aggressive approach.

Specific Organization

I chose Lacoste as the specific organization to

focus on. Lacoste has always been one of my

favorite luxury brand clothing lines. My

grandparents have generously been giving me

Lacoste polo shirts on my birthday every year

since I was four years old. I continue to sport the

polo on vacations and in more casual settings.

History

It was in 1927 that René Lacoste had made for

himself a batch of shirts which were more

comfortable to wear ‘in the heat of the American

courts’. These shirts were made of a mesh

material, which completely absorbed perspiration,

and caused a sensation in the courts. In 1933,

Andre Gillier, the owner of one of the biggest and

oldest hosiery factories in Troyes specializing in

mesh materials, entered the scene. The two men

joined forces to set up a company to manufacture

the crocodile logo-embroidered pique knit shirts.

They created ‘La Chemise Lacoste’ and the brand

name was registered in June 1933. Lacoste

continued to work on his inventions and designs

until shortly before he died in 1996 at the age of

92. He left a global empire that was presided over

by his son, Bernard Lacoste, who was the

president of the company from 1963 until his

death in 2006 (“History of Lacoste”, 2013).

Today, the Lacoste collection consists of more

than just polo shirts. Lacoste’s product line

includes sweaters, pants, dress shirts, eyewear,

footwear, and watches. A consumer can walk into

any high end retailer such as Macy’s or Nordstrom

and purchase Lacoste apparel. Lacoste also has its

own retail boutiques. Lacoste invests a great deal

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in brand building and in quality control. Currently,

Lacoste has many celebrities modeling its

clothing, including Ginnifer Goodwin, Paco

Delgado, Anne Hathaway, and Russel Crowe.

Lacoste claims to sell two Lacoste items per

second worldwide. In 2011, the Lacoste brand

achieved a wholesale turnover of 1.6 billion Euros.

The company has a worldwide presence in 115

countries including the U.S., France, Italy, Greater

China, and Japan. Lacoste currently sponsors

numerous world sporting events, including the

Australian Open, Dubai Tennis Championships,

Madrid Open, ATP World Tour Finals, French Open,

and more (“Lacoste Press Kit”, 2012).

Lacoste’s high brand recognition and exclusivity

make it a common target for counterfeiters.

Counterfeiters are easily able to stich a Lacoste

tag into the collar and an alligator onto the left

chest of a polo shirt. Lacoste polos retail for about

$72.00. Counterfeiters sell them wholesale for

about $8.00 each and retail on sites like eBay for

$20.00-$32.00. I would argue that one of the

most common counterfeit pieces of apparel

currently sold on eBay is the fake Lacoste polo.

Conclusion

When one carefully examines a counterfeit Lacoste

polo shirt, one may notice many slight variances

that distinguish it from an authentic one. The fine

details of a genuine Lacoste crocodile and the

material from which the buttons are made are

usually never found in counterfeit products. To

avoid purchasing a knockoff, one should purchase

merchandise through official retailers only. If one

purchases a ‘Lacoste’ from a street vendor or on

eBay, it is probably a counterfeit.

Lacoste invests millions of dollars annually to

combat counterfeiting. The company has full time

employees dedicated to defending its products

and trademark around the world. It works with

police and customs officials in a number of

countries to foil counterfeiters.

References

Bian, X.,& Moutinho, L., (2011). Counterfeits and branded products - Effects of counterfeit ownership. The

Journal of Product and Brand Management, 20(5), 379-393.

Bloch, P., Bush, R., & Campbell, L. (1993). Consumer ‘accomplices’ in product counterfeiting. Journal of

Consumer Marketing, 10(4), 27-36.

Business action to stop counterfeiting and piracy (BASCAP). (n.d.). International Chamber of Commerce.

Retrieved from http://iccwbo.org/advocacy-codes-and-rules/bascap/

History of Lacoste. (2013). Retrieved from http://www.devanlay.fr/public/hr/History.aspx

Intellectual property on the facts and consumer opinions on counterfeit and pirated goods. (2013). American

Consumer Institute. Retrieved from http://www.theamericanconsumer.org.

Lacoste press kit. (2012). Retrieved from

http://www.lacoste.com/library/contents/press/pdf/LACOSTE_presskit_en.pdf

Magnitude of counterfeiting and piracy of tangible products: An update. (2009, November). Organisation for

Economic Co-operation and Development. Retrieved from http://www.oecd.org/industry/ind/44088872.pdf

http://www.oecd.org/industry/ind/44088872.pdf

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Nia, A., & Zaichkowsky, J. L. (2000). Do counterfeits devalue the ownership of luxury brands? Journal of

Product & Brand Management, 9(7), 485–497.

Sahin, A., & Atilgan, K. O. (2011). Analyzing factors that drive consumers to purchase counterfeits of luxury

branded products. The Journal of American Academy of Business, 17(1), 283-292.

Wiedmann, K. Hennigs, N.; Klarmann, C. (2012). Luxury consumption in the trade-off between genuine and

counterfeit goods: What are the consumers' underlying motives and value-based drivers? Journal of Brand

Management, Special Issue: Luxury and Counterfeiting,19(7), 549.

Yi-Chieh, J. L. (2009). Knockoff: A cultural biography of transnational counterfeit goods. Retrieved 24 Nov.

2013 from http://udini.proquest.com/view/knockoff-a-cultural-biography-of-pqid:1851554141

Zhang, J., Hong, L. J., & Zhang, R. Q. (2012). Fighting strategies in a market with counterfeits. Annals of

Operations Research, 192(1), 49-66.

Additional Bibliography

Annual report on intellectual property enforcement. (2011). U.S. Intellectual Property Enforcement

Coordinator. Retrieved from

http://www.whitehouse.gov/sites/default/files/omb/IPEC/ipec_annual_report_mar2012.pdf

Counterfeiting: problems and solutions in report of the Committee on Economic Affairs and Development.

(2004, February). Council of Europe (CoE). Retrieved from

http://assembly.coe.int/documents/WorkingDocs/doc04/EDOC10069

Economic impact of counterfeiting in Europe, global anti-counterfeiting group. (2000). Center for Economic

and Business Research (CEBR). Retrieved from http://www.cebr.com

Global counterfeiting background document. (2003). APCO. Retrieved from:

http://counterfeiting.unicri.it/docs/Global%20counterfeiting%20background.pdf

Grossman, G., & Shapiro, C. (1988). Foreign counterfeiting of status goods. Journal of Economics, 103(1),

79-100.

Lowe P. (1999). The scope of the counterfeiting problem. International Criminal Police Review, Number 476-

477, 92-97.

Report on EU customs enforcement of intellectual property rights: Results at the EU border. (2012). European

Commission. Retrieved from

http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_controls/counterfeit_piracy

/statistics/2013_ipr_statistics_en.pdf

Wilcox, K., Kim, H.M. and Sen, S. (2009). Why do consumers buy counterfeit luxury brands? Journal of

Marketing Research, 46(2), 247-259.

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Celebrity Endorsements

Josh Friedman

Creating, communicating, delivering, and

exchanging goods or services that have value to

consumers is called marketing. Advertising is a

form of marketing communication in which it

persuades a certain market to take actions from

that advertisement. Celebrity endorsement is a

form of advertising campaign, which involves a

popular figure, using their name to promote a

product or service. The credibility of the

endorsements source, as well as the relevance of

the subject of the endorsement itself, affects the

consumer attitude towards celebrity

advertisements. The importance of doing research

in the field of celebrity endorsement is vital to its

projected success in the consumer market. The

goal for using a celebrity for advertisement is to

associate the targeted consumer market with the

product or service being promoted.

Background Statement

The concept of celebrity advertisement originally

dates back to the early 18th century. In a market

where advertising plays a vital role in the

consumer market, companies need to take all the

possible steps to persuade the consumers to make

a purchase through an effective advertisement

campaign. As marketers devise their advertising

plan and begin to make decisions, marketers need

to know whether or not to use celebrity endorsers.

Celebrity advertisement can be a very effective

way that companies communicate with the

consumer market, however it is also extremely

expensive. In addition, while celebrities can have a

positive impact on the targeted consumer market,

they can easily have a negative effect. Therefore,

when a company is faced with the task of selecting

a celebrity, they need to focus on the relevance

and credibility of that celebrity, as well as all the

factors that this celebrity may have on the market.

Celebrities are found to be effective when they

promote products or services that they are more

likely to use.

Literature Review

Advertisement has a subliminal and influential

effect on our everyday lives. Each day, consumers

are exposed to over 1,500 messages promoted

from companies and brands. These messages can

address the consumer market in a variety of ways.

Consumers are exposed via television, billboards,

radio, mobile phones, convenient stores, and open

environments (Grede, 2002). In today’s society,

most of the popular brands select a well-known

person, either from the film industry or from the

sports world, to endorse for their brands In a

group of students surveyed, 77% felt that celebrity

endorsement helps them to recognize the brand

quickly, and 53% felt that celebrities have the

ability to influence and change the consumer’s

perception and attitude (Vaghela, 2012).

Celebrities who are perceived to be highly credible

can alter consumer attitude and create behavioral

change. Credibility is dependent on three

elements. The first element is expertise, which is

the knowledge and skills the endorser has in a

specified area. The second element,

trustworthiness, is dependent on the reliability of

a product or service. The last element, likability, is

how attractive the source can be to the

consumers.

Creating an image that the consumers can easily

associate the celebrity with a product is a key

factor in achieving success. If there is no

correlation between the celebrity and the brand,

then the consumer is only remembering the

Josh is a student at Lander College studying business.

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celebrity and not the product or service. When this

transpires it defeats the purpose of using the

celebrity to create an image. Another risk for a

company is to have a multiple endorsement

strategy. Credibility is lost and consumer

confusion occurs when the celebrities are

endorsing multiple brands or products. In

addition, a celebrity endorsing a company does

not necessarily guarantee success. Companies

need to ensure that the celebrity they choose has

a positive image, is attractive, and has a high

credibility, because the behavior of celebrities

reflects back onto the company. Therefore,

companies attempt to ensure that the endorsers

do not have any behavioral or legal issues that

could cause the company a loss (Amos, Holmes, &

Strutton, 2008).

In today’s society, the most prevalent endorsers

are athletes, coaches, and other sports personnel

(Bush, 2004). In the last decade, companies have

paid roughly $17.2 billion to athletes, coaches and

teams to endorse their products or service. An

athlete’s current performance is the key for

companies or brands to determine what impact

celebrities have in advertising and on endorsed

brands. A study was conducted to examine the

influence athletic performance has on the

elements of source credibility and the impact of

consumers’ attitude toward the advertisements

and their purchase intentions (Koo, Ruihley, &

Dittmore, 2012). In the realm of sports,

performance and skills determine expertise. The

on-field performance of an athlete will alter the

consumers’ perception of the celebrity’s expertise,

which ultimately will lower the athlete’s source of

credibility. The better their performance, the more

publicity they will attract. The adverse relationship

is true; if the athlete performs at a low level, he

will reduce his publicity and source credibility; not

only the athletes’ credibility decreases, the

consumers’ attitude towards the associated brand

takes a direct fall (Till & Shimp, 1998).

Research by Till and Shimp (1998) suggests that a

match up between a non-famous or unknown

athlete and the brand is adequate enough to

provide positive responses. Further research

states that an unknown model, claimed to be an

athlete, might have a similar or greater effect than

an actual athlete when promoting sports related

products. Studies show that athletes who endorse

products will have a greater influence on the

consumer market if they are endorsing for sports

brands rather than for brands not associated with

sports.

Application and Analysis

Although source credibility has a critical effect on

celebrity advertisement, there are still other

factors that need to be discussed. A marketing

campaign that elects to go with celebrities as their

endorser must realize that they potentially can be

major competitors. When selecting a celebrity not

only does the company need to find someone one

with a high credibility, it needs to be aware of up-

and-coming celebrities and the competition. In

sports, major competitors select their endorser

and hope the endorser can influence the consumer

market. What distinguishes athletes from one

another is their performance level, which in result

changes the attitude and perception of the

consumers. Major competitors can look for

athletes who win and not ones with the highest

publicity.

Specific Organizations

Nike is one of the world’s largest suppliers of

athletic shoes and apparel. Bill Bowerman and Phil

Knight established the company in 1964. Bill and

Phil had a vision to revolutionize the footwear

industry. Bill Bowerman was a track and field head

coach at the University of Oregon. Bill Knight was

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a middle-distance runner from Portland, who

attended the University of Oregon. Bill, who is a

well-respected coach nation-wide, coached Phil

during his tenure in Oregon. Upon finishing

university, Phil composed a paper that proposed

an innovative design of a quality shoe that could

compete with German brands that would be

manufactured in Japan. With no response to his

paper, he contacted the manufactures of Tiger

shoes to make him a distributor in the United

States (Nike). Bill Bowerman then offered to

become Phil’s partner in result creating Blue

Ribbon Sports. Knight began to sell the shoes out

his trunk. Meanwhile, as Phil was selling shoes, Bill

was ripping apart the shoes trying to design a

faster, lighter, more efficient shoe. They had the

runners of the Oregon track and field team tests

the new and efficient shoe. While both Bill and Phil

had full time jobs, they needed to hire a manger

to run Blue Ribbon Sports. Jeff Johnson a

teammate of Phil’s, who was creative and artistic,

was hired. Without missing a beat, Johnson

immediately created product brochures, print ads

and marketing materials (Nike). Jeff opened up the

first Blue Ribbon Sports retailer store. After

parting ways with the manufacturers of Tiger, they

decided to design and manufacturer their own

brand of sports shoes. The brands name was

called Nike. In essence they created the design

“Swoosh” which emerged as Nike’s logo. Nike

ultimately became the nation’s leaders in the shoe

industry. What kept Nike above all its competitors

was their ability to attract young and talented

athletes to endorse for them. One of the earliest

endorsers for Nike was Michael Jordan with his

NBA rookie shoe.

Nike is well known for signing the hottest athletes

in the realm of sports (Nike). In 2001, Nike signed

rookie Quarterback Michael Vick of The Atlanta

Falcons for $2 million. Michael had a few great

seasons in Atlanta building up his credibility. In

the summer of 2007, Michael found himself

surrounded by off-the-field issues. Michael

admitted to his involvement in dogfighting. He

was convicted and imprisoned for 21 months.

Immediately after being convicted, Nike

suspended their contract with Michael and

ultimately stopped selling any merchandise related

to Vick (Duncan, 2007). Before his legal issues,

Michael was one of the best athletes on the field.

He had a great influence and impact on the

consumer market. Although he was a great

endorser, legal troubles caught up him and

eventually effected Nike. Despite his legal troubles

that kept him sidelined for two years, Michael

came back and had a pro bowl level season. Later

that year, Nike resigned him to another large

contract. Since returning to the NFL, Michael has

regain trust and likability across the nation. From

this specific incident, we really learn how off-the-

field issues can affect a brand or company in a

detrimental way. In addition, we see how his high

credibility played a role in influencing and

persuading the consumer market in his first

contract with Nike.

Synthesis

Electing to use celebrity endorsers may benefit a

company in various ways. Using a celebrity may

serve as an advantage to a company against their

competitors. Celebrities have the ability to

persuade and influence the consumers’ mind and

purchase intentions. Elite endorsers are more

likely to influence the consumers’ attitude and

mind as opposed to using ordinary athletes.

Choosing a celebrity who wins on a constant basis

also gives a company an advantage. When the

athlete wins, his/her victory gives over insurance

to the consumers that this athlete knows how to

win with high expertise. Companies tend to push

to use celebrities as endorsers because the

consumer market tends to emulate and admire

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their characteristics, traits and their everyday

lifestyle.

Suggestions for Future Research

Vast areas of celebrity endorsements have gone

unstudied. There are a few suggestions that I can

make that should be looked into in the field of

celebrity endorsements. A question could be

asked: what is the extent to which negative

performance has an effect on a player’s credibility

and effect on the brand or company. Studies that

were discussed only discerned the off-field issues

that have a negative impact on the consumers’

attitude and purchase intentions rather than bad

play.

A possible detriment for companies using athlete

endorsement is the lack interest in sports.

Consumers may begin to realize how these

athletes do not really care about their fans. As

fans, we need to realize that these athletes are

making millions of dollars from us watching them.

Not to disregard their credibility or their talent,

these athletes play for the money and we support

them. Publicity is what is keeping the consumer

market engaged with these celebrities. These

studies discussed sources of credibility and how

they positively and negatively affected the

endorser, brand or company. Further research may

want to look at other characteristics of athletes.

The experiments conducted were based on a

selected group of college students. In the future,

when studies are performed there should be a

broader selection of respondents.

Despite the cost, companies right now are

spending a substantial amount of money on

endorsers. In the near future companies will begin

to realize that it is not necessary to sign

celebrities to massive contracts. Companies will

search and eventually find a way not to spend

millions of dollars on celebrity endorsers and still

be very effective. Marketers need to help in finding

the most effective ways to influence consumers’

mind and purchase intentions. Money is not

always the answer. Marketers need to be creative

and design a marketing scheme that will be

efficient and effective.

References

Amos, C., Holmes, G., & Strutton, D. (2008). Exploring the relationship between celebrity endorser effects

and advertising effectiveness. International Journal of Advertising, 27(2), 209–234.

Bush, A. M. (2004). Sports celebrity influence on the behavioral intentions of generation. Journal of

Advertising Research, 44(1), 108-118.

Duncan, A. (2007). Companies distance themselves from Michael Vick. Retrieved from

http://advertising.about.com/od/celebrityendorsements/a/vickendorsement.htm

Grede, R. (2002, March 29). Rising above the advertising clutter. Small Business Times, Retrieved July 7,

2008 from htt://www.thegredecompany.com/docs/Rising%20Above%20Advertising%20Clutter.pdf

Koo, G. Y., Ruihley, B. J., & Dittmore, S. W. (2012). Impact of perceived on-field performance on sport

celebrity source credibility. Sport Marketing Quarterly, 21(3), 147-158.

Nike (n.d.). History & heritage. Retrieved June 6, 2014 from http://nikeinc.com/pages/history-heritage

Till, B., & Shimp, T. (1998). Endorsers in advertising: The case of negative celebrity information. Journal of

Advertising, 27(1), 67-82.

http://nikeinc.com/pages/history-heritage

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Vaghela, P. S. (2012). A study on consumer attitude perception about celebrity endorsement. International

Journal of Marketing and Technology, 2(12), 150-163.

Additional Bibliography

Atkin, C. & Block, M. (1983). Effectiveness of celebrity endorsers. Journal of Advertising Research, 23(1), 57-

61.

Friedman, H., & Friedman, L. (1979). Endorser effectiveness by product type. Journal of Advertising

Research,19(5), 63-71.

Hovland, C. I., Janis, I. L., & Kelley, H. H. (1953). Communication and persuasion; psychological studies of

opinion change. New Haven, CT: Yale University Press.

Kahle, L. R., & Homer, P. M. (1985). Physical attractiveness of the celebrity endorser: A social adaptation

perspective. Journal of Consumer Research,11(4), 954-961.

Kambitsis, C., Harahousou, Y., Theodorakis, N., & Chatzibeis, G. (2002). Sports advertising in print media:

the case of 2000 Olympic Games. Corporate Communications: An International Journal, 7(3), 155-161.

Koernig, S. K., & Boyd, T. C. (2009). To catch a tiger or let him go: The match-up effect and athlete

endorsers for sport and non-sport brands. Marketing Quarterly, 18 (1), 25-37.

Louie, T., Kulik, R., & Jacobson, R. (2001, February). . When bad things happen to the endorsers of good

products. Marketing Letters, 12(1), 13.

Ohanian, R. (1990). Construction and validation of a scale to measure celebrity endorsers' perceived

expertise, trustworthiness, and attractiveness. Journal of Advertising, 19(3), 39-52.

TAB Journal

The Impact of Culture on Advertising

Adina Linn

As a result of the recent economic recession,

many multinational corporations face the question

of whether or not to globally standardize their

advertisements. In addition to cost savings, there

is also a possible disadvantage of standardization.

Multinational corporations deal with a large

marketing mix, composed of different countries

that contain different cultures. Each culture has

their own set of values, ideals, and religious

beliefs (Walle 1997). Culture greatly influences the

success of company’s advertising efforts. If

advertisers wish to attract customers from a

specific region, it is important to take into account

the individual cultures of that region and alter the

advertising techniques to accommodate each one

(Gregory & Munch, 1997).

This paper analyzes the unique role that culture

plays in advertising, and how the relationship

between the two is imperative to attracting

customers, worldwide, and cross-culture. This

subject is intersting because there is an ongoing

debate about whether it is necessary to alter

advertising messages to appeal to different

cultures.


The controversy regarding standardization of

advertising is not a new one; it dates back to the

Roman Empire. The Catholic Church participated

in a bitter debate which showed the controversies

and lack of clarity on this issue. They debated the

view of modern globalizers versus those who felt

that products or advertising messages need to be

adjusted to cater to the needs and beliefs of

diverse markets (Walle, 1997). Later, in the early

1980s, the world was going through a period

known as “globalization”, diffusion of the world’s

cultures. Based on that, people thought that only

one message was sufficient to target different

markets around the world. In current times, it is

still an ongoing debate that multinational

corporations face when creating their advertising

campaigns. Extensive research is needed to

determine if different cultures and other factors

have an effect on consumer behavior and if

companies can rely on “westernization” to

standardize advertisements (Walle).

Literature Review

The reason many multinational advertising

companies do not usually accommodate different

cultures is because they try to appeal to a variety

of consumers using the same standardized

message, thus reducing their costs. However,

many argue that cultural differences must be

taken into consideration when advertising

products around the world. If a company’s

advertisements show similar values and beliefs

that are consistent with those of society, the

consumers’ reactions will be more positive, and

their desires to purchase will increase (Gregory &

Munch, 1997). Problems occur with standardizing

advertisements. When companies attempt to

translate their message into numerous languages,

there is often improper translation. Additionally,

ads display certain images that can be offensive to

some cultures (Gregory & Munch). When people

feel that their values and norms are being

“attacked” or challenged, it diminishes their

willingness to buy that product. Besides values

and beliefs, roles are a big part in collectivist

Adina Linn is a student at Lander College studying Business.

TAB Journal

cultures, such as Mexico. In Mexican culture, the

role of the family has a big influence on the

individual, and interactions between family

members can change one’s attitudes and

opinions. Therefore, advertisements that present

norms consistent with family values will be more

persuasive and positively affect consumer

reactions in Mexico.

Another dominant orientation in the Mexican

culture is the concept of “Machismo” masculinity,

where the husband is a more dominant spouse

than the wife. The man in Mexican culture is a

symbol of authority, toughness, and a strong

sense of respect. The concept of “Marianismo" or

femininity symbolizes submissiveness,

tenderness, and the responsibility of caring for the

family (Gregory & Munch, 1997). Advertisements

whose content is consistent with collectivist values

such as family and familial roles will attract buyers

from that culture. Conversely, these same ads will

not have the same impact on individualistic

cultures that place emphasis and priority on

individual values.

Even when a company can succeed in

homogenizing a certain product across many

cultural markets, the interpretation of its

advertising message may have an entirely different

meaning to members of different cultures. For

instance, the familiar icon of the Marlboro Man is

an ambiguous figure, which has proven to have

different meanings to different people (Walle,

1997). To a North American, this man is a

reference to ‘the American Cowboy’ and life on the

frontier. He represents strength, independence,

and superiority. To an East German woman, the

same image of the Marlboro Man can mean

something totally different. In one advertisement,

a female store clerk in East Germany noted the

fact that the man lived without fences and

contrasted it to her own life behind the iron

curtain, (Walle).

While working for the Medical Care Development

in West Africa, a third world country, David Sokal

engaged in conversation with a young African man

about an advertisement for Marlboro cigars. The

young man commented on the impressiveness of

the Marlboro Man. He was in awe of the tanned

cowboy rounding up fat, robust cattle. To him, a

rural African, this meant wealth and prosperity

(Walle). Marlboro, a multinational corporation,

chose to market its tobacco across different

cultures, using the same advertisement, depicting

the Marlboro Man. While this one product,

tobacco, is sold throughout different countries, its

symbolic message is interpreted differently based

on the customer’s culture and background.

Walle (1997) claims that this interpretation was

not intended. Rather, the creators of this icon

were seeking to conjure up the image of the

cowboy, representing the American vision. Without

even realizing, they succeeded in reaching the

hearts of people in different cultures, as they

created their own interpretations based on what

was meaningful to them. Although many argue

that messages targeting mixed cultural markets

prove to be ineffective, this unintended ambiguity

of the Marlboro Man proved to have greatly

benefitted the company (Walle). Culture has an

effect on advertising because of its impact on the

interpretation of messages.

In their article about controversial advertising, Li

and Shooshtari (2007) brought to light an

important case where major multinational

corporations did not take into account Chinese

culture when advertising their products. It spurred

an offensive reaction from the Chinese people.

One case discussed Toyota’s 2003 ad campaign.

When analyzing the history of Toyota’s

advertisements in China, one sees that, in general,

their advertisements generated positive feedback

and were well-accepted. They showed that as

international businesses, they understood and

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respected Chinese core values (Li & Shooshtari).

For example, Toyota incorporated a well-known

Chinese proverb “che dao shan qian bi yo lu” in

one of their advertisements “Where there is a road,

there's a Toyota”. However, in 2003, when they

advertised Toyota’s 2004 SUV model, the overall

negative reaction was surprising, and these

commercials were banned. The content of these

commercials included Toyota Land Cruiser with a

headline that can be translated into “ba dao [The

rule by force], you cannot but respect” (p.7). The

brand name “Prado” is on the SUV’s front bumper.

The Chinese characters chosen to represent this

brand were pronounced as “ba dao.” Although it

sounds similar to “Prado” its literal translation is

“taking the road in one’s own hand”. This phrase

can have multiple meanings, depending on the

context, including “the mighty rule”, “rule by

force”, “tyranny” or “overbearing”. The ad was

interpreted as “You can't help but be ruled by

Prado's power,” “The Prado's power will take you

over,” or “You have to admire and respect Prado's

supreme quality” (Li & Shooshtari, p. 10). This

unintended error in translation resulted in a

message that was offensive to many Chinese

consumers. Immediately after the ad’s release,

consumer calls came flooding into the Toyota

office in Beijing, China, protesting their negative

feelings towards the ad. It was described this as a

‘cultural pitfall’.

The image that Toyota hoped to portray to its

potential consumers consisted of “This car lives up

to its name—no matter who you are or where you

are, there's no escaping Toyota's powerful bao

dao" (Prado). The makers of the car wanted it to

appeal to and attract the upper-class nobility,

displaying “high social status and character of a

road warrior.” The literal meaning is neutral and

acceptable to Chinese readers, however in context

the ad seems to be controversial and disrespectful

to the socially-stratified Chinese culture. Toyota’s

interests were solely creativity and innovation, but

became a threat to Chinese identity, especially

when considering past tension between the two

countries. Although Toyota gained their respect

from the Chinese through past advertisements,

that were consistent with Chinese values, this faux

pas, due to the inaccuracy and inability to

translate their message into Chinese, greatly

offended their culture.

Another multinational company that offended the

Chinese culture through their advertising efforts

was Nike, in its 2004 ad campaign. They released

the same million-dollar, 90-second TV

commercial, “Chamber of Fear,” in China, Hong

Kong, Singapore and the United States. Nike used

one message to target these culturally diverse

markets. China’s response to it was disastrous (Li

& Shooshtari, 2007). Filmed and produced in the

U.S., the clip featured basketball star LeBron

James, sporting a pair of Nike sneakers, fighting

and defeating an elderly Chinese martial arts

master, as well as dragons and goddesses. A few

different scenes unfolded, where LeBron was

shown battling and overcoming different

obstacles. A lot of Chinese concepts were

incorporated, including Chinese stone lions and

kung fu warriors (Li & Shooshtari). The forces that

LeBron was overpowering, in order to shoot into

the basket, were fear, hype, temptation, hatred,

complacency, and self-doubt. While this concept

was acceptable and non-threatening to Chinese

culture, the imagery that accompanied the text

was insensitive and offensive to them.

Analysis

When a multinational corporation considers

standardizing its message across cultures, there

are critical factors to consider. Since the

advertising industry is highly competitive, in order

to attract consumers to their product versus their

competitors, advertisers should appeal to the

TAB Journal

culture of the consumer. A major one is whether

the cultures in their marketing mix are collectivist,

individualist, or a mixture of both. These cultures

contain very different values and priorities. A

collectivist culture places emphasis on the

“group,” while an individualistic culture is focused

on the individual person (Gregory & Munch, 1997).

This seemingly small detail makes a big difference

when creating an advertising message intended to

appeal to multiple cultures. Although having

respect for all cultures shows social responsibility

and often generates more sales, there are also

legal implications. When advertising in China,

Nike, and Toyota did not comply with cultural

standards and as a result, their ads were banned

(Li & Shooshtari, 2007). Article XX of the WTO,

GATT’s Provisions, allows for regulations

necessary to protect public morals in China.

Chinese regulatory institutions banned Nike’s

2004 commercial, claiming that it “violates

regulations that mandate that all advertisements

in China should uphold national dignity and

interest, and respect the motherland’s culture” (p.

12).


In 1969, Don Fisher, a wealthy Californian real

estate developer, was frustrated with his inability

to find a pair of jeans that fit right. Together with

his wife Doris, Don decided to open his own retail

store, to ‘bridge the gap’ between the boomers

and the current ‘silent generation.’ This is how

Gap began. The first store was opened in San

Francisco, California. In 1987, Gap’s first

international store opened in London. This was the

beginning of their fusion into a multinational

corporation. By 1992, Gap was recognized as the

second largest apparel brand in the world (Joslin

et al., 2009). Gap’s annual report in 2009 stated

one of Gap’s challenges as an international

company, is “maintaining favorable brand

recognition and effectively marketing products to

consumers in several diverse market segments”

(Joslin et al., p. 17).

Synthesis

Since its inception, Gap has shown their ability to

accommodate and reach their culturally diverse

markets. Recently, they found themselves in a

situation where they were subject to public

protests against their advertisement. In 2013, Gap

released a holiday advertising campaign titled

“Make Love”. One of their advertisements featured

a popular Sikh actor and jewelry designer, Waris

Ahluwalia. Shortly after the release of this ad,

vandalism appeared on one of the billboards

displayed in a subway station. Racist comments,

such as, “please stop driving taxis” were scribbled

all over, and the picture of Ahluwalia was defaced.

The words “make love” were changed to “make

bombs.” When evidence of this graffiti appeared

online, Journalist Arsalan Iftikhar tweeted, to

inform the world about this through social media

(Kuruvilla, 2013). Gap instantly tweeted back,

asking for the location of this ad so they can fix

the situation. In an interview, Gap (2013) told the

Daily News, “Gap is a brand that celebrates

inclusion and diversity. Our customers and

employees are of many different ethnicities, faiths,

and lifestyles and we support them all”. Gap was

praised for its immediate response to these racist

comments, and for supporting and backing their

campaign.

Shortly after the prejudiced remarks were exposed

to the world via the Internet, Gap immediately

placed Ahluwalia front and center of their home

page. They showed respect for the Sikh culture

and religion and stuck to their beliefs in

advertising. Using Ahluwalia as a model was a

brave move on Gap’s part and the company was

willing to sacrifice potential public attack to show

their diversity and acceptance of different cultures

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(Kuruvilla, 2013). Gap’s promotion of cultural

acceptance increased their sales, as one customer

tweeted to Gap, “I just holiday shopped w/you

because of yr anti-racist support of #Sikh model

Waris Ahluwalia!” (Kuruvilla). If Gap continues to

implement models from different cultures which

have different religions and beliefs, their

advertisements can potentially increase revenue.

Although some prejudiced individuals may

continue to show opposition to this, hopefully,

many people will embrace their cultural

acceptance, and respect it.


The corporate world is changing rapidly. As great

technological breakthroughs and new innovations

come out all the time, competition within each

industry continually increases. As a result,

businesses need to improve their advertising

efforts to gain more consumers. One way to

attract more consumers across the world is by

appealing to specific cultures and beliefs.

Although in the past international businesses have

succeeded in doing so, further research is needed

to keep up with the fast-changing industrial and

advertising world. Advertisements can include

models from minorities, and have their slogans in

multiple languages. A small step like this shows

consumers that their culture and way of life means

something to the company. Another important

detail to remember is that America itself is a large

melting pot of many different religions and

cultures. Businesses have to realize that although

other ethnicities become “westernized,” and may

start dressing like an “American,” their core values

and beliefs are still present.

Multinational corporations put a tremendous

emphasis on the creativity and originality of their

advertisements. However, it is equally, if not more

important, to invest more time, effort, and money

in extensive research of their culturally diverse

target markets. The members of the advertising

agencies should be educated and aware about

what each culture values the most. Additionally,

there should be more accurate translation and

interpretation into other languages. When a

phrase cannot be translated properly, it should be

eliminated, rather than causing a potential racial

blunder. By implementing these tactics and

conducting further research, companies can

maximize the success of their advertising efforts.

References

Gregory, G. D., & Munch J. M. (1997). Cultural values in international advertising: An examination of familial norms and

roles in Mexico. Psychology and Marketing, 14(2), 99-120.

Joslin, R., Lueck, P., Martino, C., Rhoads, M., Wachter, B., Chapman R., & Christian, G. (2009). Gap, Inc.: Has the retailer

lost its style? In R. D. Ireland, R. E. Hoskisson, and M. A. Hitt (Eds.), Understanding Business Strategy: Concepts and

Cases. Retrieved from http://www.cengage.com/management/webtutor/ireland3e/cases/gap

Kuruvilla, C. (2013, November 27). Gap praised for quick response to racist graffiti against Sikh model, as more evidence

of vandalism pops up. New York Daily News. Retrieved from: http://www.nydailynews.com/new-york/gap-ads-

featuring-sikh-model-waris-ahl

Li, F., & Shooshtari, N. H. (2007). Multinational corporations' controversial ad campaigns in China - Lessons from Nike

and Toyota. Advertising and Society Review, 8(1), 1-18.

Walle, A. H. (1997). Global behaviour, unique responses: Consumption within cultural frameworks. Management

Decisions, 35(10), 700-708.

http://www.amazon.co.uk/R.-Duane-Ireland/e/B001IGNN4A/ref=ntt_athr_dp_pel_1/280-8912671-9270565

http://www.amazon.co.uk/s/ref=ntt_athr_dp_sr_2/280-8912671-9270565?_encoding=UTF8&field-author=Robert%20E.%20Hoskisson&search-alias=books-uk

http://www.amazon.co.uk/s/ref=ntt_athr_dp_sr_3/280-8912671-9270565?_encoding=UTF8&field-author=Michael%20A.%20Hitt&search-alias=books-uk

TAB Journal

The Result of Cause-Related Marketing on Consumers'

Attitude and Brand Loyalty

Elisheva Florence

Cause-related marketing (CRM) is a powerful

marketing tool which brings success to many

companies. CRM is the process of implementing

marketing techniques characterized by an offer

from a company or firm to contribute a specified

amount of resources to a designated charitable

cause when customers engage in revenue-

providing exchanges that satisfy organizational

and individual objectives (Van, Odekerken-

Schröder & Pauwels, 2006).

This paper will discuss how CRM has developed

throughout the past decade. It will also explore

the different categories of cause-related

marketing and demonstrate how it can lead to

positive consumer attitude and an increase in

brand loyalty. Furthermore, this paper will

differentiate between strategic CRM and tactical

CRM and explore the relationship between

customer passion for a particular cause and

customer purchasing. This marketing tool is

beneficial to three distinct groups, as it feeds the

needs of a corporation, supplies the needs of a

non-profit organization, and satisfies for the

emotional and altruistic desires of an individual

consumer. CRM can improve corporate image,

increase customer purchasing, and create a strong

relationship between a company and its

customers.


Since the late 1900s, many companies have felt

pressure to increase their corporate social

responsibility (CSR) to prove their corporate care

for society. Van den Brink, Odekerken-Schroder,

and Pauwels (2006), define CSR as the extent to

which businesses assume the economic, legal,

ethical, and discretionary responsibilities imposed

on them by their various stakeholders. Lantos

(2001) states that in the past 50 years businesses

were assessed not only by their honesty and

economic performance but also by their

contributions to the public.

CRM is an effective tool to attract consumer

spending while also maintaining the company’s

CSR. For example, in 1984, credit card company

American Express guaranteed to donate a penny

to the Statue of Liberty restoration project for each

card member’s transaction. It increased

cardholder transactions by a booming 28%. CRM

then immediately caught the attention of

companies who wanted to boost their profit and

improve their company image (Rozensher, 2013).

CRM quickly came to be known as the most

popular method of marketing by the early 1990s.

During this time, many companies were using

CRM programs and spending an exuberant

amount of money on their campaigns. Likewise, at

the end of the 1990s many companies foresaw

continued growth in their promotions of CRM.

Since then, CRM has become a topic of scientific

research, not only one of corporate interest. These

studies suggest a positive relationship between

CRM and consumer loyalty, as the consumers may

feel a sense of morality and benevolence when

contributing to a certain cause, therefore creating

a positive consumer attitude towards the

company.

Elisheva Florence is a student at Lander College majoring in accounting.

TAB Journal

Literature Review

There are two categories within cause-related

marketing; strategic CRM and tactical CRM.

Strategic CRM is more effective than tactical CRM,

according to Ellen et al. (2000), as strategic CRM

involves high senior management, a substantial

amount of resources, and most importantly, a

long–term commitment to whichever organization

the company is endorsing. Tactical CRM, however,

is limited involvement of employees and short-

term commitments to whichever cause the

corporation is donating; this allows a company to

make a reduce donation and risk, but may result

in a lesser reward. Consumers admire a company’s

long-term commitment to the cause, because the

extended provision for the organization is seen as

an altruistic intention, as in strategic CRM. Short

term commitment to a cause as used in tactical

CRM may portray a message to the consumer that

the company focuses largely on self-interest and

purely wants to boost sales with publicity. While

most companies usually use one strategy, there

are cases in which companies use both strategic

and tactical CRM (Van den Brink et al., 2006).

In researching CRM, 240 subjects from a European

university took an unbiased survey in which the

subjects were provided fictional examples of CRM

being implemented. The result showed that

strategic long-term CRM does have a greater

effect on customer brand loyalty (Van den Brink et

al., 2006).

Often, curious consumers will question the

motives behind a company’s CRM campaign. A

company’s intentions are classified as either

intrinsically motivated or extrinsically motivated.

Intrinsic motivation stem from the company’s self-

actualizing feeling of helping society, whereas

extrinsic motivations are expressed as self-

interest desires focused on a response from the

environment. Customers purchase a larger volume

of goods and services from a company whose

motives are intrinsic. Some, however, disagree and

argue that there is a lack of information to prove

the correspondence between corporate social

responsibility and consumer purchasing (Van den

Brink et. al, 2006).

Another aspect of CRM is the connection created

between the company and the cause. Thus, any

customer who has a particular association to a

cause to which the company is donating, the

consumer will be more likely purchase from that

company. This occurs when a company has cause

specificity.

A successful example of cause specificity was

shown in a survey given to a spectrum of people

who varied from highly religious to less religious

backgrounds. The study found that highly

religious people are more favorable to a company

whose cause is religious, whereas, less religious

subjects look more favorably upon a company who

supports a more secular cause. From here, one

can derive that “cause affinity” has a strong effect

on consumer attitude (Sheikh & Beise-Zee, 2011).

However, many believe that cause specificity is a

poor marketing strategy, as it may cause people

who feel unfavorably towards that specific cause

to refrain from buying from the company.


An issue of competing forces can surface with

CSR. A publicly-owned company often receives

pressure from investors and shareholders in the

company regarding most decisions, which may

induce conflict in the situation of restricted profit;

the company’s interest to increase CSR may

conflict with the investors’ interest of maximizing

profits (Lantos, 2001). Such a problem does not

arise in the case of a privately-owned company, as

the proprietors may do as they seem fit and do

not need to answer to a board of directors.

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CRM, however, also has the potential to damage

society. Consumers may invest too much into a

company as a result of being too committed to its

associated cause, which may be a detriment to the

consumers’ personal finances. This could also be

dangerous to an organization that is not

associated with a particular company, as they may

lose publicity and resources, and therefore

supporters (Rozensher, 2013). CRM may also hurt

the company itself, as the prices of the goods

produced by the company will rise to cover

donative costs, which eventually will lead to less

consumer spending and a backlash to the

economy (Rozensher, 2013).

Another inference discovered by researchers is

intensified customer demands to be involved in

CRM decisions. Many customers who purchase

products in connection to CRM campaigns have

commented that they would like to know the

impact of their purchase. Consumers have stated

that they wish the companies would elaborate on

the effect of the cause-related product, which is

not something that all companies would prefer to

do (Rozensher, 2013).


ConAgra, the nation’s second to largest food

company, began in 1919 when Alva Kinney

combined four grain mill companies together in

Nebraska (“Congra Food, Inc. History”, 2013). It

was first called Nebraska Consolidated Mills

Company, and was then renamed ConAgra, Inc. 70

years later. ConAgra is an international company

that produces many agricultural supplies like

fertilizer, pesticides, and feeds.

During World War II, sales soared because of the

high demand for grain and milling. ConAgra

constantly competed with rival milling companies

General Mills and Pillsbury, so to get ahead

ConAgra expanded and opened a flour mill and

animal feed mill in Alabama. When that was not

enough, further research was put into processed

foods like using flour for cake mix, which became

known as Duncan Hines. Since ConAgra had only

about ten percent of the prepared cake market, it

was not worth their continuous efforts to gain a

foothold, and they soon sold Duncan Hines to

Proctor and Gamble. ConAgra used the money

from this deal to invest even more with basic

commodities, like grains and feeds. At this point

they moved beyond the U.S. borders and opened

up grain processing plants in Puerto Rico through

its second child company, Caribe Company.

In the 1950s and 1960s people began to recover

from World War II and were able to afford more

expensive foods. Therefore, people had less of a

need for flour consumption; this caused the

number of sales in ConAgra to decrease, since

their main resource was flour and feed. To fight

off the loss, ConAgra’s competitors, General Mills

and Pillsbury were quick to introduce new types of

foods that were not purely flour. Instead of

experimenting, ConAgra took the easier way out

and turned back to focus mainly on animal feed as

well as another commodity: chicken. They

partnered with a Spanish producer of animal feed

and breeder of pigs, chickens, and trout, known as

BioterBiona. In 1971, ConAgra became the official

name of Nebraska Consolidated Mills. In 1973,

ConAgra was listed on the New York Stock

Exchange. Unfortunately, losses were realized the

following year and the company had to suspend

dividends. In 1975, ConAgra almost filed

bankruptcy due to heavy losses in commodity

speculations.

In 1975, the former CEO of Pillsbury, Charles

Harper, was hired as the President of ConAgra to

reshape the company. He had strict goals that

were to broaden the ConAgra sales base. Harper

sold unnecessary operations to ease debt. He

purchased Banquet Foods, Corp. which resulted in

a chicken production increase of one-third. Harper

TAB Journal

also bought Peavey Company to augment wheat

milling. In 1978, ConAgra bought a distributor of

herbicides and pesticides, known as United Agri

Products. The acquisition was supported by

Harper’s hypothesis that if there were higher grain

prices it would cause a larger demand for these

chemicals. Harper also knew not to rely on

commodities, which only prosper at certain times

in the economy. Thus, he bought into

miscellaneous areas such as pet accessories,

Mexican chain restaurants, and fabric chains.

ConAgra began acquiring prepared food

manufacturers in order to meet their financial

goals. Return on equity was 20%, annual earnings

were over 14%, and long term debt was less than

35% of capitalization. Due to financial stability,

ConAgra decided to obtain more businesses. They

bought some seafood processing plants in 1981;

companies acquired included Singleton Seafood,

Sea-Alaska Products, Trident Seafoods, and

O’Donnell-Usen Fisheries. In 1982, ConAgra took

first place in the chicken industry by creating

Country Poultry. Soon afterwards, the creation of

ConAgra Turkey Company and the acquisition of

Longmont Foods took place. No longer was

ConAgra just focused on plain chickens, but they

were also concentrating on more exciting

variations like marinated chicken breast, hot dogs,

and processed chicken for fast food restaurants.

ConAgra then moved to the red meat market. They

acquired Armour Food Company, a processer of

hot dogs, sausage, bacon, ham, and lunch meats.

Along with meats, Armour also had a line of

frozen dinner classics. ConAgra was not hasty in

making this purchase; they waited until Armour

closed some plants and went down in book value

before making the purchase. They made their way

further by buying out Morton, Patio and Chun King

Brands. In 1987, ConAgra became the third largest

beef packer in American after buying E.A Miller

and Monfort of Colorado. However, soon after,

there was a steady decline in beef product sales

when consumers began to become more heath

aware. As a result, ConAgra moved into a healthier

beef product industry and bought 50% of Swift

Independent Packing Company.

At this point in time, if a consumer would go into

a grocery store looking for ConAgra foods, most

of it could be found in the frozen food section. To

further diversify, Harper purchased Beatrice Co,

which distributed dry goods. ConAgra Company

expanded and acquired different projects in Japan,

Thailand, France, Canada, Chile, and Australia. In

America, ConAgra catered to a different market by

buying National Foods, a kosher food business. In

the 1990s, ConAgra introduced Healthy Choice, a

low fat, low sodium line of frozen dinner foods.

Advertising Age named this as the most

flourishing new food brand in the two decades. In

1992, Harper resigned and Phil Fletcher took over.

Fletcher cut operating expenses by establishing

cost-control measures and creating better

communication between the companies many

branches. He spread out globally in China,

Australia, Denmark and Mexico. In 1994, the

company’s 75th anniversary, sales were over 23

billion dollars, with earnings of $437 million. To

celebrate, ConAgra donated $200,000 to a

museum in Nebraska for the creation of a model

of the original Glade Mill (one of the original four

flour mills). ConAgra, once a small flour milling

company, rose up to be a great international food

corporation with over $20 billion in sales.

Synthesis

ConAgra used many marketing techniques to

develop is CRM. As stated earlier, CRM can be

beneficial to both the corporation and the non-

profit organization. According to Cone and Phares,

a CRM program will not be beneficial if it is not

backed by the executives. ConAgra had the

backing of Bruce Rhode in creating their project

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called, “Feeding Children Better”. The program had

a focus to end childhood hunger in America (PR

News, 2003). ConAgra had the intrinsic and

altruistic characteristics and motives in creating

the connection between the company and the

cause.

When ConAgra Foods Foundation heard about the

concept of “heat vs. eat”, a decision poverty

stricken families have to make between paying

electric bills and grocery bills, they spread

awareness about the childhood hunger in the

United States (PR News, 2003).

ConAgra then created “Feeding Children Better

Program” to combat childhood hunger. ConAgra

combined this program with America’s Second

Harvest, one of the country’s largest hunger-relief

organizations. ConAgra would give financial

funding to food banks, which would then give out

food to Kids’ Cafes, where children received a free

hot meal (PR News, 2003).

ConAgra’s altruistic actions made them winner of

the Platinum PR for CRM. The enormous amount

of money spent on the Feeding Children Better

program was worth for ConAgra as they made

society aware of the outbreak of hunger and

attracted attention to their own company (PR

News, 2003).


There are a number of changes that can occur in

business or environment that may shape the role

of CRM in the future. One assumed change is an

increasing pressure on companies to be

associated with a cause. One can predict that in

the future CRM will no longer be a suggestion but

rather an obligation. The Lantos’ (2001) article

includes a statement:

There are increasing pressures and rising

expectations for such altruistic CSR

because there has been a decline in the

social institutions that have traditionally

tied communities together, namely,

families, religious organizations and

neighborhoods, along with higher mobility,

and so it many people believe that it is

business' obligation to help fill the void (p.

605).

Another aspect is the change in cause interest or

attraction amongst the company’s target market.

The organizations which the target market is

supporting now may shift as a result of

environmental changes. The cause-affinity of

consumers is crucial in CRM, as that will attract

the customers to buy from the corporation

associated with the cause (Sheikh & Beise-Zee,

2011). Therefore, it is important that a company

stay up-to-date on the causes which are

significant and stay relevant for their target

market. The company can then associate itself

with a cause that is popular amongst the target

market to ensure brand loyalty and positive

consumer attitude.

A vital change to expect in the future is an end to

corporate philanthropy. Companies will refrain

from donating to a cause out of mere kindness;

instead they will give to a cause as a marketing

benefit. Corporations will expect to derive more

benefit and have more control over the money that

they donate, as opposed practicing the traditional

corporate philanthropy of donating to nonprofits

with no strings attached and for unrestricted use

(Rozensher, 2013).

TAB Journal

References

ConAgra Food, Inc. history. (2013). Retrieved December 22, 2013, from

http://www.fundinguniverse.com/company-histories/conagra-inc-history

Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility. Journal of Consumer

Marketing, 18(7), 595-630.

PR News. (2003, October 13). Platinum PR award winner: Cause-related marketing. Retrieved from

http://www.prnewsonline.com/subscription/2003/10/13/platinum-pr-award-winner-cause-related-

marketing/

Rozensher, S. (2013). The growth of cause marketing: Past, current, and future trends. Journal of Business

and Economics Research, 11(4), 181.

Sheikh, S. R. & Beise-Zee, R. (2011). Corporate social responsibility or cause-related marketing? the role of

cause specificity of CSR. The Journal of Consumer Marketing, 28(1), 27-39.

Van den Brink, D., Odekerken-Schroder, G., & Pauwels, P. (2006). The effect of strategic and tactical cause-

related marketing on consumers' brand loyalty. Journal of Consumer Marketing, 23(1), 15-25.

TAB Journal

Sweet Manipulation

Danielle Reifer

Have you ever wondered why the fast food

industry is doing so well? How the bags of chips,

soda, and ice cream are constantly being sold in

vast quantities? Fast food restaurants are

everywhere, marketing their cheap and available

products to everyone. These fast food restaurants’

products can be very unhealthy; filled with fat,

sugar, and salt. Unfortunately, families can only

afford a one-dollar hamburger or a bag of potato

chips over fresh fruits and vegetables. Therefore,

many people have very unhealthy diets.

However, there is another reason fast food

restaurants and the junk food industry are doing

so well. The secret lies in the products themselves.

Research shows that fat, sugar and salt may be as

addictive as drugs and can cause similar effects in

the brain.

When in a state of depression, a giant tub of

sugary ice cream, a big bag of salty potato chips,

and a large cheese pizza usually help people deal

with their intense emotions. This is because fat,

sugar, and salt cause the body to release

dopamine. Dopamine is a chemical in the brain

that is associated with pleasure and reward. When

released, dopamine causes people to feel good.

This process also occurs in the brain while taking

drugs, smoking cigarettes, and drinking alcohol

(Hockenbury & Hockenbury, 2010).

Since dopamine gives a pleasurable feeling, the

brain believes it is being rewarded. The feeling is

very pleasurable, yet very addicting, causing the

body to crave the same sensation again. Overtime,

a human body will stop releasing as much

dopamine as it used to, and more food is needed

to achieve the same result. “Over time, the brain’s

circuitry might become rewired to produce less

dopamine in response to high-calorie, flavor-

enhanced foods” (Consumers Union of the United

States, 2013, p.1). They also add, “As a result -

and possibly in combination with genetics and

environmental factors - some people will eat

more, attempting to stimulate dopamine

production to feel good” (p.1). Frequent

overeating starts an addiction.

There have been many studies done on food

addiction. One of these studies involves seeing the

differences between the brains of obese girls and

thinner girls. “A team led by investigators at the

Oregon Research Institute in Eugene noticed that

MRI scans of the regions of the brain related to

reward and the senses lighted up more in obese

girls anticipating a chocolate milkshake than when

they were actually drinking it, compared with brain

MRIs of leaner girls” (Consumers Union of United

States, 2013, p.1). This study showed that people

who find food more exciting are likely to overeat.

Eric Stice of the Oregon Research Institute added,

“And the more you eat high-fat or high-sugar

foods, the less your brain regions are activated by

actual intake of these foods” (p.1).

In an interview with Monica Eng (Eng, 2013), when

asked what surprised him the most, Michael Moss,

the author of Salt Sugar Fat, answered, “On a

personal level it was how many food-company

executives I met [who] are health conscious and

do not eat their own products, especially when

they get injured” (p.1). Moss describes a scientist

at Kraft, who had stopped having liquid calories

due to an injury. Moss also added, “He has also

stopped eating salty chips, because he was among

the many of us who cannot stop at one tiny

serving” (p.1).

Danielle is a student at Lander College for Women and is studying business.

TAB Journal

In another interview with Alexandra Sifferlin

(Sifferlin, 2014), Moss added that the scientist

from Kraft also avoided Kool-Aid, which the

company produces. Moss stated that, “The

optimum amount of sugar in a product became

known as the ‘bliss point'" (p.1). He then

explained that food scientists spent a lot of time

to find the perfect amount of sugar to help sell the

products faster and in larger quantities. When

eating fatty foods, you have the same pleasurable

feeling as when eating sugar, but fat has double

the calories. He claimed, “The companies

discovered they could add as much fat as they

wanted to their products, and unless people

looked closely at the nutrition facts, they are

going to totally love it more than they would

without the fat” (p.1). Moss also wrote that he

spent time with the former top scientist at Frito

Lay, who had been trying to get Frito Lay to cut

back on the salt in their products. Moss was

served healthy food while there and observed that

there were no processed products in the

scientist’s house.

When asked if he thinks the executives felt guilty

about the obesity problems they have helped

create, Moss answered that the scientists may feel

guilty but do not hold themselves accountable for

the products. Many of the products were invented

when there was lower dependency on the

products. He also added that Kraft had tried to get

the whole industry to help fight obesity and cut

back on these ingredients, but the rest of the

industry refused to join Kraft’s efforts. Kraft began

to show how much of each ingredient is in one

serving and in the whole package. He said that for

a company, who tries to make their products

addictive to achieve the highest amount of profit,

they had asked their scientists to cut back on

these addictive ingredients in the products. He

added that, “Ultimately, they ran into the problem

that the whole industry faces, which is the huge

pressure from Wall Street and the investment

community to increase profits” (Sifferlin, 2014,

p.1).

Obesity is a big problem all over the world.

Research shows that junk food may be just as

addictive as drugs and can cause similar results to

the body. However, not everyone agrees: “But not

everyone is swallowing the theory. Food addiction

has not been formally recognized by the American

Psychiatric Association. And there is a lack of

objective evidence that the condition contributed

greatly to the U.S. obesity epidemic” (Consumer

Union of Unites States, 2013, p.1). Addiction or

not, many people have a problem of overeating,

and it can lead to severe health problems. Some

companies in the food industry may be using this

addiction to help sell more products. Others, like

Kraft, may be trying to change their products to

try to turn this addiction around. Next time, you

see a donut and feel like you need it, you should

decide if it is worth it, because once you start,

there is no stopping.

References

Consumers Union of United States. (2013, November 27). ‘Feel-good’ food may be addictive, though direct

evidence has not been found. Washington Post. Retrieved from

http://www.washingtonpost.com/national/health-science/feel-good-food-may-be-addictive-though-

direct-evidence-has-not-been-found/2013/01/21/28d9833e-1edf-11e2-9cd5-b55c38388962_story.html

Eng, M. (2013, March 15). Michael Moss on 'Salt Sugar Fat': Author says consumers can use their power

against an industry that keeps them addicted to unhealthy food. Chicago Tribune. Retrieved from

TAB Journal

http://articles.chicagotribune.com/2013-03-15/features/ct-prj-0317-salt-sugar-fat-michael-moss-

20130315_1_general-foods-food-industry-unhealthy-food/2

Hockenbury, D. H., & Hockenbury, S. E. (2010). Focus on neuroscience, the addicted brain: Diminishing

rewards. In A Discovering Psychology, 5th ed. (p.34). New York, NY: Worth Publishing.

Sifferlin, A. (2014, February 27). Salt sugar fat: Q&A with author Michael Moss ‘How did Lunchables get

created?’ Moss pulls back the curtain on the processed food industry and why it's so obsessed with sugar,

salt and fat. Time.com. Retrieved from http://healthland.time.com/2013/02/26/salt-sugar-fat-qa-with-

author-michael-moss/

TAB Journal

Mahna Mahna

Shevi Gartner

Mahna Mahna is a fashion company that

specializes in renting an array of high-end

clothes, shoes, and accessories to fashion industry

professionals. Established in April 1991, the

founder Sumiko Enya opened the first showroom

in Tokyo, Japan, which became one of the top

rental houses in the U.S. by providing a wardrobe

to top stylists in television, film, video, and print

production, as well as celebrities. A hundred

percent of all celebrities in Japan have used Mahna

Mahna’s services. It has been noted that the

entertainment industry in Japan would fall apart

without them (“NY Style Competition”). They have

since expanded to many more showrooms in

Japan, Korea, and most recently, SoHo, New York.

Sumiko Enya, an established stylist in Japan before

starting Mahna Mahna, always wished there was a

rental house that was outfitted to handle all types

of jobs that carried everything from clothes,

shoes, to accessories. She understood what people

were lacking, and her extensive understanding of

the industry helped make Mahna Mahna the

number one rental house in Asia.

Mahna Mahna’s philosophy is “fashion was born as

part of human culture and art. It has been shaped

by our surroundings and continues to evolve with

us. With a profound appreciation of history and

culture, our company hopes to foster happiness

through fashion. Our goal is to constantly evolve

as specialists in cultivating and finding the best in

fashion.” (“Mahna Mahna Philosophy”, 2014, p.1).

While a lot of rental houses specialize in certain

styles such as avant-garde, or period pieces,

Mahna Mahna understands that clients have vaious

needs from vintage to contemporary, and pride

themselves on having a diverse array for clients to

choose from. Stylists know they can come in to

Mahna Mahna for a complete “head-to-toe” look.

They carry major designer collections such as

Alexander McQueen, Jean Paul Gaultier, Emilio

Pucci, Maison Martin Margiela, and Valentino, as

well as hard to find brands like Comme des

Garcons, DressCamp, and Atsuko Kudo. They also

carry a vintage collection including Chanel, Yves

Saint Laurent, and Oscar de la Renta. Recently,

Mahna Mahna has been a part of many music

videos and performances, and is now beginning to

work with major network television series.

Kaori Cipriano and Haruka Hiroishi both went

through an intense interview process a year and

half ago in Japan, where they met for the first

time. Sumiko Enya wanted to hire them together

because she felt they would be a perfect match to

run the New York location, and if one of them had

said no, she would have gone with a different

pairing. Cipriano left her job at Fashionhaus in

New York City (NYC), where she had been working

for some time doing international sales. Haruka

was involved in freelance work for Japanese

production companies at the time. They both

accepted the offer made by Enya and were sent to

Japan for two months of training.

Because Kaori and Haruka were launching Mahna

Mahna for the first time in the United States, they

did not have a client base yet. They started from

scratch, doing research on stylists and sending

out press packages. They also hired a public

relations (PR) company to help, but they did not

receive the results they had hoped for. They

realized the PR company was not a good

Shevi is a student at Lander College for Women and is majoring in marketing.

TAB Journal

investment for them, because Mahna Mahna is not

a retail store. Therefore, Cipriano and Haruka felt

that a high exposure to the general public was not

the right direction for their brand. Cipriano

suggested that perhaps advertising in high end

magazines would be more appropriate, which

proved to be beneficial for their company. In

addition, she prefers to think of more organic

ways to develop and grow the company, like

having more personal relationships with clients.

This practice works for them, because after only

nine months of being open, Mahna Mahna is

seeing results. Marketing is very important to a

business, but money has to be invested in the

right strategy. Kaori suggests that in order to do a

high risk, high return project, capital needs to be

available for use. Currently the company has

something that is working for them, but like in any

business, there are always ways to improve. Social

media can be a good example to help Mahna

Mahna grow and improve.

In order to be successful they have to constantly

remind people about what they do, have lots of

events and parties, and invite people in the

industry. Although they started out slow in May,

they are now getting calls from other people. From

here, it can be deduced that much of their

marketing comes from word-of-mouth. Mahna

Mahna is a diverse company that includes many

divisions such as rental, wholesale, styling,

consulting, and working on production for

Japanese companies.

The Mahna NY Style Competition took place on

social media and ran for a month around NYC

Spring Fashion Week 2014. The competition

invited fashion industry professionals to compete

for the chance to win $10,000 in credit towards

rentals from Mahna Mahna. The company team

headed by Kaori Cipriano looked for “well styled

images…that truly spoke to the originality and

creativity of the individual” (“NY Style

Competition”, 2014, p.1). They are quoted as

having said, “We were looking to showcase the

work of these emerging talents so that we can

continue to grow with them and invite them into

the Mahna Mahna family” (p.1). The judges picked

ten of the top photos, and Facebook fans voted for

their favorites. On February 11, Mahna Mahna

hosted a cocktail party in their Soho showroom

and announced the winner, fashion photographer

Drew Johnson. Sumiko Enya, who flew in from

Japan to attend the event, decided last minute to

award a prize of $5,000 in rentals to the first

runner up, which was a pleasant surprise for

Donald Hicks, a professional stylist. This contest

turned out to be a great way to introduce many

new stylists to Mahna Mahna, and helped their

Facebook page gain 300 new followers in just one

month.

One of their biggest competitors is a rental

showroom by the name of Albright, which is also

located in lower Manhattan. Cipriano is not

worried about them though, because she believes

in her brand. They have heard that people are not

always happy with quality of the merchandise at

Albright, but before Mahna Mahna opened up,

people did not have much choice. Mahna Mahna is

dedicated to giving the best customer service and

quality of merchandise. They and are friendly and

helpful and treat all their clients equally, and feel

they have a leg up in customer service

satisfaction.

One challenge they faced with the new American

launch was trying to make their headquarters

realize that there is a big difference between

running a business in Japan and in America.

Cipriano says that she has had experience with

many Japanese companies that tried and failed to

be successful in America. This was ultimately

because they were trying to use the same business

model in both places, which according to Cipriano

is a big “no-no.” The difference, she says, is

TAB Journal

flexibility. In Japan, there are no discounts, no

negotiations, and no such thing as late. However,

they fully trust their customers—maybe too

much—and allow customers to take the

merchandise and pay within 90 days.

In the U.S., a business like this has more room for

negotiations, but upfront payment is a must. In

Japan, business is a very formal affair and there is

no room for personal relationships with

customers. Cipriano says that this model frowned

upon there. People in business do not talk to each

other about their personal lives, they do not ask

about their clients’ kids, or anything that is not

related to the business. In Japanese businesses

she says, it is “please”, “thank you”, and “sorry.”

This difference can definitely be seen and felt in

the Mahna Mahna NYC showroom. The team feels

like a family, always joking around with each

other, and talking about what is going on in their

lives.

Cipriano says New York has definitely changed her

views of business, as well as her personality. New

York makes a business person tougher, which is a

must; otherwise a business cannot survive. In

NYC, apologies are not always needed. A good

balance is needed. Politeness can be present,

without being seen as weak. They hope is to help

reinvent the way U.S. productions think and use

wardrobe. Mahna Mahna is altering the business

plan to help suit the new U.S. market, and offering

specialized production packages to stylists.

Mahna Mahna gets its merchandise from a variety

of channels including other showrooms and

buyers, who travel all over the world to find items.

They are constantly scouting new collections to

feature in the showrooms. Currently, Mahna

Mahna carries over 100,000 items in ten

showrooms around the world. The company is

hoping to expand to Los Angeles, California, as

well as other parts of Asia.

References

Mahna Mahna philosophy. (2014). Retrieved from http://www.mahnany.com

NY style competition winner announced at Fashion Week event. (2014, February 20). Nolcha Fashion Week.

Retrieved from http://nolchafashionweek.com/2014/02/20/ny-style-competition-winner-announced-at-

fashion-week-event-co-hosted-by-mahna-mahna-and-nolcha-fashion-week-new-york-presented-by-

rusk

TAB Journal

The History of the United States Monetary System

Rachel Morris

Ever since the beginning of time, humanity has

participated in some form of a monetary system

no matter how basic. The first monetary system

that humanity took part in was the simplest form,

self-sufficiency. Under this policy, if someone

needed something, such as food and clothing,

they had to make it themselves. This policy is not

very efficient, because people have different

abilities and strengths.

The next system to emerge was the barter system.

Through this system, people traded goods and

services for other goods and services. We can see

from European history that they utilized this

system to its fullest. Every child in kindergarten

learned about the explorers in 1492, who traveled

across the ocean all the way from Spain and

chanced upon America. The reasons for their

travel, as many historians theorize, were “God,

Gold, and Glory.” These forces, or derivatives of

these forces, serve as motivations for almost every

world event that has taken place in history.

Through the many historical documents and travel

journals (that these explorers kept on their

travels), the exploration’s efforts in converting the

“barbarians” to Christianity brought deaths of

many Indians. Additionally, as seen from the

explorers’ actions, the glory of claiming new land,

and putting the country’s flag on the soil, was at

the forefront of many explorers’ missions. Many

explorers would travel to a land, claim it for their

country, and then leave without ever trying to

inhabit it. For example, when Portugal claimed

parts of South America after the Treaty of

Tordesillas, they set up trade routes and moved

on to the next place. Virtually all historians agree

that gold, or some form of trading commodities,

was the chief factor and motivation for the

explorers to travel and discover new lands.

Motivation for the generation of exploration began

as a result of the Ottoman Turks taking over many

ports. Many people wanted to do business without

having the large middle man markups that the

Ottoman Turks placed on goods. Therefore,

countries decided to go on a quest in search of

the riches of the east: gold, silk, spices, jewels,

and silver, to name a few. The countries started

sending people to travel to the edges of Europe to

establish their own ports. The taxes and tariffs

filled the government’s treasuries. These countries

may not have had the complex economic theories

that were later developed, but they understood

that to build up gold and silver (bullion), they

needed to export more than they import.

One of the pioneers of the exploration was

Portugal, who sent Bartholomew Dias to the Cape

of Good Hope and Vasco Da Gama around the tip

of Africa and on to India. Through their efforts,

Portugal procured a monopoly on the spice trade.

All of the exploration brought about a

phenomenon called “The Colombian Exchange.”

The bartering system, the monetary standard at

the time, spread different goods and products

across national borders. Spain introduced sheep,

cows, wheat, olives, and many other products,

while America introduced Spain to potatoes,

tomatoes, corn, sugarcane, chocolate, tobacco,

and slaves among other things.

Although the barter system worked very well for

the Europeans in the 1400s, it still presented

many problems. One problem presented was that

Rachel is a student at Lander College for Women and is studying business.

TAB Journal

sometimes a person needed something, but the

person who had that thing did not necessarily

need what they were offering. Additionally, this

system proved clumsy. The value of one person’s

goods and services was not necessarily equivalent

to the other goods and services being bartered

for. For example, a person who breeds elephants

realizes he needs a ballpoint pen. How will he

trade the goods he has for the goods that he

needs?

Despite the negatives of the barter system, the

economic effects of the explorations were robust.

The influx of food and wealth started a

commercial revolution. Additionally, the bartering

system is not as susceptible to the impacts of

inflation. If we decide that a pig has the same

value as a goat, and inflation occurs, the pig and

the goat are still worth the same amount and can

be traded. On the other hand, bartering is not

totally inflation proof. In the exploration era, with

so many goods and commodities being pumped

into the continent, the economy acted the same

way as it would in any money based society. Slight

inflation began to set in as Europe introduced a

ton of spices that had previously been a luxury

item and made them easily available to

consumers. Those commodities began to decrease

in value and this caused a strengthening of the

middle class.1

As a result of the slight inflation, people decided

that they wanted to get involved in the trade and

get some of the money from traveling to other

countries. They wanted to benefit from the

mercantilist system that the government enjoyed.

Many people got together and created joint stock

companies. These companies were business

organizations, where private investors financed

the voyage themselves, and the returns from these

1 It is interesting to see a parallel today with the deflation of

the dollar and a waning middle class.

voyages were theirs to keep. Because of this, new

banking arrangements were established and

Europe’s financial scene continued to progress,

from the barter system to more sophisticated

systems.

The new and more sophisticated system that

emerged was the concept of money. Money is

simply something that everyone accepts as

payment. The earliest money was a rare food or

clothing item and some cultures used uniform

sized bricks of salt as money.2 The system worked

pretty well, but there was still one problem: those

commodities began to wear down. The clothing

would wear out and rip and the salt would slowly

come apart and fall away.

The people needed money to be a medium of

exchange that can store purchasing power,

meaning you can put it in the bank for years and it

won’t go bad. Additionally, money has a standard

of value. A standard of value means that people

can pay money according to the value of the item

they wish to purchase. The people living in

America resolved the problem by creating a new

monetary form called metallic money. Metallic

money is made out of metal and also has intrinsic

value. The people made the value of each coin

directly linked to the value of the metal in that

coin. A gold coin was worth the gold in that coin

and if someone wanted gold, they could melt the

coin down and use it.

Every country with money has a monetary

standard. A monetary standard states the basic

unit of value. Before the founding of the U.S. as a

country, the 13 colonies had different dollars and

would not accept each other's money. This was

not conducive to an economy and business

between the states. In 1776, the U.S. declared its

independence, but it took until 1792 (16 years) for

2 Salt in those days was a rare and expensive commodity.

TAB Journal

Congress to come up with a monetary standard. In

1792, Congress finally passed the First Monetary

Act. The country decided on the “dollar” as the

basic unit of money. The country also had to

define the value of that dollar. This New Monetary

Act provided for a bimetallic standard, a system

where the money was based on not only gold, but

other metals including silver and copper. The

dollar was defined as 24 and 3/4 grains (a

measure) of pure gold and 371 and 1/4 grains of

pure silver. This ratio of gold to silver was 1:15. A

provision was created for gold coins to be minted

in denominations of $2.50, $5, and $10 and silver

coins to be minted in denominations of $1.00,

$0.50, $0.25, $0.10, $0.50. Copper coins were

minted in $0.10 and $0.05. These coins were all

full bodied coins meaning that the value of the

metal in the coin was worth the dollar amount it

represented. In this monetary system, everyone

was allowed to own gold, there was free trade, and

everyone could use this commodity. This money

that America had created was on the bimetallic

coin standard. The bimetallic coin standard meant

that the basic monetary unit was defined in terms

of a coin containing a certain amount of gold at a

certain level of fineness.3 This money was full

bodied money, meaning that each coin contained

its full monetary value in that metal.4

Even with the new dollar accepted by all the

states, the colonies continued to use the Spanish

dollars that they were used to. Spain was a world

trader and they would come to the U.S. to trade

and bring their currency. The U.S. accepted it, and

the Spanish dollar was considered legal tender by

law. The impact of the Spanish dollar was felt for

3 Gold is a very soft metal so it cannot be made into a coin that

is 100% gold. Instead, there is an added mixture of alloys and

other metals in it.

4 Today the penny contains more copper than “one penny’s

worth” of copper.

many years after. The Spanish dollar has eight bits

to the dollar and the American dollar had a little

less silver. People began to covet the Spanish

dollar, but as the Spanish coins began to be used

more and more often, the silver got rubbed down

and began to weigh less than their American

counterparts. It got to the point that when a

person paid with a coin, they would have to weigh

it to see how much silver was in it and how much

it was worth. It was not a very practical monetary

system. [As one can imagine, this system would

probably make long lines in stores].

The United States bimetallic standard came along

with additional problems. There were different

ratios of value between the different metals in the

government and the market. The U.S. government

decided that the ratio of gold to silver was 1:15,

but then the market ratio of gold to silver changed

to a 1:15.5 ratio. One ounce of gold should be

worth 15 ounces of silver according to the

government and when someone had an ounce of

gold they could bring it to the government and

trade it in for 15 ounces of silver. The market rate

for one ounce of gold then became worth 15.5

pieces of silver; everyone began to take their gold

to the market to trade it in for the 15.5 pieces of

silver. Then they would go to the market and

trade 15 ounces of silver for one ounce of gold

and still have a half ounce of silver left over.

Finally, they would take their ounce of gold back

to the market. As a result of this repetition,

Gresham’s Law5 would take effect and the metal,

artificially undervalued by the government, would

drive out the artificially overvalued metal. No one

was bringing gold to the government to be

minted, and gold coins began to disappear6. The

5 Also known as the Copernicus Law and commonly stated as

“bad money drives good money out of circulation.”

6 They were all being melted down for silver.

TAB Journal

government needed coins for the economy to

function, and the government became desperate.

These problems brought about the printing of

paper money. The earliest form of paper money

represented something tangible. If a person would

go to the government, they would be able to trade

that piece of paper for actual metallic coins. This

kind of paper money was also on the gold coin

standard. At any time a person was able to take

their paper money to the government and trade it

in for a gold coin. This was called representative

full bodied money. The paper money itself did not

contain value but it was fully backed and tradable

for its value. The country would only print a dollar

bill if it had a dollars’ worth of gold to back it up.

Additionally, in this monetary system, everyone

was allowed to own gold; there was free trade;

everyone could use this commodity; and the value

of gold fluctuated based on supply and demand.

In practice, this money was accepted by most and

allowed the economy to continue. It served as a

medium for people to exchange between each

other without the worry of the silver wearing down

and losing its value.

In 1834, Congress changed the ratio of gold to

silver from 1:15 to 1:16. This created a new

problem; the market ratio had only risen to

1:15.6. Now, if anyone had gold they could trade

it in for more by going to the government than

they could get form the market. Thus, people

brought all their gold to the government to be

minted but did not bring their silver to the

government to trade in for gold. This policy

caused silver coins to begin to disappear.

In 1853, Congress began printing fractional silver

coins, coins which had some intrinsic value, so

people would be willing to accept them. This

worked for many people, but not for everyone.

Seven years later, the Civil War broke out and the

government found itself with only half the country

on its side. The country needed more money to

fight the war, so Congress put the U.S. on the

inconvertible paper standard. The government

began to print money regardless of how much

gold and silver the treasury owned. At one time,

the government immediately issued $430 million

in greenbacks.

People were not that enamored with paper money

anymore because without metals to back it, the

paper was no longer redeemable for its full face

value in metals. The money was no longer able to

be traded in to the government for gold or silver,

but it was still backed by some sort of metal, but

only very loosely. When the government decided it

needed money, they would simply print more out.

The monetary supply ceased to have anything to

do with the amount of the amount of goods and

services the country produced or the precious

metals it had.7

During the Civil War (1860-1865), the monetary

supply doubled. The people knew the paper

money was not fully backed, and wholesale prices

doubled with it. Metal coins all but disappeared

because people realized that they could pay with

worthless paper instead of using coins with some

intrinsic value. In 1879, Congress redeemed the

greenbacks with metal, returning to the intrinsic

value based currency.

After the Civil War, until 1900, big arguments

broke out concerning what type of monetary

standard the country should be on. One group

thought the country should adopt the gold

7 This standard is often associated with inflationary countries

and banana republics, where the commodity standard means

that the basic unit of value was based on the value of a fixed

bundle of commodities and could be traded for it. For example,

one potato, three bananas, and two apples would be

exchangeable through the government, for one dollar. The

government would have to be a big fruit store, and people

would be able to answer “yes” when asked the question “Do

you think money grows on trees?!”

TAB Journal

standard while other groups believed the silver

standard was best.8 Many laws were passed

between the period of the Civil war and 1900,

regarding this disagreement. The first act was the

Sherman Act (1890) which called for Congress to

buy 4 million ounces of silver every month in

order to back the dollars they were printing.

Finally in 1900, the argument was settled when

Congress passed the Gold Standard Act, putting

this country on a gold standard only. Then in

1914, World War I came about. Although the U.S.

joined the war effort in 1917 and dropped the

gold standard to raise money to fight the war, it

managed to resume the gold standard in 1919.

Ten years later, a turning point in our nation’s

history occurred: the Great Depression and stock

market crash of 1929. This crash not only hit

America, but also impacted the whole world.9 In

1933, President Franklin Delano Roosevelt (FDR)

took over the presidency from Hoover and the U.S.

abandoned the gold standard for good. He did this

because gold was so expensive that prices were

declining. When the prices became too low, people

had no incentives to go into business and would

simply abandon selling their goods. In May 1933,

FDR convinced Congress to pass a law giving him

the right to fix the gold and silver value of a dollar

to up to 50% of its value.

From the mid-1930s to the mid-1970s, America

moved over to the gold bullion standard and in

January 1934, FDR convinced Congress to officially

pass the Gold Reserve Act-modified gold bullion

8 Farmers and people who constantly had to borrow and pay

back liked this one.

9 Europe was extremely affected by the stock market crash. The

great depression was one reason Hitler was able to rise to

power. There was the tremendous inflation in Germany and the

people were experiencing extreme poverty. The country was in

a rut. Hitler showed them hope by giving them a scapegoat to

blame their problems on, and a new task to refocus their

energy.

standard-where the price of gold was set at

$35/oz. For every ounce of gold the treasury had,

they were allowed to mint or print $35 of

currency. Gold was not minted in coins, or

circulated. The government set the price of gold

and controlled it so that they could mint or print

the money they felt the economy needed without

worrying about the price of gold fluctuating or

there not being enough gold to back up the

dollars. This made public free trade of gold illegal,

but the money was still totally backed by gold. In

America during his time, gold was only being used

for jewelry and to settle foreign debt. Gold had

virtually the same legal status as cocaine.

Therefore, gold was not traded frequently and the

price that the government set was not necessarily

the market price.10

The government began to buy a lot of silver.

Additionally, they allowed people to own silver

privately. Because people were also able to bring

money to the Treasury and exchange it for silver

or vice versa, any dollar from before 1961, instead

of saying Federal Reserve Note on it, said "Silver

Certificate". In 1961, Congress directed the

government to stop printing $5 and $10 silver

certificates. Any bill over $5 became a Federal

Reserve Note. In 1963, this rule was extended to

the $1 and $2 bills. The price of gold stayed fixed

until the mid-1970s ($35/oz).

Recently, gold is free market again. It recently hit

its high at almost $2,000/oz, but U.S. paper

money still does not have full backing, and cannot

be traded in to the U.S. government for metal. The

U.S. government does not even have that amount

in its treasury. So, if the dollar is not backed with

intrinsic value, it must get its value from

somewhere else, because we are able to take that

10 The market price for other countries could have been higher

or lower depending on supply and demand while the U.S. price

was controlled and fixed.

TAB Journal

piece of paper money and trade it in for groceries,

electronics, a place to live or a new car. The

reason the U.S. dollar has purchasing power and

value today is because we put our faith in it. We

give the dollar its value by believing that it has

value. Our money evolved from paper money

issued by the government, to money created by

individuals.

Our faith goes even farther than that. We also give

value to another kind of paper called a check. This

piece of paper never had any intrinsic value, but

when we write on it and believe the banks will

honor it, we give it value and purchasing power.

Two-hundred and fifty years ago, the 13 colonies

had not completely worked out the banking

system and the check deposit system. When a

check from Boston was deposited in New York, it

would only be worth 90% of its value because it

was hard for the banks to collect the money from

the Boston banks that were so far away. Today, we

no longer have that problem because an effective

financial system has been set up to give effective

means of transferring money, no matter how large

or small the amount. America not only has an

effective and efficient financial banking system,

but additionally the creation of electronic

exchange and plastic money has pervaded the

country. Today a person may never feel or see any

of their money because it can be deposited

directly into their account and from their account

to others. People can use credit cards and a simple

swipe can transfer funds.

We continue to place our trust in the government

and continue to lend value to the dollar no matter

how far away we move from the gold standard. As

the government needs additional funds to back

their projects and to finance their programs, they

resort to printing fiat money—money with no

backing at all. The government issues promissory

notes in the form of bonds. When the government

sells these bonds, people buy them not based on

any intrinsic value but based on faith in the

government’s ability to pay. As time passes,

America continues to borrow a lot of money to

fund many projects and cover many expenses.

Today, the United States is in debt over 16 trillion

dollars and still borrowing more. The question

that arises is who the United States is borrowing

from and where is their money invested. About

32% of the U.S. debt is owned by the federal

government and is required to stay in trust funds

earmarked to pay social security and other

retirement programs. 32% is a significant amount

but the other 68% is owned by individual

investors, companies, and other governments

(e.g., state and local) including foreign countries.

This may come as a surprise that other countries

can be creditors of the U.S., but according to the

U.S. Department of Treasury, these foreign

countries governments own more than 45% of the

debt.

In recent years, it seems that China has risen to

become a major power in both the world’s political

sphere and economic influence. China is featured

in the news and seen as a country that is growing

economically, producing and exporting, and also

as a strong political power. The United States is

not only as one of the biggest consumers of

Chinese goods, but the United States also

maintains China as one of the nation’s largest

creditors.

Bud Conrad, a macroeconomics researcher,

analyzed interest rates in order to uncover how

the flow of capital from one country to another

affect the interest rates and the economic position

of a country. Conrad found that the deficit of

imports over exports that the nation experiences

today, would have been impossible if the country

was on the gold convertible dollar system (the

system the United States used for most of its

history). The reason, he stated, is that if imports

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rise much higher than exports, one country would

pay the other country gold in order to make up

the difference. As the country had less and less

gold, and the currency was less backed by the

gold, the imports would become too expensive

and the country would have been forced to stop

the imports; thus effectively stopping the trade

deficit. Unlike today, where the country operates

with a fiat dollar currency, there are no limits to

the trade deficit.

America’s yearly current account trade deficit is at

about $660 billion dollars a year and if the country

even attempted to use gold to pay off the trade

deficit, the gold supply would be consumed in less

than two months11. The same study also calculates

the amount of gold needed to fully back all $775

billion of Federal Reserve notes outstanding today

and concludes that the U.S. is in no position to

return to the gold standard any time in the near

future. China continues to help the U.S. dig deeper

into the deficit by loaning the U.S. money to pay

China for their goods and exports.

As the spending of the U.S. grows, the U.S. needs

more money and borrows to cover these costs.

China, as one of the United States’ largest

suppliers of goods, exports more than 500% more

goods to the U.S. than the U.S. exports to China.

Many of the products the U.S. buys are bought on

credit and China continues to buy the U.S.

Treasury bonds and bills.

According to the Federal Reserve, China owns

more U.S. debt than the United States citizens do.

As the third largest holder of U.S. debt, after the

Federal Reserve ($2 trillion) and the social security

trust funds ($3 trillion), China bought over 8%, or

$1.2 trillion of treasury bonds and treasury bills

11 That is assuming that the amount of gold the U.S. has

recorded on its books is correct. It is possible that is incorrect,

because there has not been an audit of their books in decades!

during the “debt crisis of 2011”. China’s purchase

of such a significant amount of U.S. debt has led

many citizens to ask why China thinks that U.S.

debt is a valuable or safe investment.

Generally, the U.S. debt is a safe and stable

investment and has even grown as a result of the

strengthening of the dollar. But in the past few

years, the United States has gone through many

turbulent times, for example, they bailed out

finance firms and large banks who were

threatened by the sub-prime mortgage crises,

where mortgage loans were supplied to many

families who were unable to pay back the loans

and defaulted on the mortgage. This was another

reason that the U.S. decided that more money was

necessary and they issued more treasury bonds,

providing liquidity to financial systems.

The Chinese have a great influence over the U.S.

economy, because they can decide whether or not

n to continue to lend money to the U.S. Interest

rates would increase and it would be harder for

businesses to obtain loans. In addition, if China

turned around and sold off the debt they have

purchased, it would effectively take money out of

the U.S. economy. Many believe that this would be

a calamity for the United States. Removing the

funding and spending power of the U.S. could

affect the country by devaluing the dollar, halting

credit, making credit less accessible, increasing

prices and bankruptcies. All of these factors

together could cause the job market to plummet

and send the U.S. into a depression.

Although in the past five years, China has slowly

lessened their purchasing of U.S. bonds, interest

rates have not skyrocketed and the dollar has not

dropped. Many other economists believe that it

would be impossible for China to pull the funding

out of U.S. as many people fear. Economists show

that if China removed their support of the U.S.

they would harm themselves as the U.S. would be

TAB Journal

in no position to pay back the debt owed to China.

If China forces U.S. to run low on capital, they are

threatening their own country’s stability.

Therefore, China will not take a chance and will

stay far away from harming the U.S. dollar.

It is quite clear that the value of the dollar is very

connected to the faith that people have in its

value. Throughout the history of the U.S. dollar,

the currency has been backed by different means.

At first, it was fully backed by gold and other

metals and at some points it was mainly backed by

silver, but once the country left the gold standard,

the value of the dollar was placed in the hands of

the people. If at any point in time, the nation

decides that the currency is worthless and they

dump it in the street, the dollar bills will truly have

no value. The American currency is simply the

value we place on it and nothing more and

nothing less.

But there is one exception to this rule. The value

of the dollar is what we believe it is, but it is also

what we make out of it. If we treat the dollar as if

it has value, then it will have value. China has the

ability to say that the dollar is worthless, and they

may even believe that, but it would not be in

China’s best interest to take such action or make

such a statement. The U.S. citizens also hold some

power. They may believe that the value of the

dollar is worthless without the gold standard.

However, no matter how many intelligent people

tell us that the U.S. dollar is not worth very much,

our country has the power to ignore it and

continue spending as if the dollar has true value.

References

Barter news. (2011). Retrieved from http://www.barternews.com

Brief history of money in the USA. (2009, August 15). American Monetary Institute. Retrieved from

http://www.monetary.org/a-brief-history-of-money-in-the-usa

CMI gold & silver (2011). Retrieved from http://www.cmi-gold-silver.com/history

Debt crisis of 2011. (2011). Retrieved from http://www.usgovinfo.about.com

Federal Reserve Bank of San Francisco. (2011). Retrieved from http://www.frbsf.org/currency

Federal Reserve Bank of St. Louis (2011). Retrieved from http://www.stlouisfed.org

Gold eagle. (2011). Retrieved from http://www.gold-eagle.com

History of the U.S. currency. (2011). Retrieved from http://www.newmoney.gov/currency/history.htm

Money matters 101. (2011). Retrieved from http://www.moneymatters101.com/money/importantevents.asp

Murse, T. (2011). How much U.S. debt does China really own? Retrieved from

http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-Debt-Does-China-Own.htm

Recent developments. (2011). Board of Governors of the Federal Reserve. Retrieved from

http://www.federalreserve.gov

Ron’s currency stocks & bonds. (2011). Retrieved from http://www.ronscurrency.com

U.S. China treasuries. (2011). Retrieved from http://www.reuters.com/article/2011/06/30/us-usa-china-

treasuries

http://www.monetary.org/a-brief-history-of-money-in-the-usa/2009/08

http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-Debt-Does-China-Own.htm

TAB Journal

Investment Principles

Eric B. Lehmann

Everyone wants to make money. Everyone wants to

beat the market, but not everyone gets what they

want. Historically, equity investments have

outperformed any other asset class in the long-

run. As such, many blindly invest in the stock

market and hope for their millions. They think

investing is a matter of luck, equivalent to

gambling. In their case, they are right. They are

gambling if they invest without doing research. I

am not a gambling man; therefore, I composed my

portfolio based on macroeconomics, fundamental

analysis, and diversification to limit unsystematic

risk. No, you do not always get what you want, but

as the Rolling Stones say, “you can still try”

Strategy and Methodology

We live in a volatile economy; one day the market

may soar while the next day it may plummet.

Therefore, with my bottom-up philosophy I took

numerous precautions to stabilize my investment

in this tumultuous economy.

First, I invested mostly in large cap stocks since

they are known to be the most stable and

established companies. Second, I invested only in

dividend paying stocks because they offer the

most stability even in a down market. Dividend

stocks offer a steady stream of income even in a

downturn, offering downside protection without

compromising its capital appreciation potential.

Third, I sought to develop a portfolio that had a

low risk, but since low risk means low return, I

compromised to create a portfolio with the beta of

1—the same systematic risk as the market. This

will be addressed in further detail in the Risk.

Adjusted Returns section

Above all, diversification is the best defense in any

economy. I chose five stocks which are spread out

in different industries and sectors in the attempt

to limit risk overlap. They are MGE Energy Inc., a

mid-sized utility company; Philip Morris

International Inc., a global tobacco company;

Broadcom Corp., producer of semiconductors and

high-tech chips; Eaton Corp., a diversified

industrial company; and Enterprise Products

Partners, a gas-pipeline company. My investments

are shown in the table below.

MGE Energy Inc.

My first security selection is MGE Energy. MGE

Energy Inc. (MGEE) is a utility holding company

based in Madison, Wisconsin. Its chief holding is

Madison Gas and Electric Co. (MGE), which

supplies electric services to over 139,000

customers and supplies natural gas to

approximately 144,000 customers in Wisconsin.

MGE Energy services a strong local economy, in

fact, Madison’s economy was ranked seventh out

of 366 metropolitan areas in a study conducted by

Holdings Price on

9/4/2012

Portfolio

Weight

Number

of

Shares

Value ($)

MGE Energy

Inc.

49.65 20% 4028 200,000

Philip Morris

International

Inc.

89.44 20% 2236 200,000

Broadcom

Corp.

35.34 20% 5659 200,000

Eaton Corp. 44.75 20% 4469 200,000

Enterprise

Products

Partners

53.88 20% 3711 200,000

Total 100% 1,000,000

Eric is a student at Lander College for Men and is majoring in finance.

TAB Journal

POLICOM Corp. Such a strong economy bodes well

for MGE Energy, since a growing economy requires

additional utility services.

Given our current volatile economy, I believe MGE

Energy is a wise investment because during

economic hardship people continue to use

utilities, and MGE Energy in particular, has a safe

Beta of 0.4. Additionally, it has increased

dividends for the past 37 consecutive years, a

testimony to stable returns for investors.

Fundamental Analysis

I utilized fundamental analysis to pick MGEE.

Below is the table of ratios I analyzed. “Dividends

USD” show the profit the investor realizes while

holding the security.

A vital aspect that should be analyzed in a utility

company is its net profit margin, because

investors care about the after tax profitability of a

company as it may translate into returns for

investors. Since 2009, MGE Energy’s net profit

margin has increased from 9.55% to 11.15%, an

increase of 1.60%. This high net profit margin

compared to the industries rate of 8.5% illustrates

MGE Energy is a profitable company that is

displaying sustained economic growth. What does

the investor gain if he must pay more per share?

So, the next logical ratio to analyze is the price to

earnings ratio.

The price to earnings (PE) ratio is indicative of the

value of the stock, or the dollar-on-dollar worth

of the stock to the investor. From 2009 to 2011

MGE Energy’s PE ratio rose from 16.17 to 17.89.

Such increases can result in capital gains for the

investor. Although the MGE Energy’s PE ratio is

higher than the utility industry PE ratio of 13.9

which may indicate it is more expensive. I believe

MGE Energy’s PE ratio is justified, if not

undervalued, given its track record of sustained

growth and dividend increases. As a matter of

fact, according the Standard & Poor's (S&P) report,

had an investor invested $10,000 ten years ago it

would now be worth approximately $19,393!

The dividend payout ratio is another key ratio to

use in the analysis of utility companies. Utility

companies generally have a high dividend payout

ratio. A high dividend payout ratio may mean

more dividends for investors, but it may also mean

the company has less financial flexibility to

reinvest12 and develop non-regulated business,

and vice versa. In the period from 2009 to 2011,

MGE Energy decreased its dividend payout ratio

from 66.1% to 57.4%. This decrease shows MGE

Energy is retaining cash to further develop and

grow its company. Indeed, MGE recently finished a

$14 million upgrade at the Walnut Substation and

a $2.5 million expansion at the Femrite

Substation, increasing MGE’s capacity and growth.

Also, although the dividend payout ratio is

decreasing do not be deceived, as noted above,

MGE Energy has consistently increased dividends

for the past 37 years and is currently paying an

annual rate of $1.5804 per share.

12

Although some may argue that a company will only have

as high of a dividend yield as they can afford, I am of the

opinion that this is not necessarily so. A company may be

forced to pay high dividends if its income statement is not

impressive enough to attract investors. In fact, the S&P report

is of the opinion that utility companies like to lower their

payout ratio to less than 70%, but not all are able to do so.

MGE Energy 2009 2010 2011

Net Profit

Margin %

9.55 10.84 11.15

Price to

Earnings

16.17 16.28 17.89

Payout Ratio % 66.1 59.5 57.4

Return on Equity

%

10.41 11.24 11.32

Debt to Assets 0.61 0.6 0.62

Dividends USD 1.46 1.49 1.52

http://www.standardandpoors.com/

TAB Journal

Furthermore, the dividend payout ratio decrease is

a result of a share price increase from $35.74 to

$47.23 during this three year period; so the

decrease in the dividend yield just means the

investor gained capital gains instead.

The next aspect that has to be analyzed is the

company’s management. If the management is

poor, the company may suffer. MGE Energy’s

return on equity (ROE) ratio has increased from

10.41% to 11.32% in the past three years, beating

the industry average of 11.1%. This increase in the

ROE ratio shows positive management and bodes

well for investors.

MGE-Energy’s debt to assets (D/A) ratio has been

consistently good, fluctuating between 0.60 and

0.62 in the past three years. This moderate ratio

reflects MGE Energy’s financial stability and its

proper use of leverage to spur growth.

Risk Factors

MGEE bears the same risks as the rest of the

utilities industry, but the utilities industry is

affected by weather. Very cool winters means an

increase in the demand for gas for heating, and

very warm summers means an increase in demand

for electricity to power cooling units. Whatever

type of weather, extreme conditions are beneficial

for the utilities industry. Moderate temperature,

however, is adverse for the industry because

people tend to use less gas for heating and less

electricity for cooling. This decreases the revenues

of utility companies and MGEE too will suffer in

temperate weather. On the other hand, wild

weather can damage MGEE’s plants which will

increase expenses and decrease revenue.

Some of MGEE’s largest expenses are oil, coal, and

natural gas. MGEE must purchase these

commodities in order to service their consumers.

If commodities become more expensive, MGEE’s

expenses will increase. If MGEE chooses to charge

customers more to cover their costs, customers

may be forced to use fewer utilities, thereby

decreasing MGEE’s revenues and gross profit.

Additionally, this increase in utility cost may mean

fewer customers will be able to pay their bills,

thereby increasing MGEE’s bad debt expense.

Furthermore, if prices are high, MGEE may have

trouble signing customers on to long-term

contracts.13

Along with the higher costs that come with a

commodity price increase are many other

associated risks. For example, utility companies

pay for gas when they inject gas into their storing

facilities during the summer, but only receive

revenues when they sell the gas during the winter.

An increase in gas price means MGEE will have to

pay more money up front without being

compensated until the winter. Suffice it to say, oil,

coal, and natural gas prices are a primary risk to

the utilities industry.

MGEE, like most utility companies, is known for its

high dividends. At the time of this investment

Congress was reforming the tax code for the 2013

year. It was expected that Congress would

increase the dividend tax rate, making it less

attractive for investors to invest in high dividend

paying stocks. MGEE would suffer as a result of

this dividend tax code change, since investors may

be less inclined to invest in dividend stocks.

Unfortunately, this risk has been realized to an

extent.

Stock Performance

During my holding period, MGEE increased from

$49.65 to $51.77 and paid a $0.40 dividend, a

total increase of 5.07%. MGEE performed as I had

expected: utility stocks generally promise stable

returns, no matter what the market is like. Below

13

http://www.valueline.com/Tools/Educational_Articles/Stocks/The_Effect_of_Natural_Gas_Prices_on_Utilities.aspx

TAB Journal

is a graph depicting how MGEE performed during

my holding period.

Philip Morris International, Inc.

Philip Morris International (PM) manufactures and

markets tobacco products in the European Union,

Eastern Europe, Middle East, Africa, Asia, Latin

America, and Canada—everywhere but the U.S.A. It

sells a range of brands including: Marlboro, Merit,

Parliament, Virginia Slims, L&M, Chesterfield, Bond

Street, Lark, Muratti, Next, Red & White, and many

local cigarette brands. PM is the largest publicly

traded company in the tobacco industry.


I evaluated PM as a good investment with the

fundamental ratios that are presented in the table

below.

PM incurs high interest expenses since it heavily

uses debt-financing, and also pays high taxes due

to governmental regulations on the tobacco

industry. Both of these reduce PM’s net income.

Therefore, it may be useful to ignore taxes and

interest just to see how well PM is operating. PM’s

operating margin has steadily increased during

the 2009-2011 period: it increased from 40.1% to

42.9%, beating the industry average of 38%. On an

operating basis, PM seems to be becoming

increasingly profitable

Even though operating margin is a good indication

of profitability, it is still worthwhile to check the

bottom line earnings per share (EPS). From 2009-

2011 PM’s EPS increased from 3.24 to 4.85,

greatly surpassing the industry average of 2.5.

This means PM is steadily generating earnings,

which usually translate into capital gains for

investors.

PM is the industry leader in market capitalization,

increasing its market cap from 94.24 to 139.48

billion dollars, while the industry average is only

65.05 billion dollars. Although different investors

may interpret this in different ways, I contend that

large cap stocks are usually the most mature and

stable investments. The greater the market cap,

the greater the safety, which is especially

comforting in the current volatile economy.

Leverage is important for a company to maximize

its return on equity. From 2009-2011, PM’s D/E

ratio has increased from 2.39 to 64.75, and in

turn, its ROE ratio has also dramatically increased.

PM’s increase in debt may increase return, but it is

also alarming as it increases default risk. PM must

be closely monitored in the future to monitor its

interest expense; if it becomes too risky, it may

lose its merits as a conservative investment.

Risk Factors As an international tobacco company, PM is

subject to substantial taxes. Increases in cigarette

taxes have been proposed in numerous countries.

Increases in excise tax, sales tax, and import

Philip Morris 2009 2010 2011 Industry

Avg.

Operating

Margin %

40.1 41.2 42.9 38.0

Earnings Per

Share

3.24 3.92 4.85 2.50

Market

Capitalization

94.24 B 108.46 B 139.48 B 65.05 B

Debt to Equity 2.39 3.81 64.75 -

TAB Journal

duties can adversely affect PM’s sales volume and

profitability in a disproportionate measure to its

competitors because some tax rates are based on

sales price, and PM tends to focus on premium-

priced manufactured cigarettes. In other words,

PM will suffer a higher tax rate than its

competitors because PM sells more expensive

merchandise.

Governmental regulations aimed at decreasing the

use of tobacco products may decrease PM’s share

price. The World Health Organization’s Framework

Convention on Tobacco Control (FCTC) attempts

to regulate the tobacco industry on a global level,

interfering with PM’s global business. It has

enacted and proposed the following: restrictions

on advertising, restrictions on tobacco product

ingredients, restrictions on packaging designs,

restrictions on cigarette vending machines,

restrictions on smoking in public areas and even

in some private areas; requiring the display of

larger health warnings, and the elimination of duty

free allowances for travelers. The FCTC also

attempts to make smoking less appealing to adult

smokers. Combined with diminishing social

acceptance of tobacco usage, this may reduce the

industry’s sales volume and be detrimental for PM.

Furthermore, as the tobacco industry becomes

more regulated, the black market for tobacco may

grow. Counterfeiting, contraband, and cross-

border purchases can further decrease PM’s net

sales.

For numerous reasons farmers may be influenced

to grow less tobacco leaves. This would lower the

supply of tobacco, which, in turn, would increase

PM’s cost of goods sold and decrease PM’s gross

profits. Additionally, climate changes may ruin the

tobacco and decrease the quality of PM’s

products, which would reduce the demand for

PM’s products and decrease PM’s net sales.

Stock Performance

PM decreased from $89.44 to $86.09, probably

due to governmental restrictions in Russia, but

was propped up by a dividend of $1.74. This

illustrates the power of dividends. Overall, PM

decreased 1.80%. Even though PM underperformed

during this holding period, I believe it will be

profitable in the long-run. To the right is a graph

of PM’s performance.

Broadcom Corp.

Broadcom Corp. (BRCM) provides semiconductors

solutions for wired and wireless communications

which deliver data, voice, video, and multimedia

connection to all environments. BRCM’s has a

dizzying technological portfolio including system

on a chip (SoC), which is the platform for

Samsung’s Galaxy Y Series smartphones, and

embedded software solutions. Offering solutions

for the office and home wireless networks, such as

Wi-Fi, Bluetooth, modems, GPS devices, and cable

set-top boxes is just a drop in the bucket of what

BRCM offers.


The ratios which I used to analyze Broadcom Corp.

are presented in the table on the following page:

TAB Journal

Broadcom Corp. 2009 2010 2011

Price to

Earnings

243.9 21.9 17.8

Inventory

Turnover

6.07 6.84 7.12

Debt to Equity 0.22 0.12 0.18

Dividend Yield

%

0.00 0.73 1.23

Broadcom Corp. has a relatively high price to

earnings ratio even for the growth-oriented

semiconductor industry. In 2009 BRCM’s P/E was a

whopping 243.9 due to poor earnings, but since

then it has steadily increased its earnings and

brought its P/E ratio down to 17.8 as of 2011.

Although BRCM had a bad year in 2009, it has

done extraordinarily well since, and as BRCM

continues to grow its earnings and thereby lower

its P/E ratio, it is becoming more of a value stock

than a growth stock. At the P/E of 17.8, I think

BRCM may be undervalued and will snap up to its

appropriate price.

BRCM’s inventory turnover ratio supports this

analysis. From 2009 through 2011, BRCM’s

inventory turnover ratio increased from 6.07 to

6.84, and then to 7.12. This is a healthy turnover

ratio and indicates that BRCM is efficiently selling

its products, which is important in the technology

industry where products can quickly become

obsolete.

BRCM’s D/E ratio has decreased from 0.22 to 0.18

from 2009-2011. At the time of the investment, I

thought this low D/E ratio was good because it

meant a low default risk. However, since then I

have learned that such a low D/E as 0.18 may

mean BRCM is not sufficiently utilizing leverage to

increase its profitability.

BRCM started issuing dividends in 2010 at a

dividend yield of 0.73% and has increased to

1.23% in 2011. This new dividend strategy may

indicate that BRCM has “surplus” cash to payout in

dividends to attract investors. It should be

interesting to observe how this strategy plays out,

but in the meanwhile it increases income for

investors.

Risk Factors

BRCM may be viewed as a growth stock. Its P/E

ratio (at the time of the writing of this project) is

26.21. Even for the growth oriented technology

sector this is considered a high P/E; the

semiconductor industry’s P/E ratio is only 19.5. An

obvious risk is even if BRCM grows, it may not

grow as much as anticipated and it may fail to

justify its high P/E ratio. This may occur for

numerous reasons.

BRCM generates much of its revenue from sales to

a relatively small customer base. For example, for

2011, 2010, and 2009, 42.6%, 38.6% and 34.6%

(respectively) of BRCM’s total revenue came from

its five largest customers. If for some unforeseen

reason BRCM would lose any of these customers, it

would mean a dramatic decline in BRCM’s

revenues.

Additionally, BRCM has received the majority of

their licensing revenue from Verizon Wireless and

Qualcomm. From January 2008 through

December 2011 alone, BRCM generated $753

million from licensing agreements with these two

companies. Recently, BRCM’s licensing agreement

with Verizon Wireless ended, and the Qualcomm

agreement will terminate in 2013. There is no

guarantee that BRCM will be able to replace these

two primary customers. If they fail to do so,

BRCM’s revenues will take an extreme dive.

BRCM competes in the highly volatile

semiconductor industry. As such, BRCM’s stock

can experience extreme highs and lows even in a

short timeframe. From the beginning of 2009 to

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the end of 2011, BRCM’s stock fluctuated from as

high as $47.39 to as low as $15.31 per share.

These vicissitudes were caused by factors beyond

BRCM’s control; if the investors buy and sell at the

wrong times, they may face extreme losses.

The semiconductor industry is also exceedingly

competitive. BRCM must compete with older and

better known companies that have greater name

recognition, lower expenses, and more resources.

BRCM must also compete with emerging

companies which seek to undercut BRCM. In order

to remain competitive, the compnay must be able

to gauge demand, respond quickly to these

changes in demand, develop new technologies,

adapt quickly to technological developments,

introduce new products to the market, and deal

with global economic risks. The industry is fast

paced and demanding; any failure to swiftly

address these concerns could reduce BRCM’s

value.

BRCM relies on third parties to manufacture,

assemble, and test its products. This presents the

risk that BRCM may be unable to control the

quality and timely shipping of their products.

Moreover, if the third parties decide to charge

BRCM higher rates, BRCM may be forced to find

new manufacturers or pay the higher charges.

Stock Performance

BRCM underperformed, dropping from $35.34 to

$34.02, but paid a $0.10 dividend, totaling in a

loss of 3.45%. I cannot pinpoint the cause for this

decline, but perhaps it was due to Qualcomm’s

recent ascent, drawing investors away from BRCM.

Even so, I still retain my position that BRCM

investors will soon see an upward movement. The

graph below is a visual of BRCM’s performance

over my holding period.

Eaton Corp.

Eaton Corp. (ETN) is a diversified manufacturer of

industrial products such as electrical systems,

power management components, truck and

automotive transmissions, and hydraulics. ETN

also services industrial, mobile, and aerospace

equipment. In addition, ETN offers energy

solutions by helping expand traditional and

renewable energy sources.


I utilized the financial ratios presented in the table

below.

Eaton Corp. 2009 2010 2011

Net Profit Margin % 3.23 6.77 8.41

Price to Earnings 28 18.6 11.1

Days Sales

Outstanding

64.47 55.06 53.25

Return on Assets % 2.33 5.54 7.69

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ETN has a very steady Net Profit Margin (NPM)

which is important for an industrial company.

From 2009 through 2011, ETN’s NPM more than

tripled going from 3.23 to 8.41! ETN has been

becoming steadily more profitable which may

translate into capital gains for investors.

ETN’s P/E ratio has been decreasing in

commensurate to its increase in net profit margin,

going from 28 in 2009 to 11.1 in 2011, even

becoming lower than the industry average of 13.9.

This means ETN is becoming a cheaper investment

and investors get more earnings for every dollar

they pay. I believe this low P/E is not a sign of

weakness, but rather an undervaluation by the

market, and I predict that its price will bounce up

to its efficient level.

One concern though, is ETN’s high days sales

outstanding. In 2009 it was at 64.47, but has

since become a more controlled 53.25. The ratio

should be monitored closely to check if ETN’s

accounts receivables continues to become more

liquid; if not, then it may be unfavorable.

ETN’s ROA increased during 2009-2011 from

2.33% to 7.69%. This increase in ROA shows that

ETN’s operating performance is being well

managed and ETN is efficiently using its assets.

Risk Factors

ETN bears the risk of weakening global markets.

As of 2011, 55% of ETN’s revenues were generated

by business outside of the U.S. A weak global

economy may mean less demand for ETN’s

products and services. Moreover, even if the

global markets remain stable ETN still bears

currency exchange risk.

A further risk related to global markets is ETN’s

exposure to emerging markets like Brazil and

China. Operations in these new, foreign markets

increase ETN’s geopolitical and operational risk.

ETN requires commodities, such as iron and

copper, to manufacture its products. Rising

commodity prices means increased costs for ETN.

To offset rises in commodity cost, ETN must

hedge these commodities. However, the

commodity market is extremely volatile, so it may

be tricky to hedge properly; any inability to do so

will increase ETN’s costs and decrease its gross

profit

Stock Performance

ETN was my portfolio’s number one performer,

increasing from $44.75 to $55.02 and paying a

$0.38 dividend; ETN increased by an astronomical

23.8%. This is probably attributed to an overall

increase of the entire industrial industry. ETN’s

price change over my holding period is illustrated

on the table that follows below.

Enterprise Products Partners L.P.

Enterprise Products Partners L. P. (EPD) operates in

the natural gas industry. Primarily, EPD processes,

fractionates, stores, and transports natural gas

and natural gas liquids (NGL). EPD operates

pipelines which transport gas from producers in

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the U.S.A., the Gulf of Mexico, and Canada, to

domestic consumers and markets. EPD has over

14 billion cubic feet of natural gas storage and

50,600 miles of offshore and onshore pipelines.


I used fundamental analysis in picking EPD. The

ratios I used are presented in the table below.14

EPD 2009 2010 2011

Price to Earnings 18.1 36.2 19.5

Gross Margin % 7.6 6.8 6.8

Revenue Mil 25,511 33,739 44,313

Return on Equity % 13.22 3.07 17.43

Debt/Assets 0.93 0.64 0.65

Enterprise Product Partners earnings have

increased from 2009-2011, which is reflected in

its P/E ratio. Its P/E has grown from 18.1 to 19.5;

even so, it is much below the industry average of

28. This low P/E ratio makes it a value stock, and

value stocks have been proven to be the most

stable and profitable investments in the long run.

As EPD’s revenues and P/E ratio steadily grow,

investors can realize capital gains.

One concern is: even though EPD’s revenues have

grown during 2009-2011 from $25,511 million to

$44,313 million, its gross margin has not done

the same. EPD’s gross margin decreased from

7.16% to 6.80%, indicating EPD is suffering from

increased COGS. EPD’s gross margin must be

closely observed for any further decline.

EPD’s ROE should be comforting for investors; it

increased from 13.22% to 17.43% during 2009-

2011. This positive development in the ROE was

caused by EPD’s increase in net income. So,

although EPD’s gross margin has declined, its

14

EPD has been doing consistently well aside from a bad year in 2010. For the purposes of brevity, I will ignore 2010 in my discussion.

increase in net income and ROE should be

promising enough.

EPD’s D/A ratio is also noteworthy. In 2009, EPD’s

D/A was 0.93; meaning only .07 of EPD’s

financing came from equity. However, since then

EPD’s D/A has decreased to a less alarming 0.65.

This shows EPD’s management has been very

aggressive with leverage in the past, and was

successful in bringing it back down to a

maintainable proportion. EPD remains to be a

solvent firm.

Risk Factors

EPD is a master limited partnership and therefore

does not have to pay taxes. At the time of my

initial investment, there was a fear that the tax-

free status would be eliminated and EPD would be

forced to pay taxes in the event of a “fiscal cliff.”

This would negatively affect EPD’s cash flow; cash

available for dividends would decrease, and

subsequently, share prices may drop. However,

Congress has imposed no such taxes, and

according to Wells Fargo, it is unlikely that it will

happen

As an operator in the natural gas industry, EPD is

subject to the high volatility of that industry,

namely, the extreme fluctuations of gas prices.

High gas prices may mean less consumer demand,

and low gas prices may mean gas producers will

not have enough incentive to explore and develop

more gas, which would also decrease EPD’s

business activity. Either extreme may adversely

affect EPD.

EPD is sensitive to declines in economic activity. A

decline in economic activity may reduce demand

for energy commodities such as crude oil and

natural gas. This reduction in demand would mean

there would be less need for EPD’s transportation

services which would decrease EPD’s revenue. A

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decrease in revenue may spur a decline in EPD’s

share price.

A greater-than-expected rise in interest rates may

adversely affect EPD. EPD employs high leverage

as a means of raising capital, and thus incurs

relatively high interest expenses. For the year

2011 alone, EPD’s interest expense was

$744,100,000. Additionally, EPD had

approximately $1.1 billion in long term debt

subject to variable interest rates. An increased

interest rate would increase EPD’s interest

expense, limit cash flow, and may mean a

decrease in dividends paid. Additionally, in the

DDM a rise in interest rates will decrease share

price. Although this may be a systematic risk, it is

of great concern when analyzing EPD.

Stock Performance

EPD decreased from $53.88 to $52.71, but paid a

$0.65 dividend. In total, EPD lost 0.97%.

Nevertheless, I would still hold this stock because

I think it will do well in the coming years. As can

be seen in the graph, EPD may already be on the

rise. EPD’s performance is depicted below.

Portfolio Performance Analysis

Since I did not know which of my five selections

would perform the best, I opted to weight my

portfolio equally and invest 20% in each security.

Overall my portfolio generated profits and

increased by 4.53%. Due to my diversification, my

portfolio was profitable. Had I invested in only one

sector, my portfolio would have been much riskier:

it may have risen like ETN, or it may have declined

like BRCM. Even though it is the percent that

matters, it is still pleasing to see the dollar profit.

On my initial investment of $1,000,000 I would

have made $45,291.69—not a bad profit for just

four months.

Below is a table showing my portfolio weightings

and returns.

zzz

Portfolio Holdings Price Per

Share on

9/4/12

Price Per Share

on 11/13/12

Dividend

Received Per

Share

Holding

Period Profit

Security HPR Portfolio

Weight

Portfolio HPR

MGE Energy Inc. 49.65 51.77 0.40 2.52 5.07% 20% 1.01%

Philip Morris International, Inc. 89.44 86.09 1.74 -1.61 -1.80% 20% -0.36%

Broadcom Corp 35.34 34.02 0.10 -1.22 -3.45% 20% -0.69%

Eaton Corp. 44.75 55.02 0.38 10.65 23.80% 20% 4.76%

Enterprise Products Partners L.P. 53.88 52.71 0.65 -0.52 -0.97% 20% -0.19%

Total - - - - - 100% 4.53%

SPDR S&P 500 141.04 145.55 1.801 6.31 4.47% - -

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It is important to use a benchmark to determine

how one’s portfolio performed in comparison to

the market. The trouble is finding an accurate

benchmark; meaning, a benchmark which

encompasses most, if not all, of the portfolio’s

individual securities. Otherwise, it is an unfair

comparison since the two operate in different

markets; it would be tantamount to comparing a

U.S.A. market to a Korean market. However, no

index that I know of encompasses all of my

security selections. Therefore, although it may not

accurately reflect the market in which my portfolio

operated, I used the SPDR S&P 500 to benchmark

my portfolio. I chose the SPDR over the S&P 500

index because it allowed me to easily incorporate

dividends into the total return, and since the SPDR

mimics the index, it should be a fair replacement.

During my holding period the SPDR increased

from $141.04 to $145.55, and along with a $1.80

dividend, the SPDR gained $6.31, or 4.47%. This

can be seen in the table above. It seems that my

portfolio outperformed the market by 0.06%

(4.53% - 4.47%) but this figure will have to be

risk-adjusted in the next section.

On the next page is a graph comparing my

portfolio to the SPDR.

It is perfectly clear from the graph that my

portfolio followed the trend of the market. Almost

every rise and fall of the SPDR was replicated by

my portfolio. This is explained by systematic risk.

Since my portfolio and the market are affected by

the same undiversifiable risks, such as interest

rate risk and fear of “fiscal cliffs”, they behaved in

a similar fashion.

Risk Adjusted Returns

It would be unfair to say one stock performed

better than another without accounting for the

different risks involved. As noted before, without

risk adjustment, my portfolio outperformed the

market by 0.06%. But, let us now compare returns

according to the Treynor Index which will account

for risk.

First, the beta, or systematic risk, of my portfolio

is 1.004. The beta of each security is shown in the

table below.

Security Beta

MGE Energy Inc. 0.43

Philip Morris International, Inc. 0.90

Broadcom Corp 1.23

Eaton Corp. 1.80

Enterprise Products Partners L.P. 0.66

Average 1.004

On the date of my purchase, September 4, 2012,

the U.S. 10-Year Treasury Notes yielded 1.57%.1

Since this is an annualized figure, my portfolio’s

and the market’s return must be annualized, too.

My holding period was 127 days; so my portfolio’s

4.53% turns into an annualized 13.02%, while the

market’s 4.47% turns into 12.86%.

The Treynor Index is calculated as follows: (RP –

RF) / β, where RP is the portfolio return, RF is the

risk-free return, and β is the systematic risk of the

portfolio. My portfolio Treynor Index is therefore

[(13.02% - 1.57%) / 1.004] = 0.1140, while the

1 Obtained from Marketwatch.com

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market’s Treynor Index is [(12.86% - 1.57%) /

1.00] = 0.1129. This is shown in the table below.

Risk Adjustment Return Beta Treynor Index

Portfolio 13.02% 1.004 0.1140

Market 12.86% 1.000 0.1129

Even with risk adjustment my portfolio still beat

the market by 0.0011 in the Treynor Index,

although by a smaller margin since my portfolio’s

beta is 0.004 greater.

Additionally, according to Jensen’s Differential

Rate of Return Measure, my alpha was

0.002017646. This shows that with my

management, I was able to produce a portfolio

risk premium that was slightly greater than the

market risk premium after accounting for risk.

Conclusion

This project was invigorating and stimulating.

Throughout the process of this investment

simulation I learned a lot about the market. I

learned what to look for and where to find it.

Overall, I feel more confident to pursue a career in

equity research.

During this project I also learned a lot about

myself: which securities I am drawn to, and about

my conservative investing personality, which I am

now more aware of in other areas of my life, too. It

amuses me that my last stock pick (Eaton Corp.)

which I was the least fond of due to its high risk,

also generated the highest returns.

Additionally, I was shocked that with all of my

research and diversification, my portfolio only

narrowly beat the market. Nevertheless, I still

agree only with the weak-form of the efficient

market hypothesis, and I trust that with a longer

investment holding period I can justify my

skepticism towards the semi-strong and strong

form of the EMH. Let us hope I do not have reason

to convert. No, not everyone gets what they want,

not everyone makes money, and not everyone

beats the market, but I am glad I tried and did.

TAB Journal

Equity Portfolio for the 21st Century

Rafi Mahilnitski

2013 was a great year for the stock market. The

Dow Jones Industrial Average added over 20% and

the NASDAQ rose over 30%. At this time, should

investments be held or is it time to sell? Two

authoritative investors have different opinions on

this point. Carl Icahn warns that stock market

could face a “big drop” while Warren Buffet thinks

that stocks are in “zone of reasonableness”. In my

view, it is never too late to invest in a company if

you think that it has potential, good business

model, and good leadership. In such cases the

price of the company may eventually go up, but in

the short-term the macroeconomic situation may

significantly slow this process down.

In order to build and diversify my fictitious

portfolio, I decided to invest in five companies in

different industries. The diversification may

compensate for the underperformance of a

particular industry. I also tried to pick a company

with a “healthy” balance sheet and a history of

growth in its stock price. In addition, I tried to find

stocks that pay dividends so I would be able to

have some income while holding the stocks. I

picked companies with very large capitalizations,

because these companies are safer. The selected

companies included: General Electric (GE),

Microsoft (MSFT), Nike (NKE), Home Depot (HD)

and Starbucks (SBUX).

Security Selections

I chose five different well-known companies from

different industries that have large market

capitalizations, and are the leaders in their

industries. I picked companies I know and like

after analyzing their balance sheets. I looked

mostly for their potential to grow. I believe that

people invest in the stock market for profit and

not primarily for a dividend income. Still,

companies should pay some sort of dividend in

order to keep people from selling their stock. I

invested equal amounts in each company.

Nike

Nike is the largest seller of athletic footwear,

apparel, equipment, and accessories in the world,

It sells more than 1 million pairs of shoes every

day. Brands such as Hurley, Converse, and Air

Jordan are well-known Nike brands. Nike

diversifies its products beyond developing and

selling shoes. It sells equipment for the majority

of the sports industry which includes; basketball,

soccer, football, fitness, running, golf, tennis, and

many others sports. The company also has its own

clothing line; it sells socks and coats, and much

more, while focusing mostly on athletic-style

clothing. Since the beginning of 2012, Nike

replaced Reebok as the NFL's licensed-apparel

maker in a five-year deal. It provides uniforms for

the U.S. national basketball team and for over a

dozen of national soccer teams, athletes, and

clubs. Nike has the endorsements with LeBron

James, Roger Federer, Rafael Nadal, Tiger Woods,

and Rory Mcllroy among many others.

One of the biggest Nike’s agendas is innovation.

Nike tries to integrate technology. It released its

Fuel Band which allows athletes to count both the

number of steps one makes every day and the

calories one consumes. Nike’s new Flyknit

technology uses an ultra-light thread to create a

single-layer upper that eliminates overlays,

reduces weight, and minimizes waste. Nike also

sells an iPod Sensor, a little device which is located

inside the sneaker and interacts with the iPod.

Rahy is a student at Langer College for Men and is majoring in accounting.

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This company was started by Bill Bowerman, an

American track and field coach, in 1964. Now,

Nike employs over 40,000 people around the

world. Nike owns 753 retail stores, 303 of them

are located in the United States. North America

still gives Nike the opportunity to grow; Earnings

before interest and taxes for the North American

segment of Nike grew 25% in fiscal year 2013.

According to “The World’s Most Powerful Brands”

list, by Forbes, Nike takes 26th place, and is the

most powerful apparel brand. It nearest

competitor, Adidas, is only number 53. According

to “Global 2000” list by Forbes, Nike’s sales are

ranked #369 in the world, and its profits are #242

in the world.

In the era of technology, more people prefer to

shop online from home; and Nike online store

combined more than 70 brands into one single

destination for people to order almost every Nike

product. Nike’s DTC (direct to consumer) business

grew an impressive 31% last year. Nike Inc. is

planning to expand its business all over the world,

and especially in Brazil, Russia, India, China, and

South Africa (BRICS)`. In the next 10 years, one

billion consumers are going to enter the middle

class, and the vast majority of them will be in the

BRICS countries.

Financial Ratio Analysis

Nike has recorded very strong financial

performance in the period from 2009 – 2013; Nike

stock rose 95% compared to the S&P 500 Index’

30%. In fiscal year 2013, revenues from

continuing operations grew by 8%, and diluted

earnings per share grew 11%.

Operating profit margin is important for every

type of business; it shows how well the

management does its job to sell the product.

Nike’s operating profit margin is significantly

higher than the average for this industry. It is

twice as big as Adidas’. In the last ten years, this

growth has been in the 10 - 13% range.

Nike’s current ratio is 3.47. Nike’s closest

competitor, Adidas, has a current ratio of only

1.57. This company is quite liquid. Inventory

turns over 4.3 yearly. This ratio is very important

for the retail industry, since it sells products to the

customer. Although this ratio is slightly lower

than last year, it is still a “healthy” number, in my

opinion.

Earnings per share grew 11%, demonstrating a

substantial growth. In the last five years, its

compound annual growth rate was 8%, which

shows that the company’s profitability increases

annually.

Risk Factors: Competition and Exchange

Rates

Nike is a highly competitive company and

dominates the athletic footwear market. Nike’s

success depends on marketing and must adapt to

a rapidly changing media environment. Changes in

the U.S. dollar’s exchange rate could possibly

harm Nike’s financial stability; the weakening of

the dollar might cause an increase in the price of

manufacturing overseas.

The majority of Nike’s factories are located in

China, Thailand, South Korea and Vietnam; only

Nike 2013 2012

Earnings Per Share (EPS) $2.69 $2.42

Current Ratio 3.47 3.05

Inventory Turnover 4.3 4.5

Operating Profit Margin 12.86% 12.6%

TAB Journal

8%1 of its factories are located in the United

States.

Microsoft

In the era of technology, I could not avoid placing

at least one technology stock in my portfolio.

Microsoft is a software giant. Approximately 75%

of all personal computers, laptops, and cellphones

have an operating system developed and licensed

by Microsoft. Its key products are: Microsoft

Windows Operating System, Xbox, Microsoft

Office, Windows Server, Bing, Skype, and recently,

Surface.

The Microsoft Business Division currently brings

31% of the company’s total revenues. Microsoft

key product in this division is Microsoft Office,

which is virtually ubiquitous. Microsoft Office has

no real competition in this sphere. Although

Apple and Google provide free software, they still

cannot compete with Office.

The second biggest contributor to the revenue is

the Windows division, which contributes 25% of

total revenue. The only competitor Microsoft has

in this industry is Apple. However, Apple does not

allow computer manufacturers use their OS on

their computers. It only installs the OS on Apple

computers. Their market share is seven times

smaller than Microsoft’s.


The payout ratio indicates the percentage of the

company’s net income, which is paid to the

shareholders as a dividend. Microsoft has a

slightly volatile dividend payout ratio with a

standard deviation of 6.5 percentage points. Even

though that this ratio seems to be volatile, it is

still very good compared to the industry. The

technology industry happens to have mostly

growth stocks, rather than dividend generating

1 According to Nike Manufacturing Map Nikeinc.com

stocks. Google and Facebook do not pay dividends

at all, and Cisco and Apple just started to pay

dividends.

Microsoft’s net profit margin grew from 23% in

2012 to 28% in 2013. This is higher than Apple

and Google (Microsoft’s closest competitors).

Apple's margin is only 21.67% and Google's

21.40%. The company should continue to grow

because it will have more retained earnings to

reinvest. Furthermore, stockholders may also

receive higher cash dividends. Microsoft has

managed to reduce its operating expenses from

last year.

Current ratio is important for Microsoft, since it

has a lot of expenses that it needs to pay them on

monthly basis, such as salary. Microsoft employs

approximately 99,000 employees. 37,000

employees work in research and development,

26,000 in sales and marketing, and another 9,000

in general and administration. Since these jobs

require huge labor expenses, any shortfalls may

likely cause the stock price to drop and damage

company’s reputation.

In order to pay dividends to the stockholders, a

company must have cash. That is why it is very

important to have a current ratio above one.

Microsoft places in the middle of its industry

average.

Microsoft returned 30% on its equity as measured

by net income versus equity. This is slightly above

the industry average. In the last five years

Microsoft spent $36.3 billion in share repurchases.

The return on equity has been above 20% for the

last eight years.

MSFT 2013 2012

Payout Ratio 34.5% 38.1%

Net Profit Margin 28.08% 23.03%


ROE 30.09 27.51

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The Home Depot

Home Depot is the world's largest home

improvement retailer; it sells building materials,

home improvement and garden products. As of

the fiscal year 2012, Home Depot had 2,256

stores throughout United States and more in

Canada and Mexico.

Products

A regular Home Depot store stocks about 40,000

products during the year. Home Depot also offers

600,000 products through its website. As an

industry leader, Home Depot provides consumers

a selection of environmentally preferred products

that help to save consumers money.

The Home Depot stores serve three customer

groups. "Do it Yourself Customers” - home owners

who buy products and complete their own projects

and installations. "Do It for Me Customers” - home

owners who buy materials themselves and hire

third parties to complete the project or

installation. And “Professional Customers”- these

customers are primarily professional general

contractors, repairmen, and small business

owners. Home Depot provides professional

customer service for every group of its clients.


Inventory turnover is very important. Customers

want to see fresh product. Home Depot's

inventory turnover has grown; clearly,

management understands its consumers. Sales

per square foot ratio of $319 has grown slowly

but steadily. This measures management’s

efficiency, in facilities usage. The reason for such

impressive performance in this area could be due

Home Depot’s large investment in inventory

management software.

The current ratio of 1.34 is lower than last year

and uncomfortably close to one. In the last five

years current ratio of the company slightly

increased; it is understandable that Home Depot

has a relatively low current ratio, since the retail

chain has to pay rent, salaries, utilities, and $5

billion in accounts payable. Home Depot's current

ratio, nonetheless, is still a bit higher than its

closest competitor, Lowe’s Companies, whose

ratio is 1.27.

The net profit margin for 2013 was 6.1% and has

increased from year to year at a rate of 18%.

Earnings per share have increased by

approximately 50 cents every year. The company

more than doubled its earnings per share in the

last four years. Lowe's earnings per share are

almost half of Home Depot’s.

HD 2013 2012

Inventory Turnover 4.65 4.40

Sales per Square Foot 319 299



EPS $3 $2.47

Starbucks

Starbucks Corporation is a coffee retailer

operating in 61 countries. Starbucks purchases

and roasts coffee that it sells, along with tea,

juice, and other beverages. By the end of 2014,

Starbucks anticipates having 20,000 stores on six

continents. Starbucks is also planning to open

3,000 new stores in the U.S. in the next five years.

It has 200,000 employees.

Starbucks tries to enhance its customer

experience, by creating a loyalty card program,

and by keeping it customers informed using social

media. Starbucks currently has 35 million

Facebook fans, 5.5 million Twitter followers, and 7

million users using Starbucks’ mobile app.

Starbucks goes beyond just being a coffee shop,

TAB Journal

by bringing Verismo System, a coffee machine for

home that lets customers make coffee at home

using Starbucks K-Cups. In 2012, Starbucks sold

more than 500 million of K-Cups.

The company tries to expand its stores by adding

La Boulange bakery products, and Evolution Fresh

high quality premium juices, which shows its

commitment to health and wellness. Starbucks is

also bringing Teavana tea brand to the stores, and

will be opening tea bars in the stores. “Coffee

Giant” scores #76 on the World's Most Valuable

Brands list compiled by Forbes in 2012. The only

restaurant company that is ahead of Starbucks is

is McDonald's.


Starbucks’ operating margin is 15%, and has

increased from year to year. The reason for the

better margin could be the high prices of

company, or reduced expenses. Earnings per

share grew 17 cents since last year to $1.79. In

the last five years, earnings per share quadrupled.

During the last five years, the company had a very

stable assets turnover ratio of 1.7. The dollar

amount of assets is growing also, because the

sales growth is about 10% a year, therefore assets

growth rate is very similar. It is interesting that

Dunkin Brands, the closest competitor of

Starbucks, has a total asset turnover rate, which is

merely one-eighth of Starbucks’.

Starbucks enjoys annual revenue growth of 13.7%.

The company not only opens more stores but sells

more products as well. On the Starbucks’ chart, we

may see that the company’s growth reached

record high levels. We may also see that the

company had a revenue decrease in 2009 due to

the global economic downturn.

External Circumstances

In the September of 2013, the Chinese

government and media openly criticized Starbucks

for its price policy in the region. The reporters

accused Starbucks of charging $4.40 for its

middle-sized latte, while the price for the same

drink in the U.S. is only $3.20. This accusation

harmed Starbucks’ popularity in China, and, as

result, could cause a decrease in revenue from the

region.

Starbucks’ CEO, Howard Shultz, said that the

company would not cut health insurance benefit or

reduce working hours for employees,in order to

avoid health insurance to it workers due to

“Obamacare”. The coffee chain has a unique

policy, where even part-time workers are eligible

for insurance. In 2010, benefits cost the company

$300 million, more than it paid for coffee. High

health insurance for employees might result in

lower net income.

General Electric

General Electric (GE) is one of the biggest

companies in the world. It specializes in eight

industrial businesses, including advanced

manufacturing services, industrial Internet, and

leading natural gas technology. Advanced

manufacturing includes 3D printing and high

performance computing. The industrial Internet

helps to run a service business through smart

machines. The CEO of the company, Jeffrey R.

Immelt, positions GE as the biggest infrastructure

company in the world.

GE works in 160 countries with 305,000

employees worldwide; 131,000 of them in the U.S.

This is just a little glimpse of what GE does, the

company is all over the world, and produces from

SBUX 2012 2011

Operating Margin 15% 14.5%

EPS $1,79 $1,62

Total Asset Turnover 1.71 1.70

Revenue Growth 13.67% 9.27%

TAB Journal

microwaves, dryers, and dishwashers to marine

engines, diesel marine power, and mining

equipment. The list of the company's products

and services is so big that it will take more than a

page of my report to list all the products. They

could be viewed on the company website. The

company is so big that it does not compete with

any one organization as a whole business, rather it

competes with many different companies in every

segment.

Access to shale gas is opening new possibilities

for energy use, and GE is involved in almost every

aspect of this “Shale Revolution”. Natural gas

could be a game changer for the U.S. and maybe

globally, and GE is the leader in this industry. The

company is going forward, and uses the next

generation materials. GE's newest jet engines use

new material to reduce weight, improve fuel

consumption and lower maintenance. General

Electric has major investments in software &

analytics. The company has a Software and

Analytical Center of Excellence in California, where

employees work on the power of the industrial

Internet. They try to improve performance of

assets by at least one percent; improving asset

performance by one percent can add $20 billion of

profit annually.

One of the companies, which has a very big

influence on GE's success, is Boeing (BA); because

GE builds engines for Boeing. With a new model of

Boeing 777x, Boeing received $95 billion in

orders. Right now GE’s aviation segment accounts

only for 20% percent of revenue, but it will grow.

The $95 billion deal is just the beginning for

Boeing, with three airlines (Emirates, Qatar, and

Etihad). When Boeing will start selling 777x to

U.S., Asian, and European airlines, the orders of

GE's engines will keep growing. Forbes ranked GE

#7 on the Most Valuable Brands chart, and #4 on

the Global 2000 chart.


GE’s net profit margin was 9.26% for 2012; in the

last three years, the net income profit margin

experienced 10.7% growth. Return on assets ratio

of 1.95% grew very steady, excluding the year of

2008, when the world’s economy suffered a crisis.

GE has hundreds of plants with very expensive

equipment. Other big, technology companies have

return on assetss of about 20%, but do not have as

much hard assets like buildings and plants as GE.

GE has extremely high dividend payout ratio of

50%. The stock’s dividend yield is 2.80% annually.

The debt to assets ratio is 0.82, indicating very

high indebtedness. Our chart shows that the

company is going in the direction of being more

solvent, by reducing the debt to total assets ratio

by one percent every year.

GE 2012 2011


ROA 1.95% 1.79%

Dividend Payout Ratio 50.35% 49.19%

Debt/TA .82 .84

Some Risks

General Electric is so diversified that it represents

mostly systematic risk. If the economy is not very

good, the company might be harmed, as we saw

during the recent 2007-2008 financial crisis; GE’s

company stock declined by more than 60% percent

(from $30 to about $10). The company has half of

one trillion dollars in debt, with annual revenues

of $140 billion. In contrast, Siemens, German

company in similar industries, has revenue of $94

billion with only $24 billion in debt.

Relative Stock Performance

In this section, stock performance of the five

companies is compared. Nike grew 17%, ranking

the best in this portfolio. There are two factors

which caused the company to grow; one of them is

TAB Journal

the overall market performance, market was doing

very well this fall, since the economy was

improving. The second reason is that the company

itself is doing well financially, it has very

aggressive marketing strategy. Nike keeps

developing new products, like Smartwatch, and it

is growing its presence in developed markets each

quarter. In the end of last December, Nike

announced it earnings for the quarter; it showed a

significant financial gain compared to the 4th

quarter in 2012.

Microsoft stock’s price grew 15% until the last year

and for 13 years the company’s price barely

increased. The last time Microsoft’s price was

above $38 was 14 years ago. Microsoft increased

its market share on Smartphone by other 200%

this year.

The Home Depot gained 9.5%, not as much as

Microsoft, Nike, or GE and less than the S&P 500

index. Therefore, in my opinion, Home Depot was

not a very successful selection for my portfolio. I

ignored the growing competition from Lowe’s, as

some experts assert. The reason Home Depot’s

price did not grow much it is because the

company’s earnings per share were $3.72, which

is slightly lower than the estimate of $3.74.

Improvement of housing market data is good

news for Home Depot; it will bring in a lot of

customers.

Starbucks performed worse than any other stock

in my portfolio, it only gained 5.87%. One of the

reasons for such poor performance is the criticism

of the prices in the coffee shops by Chinese

government. A $2.76 billion fine to Kraft also held

the shares from growing. I think this company will

continue to bring in higher revenue and income as

it grows to more countries. It is also introducing

new grocery and fresh juice sections that will be in

the stores in the next few years.

GE gained almost 17% over the last three and half

months, at the time this paper is being written.

Boeing, for whom GE makes jet engines, received

huge number of orders from airlines. In my

opinion, this company reflects the macroeconomic

situation of the U.S.; therefore if the country is

doing well, then the company’s price should

follow.

Throughout the course semester (Fall 2013), this

portfolio appreciated by 12.8%, which is 2.4%

higher than the S&P 500 gain of 10.4%. I picked

the S&P 500, for my benchmark, as opposed to

Dow Jones Industrial Average or Nasdaq

Composite, because I think 500 companies can

better reflect the entire market. The market was

almost as volatile as my portfolio, since all of

them had different risk factors all my stocks were

weighted at 20% of the portfolio each.


Symbol

Last price as of

12/27/13

$

Initial Price as

of 9/9/13

Market Value

as of 9/9/2013

$

Weights Gain in

%

Gain in

$

General Electric GE 27.83 23.87 1,000,009 20% 16.59 165,900

Microsoft Corporation MSFT 37.29 32.39 1,000,008 20% 15.13 151,282

Starbucks Corporation SBUX 78.57 74.22 999,972 20% 5.86 58,607

Nike Inc. NKE 78.16 66.82 1,000,028 20% 16.97 169,714

The Home Depot HD 81.64 74.6 1,000,013 20% 9.44 94,371

12.80 $639,876


TAB Journal

Risk-Adjusted Return

I utilized the Treynor Index to adjust for risk. My

portfolio’s beta is slightly higher than one, which

makes it more risky than the market. Therefore

my portfolio should produce a higher return. I

used Treasury-bills as the risk free instrument.

The rate for T-bills as of December 2013 was

0.05%2 We may see that my portfolio Treynor

Index is 11.68%, while the market Treynor index

will be 10.35% (11.40 - .05). The Treynor index of

my portfolio beat the market by approximately

1.30%, which is slight but and noticeable.

Conclusion

This portfolio was my first serious financial market

experience. I picked companies that I hear in the

news and researched them. Before embarking on

this project, I felt that it is extremely easy to earn

a high return on stocks, but after this project I am

not so naïve anymore. I saw how systematic and

unsystematic risks operate, and now understand

better the roles of systematic factors like tax

rates, healthcare reform or foreign exchange rate

scan benefit or harm the company.

When I was first introduced to the efficient market

hypothesis, I thought that this theory does not

work at all. But now looking at my risk-adjusted

return, I can relate to the “weak form” of this

theory. Although I still hope that semi-strong

2 Retrieved from FederalReserve.com

form does not work, I am not so sure looking at

my returns.

I also think that diversification is a very safe

approach for somebody who does not want to lose

any money. But for somebody who wants to strike

it rich it is probably not the best strategy. The

greatest investor of all time, Warren Buffet, seems

to agree with me that when investors do not

understand what they are doing they pursue wide

diversification. My portfolio outperformed the

market on a risk-adjusted basis, but I still need to

learn a great deal in order to become the next

Warren Buffet or Peter Lynch.

Finally, I must thank, my professor, Dr. Kenneth

Bigel for his encouragement and invaluable

assistance.

Stock Symbol Return 3 month

Treasury Bill

S&P 500

Return Beta

Treynor

S&P 500

Treynor

Index

Alpha

GE 16.59% 0.05% 10.40% 1.81 10.35% 9.14% -2.19%

MSFT 15.13% 0.05% 10.40% 0.96 10.35% 15.71% 5.14%

SBUX 5.86% 0.05% 10.40% 1.09 10.35% 5.33% -5.47%

NKE 16.97% 0.05% 10.40% 0.95 10.35% 17.81% 7.09%

HD 9.44% 0.05% 10.40% 0.90 10.35% 10.43% 0.08%

TOTAL 12,80% 1.14 10.35% 11.68% 0.95%

TAB Journal

Sports Apparel Licensing

Simcha Himmel & Abraham Weiser

Although the earliest known use of “brand

licensing” comes from the Middle Ages – when the

Popes granted regional “tax collectors” licenses to

associate themselves with the Vatican in exchange

for royalties – modern merchandising began in the

1870s (“The History of Licensing”, 2013). Brand

licensing and merchandising is a business

arrangement where a licensor (property right

holder) permits a licensee (manufacturing

companies) to manufacture products carrying the

licensor’s logo or trademark, in exchange for fees

called royalties (Kwon, Kim, & Mondello, 2008).

Licensing is a subcategory of co-branding (i.e.,

when two, generally known, brands combine to

create a new product bearing both brand names)

where a licensee wants to attach a well-known

brand name or logo to its product (Leuthesser,

Kohli, & Suri, 2003). The retail sale of licensed

merchandise in the U.S. and Canada in 2005 was

$71.21 billion, of which sport licensed

merchandise comprised 19% (Kwon et al., 2008).

The objective of this paper is to survey the

modern history of brand licensing, delineate its

benefits and potential detriments, and discuss

brand licensing as it applies to Under Armour Inc.,

a sports licensing and sportswear manufacturer

(NYSE:UA). This paper will examine the above

issues from the licensee’s perspective, and not

from that of a licensor. This area of marketing is a

particular interest to the authors (both of whom

are Marketing Majors and avid sports fans),

because of the limitless applications and win-win

propositions co-branding and brand licensing

seem to offer.

Brand Licensing Modern History The use of brand licensing in merchandising

started in the 1870s with Adolphus Busch (original

partner in beer brewer, Anheuser Busch) allowing

the manufacturer to produce and sell a wine key

bearing the BUSCH name (“The History of

Licensing”, 2013, “History”, 2013). Peter Rabbit is

believed to the oldest licensed character – licensed

around the turn of the 20th century. In the late

1920s through the 1930s, there was the creation

of well-known and well-licensed characters, such

as, Winnie The Poo, Mickey Mouse, the Loony

Tunes (i.e., Bugs Bunny, Daffy Duck, Porky Pig,

Elmer Fudd, Sylvester, Tweety, Marvin the Martian,

Taz, Wile E. Coyote, & Road Runner), and

Hopalong Cassidy (“The History of Licensing”).

The 1930s were significant in their contribution to

major brands of today. In 1932, there was the

creation of DC Comics first limelight superhero,

Superman. Kay Kamen also joined the Walt Disney

Company, and became “The Father of Modern

Licensing”. Starting with Mickey Mouse, Kamen

was responsible for Disney’s highly successful

licensing approach. Macy’s in New York sold a

record high of 11,000 timepieces [watches] with

the Mickey Mouse image in one day (“The History

of Licensing”, 2013, p. 5). And besides the

“classic” Disney characters we all know and love,

there was also a well-known Marvel Superhero

(“The History of Licensing”, 2013; Walt Disney Co;

Krantz, Snider, Della Cava, & Alexander, 2012).

Marvel, which has been licensed out to movie and

television producers and to action figure makers,

was co-branded with LEGO and includes

characters such as, Spider-Man, Iron Man, the X-

Men, Wolverine (the most famous X-man), the

Hulk, the Fantastic Four, Captain America, Silver

Surfer, Thor, etc. Marvel began as Timely

Publications in 1939. Marvel’s competition

Simcha and Abraham are student at Lander College and are majoring in marketing.

TAB Journal

included DC Comics (whose Batman character was

also born in 1939) and Superman, who made his

first appearance in the Macy’s Day Parade in 1940.

By 1942, during the World War II, the Superman

comic sold over 1.5 million copies. It was a

standard military issue offered to the U.S. Marines

stationed in Midway (“The History of Licensing”,

2013).

The 1940s introduced Archie Andrews, Thomas

the Tank Engine, and NASCAR (National

Association for Stock Car Auto Racing). Highly

popular below the Mason-Dixon Line, NASCAR

grew to 75 million fans. As a result, today, it

purchases over $3 billion in licensed products

annually, particularly focusing on licensed apparel

(“The History of Licensing”, 2013).

The 1950s saw an explosion of brand licensing

including Peanuts and Met Life’s licensed Snoopy

dog; James Bond, the first licensed celebrity

property; Elvis Presley, who set the benchmark for

celebrity licensing programs; Kermit the Frog; the

Flintstones; Scooby-Doo; the Smurfs; Paddington

Bear; and Barbie. Also in this decade, sports

merchandising began with Pete Rozelle and the

Los Angeles Rams. Rozelle, went on to have a stint

as a commissioner of the NFL (National Football

League), and licensed L.A. Rams products to raise

additional needed cash (“The History of Licensing”,

2013).

In the 1960s (1963 precisely) NFL Properties, the

first licensing division in professional sports, was

formed, triggering the formation of Major League

Baseball (MLB) Properties in 1966 and NBA

(National Basketball Association) Properties in

1967. NFL Properties, which controls licensing

rights for all NFL teams and the Super Bowl,

currently accrues over $3 billion in licensing deals

per year. Other trend setting brands from the

1960s include the Beatles, G.I. Joe, and Sesame

Street (i.e., Oscar the Grouch, Big Bird, Ernie and

Bert [and the iconic yellow rubber duck who makes

bath time so much fun], and Elmo]) (“The History

of Licensing”, 2013).

The biggest brand of the 1970s (in the authors’

opinions) was the Disney owned and produced

Star Wars Movies (written and directed by George

Lucas) in addition to Star Trek, Hello Kitty,

Garfield, and Strawberry Shortcake (“The History of

Licensing”, 2013).

The 1980s brought about the licensing of major

corporations: Coca-Cola, Harley Davidson, Pepsi,

Coors, and John Deere, and the characters Barney,

the Mars M&M’s characters, Teenage Mutant Ninja

Turtles (published by Mirage studios and bought

by Nickelodeon) and the movie E.T. The movie

introduced the concept of product placement

within movies and T.V. shows by including E.T.’s

favorite candy, Hershey’s Reese’s Pieces. The

grass roots of the Martha Stewart brand were also

planted in the 1980s, but the decade’s biggest

contribution to the licensing was the formal

recognition of the brand and character licensing

industry. The first “licensing show” was organized

by Expocon in 1981, and the first industry related

association, The Licensing Association, whose

members comprised of property owners and

licensors, was formed in 1982. The Licensing

Merchandiser’s Association was created in 1984

by manufacturers and licensees in response to

their counterparts’ association. Both organizations

merged to form the Licensing Industry

Merchandiser’s Association (LIMA). The licensing

of collegiate sports apparel began in the 1980s

with a licensing agreement between the University

of Pittsburgh and Champion (“The History of


The 1990s continued many licensing trends, with

more licensed television characters for kids (i.e.,

the Teletubbies, Dora the Explorer, and Bob the

Builder), Nickelodeon’s Spongebob Squarepants,

TAB Journal

the Mighty Morphin Power Rangers, and another

crew of teenage Ninja and Samurai. The decade

also included: publicizing children’s books, such

as Goosebumps and the overly rated Harry Potter;

T.V. shows; trading cards; and the second most

successful video game-based franchise of all time,

Pokémon (“The History of Licensing”, 2013).

While licensing in the 21st century did not bring

about as many novel brands, it focused more on

brand extension (“The History of Licensing”,

2013). Five movies based on Marvel’s Hulk were

released, as were four Spider Man movies, three

Iron Man ones, Captain America, “The First

Avenger,” The Avengers, two Thor’s, six X-Men,

two Ghost Rider’s, two Fantastic Four, plus a

whole slew of licensed T.V. series based on Marvel

characters (“The History of Licensing”; Marvel

Movies). Lucasfilm released “Star Wars: Episode III

Revenge of the Sith” based on the sixth and last

episode of George Lucas’s “original six” (not to be

confused with the NHL’s Original Six).

In 2008, the Batman movie, “The Dark Knight” was

released by Warner Bros (“The History of

Licensing”, 2013). The 21st century also had

record deals and endorsements with sports

celebrities. Many of whom earn more from

licensing and endorsements, than they do from

their contracts. They included soccer star David

Beckham, golfers Tiger Woods and Phil Mickelson,

a basketball star LeBron James, a baseball star

Alex Rodriguez, Ichiro Suzuki, the first Japanese

player in the MLB, and a tennis champion Rodger

Federer (“The History of Licensing”; Roberts,

2013).

Here are the top ten sellers of licensed products

(by nominal quantity) as reported by License

Magazine in 2009: Disney Consumer Products,

ICONIX, Warner Bros., Consumer Products, Marvel

Entertainment, Nickelodeon & Viacom, MLB,

Philips-Van Heusen, Sanrio, Collegiate Licensing

Company, and Cherokee Group (“The History of


Advantages and Disadvantages of

Licensing and Co-branding

In general, like all business enterprises, there is a

certain level of risk and reward to being a licensee.

Licensing is beneficial to a licensee if it a) saves

costs; b) improves the licensee’s brand image; c)

differentiates the new product; d) facilitates

opening business channels for the licensee; e)

increases sales; and f) confers a competitive

advantage. Many of these conditions are

interrelated and they are discussed next.

The first condition addresses cost savings.

Licensing can save costs, because the licensee

gains consumer awareness. It benefits from the

well-known brand, character, logo, or a design, by

tapping into the brand’s loyal followers (Licensing

Industry Merchandiser's Association; McKee,

2009). This is free publicity and advertising to

increase sales. Another reason licensing may lower

costs is by allowing the licensee to eliminate the

need for an in-house art staff (Licensing Industry

Merchandiser's Association, p. 2). This is obviously

a benefit, because it gives the licensee the option

to increase profitability and gain a competitive

advantage by lowering prices. Furthermore, if the

licensee lowers its prices to gain a competitive

advantage, its market share and sales may

increase.

The second condition is whether the licensing will

improve the licensee’s brand image. If co-

branding and licensing enhance the brand’s

authenticity and credibility, then consumers will

be more willing to recommend the brand and

accept brand extensions (Del Rio, Vazquez, &

Iglesias, 2001); which can result in more sales and

a more receptive network of large distributors to

work with (Licensing Industry Merchandiser's

TAB Journal

Association). Studies conducted by Saqib and

Manchanda (2008) revealed that consumers’ brand

perception improved for licensed products as a

result of licensing. Leuthesser et al. (2003) note

that high-quality brands can increase quality

perceptions to partner brands. “Consumers may

perceive products licensed by a well-known brand

to have a similar quality to the brand’s own

extension” (Saqib & Manchanda, 2008, p.77).

Based on the example of Nike and the Michael

Jordan brand “Co-branding […] enables one brand

to benefit from the ‘halo of affection’ that belongs

to another” (McKee, 2009). By association,

consumers’ positive perception of one brand will

influence similarly their perception of the partner-

brand.

Next, licensing can be beneficial if it differentiates

the new product. Differentiating one’s product

through licensing can bring three benefits. It

offers an exposure to distributors and purchasing

officers who would otherwise tend to ignore an

undistinctive brand. It gives the licensee a

competitive edge in selling to consumers due to

the product’s uniqueness (Licensing). In addition,

it allows the licensee to charge higher prices for

its products because of consumers’ expectation to

pay top prices for licensed goods. Higher prices

can increase the licensee’s margins and again

establish a competitive advantage (Licensing; Wu

& Chalip, 2013; Del Rio, Vazquez, & Iglesias,

2001).

On the flip side, licensing can contribute to added

costs, financial risk, weakened brand image,

reduced equity, and major difficulties from

uncooperative partners. We showed before how

licensing can cut costs, but as a licensee, one

must measure these cost savings against the

additional costs of licensing. These items include

royalties and advances (Licensing Industry

Merchandiser's Association), specialized

consultant and advisor fees (Seltzer & Polakoff,

2011), potential litigation, and opportunity costs

(Beckett, 2007). Advances, licensing fees and

royalties that must be paid upfront, entail financial

risk, because there is no guarantee that the

licensee’s product will sell (Licensing Industry

Merchandiser's Association). And even if the

product does sell, one must ask whether these

sales are additional sales or the new licensed

product is cannibalizing the already existing

products. If there is cannibalization, then the

licensee is not making money; and it may be

incurring losses because of royalties. A second

risk is the opportunity cost of utilizing limited

space and inventory dollars for the unproven

licensed product (Beckett). Retaining in-house

licensing advisors or hiring outside consultants

also constitutes additional cost (Seltzer &

Polakoff). Lastly, if the licensee is in an industry

with exclusivity contracts, obtaining a license can

be really competitive and expensive (Kwon et al.,

2008).

Licensees must also consider the risk that

licensing or co-branding may weaken their brand

rather than strengthen it for several reasons. Co-

branding can have a dilutive effect of spreading

the credit for a positive consumer experience

across two brands (McKee, 2009). By co-branding,

each brand is giving up some of its prestige.

However, at the same time, if consumers have a

bad experience with a product, it can reflect badly

on brand A even if it is brand B’s fault (McKee,

2009). This is especially difficult when brand “A” is

a licensee (Leuthesser, Kohli, & Suri, 2003).

Further, licensed product depends on the other

brand’s equity and it can make one’s brand appear

weak and inferior (McKee, 2009).

Licensing and co-branding put a brand’s image

and reputation at risk. Each brand relies on each

other to reflect well and not besmirch the other’s

name. A vivid example of this can be seen by

examining the co-branding alliance Kmart had

TAB Journal

with the Martha Stewart Brand. When Kmart

declared bankruptcy, Kmart hurt the Martha

Stewart image, and conversely, when Martha

Stewart was accused of insider trading, she

tarnished Kmart’s image (Clinton, 2002; Hein,

2002).

Other factors to consider in licensing involve

contract limitations and uncooperative

relationships between licensees and licensors.

First, there are restrictions placed on licensees “in

areas such as submitting products for all

necessary approvals, creating a product to

agreed-upon standards, and marketing a product”

(Licensing Industry Merchandiser's Association,

p.1), which may limit growth and market reach

(Leuthesser et al., 2003). Second, the licensee

becomes dependent on the licensor for continued

goodwill. The licensor can make the licensee’s life

miserable by refusing to renegotiate the license,

ignoring shifting licensee’s needs or opting to go

to an exclusivity contract with a competitor when

the license expires. Licensees may also be forced

out of business (Kwon et al., 2008). If a licensee

and licensor cannot get along, conducting

business can get “messy”. It is worth to assess

whether the two parties will collaborate well.

Overall, while offering an upside, licensing has

also a few downsides that need to be taken into

consideration.

Sports Apparel Licensing

While the above passages pertained to brand

licensing in general, co-branding involving team

licensed apparel has a unique brand structure that

cannot be replicated in other industries (Kwon, et

al., 2008). Sports licensing is a whole different

“ball game” with a different set of rules. In order to

define the scope of the team licensed apparel

industry, let us digest a few key recent statistics:

1) “In 2010 approximately $200 billion […] worth

of licensed merchandise was sold worldwide”

(Sillcox, 2012, p.1); 2) sports related merchandise

accounted for 12.5% or $25 billion of the global

market (Sillcox); 3) top two sport players each

tallied approximately $5 billion in merchandising;

and 4) 68% of MLB merchandise sales and 60-70%

of the National Collegiate Athletic Association’s

(NCAA) came from apparel and headwear (Lollar &

Brett, 2013). Thus, we can project the team

licensed apparel industry to be within the range of

$16.75-$17.75 billion per annum.

The team licensed apparel industry is unique in

co-branding. The alliances are not expected to

offer better quality or more functional products,

but to solely increase perceived value of the

products for the consumers. As a result, sport

teams and manufacturers work less closely with

consumers than in other industries (Kwon et al.,

2008). The manufacturer makes use of the team

logo as a powerful means of introducing its

products to the team’s followers and fans (McKee,

2009) whereas the sport team gets its royalty. The

potential to hurt each other’s brands (as discussed

earlier) is mitigated. In fact, organizations

frequently use the association with sports to

distinguish their brands (Kaynak et al., 2008). This

is the first advantage sports apparel licensing

holds over other forms of licensing.

In addition, playing sports is “something

evergreen [that will stay popular],” which Meyer

Janet, president of Design Plus (an Atlanta-based

licensing boutique that specializes in branding)

says, it is “the route to go” (Spader, 2007). A

strong argument for extending one’s brand is to

include sports licensed products, as long as there

is a perceived connection between the base

product and the sport (Leuthesser et al., 2003).

Retailers generate 40% of their annual sales

revenue during the holiday season of gift buying

(Saqib & Manchanda, 2008). When it comes to

buying gifts, there is a major difference between

apparel and team-licensed apparel. The first is a

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merely clothing and questionable: “will-he-like-it”

gift, while the second is a convenient and

automatic “touchdown”, as long as one knows the

other person’s favorite team. The primary concern

of the retailer to increase sales is how popular the

sport or team is during the holiday season.

A major drawback in sports licensing is the power

of sport leagues. Since it is considered a privilege

to be a licensee in this industry, leagues have a

“stronghold” on licensees (Lollar & Brett, 2013).

Licensees are somewhat beholden to the leagues,

which can force them out at their will.

Sales are also somewhat dependent on the

performance of the sport team, whichever one is

licensing. Even though strikes or lockouts occur in

any given league once every five to ten years, such

work stoppages can also drastically reduce sales

(Lollar & Brett, 2013).

Fortunately, there are two main reasons to expect

steady sales. Sport merchandise consumers can be

split into two major groups. The first group is

genuine and thoroughbred sports fanatics. The

second group includes casual sports fans and fair

weather fans. The fanatics repeatedly buy

merchandise with their team’s logo out of a strong

brand loyalty and support of the team (Kaynak et

al., 2008). The casual fans buy sports merchandise

for what is known as the social identification

function.

Social Identification Function

The social identification function is related to the

desire to be accepted by members of a certain

group (Del Rio et al., 2001). According to Wu and

Chalip (2013) people have preferences for

particular brands, especially when it comes to

apparel. People may perceive themselves as

similar to others, who use the same brands. They

may wish to identify themselves with the

stereotypical user of that brand.

There are various theories as to why people use

brands for a social identification. The self-

congruity theory maintains that people want to be

perceived as being part of “the group” while the

symbolic self-completion theory claims that

people want to substantiate the own identification

(i.e., definition of themselves) though the

association with other brand users (Wu & Chalip,

2013). Regardless of the reason, sport fans will

continue to buy team licensed apparel, either to

convince themselves or others that they are real

fans.

Kwon and colleagues (2008) conducted a study to

show that college students were more prone to

wearing their team’s gear when they wanted to be

associated with the school or team after a win, but

not when their team lost (Kwon et al., 2008).

Another study (Del Rio et al., 2001) demonstrated

that people who initially associated themselves

with a sport team brand for purely social reasons

later developed brand loyalty similar to “real” fans.

They were also likely to accept price premiums

charged by the brand (Del Rio et al.).

In summary, the team licensed apparel industry

offers a highly loyal consumer base, has the

potential to improve one’s brand equity, and

carries relatively less risk than other areas of

licensing.

Sportswear & Fitness Apparel

Industry

During the 1970s, athletic sportswear evolved

from a product line aimed at small and unique

markets into a mainstream fashion product

(“Sportswear Industry Data”, 2004). During these

crucial years, the once clear difference between

formal and informal wear and function and style

clothing diminished. In the 1980s, the

acceptability of casual dress on more occasions

paved the way for sportswear to move into the

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mainstream clothing market. The trend was

accompanied by an increase in sport participation

(“Sportswear Industry Data”). The public shifted

towards a healthier lifestyle with an emphasis on

being fit and physically in shape. Since then, the

public’s increasingly active lifestyle, requiring

more versatile, comfortable, fashionable, and high

performance clothing, has created a strong

demand for sports and fitness clothing, which

offers both functional performance and style

appeal (Sorkin & Feder, 2005). This market has

grown so much to the point where the

international athletic apparel market is worth

approximately $145 billion. Of the $145 billion

(Sage, 2008), the U.S. accounts for 41% of total

sales (Sorkin & Feder), which makes it the largest

market of the sports apparel merchandize.

The sports apparel market is predominately

controlled by three companies: Nike, Adidas, and

Reebok. Nike owns close to a third of the

international sports apparel market whereas

Adidas and Reebok, combined, control 20% (Sorkin

& Feder, 2005). These companies have achieved

their dominance via partnering up with high

profile athletes and sports organizations, which

helped endorse their brands (“The UA Story”).

Nike, which has cornered a third of the sports

apparel market worldwide, is an American

multinational company which designs and sells

sportswear around the globe. It is one of the

world’s largest suppliers of athletic shoes and

apparel (Sage, 2008). Nike is also a major

manufacturer of sports equipment. The brand

itself is valued at around $10.7 billion, making it

the most valuable brand among sports businesses

(Schwartz, 2010). Nike promotes its products by

sponsorship agreements with celebrity athletes,

professional teams, and college athletic teams. It

was the first company to have all of its shoes

produced in Asia and the first company to market

and advertise athletic shoes. Practically all sports

apparel businesses try to emulate Nike’s

successful business model.

Adidas and Reebok are two main companies which

hold a significant share of the sports apparel

market worldwide. Adidas purchased the Reebok

sportswear company in 2005 to better compete

with Nike. These two companies design and

manufacture sports clothing and accessories. In

this highly competitive market, they have taken

the same route as Nike and partnered with high

profile athletes and sports organizations. They are

highly respected name brands and own 20%

market share of the sports industry (Sorkin &

Feder, 2005).

Under Armor

Competing with the above mentioned companies,

Under Armour is also a designer of high

performance apparel, supplying athletes with

moisture-wicking apparel worldwide (“The UA

Story”). Their products are worn by athletes at all

levels, from youth to professionals, on playing

fields around the globe (“Under Armour Named

Exclusive Official”, 2008). They are continuously

innovating and improving their products to stay

ahead of competition. Out of the appreciation for

its customers and community, Under Armour runs

several community programs to help people in

need. They support breast cancer awareness by

producing garments in pink, the signature breast

cancer awareness color, and run a wounded

warrior program, which assists soldiers who have

been wounded in combat. This initiative is funded

through the sale of specific Wounded Warrior

products (Under Armour). These are only a few

examples of how Under Armour runs its

successful business by giving back to the society.

Under Armour’s History

In 1996, Kevin plank founded Under Armour to

resolve a problem that had troubled him for some

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time. Kevin Plank was frustrated that he needed to

change his cotton T-shirt several times a game.

He wondered why there were no T-shirts made

out of the same material as his compression

shorts (Thomaselli, 2001). He took the material

that the shorts were made from and asked a tailor

to make him a shirt out of the same material. After

a few adjustments to the shirts, he formed the

company Under Armour from his grandmother’s

basement in Washington D.C. (”UA Story”).

Under Armour started off only offering high

performance shirts called Under Armour HeatGear

T-shirts, which wiped away sweat from the body

and kept the athlete dry and cool in extremely hot

conditions. Plank went around selling his shirts

from the trunk of his car until he finally made a

team sale generating $17,000 in sales. In 1997,

Under Armour introduced a new T-shirt with the

famous ColdGear material, which keeps athletes

warm, dry, and light in cold conditions. Later that

year, Under Armour introduced the AllSeasonGear

line, which was comfortable gear for weather in

between the two extremes. In 1998, the company

moved to a new headquarters and warehouse in

Baltimore, leaving Plank’s grandmother’s

basement (“The UA Story”).

In 1999, Under Armour used product placement in

a movie called “Any Given Sunday”, which helped

boost brand recognition and sales. Over the next

couple of years, the brand formed relationships

with key retail partners and professional sports

leagues including MLB, the National Hockey

League, and the Baltimore Marathon. Due to its

continued growth, the company took a gamble

and launched its first TV campaign (“The UA

Story”).

In 2003, Under Armour introduced a women’s line,

UA Women. In 2004, the brand expanded its

product offering for children, and outdoor athletes

(non-team spots participants). In 2005, the

company introduced a golf line and signed its first

all-school deal with Plank’s alma mater, the

University of Maryland. Less than ten years after

its launch, Under Armour ended the year with

$281 million in revenue (“The UA Story”).

During 2006, Under Armour decided to supply

athletes with equipment that would dress the

athletes from head to toe. They introduced a new

campaign called, Click-Clack, where it entered the

brand into the footwear business and introduced

its first line of football cleats. It immediately

captured 23% of the market share within the first

year of its introduction. Due to the success, Under

Armour expanded its line to include cleats for

other sports such as baseball, softball, and

lacrosse (“The UA Story”).

Under Armour made its official entry into the

athletic footwear market in 2008 by offering its

first line of performance trainers. During this time,

Under Armour made key additions to its roster of

world-class athletes who promoted their brand.

They added future NFL Hall-of-Famer Ray Lewis,

gold medal skier Lindsey Vonn, MMA World

Champion Georges St-Pierre, and Brandon

Jennings, the first U.S. basketball player to go

straight from high school to a European

professional league. It was just the beginning. By

the end of 2010, the company added the most

accomplished Olympian of all-time and Baltimore

native Michael Phelps, two-time Super Bowl MVP

Tom Brady, and a young tennis phenomenon

named Sloane Stephens (Under Armour).

In 2011, Under Armour established a presence

outside of the U.S. and gained enormous traction

with athletes around the globe, mainly those in

Japan, Europe, Canada, and Latin America. It

opened its first store in China and became the

official partner of Tottenham Hotspur of the

Barclays Premier League. This partnership is the

largest individual team deal to date. Under Armour

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continues to grow its brand globally and is

transforming the athletic and sports apparel

industry with each and every innovation they

introduce (Under Armour).

Product Offering

Under Armour currently offers apparel for every

weather condition. For warm weather the company

offers HeatGear, Recharge Suit, UA Coreshorts,

Charged Cotton T, and Coldblack infused T-

shirts. All of these products keep cool and dry

during hot, rainy conditions. In addition, the

Coreshorts and Recharge Suit help the body

perform and rejuvenate more efficiently by relying

on technology infused fabric, which compresses

the muscles and help them stay refreshed. For

colder weather, Under Armour has ColdGear Mock,

Team USA Olympic Bobsled Speed Suit, and

Charged Cotton Storm T. All of these apparel

products are water resistant, heat trapping, and

quick dry to help athletes perform under cold and

harsh weather conditions (“The UA Story”).

For various weather conditions Under Armour

provides trainers with cleats and the Armour Bra, a

revolutionary bra that lets female athletes

customize their sports bra to fit them comfortably

and securely. They offer the UA Spine Venom

Running Shoe with a lightweight cushioning that is

flexible yet supportive. The company’s technology

has been applied to many different products,

including Hoodies, T-shirts, under garments,

hunting camouflage gear, and lounge wear.

Interestingly, they offer Alter Ego gear, which is

regular Under Armour gear with super hero icons

for primarily targeting children and young adults

(“The UA Story”).

Positioning

Under Armour started off and is still a

performance apparel company (Thomaselli, 2001),

which wants to provide superior products to what

is currently available in the market. The company

wants their brand to be known for its superior

technology. They accomplish this goal by

supplying college team players with their gear.

They estimate that when the athletes eventually

become professional sport players, they continue

using the Under Armour apparel. This has been a

smart marketing decision by the company. After a

game, athletes are often interviewed by media

wearing their T-shirts (Thomaselli). Wearing T-

shirts with the Under Armour logo demonstrates

to the public that the athletes and their idols use

Under Armour, which is a very effective testimony

of products’ superiority.

Proposition

Currently, Under Armour does not sell any

products with sports team logos (Under Armour),

We believe it is hindering the compnay from

selling higher quantities of products and giving

competitors, such as Nike and Adidas-Reebok a

competitive advantage. Many of the top athletic

apparel brands sell clothing with team logos.

Newbery describes that this is an area of clothing

in which customers’ purchasing choices are

frequently determined by the sports figures they

admire, the teams they follow or the brands they

aspire to wear (Newberry, 2008). We believe that

Under Armour should sell their apparel with team

logos and professional athletes names printed on

the gear.

Strategy & Justification

The idea of licensing logos is not foreign to Under

Armour as they already license super hero logos

for their Alter Ego line of clothing. The company

already has staff knowledgeable of the licensing

business, and an infrastructure suited for

developing and marketing such items. They

should have no trouble transitioning to licensing

and printing sports-related logos. With this typ e

of licensing, they will be able to expand their

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product offering and reach consumers who intent

to buy their favorite sports team logos on their

apparel. The ESPN Chilton Sports poll stated that

more than half of the U.S. population over 12

years of age (51%) bought an apparel item with a

college or a profession team logo (Danielle, 2012).

Additionally, Fowler reported that purchasers who

did not participate in sports or fitness activities

accounted for one quarter of the dollars spent on

sports apparel of which, team licensed apparel is

the most popular (Fowler). Under Armour currently

does not offer anything in this market; they are

missing out on a large sector of the fitness

apparel market.

Under Armour should start off slowly by licensing

small royalty logos and accumulate bigger ones as

they perfect the process. Under Armor should

start licensing college sports teams where the

university level process is easier and the royalties

are lower (Thomaselli, 2001). Allowing the

company staff to begin the sports licensing

business would enable them to target the 16% of

customers within the sports licensing market, who

purchase an item with a college logo (Danielle,

2012). Plus, with a college licensing deal, Under

Armour might build brand loyalty and customer

equity among young college students.

Under Armour should begin licensing and printing

team logos for the University of Maryland sports

teams, whom they already have a strong

relationship with. Under Armour has recently

landed a five-year $17.5 million agreement that

gives Under Armour the right to provide uniforms,

apparel, and footwear to each of the Terps' 27

varsity sports (“Under Armour Exclusive Official”,

2008). In 2011, the University of Maryland had

37,631 students and 240,000 living alumni

(University of Maryland, 2011; Schoenberger,

2011). A large student base and Alumni network

would offer access to a population for test

marketing and a growing customer base.

Once Under Armour successfully licenses college

and university sports team logos, they should

move on to licensing professional sports

organizations logos. Doing so would give Under

Armour the opportunity to sell to the 29.6% of

customers who purchase items with professional

logos (Danielle, 2012). Over time, Under Armour

could build up a portfolio of professional team

licenses and offer their consumers the ability to

choose gear with their team logos.

Conclusion

While there are costs associated with brand

licensing, licensing can also negatively affect the

licensee’s brand image or hurt the co-branding

alliance by a strained relationship with the

licensor. Licensing can also have a huge payoff.

The numerous costs savings may likely offset the

costs. The cost of royalties can be covered by the

increased prices. Although licensing can hurt the

brand image, more often than not, it can actually

make it stronger, especially for sport team

licensed goods and apparel. Licensing will likely

differentiate the new product, facilitate new

distribution channels, increase sales, and serve as

the source for competitive advantage.

The team licensed apparel industry has a few

unique benefits. Sports licensed apparel is

continuously popular, makes great gifts, and has a

consistent consumer base, even though it may

fluctuate depending on the sport team’s

performance and image. A strong brand loyalty

satisfies the need of its fans for social

identification with the team and their logo on

apparel reinforces that identity.

Under Armour could become a particularly

successful sports apparel licensee because they

already have experience with brand licensing. The

added association with sports teams would

enhance their already strong reputation as a

manufacturer of active sportswear, which is an

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important factor for a good co-branding fit. The

company could benefit from the marketing and

added interest from the teams’ fans. Under

Armour could increase sales by targeting a new

group of consumers: the 25% of consumers who

buy team licensed sports apparel but do not

participate in sport. A study by Jaedeock and

Ferreira (2001) showed that with regard to team

licensed products consumers are more likely to

buy from a company which supports social causes,

such as, breast cancer awareness and the

Wounded Warrior Project. The only conceivable

risk for Under Armour could stem from

cannibalization. However, consumers have an

interest and pay more for something that contains

their favorite team’s logo. Thus, charging prices

with the industry standard premium on licensed

goods will most likely offset the cost of royalties.

In summary, to Under Armour and readers, who

are considering entering the sports licensing

industry, we say “play ball!”

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Revenge of the Machines

Dena Brookler

It used to be that the hard work of man was a sign

of advancement. However, as technology

advances, the hard work of man is being replaced

by the software of machines. CEO’s would look

for humans to fill a job. Now, companies are

looking to save money, to be more efficient, and

to save time anywhere they can. Computers can

help them with all their problems. They are faster,

more accurate, and cheaper. The jobs that are

most at risk are the middle class jobs.

Accountants, pharmacists, meter readers,

secretaries, and lawyers are just a few of the many

jobs that are at risk. Technology is taking over

the business world at a faster rate than new jobs

are being created.

At Pacific Gas and Electric (PG&E) reader meters

were needed to check the amount of electricity

their customers used. The workers would drive

from house to house to determine the amount of

electricity used. Now, they use digital meters to

do the work humans used to. They can give a

more accurate electricity bill and even send out an

alert if the power goes out. PG&E went from

having 50 full time meter readers six years ago to

only six today. This is just one small job, of the

many, that are being taken over.

Drivers, pilots, and soldiers will less needed.

Google and Toyota came out with “smart cars” that

can drive by themselves. The Pentagon has robots

that find roadside explosives in Afghanistan and

can start a war by sending a drone from the sky.

Once the Google and Toyota “smart cars” become

widespread, the need for drivers and taxis will be

diminished. Having these cars can also be

beneficial because they can detect traffic and

means to avoid it. This can lessen the amount of

traffic in heavily populated areas.

Besides for cars, secretaries are no longer needed

in a business. More than 1.1 million secretaries

were replaced by computers, phones, and tablets

between the years 2000-2010. Bosses no longer

needed a secretary. They could just plug in their

meetings into their smart phone, computer, or

tablet and they would be reminded about it or

would see if there was a conflict. Secretaries

became an unnecessary necessity. According to

Labor Department statistics, at the same time,

telephone operators went down 64%, word

processors and typists by 63%, travel agents by

46%, and bookkeepers by 26%. Jobs are being

thrown away. Where are these people supposed to

work? How will they now support their family?

Machines are more efficient and faster than

humans. They can study person’s habits,

recognize a voice and store unlimited amount of

space (on the Internet for free), but never get

stressed out or tired. IBM created a

supercomputer, Watson, which can take an

awkwardly worded question, figure out what you

want to say, and give an answer. They tested this

program against champions from “Jeopardy!”, a TV

series, and Watson beat them. If a computer can

do something like that, then they can certainly

take over many jobs humans are doing today.

Humans are becoming more reliable on machines

and are therefore becoming more trusting of

them. People are happier to fix a problem on their

own instead of having to be on the phone for

hours with a representative. Verizon now has an

In-Home Agent system that a person can install

on their computer. This system can determine why

the Internet is down or why the TV cable box is

not working. It can fix the problem in minutes. It

saves people the hassle of trying to get a repair

Dena is a student at Lander College for Women and is majoring in marketing.

TAB Journal

man to the house at an inconvenient time and

have to change plans accordingly. This program

has been downloaded over two million times. It

saves time and money, so who would not want to

download it?

The jobs that used to be done exclusively by

humans may soon be done exclusively by robots.

The University of California in San Francisco (UCSF)

recently launched a new automated, robotics-

controlled pharmacy in two UCSF hospitals. The

doctor puts the order for the medication into the

computer and sends it to the pharmacy. Then, the

robot receives the information and gets the

medication, packages it, and dispenses individual

doses of the pills. So far, this new technology has

arranged 350,000 doses of medication without an

error. Attorneys and paralegals may also be at risk

to lose their jobs. Computers can analyze and

organize documents faster than a human for a

cheaper price. Someone can type in a keyword and

the software can scan through documents and get

the papers needed within seconds; a task that

would have taken humans hours to complete.

Out of all the jobs that can be replaced, the most

surprising is babysitters. In 2008, Aeon Co.

introduced a four foot tall yellow and white robot

that can watch and entertain children while adults

shop. They can track children with a radio-

frequency identification chip. How many mothers

would trust a robot with their child? Maybe not

now, but in the years to come it will be normal and

they may be more trustworthy than a nanny that

can only be questioned so much.

The following is a chart from the Business Insider

on the probability of robots taking over jobs in the

next 20 years:

As good as human ingenuity, advancement, and

knowledge are, it is still being outpaced by

technology. For all of man’s efforts to keep up

with technological advancements, technology is

consistently a step ahead. As man creates

technology, he ultimately decreases the need for

human employment. The sad result is that one

person’s inventions to advance technology leads

to the decline in employment of another.

References

Aquino, J. (2012). Nine jobs that humans may lose to robots. Business Insider. Retrieved from

http://www.nbcnews.com/id/42183592/ns/business-careers/t/nine-jobs-humans-may-lose-robots

Dunn, K. (2014, January 24). The HR capitalist: Probability HR jobs will be lost to robots in the next 20 years?

The HR Capitalist. Retrieved from http://www.hrcapitalist.com/2014/01/probability-hr-jobs-will-be-lost-

to-robots-in-the-next-20-years.html

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Rotman, D. (2013, June 12). Implants, printed to order. MIT Technology Review. Retrieved from

http://www.technologyreview.com/featuredstory/515926/how-technology-is-destroying-jobs/

The Associated Press. (2013, January 24). Can Smart Machines Take Your Job? Middle Class Jobs Increasingly

Being Replaced by Technology." NY Daily News. Retrieved from

http://www.nydailynews.com/news/national/smart-machines-job-article-1.1246522

Worstall, T. (2013, September 18). Phew, the robots are only going to take 45 percent of all the jobs. Forbes.

Retrieved from http://www.forbes.com/sites/timworstall/2013/09/18/phew-the-robots-are-only-going-

to-take-45-percent-of-all-the-jobs/

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Adherence to Ethical Behaviors

Faygie Rakower

This paper examines the existence of a moral

mandate and general prudency for a business

entity to recognize, regard, and comply with

ethical standards. There are a myriad of scholarly

articles with endless discourse and ceaseless

debates on the discipline of business ethics, First,

they conjecture on what constitutes ethical

behavior. Second, what is incumbent upon a

business entity and to whom they owe an ethical

duty to further their interests. Third, what steps

can be taken to encourage and foster greater

adherence to ethical behavior. Fourth, what extent

ethical measures should be implemented in the

business world. Most of these questions

presuppose the existence of something far more

fundamental; that there is value to the adherence

of ethical behavior. The examination of such an

area is imperative for having meaningful

discussions regarding the aforementioned

questions and is the reason I chose to engage in

such analysis.


Ethics refer to the moral principles or values that

generally govern the conduct of an individual or a

group. As distinguished from law or legality, there

are not necessarily any sanctions or punishments

directed at a violator or offender of ethical

standards or rules. Laws are in place to advance

the interests of society. They may or may not have

roots in morality, right or wrong, a sense of

fairness or justice, a utilitarian construct, or any

other conceivable reason for their institution.

Ultimately, what gives them legitimacy and reason

to be reckoned with, is the power vested in its

founders and their ability to enforce them.

Whether or not I see the utility in refraining from

driving while holding a cell phone, it will do me

little good when I am pulled over in the state of

New York for driving while holding a handheld

device. Even if I believe that holding a handheld

device while driving is a morally good deed (i.e., it

advances some greater ideal), I will have broken

the law regardless.

Morality descriptively refers to the identification of

a given act or set of actions as good or bad, right

or wrong, proper or improper, based upon some

other established value system, religion, or code.

Making the determination that something is moral

or immoral necessarily presupposes two things.

One, it is adhering to a particular system or code.

Two, this system or code has authority or reason

to be followed. Since neither of these two givens

are universally accepted nor are they factual in

nature, what is moral for one person is immoral

for the next.

For many, there is no such thing as morality, aside

from a mere system of identification. While 'good'

or 'bad' may be used to identify activity in

accordance with society's general conceptions of

acceptable or inacceptable conduct, it has no

deeper meaning or significance. Still, the code or

belief systems, upon which those determinations

are made, are significant to those who believe in

them; and so are the ensuing rulings regarding

morality.

However, morality in and of itself does not make

suggestions regarding how to act. It simply deems

certain activities as more or less moral. Therefore,

one who engages in immoral conduct may or may

not be considered an immoral person. It depends

on whatever it means to each person in a society

and the credence they place in that determination.

Morality itself, and those determining whether

Faygie is a student at Lander College and is studying business.

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something is moral or immoral, does not

necessarily make suggestions regarding how to

act per se. If one engages in immoral conduct he

will simply suffer consequences which accompany

it, should there be any. The underlying code or

philosophy aiding in that determination may or

may not opine on that. Many actions are highly

subjective and individualistic, and certainly not all

are in the purview of those making public

determinations.

Ethics are traditionally based upon a system of

morals or accepted values of society. Unlike

morality, they tend to deal exclusively with the

ramifications of conduct as it pertains between

man and his fellow man. For the adherents of

Judaism or Islam it is considered immoral to eat

pork. It is not unethical to eat pork in other

settings, but it may be unethical to eat pork

immediately in front of someone who is allergic to

it.

It is almost always considered unethical to

comingle clients' funds. It may or may not be

immoral depending upon which source one is

deriving morality from, though one would imagine

that the overwhelming majority of such sources

would condemn such activity in a vacuum.

However, if one comingled funds in order to save

the lives of a billion people, one would imagine

that the overwhelming majority would celebrate

such activity, and consequently those making

determinations regarding morality would say that

the person acted morally. Did said person act

ethically?

The simple approach would be that the person

acted unethically in order to achieve a moral

result. Another approach would say that since

ethics are rooted in morality, the person did not

act unethically and that the determination of

ethical behavior would be globally accepted.

Cavanagh (2010) maintains that ethics have been

ignored by scholars for centuries. This is probably

because the determination of ‘what ethical

behavior is’ usually falls into one of three

categories: completely obvious, utterly arbitrary,

and unenforceable or hopeless. However, as he

acknowledges, it has become an area of much

greater focus, discussion, and attention over the

last number of years. With greater sophistication,

an increase in the number of statistical studies

(Wurthmann, 2013) and empirical data, the pursuit

of understanding ethics has become increasingly

important.

Literature Review

There are three basic approaches to developing a

personal set of ethics (Lamb, Hair, & McDaniel,

2013). One is to examine the consequences of a

particular act. Factors to consider include: who is

helped or hurt, the duration of the impact, and the

magnitude of the overall good advanced. The

second approach focuses on the importance of a

set of rules. As mentioned before, these rules are

developed and derived from "customs laws,

professional standards, and common sense"

(Lamb et al., p. 37). One such example is the

famous axiom, "always treat others as you would

like to be treated yourself." Of course, both of

these approaches are highly subjective and

arbitrary. People could take upon themselves, for

whatever reason, to employ such an approach. It

starts getting hazy when others are making

recommendations based upon such approaches.

The final and most progressive one of the three

emphasizes development of moral character

within individuals. Pre-conventional morality

focuses on the immediate consequences of an

action, its consequences such as reward or

punishment. Most have moved beyond this

childlike approach. Conventional morality focuses

on the expectations of society. The approval and

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reaction of society at large is paramount. Post-

conventional morality attempts to represent the

morality of a mature adult. Ideally, at this level one

is less concerned about the judgments of society

and more concerned with doing the right thing in

the long run (Cavanagh, 2010). However, much

like the aforementioned approaches, the

determination of what is the right thing in the

long run, is necessarily subjective especially if it is

employed by individuals or business entities which

are being asked to use their own intuition and

fundamental sense of fairness.

Regardless of the specific approach or outlook one

employs in making ethical decisions, there are

many factors to consider. The potential magnitude

of consequences affects the likelihood that

marketing professionals will recognize a problem

as unethical. Specifically, the greater the degree of

social consensus that a certain behavior is

unethical the greater the likelihood that marketing

professionals will recognize the problem as

unethical. The greater the probability of a harmful

outcome the greater the likelihood that marketers

will recognize the problem as unethical. The

greater the period of time between a decision and

the onset of negative consequences the less the

likelihood that marketers will recognize the

problem as unethical. The greater the number of

people affected by potential negative

consequences, the less the likelihood that

marketers will recognize the problem as unethical.

The "stockholder" view of the firm advances the

notion that a firm is acting most socially

responsible when it legally maximizes its profits.

It believes that an "invisible hand" will direct

economic activity in a manner that will maximize

social welfare (Friedman, 1970). As Freidman

phrased:

There is one and only one social

responsibility of business—to use its

resources and engage in activities

designed to increase its profits so long as

it stays the rules of the game, which is to

say, engages in open and free competition,

without deception or fraud… Few trends

could so the very foundations of our

society as the acceptance by corporate

officials of social responsibility other than

to make as much money for their

stockholders as possible. This is a

fundamentally subversive doctrine (p. 133).

Ultimately, he argues, anything done that distracts

from their chief obligation of maximizing profits is

irresponsible.

Advocates of the "stakeholder" view, on the other

hand, argue that firms do in fact have

responsibilities that extend beyond lawfully

making profits for the owners (Wurthmann, 2013).

Firms are social entities that have complex and

mutually effecting relationships with a diverse

group of other social entities such as

governments, communities, employees,

customers, and creditors. The impact that they

have extends to all those entities, as well as future

generations. Therefore, firms have responsibilities

based upon the effect that they have on these

entities. However, merely demonstrating the

impact that their decisions have does not by itself

create a moral mandate. That mandate is

explained in two forms.

The first attempt at explication is that firms do not

merely represent and thereby have an obligation

to advance the best interests of its stockholders.

They have an obligation to ensure the welfare of

their stakeholders as well (Donaldson & Preston,

1995). The second explanation synthesized by

Wurthmann (2013) states that through a concerted

effort to follow ethical principles, and acting

socially responsible to all stakeholders, firms will

inevitably enhance their performance through

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various outcomes, such as engendering loyal

customers, motivated employees, innovative

products and processes, supportive communities,

and overall improved reputation.

Application

Based upon the totality of the research conducted,

and based upon the endless supply of research yet

to be tapped into ethics whose gamut is virtually

endless, clearly there is no consensus regarding

the rationale or purpose, let alone mandate, for a

business entity to follow any suggested ethical or

socially responsible course of action. There are

simply too many questions that are either not

accounted for or are accounted for in a vacuum.

What is the mandate for one to act in moral

manner? What is a moral manner? Are ethics based

upon morals? Are morals which ethics are

allegedly derived from a particular code? Is it

based upon a form of social responsibility? Do

those making ethical suggestions indeed know for

certainty what the long term and short term

effects of their suggestions are? If they did, would

that grant them moral authority? The questions do

not cease and the answers are simply not there.

Projecting a theory or offering possible

perspectives are helpful guidelines, but at the end

of the day, unless those making ethical

suggestions are charged with the power to enforce

their suggestions, their subjects have no reason to

follow the guidelines, unless they themselves

identify with the underlying values.


Virtually any business entity can be selected to

demonstrate the point presented above. Take

PepsiCo, for example. While nothing can ever be

taken for granted, let us posit that the primary

goal of any company is to maximize its profits.

How other secondary goals or considerations

interplay with the primary goal is the question. If

those charged with running PepsiCo feel

compelled to act in a manner that is ethical, then

they will do so. If they believe in the mandate or

prudency of following a course of action, then

they will do so. If they feel that acting ethical will

on a practical level increase profits through some

of the above mentioned systems, then by all

means they will proceed in that direction. Should

they feel that they can achieve similar results by

simply appearing to be ethical, then again, that

will be their path to success. Should they fear or

be inspired by either some profound karmic sense,

a more traditional sense of right and wrong, a

classic Judaea/Christian type model as a code of

conduct, or by merely appearing ethical, then they

will and should follow those guidelines.

Credence should be applied to ethical suggestions

to the extent that they are identified with.

However, to feel compelled to follow a course of

action or a suggestion which has a self-created

importance is ludicrous and detrimental to a

business entity inasmuch as it detracts from its

focus, resources, and most importantly its long-

term profits.

For example, PepsiCo's recent decision to invest

over Rs 1,200 crore to build a new beverage

manufacturing facility in Andhra Pradesh (PepsiCo

India, 2013). This comes as part of the recently

announced plans by PepsiCo and its partners to

invest Rs 33,000 crore in India by 2020. Such a

move necessarily implicates numerous ethical

questions, considerations, and duties to the

stockholders, shareholders, international labor

rules, exploitation and many others. After

examining and weighing all of the ethical

considerations involved in making such a move,

PepsiCo must ultimately do what is internally

perceived as the correct course of action.

PepsiCo is best off by examining suggestions and

reasons. If the reasons are agreeable and logical

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and in furtherance of PepsiCo's best interests then

it certainly should heed them. Simply put, if not,

not.

Future Research

Future research on this particular issue is unlikely

to yield significant data, or shed more light upon

the issue at hand. Matters that have underlying

bases in morality were never universally agreed

upon and barring some divinely inspired revelation

to all of mankind, it likely will never be. Should

data yield results indicating that taking particular

courses of action or ethics education would yield a

particular desired result or avoid undesired

results, then the lawmakers will decide in the best

interest of the society to enact laws in order to

foster these courses of action. Only then, business

ethics research will bring on a new meaning to the

society.

References

Cavanagh, G. (2010). Ethics in business requires moral maturity. Business Ethics Quarterly, 20(4), 717.

Donaldson, T., & Preston, L.E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and

implications. Academy of Management Review, 20(1), 43-65.

Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New

York Times Magazine, 122-126.

Lamb, C. W., Hair, J. F., & McDaniel, C. (2013). Mktg 7. Mason, OH: Cengage Learning.

PepsiCo India to invest over 1,200 cr on new beverage plant in Andhra Pradesh (2013, December 21).

Journalism of Courage Archive. Retrieved from http://www.indianexpress.com/news/pepsico-india-to-

invest-over-1200-cr-on-new-beverage-plant-in-andhra-pradesh/1210261/

Wurthmann, K. (2013). A social cognitive perspective on the relationships between ethics education, moral

attentiveness, and PRESOR. Journal of Business Ethics, 114(1), 131-153.

http://www.indianexpress.com/news/pepsico-india-to-invest-over-1200-cr-on-new-beverage-plant-in-andhra-pradesh/1210261/

http://www.indianexpress.com/news/pepsico-india-to-invest-over-1200-cr-on-new-beverage-plant-in-andhra-pradesh/1210261/

http://www.researchgate.net/journal/0167-4544_Journal_of_Business_Ethics

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The Importance of a Creative Work Environment

Joseph Gomez

In the 21st century, it is evident a successful

business and innovation must go hand in hand

due to the “technology cycle.” The technology

cycle occurs when a newer, better technology

replaces an older technology in the market.

Businesses are required to keep up with this cycle

in order to remain in the market. Adapting to

change is not only necessary but inevitable.

At the base of an innovative product are innovative

ideas, and as a manager, employees must be

placed in a position to create. This paper covers

the “creative work environment” method employed

to manage sources of innovation. The construction

of a creative work environment, an environment in

which workers perceive that creative ideas are

welcomed and valued (Williams, 2012), has proven

to be an effective method used by successful

companies, such as: Google, Microsoft, and

Facebook.

A creative work environment is composed of six

key components: challenging work, three types of

encouragement, work freedom, and the removal of

impediments. Challenging work demands

employee focus and effort, giving the impression

of importance. When work is at a perfect level of

difficulty, employees reach a psychological status

called “flow”, which promotes creativity due to the

complete absorption in the task according to

researcher and psychologist, Mihaly

Csikszentmihalyi. However, when work is too

difficult it causes employee anxiety and hinders

the opportunity for creativity, requiring a perfect

balance. Three types of encouragement:

organizational, supervisory, and work group

encouragement, are imperative in the construction

of a creative work environment. Organizational

encouragement means that management

encourages employees to take risks and come up

with new ideas. Top management recognizes

creativity and proposes incentives for employees.

Supervisory encouragement occurs within a

development team. Supervisors encourage open

interaction with subordinates and support new

ideas and work. Lastly, work group

encouragement occurs within a team composed of

members with a diversity of experience,

education, and background. Despite the

differences, the group has a mutual openness to

ideas. Freedom, gives employees control over their

work, which according to many studies, has shown

fruition in creative ideas. Ultimately, companies

have removed impediments, such as sticking to

the status-quo and the involvement of

management, allowing for “outside the box” ideas.

A creative work environment is a key method for

producing innovative ideas, which has proven to

be a major link to a company’s success.


The nature of the 21st century workplace has

undergone a drastic change from the workplace of

past: “The Industrial Revolution was built on

machinery, skills, and labor; however, the

information and knowledge-based revolution of

the 21st century is being built on investment in

intellect and creativity” (Pillay, Boulton-Lewis, &

Wilss, 2004, p.18). The industrial revolution’s

focus on machine and individual skill meant

workers held a specific position according to skill

and managers expected workers only to perform

their skill-based task. It is unknown what exactly

sparked the change in management, but presently,

companies have become less heirarchical in

structure and decision authority, thus allowing

creative opportunities for employees. Companies

Joseph is a student at Lander College for Men and is majoring in accounting.

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today are dealing with competitive pressures and

technological breakthroughs, making them:

“leaner and more agile; more focused on

identifying value from the customer perspective;

more tuned to dynamic competitive requirements

and strategy… continually reorganizing to

maintain or gain competitive advantage”

(Heerwagen, 2010, p.1).

The modern market stresses product innovation

like never before. Companies are no longer trying

to come up with the next big idea; they are trying

to come up with the next big idea after the next

big idea. This race for innovation is leading

managers to maximize all workers’ creativity

potential, by creating an invironment favorable to

creativity. Unlike the work environment of the 20th

century, workers today are “expected to be more

functionally and cognitively fluid and able to work

across many kinds of tasks and situations”

(Heerwagen, p. 1). Managers of modern

businesses do not bind employees to a specific

job title, in fact, a wide scope of knowledge of the

company is expected. Overall knowledge of the

company and its goals provides the freedom for

employee creativity, which has become a standard

in today’s businesses.

Literature Review

The first scholarly source discusses whether the

self-managed work team approach can be

considered a creative management tool and

evaluates its benefits and challenges. Managers

constructing a creative work environment often

do so through work-teams. Work-teams were

considered the productivity breakthrough of the

90s by Fortune magazine. This idea of work

collaborations began surging through companies

in the 1990s, “not because corporations [were]

becoming kinder and gentler towards employees,

but because they want[ed] to survive in a

golabally-competitive environment” (Elmuti,

1997). At the time, 50% of all Fortune 500

companies followed the idea of increased

collaboration. It was estimated that by 2000 90%

of all North American organizations would have at

least some type of self-managed work-teams

(Elmuti, 1997). The assembly of work-teams

provides employees with an opportunity beyond

job involvment, but job empowerement. According

to Elmuti, empowerement is a higher level of

involvement, which allows employees to make own

decisions. Allowing employees to make decisions

for the organization improves individual

motivation and organizational productivity,

because when employees are involved and become

more interested in their jobs.

Elmuti uses Saturn Corporation, a former

subsidiary of GM, as an ideal example. Saturn has

a multitude of work-groups. Each work group

makes its own job assignments, plans its own

work, performs equipment maintenance, keeps

records, obtains suppliers, and makes selection

decisions of new members into the work unit.

Leadership roles are also rotated among the team

members (Elmuti). By providing their employees

with such organizational encouragment, Saturn is

offering an opportunity for creativity.

The managers at Eastman Kodak Company, a film

manufacturer, created an enviroment open to

creativity. Work-teams were supported by

management, and positive reinforcement was

used to encourage quality work, team problem

solving, and decision making (Elmuti, 1997).

Innovation and quality improvements were

continuosly produced at Kodak, because

management rewarded quality new ideas and

fostered open communication throughout the

company.

Regardless of all the benefits of self managed

work-teams, there still lay many limitations.

Without the overseeing of a manager, self

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managed work-teams may fail because of lack of

time investment and effort as a unit. Additionally,

not all employees are fit to make decisions and

judgements. Some employees may rather not have

any authority at all. A combination or either of

these scenarios can lead to bad decisions or poor

time management on the part of employees.

In today’s global market, a self-managed work-

team is a great way to supply a company with the

innovative ideas that are necessary to remain

competitive. However, in order to avoid failure,

management must take adequate steps before the

program is introduced and utilize an adequate

management strategy to support the initiative

(Elmuti, 1997).

The second article analyzes the measures needed

in order to compete in today’s dynamic and

“hyper-competitive” business environment. Within

today’s market, it is no longer enough for a

company to be efficient and responsive (Leavy,

2003). Companies are being forced to become

more creative in everything that they do. Through

the understanding of the importance of creativity

in organizational settings, firms can do a lot to tap

into the creative potential of their workforce. They

can engage the hearts and minds of their current

employees (Leavy).

The volatility of today’s business environment has

removed the ability to merely be efficient as a

company. In the modern age, it is all about

adaptability. Many of today’s CEOs are promoting

creativity and “outof the box” thinking from all

departments, not only from the usual marketing

and product development departments.

In the case of research and development at Honda,

recognition and reward systems tend to be

designed around talent and contribution rather

than title or status (Leavy, 2003). Honda

management encouraged risk-taking and

experimentation during their ‘let’s gamble’

mission, displaying organizational

encouragement. Additionally, Honda challenges

their employees with emotionally engaging work,

as part of their ‘success against the odds’

campaign.

The article interestingly notes two types of

companies when it comes to creativity. Some

companies were built around the creative priority

from its inception, for example Nissan Design

International. On the other hand, companies such

as: Oticon, Nokia, and General Electric are

established companies, which changed from

management-driven to idea-driven organizations.

Most companies are able to uncover their

employees’ creative potential, through

encouraging and rewarding creativity.

The final article discusses which companies are

most committed to creativity and where the

creativity stems from. Additionally, the article

outlines the benefits involved with a creative work

environment. According to Coates and Jarratt

(1994), companies reliant on high-technology or

other leading-edge developments have the

strongest commitment to creativity. Previous

articles mentioned the importance of creative

ideas from employees; however, this article

initially suggests the flow of creativity in a typical

U.S. corporation to be initiated at the top (Coates

& Jarratt, 1994).

Creativity from the senior executive encourages

creative developments throughout the

organization, although, in the businesses of

tomorrow creative flow will be different. Future

businesses’ features will include, “flexibility, broad

participation, and openness, so that the flow of

information and concepts will be in many

directions, and negative sanctions and inhibitors

of new ideas are reduced” (Coates & Jarratt, 1994,

p. 15). Creative ideas will freely be able to reach

any level of the corporate hierarchy, and cross

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functional areas. An atmosphere nurturing to

creativity can be constructed from five essential

characteristics: freedom, encouragement,

resources and time, recognition, and challenge.

Providing freedom in what to do and how to do it

creates a sense of control for employees and

enthusiasm and support from management gives

the impression of successful ideas. Employees, in

addition, must be given access to appropriate

facilities, information, funding, and enough time

to solve problems in new ways (Coates & Jarratt,

1994). Managerial recognition provides

constructive feedback in addition to rewards.

Lastly, a challenge stemming from the problem

itself, outside competition or time, keeps

employees fully engaged.


Today’s consumers’ expectations for constant

innovation have led to companies stressing

creativity. Buyers in today’s market are always

looking to buy the newest innovative product.

From a managerial standpoint, all employees are

being utilized as creative minds. In a sense, it is a

number game: place all employees in an

environment conducive to creativity, and a few are

bound to have creative ideas. Many companies are

taking this creative work environment approach,

so the distinction lays in the methods used to

construct a creative work environment. The

assemblies of self-managed teams are

successfully being used by companies. At a

General Mills cereal plant in Lodi, California, teams

schedule, operate and maintain machinery so

effectively that the factory runs with no managers

present during the night shift.

In my opinion, self-managed work teams are able

to come up with a greater amount of useful ideas,

in a shorter time span, than a single product-

innovation. The multitude of employees with a

common goal presents many opportunities: “At a

weekly meeting, a team of Federal Express clerks

spotted and eventually solved a billing problem

that was costing the company $2.1 million a year,

and 3M turned around one division by creating

cross-functional teams that tripled the number of

new products” (Elmuti, 1997, p. 235).


In 1925, Leica introduced its compact cameras,

which were revolutionary compared to the heavy

plate cameras of the day. According to Timberlake

(2012), in 1932, about 90,000 Leicas were in use;

by 1961, a million. Leica, a highly priced camera,

was popular among photojournalists. Recently,

CNBC wrote an article covering a Leica

commercial. The ad is a video of a Leica worker

polishing the new Leica T System for nearly 45

minutes. During the commercial, Leica asked “Is

this the most boring ad ever made? Not if you

appreciate obsessive craftsmanship”. Leica’s

business model is apparent from the

advertisement. Leica’s conservative business

model, stress on detail and quality, along with its

astounding prices are used to grab the attention

of a specific market. Leica’s conservative outlook

is the reason they did not introduce their first

digital compact until 1998, in an attempt to join

the digital camera race with Canon and Nikon.

However, it was too late and they had lost

customers to Canon and Nikon. Sales bounced

back, nevertheless, when they introduced digital

versions of their 1950s-era M camera.

During 2012, their digital models were

responsible for more than 90% of sales. However,

according to the Camera and Imaging Products

Association, the number of cameras manufactured

per year has dropped from 121 million in 2010 to

61 million in 2013. Leica felt a need to push a new

marketing strategy given the recent decline in

camera sales (Moodley, 2014). To begin with,

Leica only owned a small percentage of the

TAB Journal

camera market: “We know that of the total

photographic market, maybe only 10% would even

consider buying a Leica. Out of the top 10%, only a

small fraction actually will end up buying a Leica”

(Babej, 2012, p.1). With the general decrease in

camera sales, Leica may need to consider new

creative ideas, because as cameras on

smartphones continue advancing, the need for a

separate camera is fading.

Synthesis of the Topic

Leica has been content with being part of a niche

market, however the overall decrease in camera

sales has Leica in need for innovation. As a

German-based company, Leica’s management is

similar to the German ideology. Leica focuses on

craftsmanship, detail, and quality. The overall

design of the cameras has not changed much from

the early 20th century.

I am proposing Leica implement a more open work

environment, allowing the opportunity for creative

thought. In an era fueled by innovation and

change, companies with stagnant ideas will not

succeed. Leica is in need of new, innovative ideas,

which will catapult them from their niche market

to a larger market. The presence of work-groups

and creative freedom can begin the circulation of

innovative ideas between the employees. Removal

of managerial impediments will allow employees

to stray from Leica’s status-quo of “old-school”

cameras.


There are three components of a creative work

environment that can potentially yield creativity, or

falter and be counterproductive. The three

components are: providing employees with

challenging work, removal of organizational

impediments, and conditions of freedom.

Assigning challenging tasks to employees has the

benefits of promoting creativity through a

psychological experience called “flow.” The

demand for attention and focus totally immerses

the employee in the task, causing the work to

merely “flow.” However, in this method lays the

possibility to assign too little or too much work:

“Workers become bored when they can do more

than is required of them and anxious when their

skills aren’t sufficient to accomplish a task”

(Williams, 2012, p.135). The search for this

balance is only temporary. Once the work

capabilities of employees are determined,

managers will know the perfect balance of work to

achieve work “flow” and creativity.

The component of freedom in the workplace

means having autonomy over one’s day-to-day

work and a sense of ownership and control over

one’s ideas (Williams, 2012). Studies have shown

that creative ideas thrive under conditions of

freedom. Although, this creative work

environment component might not always be

effective. Not all employees are fit to have control

over their work and time. Employees incapable of

managing their work and time will end up wasting

work hours or make bad decisions in their work.

Although a reasonable concern, employees with

such work freedom are often part of a larger

group, thus reducing the opportunity for mistakes.

For example, at Dunkin’ Donuts, members of the

Culinary Innovation Team are given the freedom to

explore new areas, whether it is testing 28

varieties of shortening or spending three months

researching new potato products. If these projects

were given to individuals, the opportunity for time

loss would be much higher.

The final component that might be susceptible to

being abused is the removal of impediments. The

method stems from the idea that, internal conflict

and power struggles, rigid management

structures, and a conservative bias toward the

status-quo can all discourage creativity (Williams,

2012). The removal of structure, conversely, can

TAB Journal

also allow for employee mistakes. Without

structure, an employee incapable of good

judgment most likely will make a poor decision. In

order to avoid this problem, companies simply

minimize impediment interference instead of

totally removing it. Pixar Studios minimizes

creative interference by making every film project

“filmmaker led”. When they produce films, they

know that company management, rules, and

procedures will not interfere.

References

Babej, M. E. (2012, November 26). How Leica camera is generating momentum for a passion brand. Forbes.

Retrieved from http://www.forbes.com/sites/marcbabej/2012/11/26/how-leica-camera-is-generating-

momentum-for-a-passion-brand/2/

Coates, J. F., & Jarratt, J. (1994, Spring). Workplace Creativity. Employment Relations Today, 11-21.

Elmuti, D. (1997). Self-managed work teams approach: creative management tool or fad? Management

Decision,35(3), 233-239.

Heerwagen, J. (2010, January 15). The changing nature of organizations, work, and workplace. Whole

Building Design Guide. Retrieved from http://www.wbdg.org/resources/chngorgwork.php

Leavy, B. (2003). A More Creative Organisation and a Better Breeding Ground for Leaders. Irish Marketing

Review, 16(2), 51-56.

Moodley, K. (2014, May 1). Can you watch the most boring ad ever made? CNBC. Retrieved from

http://www.nbcnews.com/business/consumer/can-you-watch-most-boring-ad-ever-made-n94666

Pillay, H., Boulton-Lewis, G., & Wilss, L. (2004). Changing workplace environments: Implications for higher

education. Educational Research Journal, 19(1),17-42.

Timberlake, C. (2012, June 14). Why Leica is opening so many stores. Businessweek. Retrieved from

http://www.businessweek.com/articles/2012-06-14/why-leica-is-opening-so-many-stores

Williams, C. (2012). MGMT 4. Mason,OH: Cengage Learning.

TAB Journal

Is There An Optimal Time to Sell Equity?

Eliezer Goldberg MA, MBA

If forced to sell the equity portion of an

investment portfolio during a calendar year, is

there an optimal day or time of day to sell? This

may sound like a hypothetical question, but for

millions of Americans turning 70½ years old it is

an important one. Section 401(a)(9) of the Internal

Revenue Code (Code) establishes rules for

Individual Retirement Accounts (IRAs) during the

life of an employee. In particular, Section

401(a)(9)(A)(ii) mandates a beginning date for IRA

distribution that would continue over the life of

the employee, while Section 401(a)(9)(C) defines

the age that triggers the beginning date of

distribution as 70½.1

As the Code does not require asset sales to be

spread out during the year, one sale per year of

the required proportion could fulfill the minimum

distribution requirement. No one accurately

forecasts equity prices for any given day and all

one can hope to sell as close to peak share price

as possible. What advice can a financial advisor

offer to retirees desperate to get the best price

possible for their equity? My analysis suggests

that it could be the last day of the year.

Background

The Securities Exchange Act of 1934 (1934 Act)2

clearly states that prices of securities are

susceptible to manipulation, control, excessive

speculation, which hinder the proper appraisal of

the value of securities and thus prevent a fair

calculation. Publicly traded companies offer

investors with some financial indication about

1 Federal Register. (1987, July 27). Vol. 52, Code 28070.

2 (1934, June 6). Title I, § 2, 48 Stat. 881.

their business. The Securities Act of 19333

requires companies to make financial information

available to potential shareholders. Financial

statements can be viewed at the Securities and

Exchange Commission’s (SEC) website.4 However,

a question arises. Is there enough information in

the public domain for one to make an educated

decision on the right price for one’s equity

investment?

In general, the board of directors or the executive

officers of a publicly traded company do not tack a

specific price to the shares or an enterprise value

to the company. In context in which a public

company must value itself, it relies on the publicly

traded price of its shares. Under the 1934 Act, a

company must file an annual report, which is

referred to as Form 10-K. The form, rules,

content, and requirements of the annual report

are detailed in the Qualifications and Reports of

Accountants (1972) in the Code of Federal

Regulations (CFR) Chapter II Title 17: Commodity

and Securities Exchanges.5 The front page of the

company’s filing provides the share price for the

day closest to the 10-K filing date. Even though

the share price is not controlled by the company

executives or the board of directors, the price has

a direct impact on calculating outstanding shares,

when it causes out-of-the-money options to

become dilutive of common stock, thereby

3 (1933, May 27). Title I, Section 1, 48 Stat. 74., 39.

4 See www.sec.gov.

5 Federal Register, 37(210.01-1, 210.1-02 Application of

Regulations S-X, Definitions of terms used in Regulation S-X,

(17 CFR part 210)), 14594.

Eliezer Goldberg is a High Yield/Distressed analyst working at a hedge fund, is

currently an adjunct professor in the Business Department of Touro College and is an alumnus of Touro College.

TAB Journal

affecting the company’s earnings per share,

market capitalization, and enterprise value.

There is an instance where a company will

telegraph to the public its disagreement with the

investing community over valuation by

announcing a stock buyback. By buying back its

own stock, the company demonstrates that having

analyzed a slew of available investment

possibilities, the repurchase of stock is equal to or

better than other possibilities. Even in that

situation, the company does not necessarily pick

an exact price at which it will buy back stock.

Sometimes a company will offer senior

management performance bonuses, in cash or

options, for improving profitability metrics. For a

publicly traded company, this is an indirect

method used to raise its stock price, assuming

investors will reward improvements in the

company’s business by boosting its stock price.

This incentive works well when employees think

the stock price can increase. When employees

conclude the market will not reward them for their

extra work, either because of general malaise in

the market, multiple-contraction, or because

investors are pricing the stock on future superior

expectations, cash bonus is more effective than

option or stock.

There are three valuation situations where a

company may make public statement of the exact

price that should be assigned to its shares. First, a

company’s management expresses a valuation

opinion when it offers to buy a certain portion or

all of the stock outstanding. Second, when a

company, that has filed a Chapter 11 bankruptcy

and wishes to emerge from bankruptcy, files a

plan of reorganization under which it offers new

shares to its creditors. The company and its

financial advisors prepare a disclosure statement,

and one of the exhibits displays the value of the

new emerging company, its stock, debt, and

enterprise value. Third, when a bankrupt company

decides to pursue liquidation instead of

reorganization and it gives creditors its opinion of

the company’s liquidation value. Even in this case,

the value presented may not be a conclusive

number but rather a recovery range depending

how the liquidation process runs its course.

In their book6, Security Analysis: the Classic 1934,

Graham and Dodd (1996) wrote:

Hence the prices of common stocks are not

carefully thought out computations, but

the resultants of a welter of human

reactions. The stock market is a voting

machine rather than a weighing machine. It

responds to factual data not directly, but

only as they affect the decisions of buyers

and sellers....Confronted by the mixture of

changing factors and fluctuating human

fancies, the securities analyst is clearly

incapable of passing judgment on common

stock prices generally (Chapter 39).

Graham and Dodd recognized over half a century

ago that is was very difficult to accurately value a

stock. For example, a classic method of valuing a

stock is to examine its price earnings (P/E) ratio.

This method looks at the earnings per share yield

(earnings per share divided by the stock price),

which is a comparable methodology to measuring

a stock that pays a dividend or a bond with paying

interest.

One can compare stocks, bonds or any

investments that promise to reward investors by

dividing the present price by anticipated payouts

to arrive at an investment yield. The nomenclature

for earnings divided by price yield is to flip the

numerator and denominator so that the return on

investment is a whole number instead of a

6 Graham, B., & Dodd, D. (1996). Security Analysis: The Classic

1934. New York: McGraw-Hill Professional Publishing.

TAB Journal

fraction. P/E ratios are quoted only as whole

numbers. If a stock’s earnings per share ratio is

$1 then the P/E ratio does not distinguish between

a price of $9.50 and $10.49. At either price, the

ratio is 10, even though there is a discrepancy of

99 cents, or close to 10%, in price. A 5% positive

or negative movement is significant and yet does

not impact the P/E ratio.

People who are compensated based on their

investment acumen could find the 10% difference

in stock price (from the low end of the range to

the high end) very significant. It is especially

important when that movement allows them to

beat an index by which their performance is being

measured. Does the Standard and Poor’s 500

Index (S&P 500) act any differently on the last

trading day of the year? I assume no one knows

which day of the year will be the best-performing

one for the multitude of indices against which

investment performance is measured, but what if

one patiently held on to equity investments until

the last day of the year and sold them at the

market close?

Analysis

I have researched the S&P 500 high, low, average,

and close prices since 1958 and compared the

close to the index’s low and average prices. I ran

two tests. One test was to compare the year-end

trading close to the S&P 500 average price as

calculated by Bloomberg. The second test was to

compare the year-end trading close to the lowest

price the S&P 500 fell to during the year. As deep

down into the abyss as the index may fall,

historically, would it made sense to hold on and

sell on the last trading day of the year?

Conclusion

In 38 out of 54 years, or 70% of the time, the S&P

500 closed the year above its average price for the

year by a margin of 1% or more. In only 12

instances, or 22% of the time, it closed more than

1% below its average for the year. In the other four

instances, the index closed within 1% of its

average for the year.

In none of the 54 years did the S&P 500 close the

year at its lowest point. In all instances, it closed

at least 2% higher than the nadir, and 50% of the

time it closed at least 14% above its low point.

Indeed, 9% of the time it closed over 32% above

the low point.

If historical data have credence and the S&P 500 is

a good metric for the stock market in general,

then one can conclude statistically that any

required selling may be more profitable on the last

day trading day of the year rather than on a

random day. A random day during the year might

reflect the yearly average price as well as the

yearly low.

Further research is needed to uncover the reason

for this highly correlated statistical occurrence.

There are a number of potential explanations for

the phenomenon. It may be that money managers

are engaged in window-dressing.

Alternatively, the lowest closing price of the year

is an anomaly, a statistical outlier created by

forced equity sales due to margin calls. The

phenomenon may be driven by the realities of the

workplace. Throughout the western world,

government and private sector employees take off

the last week of the calendar year, which may

cause a significant decrease in news that could

affect companies and their stock prices. Another

employment-related possibility stems from the

increase during the holiday season of seasonal

and temporary jobs in retail, which may increase

income and thereby reduce the pressure to sell

stock. In a similar vein, workers may receive

holiday or year-end bonuses, similarly reducing

selling pressure.

TAB Journal

High Low Average Close

Close greater

or less then

the low

% change

01/03/11 12/30/11 361 1363.61 1099.23 1267.64 1257.6 158.37$ 12.49%

01/04/10 12/31/10 361 1,259.78$ 1,022.58$ 1,139.97$ 1,257.64$ 235.06$ 20.62%

01/02/09 12/31/09 363 1,127.78$ 676.53$ 948.05$ 1,115.10$ 438.57$ 46.26%

01/02/08 12/31/08 364 1,447.16$ 752.44$ 1,220.04$ 903.25$ 150.81$ 12.36%

01/03/07 12/31/07 362 1,565.15$ 1,374.12$ 1,477.19$ 1,468.36$ 94.24$ 6.38%

01/03/06 12/29/06 360 1,427.09$ 1,223.69$ 1,310.46$ 1,418.30$ 194.61$ 14.85%

01/03/05 12/30/05 361 1,272.74$ 1,137.50$ 1,207.23$ 1,248.29$ 110.79$ 9.18%

01/02/04 12/31/04 364 1,213.55$ 1,063.23$ 1,130.65$ 1,211.92$ 148.69$ 13.15%

01/02/03 12/31/03 363 1,111.92$ 800.73$ 965.23$ 1,111.92$ 311.19$ 32.24%

01/02/02 12/31/02 363 1,172.51$ 776.76$ 993.94$ 879.82$ 103.06$ 10.37%

01/02/01 12/31/01 363 1,373.73$ 965.80$ 1,194.18$ 1,148.08$ 182.28$ 15.26%

01/03/00 12/29/00 361 1,527.46$ 1,264.74$ 1,427.22$ 1,320.28$ 55.54$ 3.89%

01/04/99 12/31/99 361 1,469.25$ 1,212.19$ 1,327.33$ 1,469.25$ 257.06$ 19.37%

01/02/98 12/31/98 363 1,241.81$ 927.69$ 1,085.50$ 1,229.23$ 301.54$ 27.78%

01/02/97 12/31/97 363 983.79$ 737.01$ 873.43$ 970.43$ 233.42$ 26.72%

01/02/96 12/31/96 364 757.03$ 598.48$ 670.49$ 740.74$ 142.26$ 21.22%

01/03/95 12/29/95 360 621.69$ 459.11$ 541.72$ 615.93$ 156.82$ 28.95%

01/03/94 12/30/94 361 482.00$ 438.92$ 460.42$ 459.27$ 20.35$ 4.42%

01/04/93 12/31/93 361 470.94$ 429.05$ 451.61$ 466.45$ 37.40$ 8.28%

01/02/92 12/31/92 364 441.28$ 394.50$ 415.75$ 435.71$ 41.21$ 9.91%

01/02/91 12/31/91 363 417.09$ 311.49$ 376.19$ 417.09$ 105.60$ 28.07%

01/02/90 12/31/90 363 368.95$ 295.46$ 334.63$ 330.22$ 34.76$ 10.39%

01/03/89 12/29/89 360 359.80$ 275.31$ 323.05$ 353.40$ 78.09$ 24.17%

01/04/88 12/30/88 361 283.66$ 242.63$ 265.88$ 277.72$ 35.09$ 13.20%

01/02/87 12/31/87 363 336.77$ 223.92$ 287.00$ 247.08$ 23.16$ 8.07%

01/02/86 12/31/86 363 254.00$ 203.49$ 236.39$ 242.17$ 38.68$ 16.36%

01/02/85 12/31/85 363 212.02$ 163.68$ 186.81$ 211.28$ 47.60$ 25.48%

01/03/84 12/31/84 363 170.41$ 147.82$ 160.46$ 167.24$ 19.42$ 12.10%

01/03/83 12/30/83 361 172.65$ 138.34$ 160.47$ 164.93$ 26.59$ 16.57%

01/04/82 12/31/82 361 143.02$ 102.42$ 119.62$ 140.33$ 37.91$ 31.69%

01/02/81 12/31/81 363 138.12$ 112.77$ 128.04$ 122.55$ 9.78$ 7.64%

01/02/80 12/31/80 364 140.52$ 98.22$ 118.71$ 135.76$ 37.54$ 31.62%

01/02/79 12/31/79 363 111.27$ 96.13$ 102.99$ 107.94$ 11.81$ 11.47%

01/01/78 12/31/78 364 106.99$ 86.90$ 96.12$ 96.11$ 9.21$ 9.58%

01/03/77 12/30/77 361 107.00$ 90.71$ 98.18$ 95.10$ 4.39$ 4.47%

01/02/76 12/31/76 364 107.83$ 90.90$ 102.04$ 107.46$ 16.56$ 16.23%

01/02/75 12/31/75 363 95.61$ 70.04$ 86.18$ 90.19$ 20.15$ 23.38%

01/02/74 12/31/74 363 99.80$ 62.28$ 82.85$ 68.56$ 6.28$ 7.58%

01/02/73 12/31/73 363 120.24$ 92.16$ 107.44$ 97.55$ 5.39$ 5.02%

01/03/72 12/29/72 361 119.12$ 101.67$ 109.09$ 118.05$ 16.38$ 15.02%

01/04/71 12/31/71 361 104.77$ 90.16$ 98.31$ 101.95$ 11.79$ 11.99%

01/02/70 12/31/70 363 93.46$ 69.29$ 83.18$ 92.00$ 22.71$ 27.30%

01/02/69 12/31/69 363 106.16$ 89.20$ 97.77$ 92.06$ 2.86$ 2.93%

01/02/68 12/31/68 364 108.37$ 87.72$ 98.37$ 103.86$ 16.14$ 16.41%

01/03/67 12/29/67 360 97.59$ 80.38$ 91.96$ 96.47$ 16.09$ 17.50%

01/03/66 12/30/66 361 94.06$ 73.20$ 85.18$ 80.33$ 7.13$ 8.37%

01/04/65 12/31/65 361 92.63$ 81.60$ 88.15$ 92.43$ 10.83$ 12.29%

01/02/64 12/31/64 364 86.28$ 75.43$ 81.37$ 84.75$ 9.32$ 11.45%

01/02/63 12/31/63 363 75.02$ 62.69$ 69.86$ 75.02$ 12.33$ 17.65%

01/02/62 12/31/62 363 71.13$ 52.35$ 62.32$ 63.10$ 10.75$ 17.25%

01/03/61 12/29/61 360 72.64$ 57.57$ 66.27$ 71.55$ 13.98$ 21.10%

01/04/60 12/30/60 361 60.39$ 52.30$ 55.85$ 58.11$ 5.81$ 10.40%

01/02/59 12/31/59 363 60.71$ 53.58$ 57.41$ 59.89$ 6.31$ 10.99%

01/02/58 12/31/58 363 55.21$ 40.33$ 46.20$ 55.21$ 14.88$ 32.21%

COMPARING THE CLOSING PRICE TO THE LOWEST PRICE

TAB Journal

>1% >2% >3% >4% >5% >7% >8% >9% >10% >11% >13% >14% >15% >16% >17% >18% >20% >21% >22% >24% >25% >26% >27% >28% >31%

01/03/11 12/30/11 361 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5%

01/04/10 12/31/10 361 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6%

01/02/09 12/31/09 363 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3% 46.3%

01/02/08 12/31/08 364 12.4% 12.4% 12.4% 12.4% 12.4% 12.4% 12.4% 12.4% 12.4% 12.4%

01/03/07 12/31/07 362 6.4% 6.4% 6.4% 6.4% 6.4% 6.4%

01/03/06 12/29/06 360 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9%

01/03/05 12/30/05 361 9.2% 9.2% 9.2% 9.2% 9.2% 9.2% 9.2% 9.2%

01/02/04 12/31/04 364 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2%

01/02/03 12/31/03 363 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2%

01/02/02 12/31/02 363 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4%

01/02/01 12/31/01 363 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3%

01/03/00 12/29/00 361 3.9% 3.9% 3.9%

01/04/99 12/31/99 361 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4% 19.4%

01/02/98 12/31/98 363 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8%

01/02/97 12/31/97 363 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7%

01/02/96 12/31/96 364 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% 21.2%

01/03/95 12/29/95 360 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9% 28.9%

01/03/94 12/30/94 361 4.4% 4.4% 4.4% 4.4%

01/04/93 12/31/93 361 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3%

01/02/92 12/31/92 364 9.9% 9.9% 9.9% 9.9% 9.9% 9.9% 9.9% 9.9%

01/02/91 12/31/91 363 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% 28.1%

01/02/90 12/31/90 363 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4%

01/03/89 12/29/89 360 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2% 24.2%

01/04/88 12/30/88 361 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2%

01/02/87 12/31/87 363 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1%

01/02/86 12/31/86 363 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4%

01/02/85 12/31/85 363 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5%

01/03/84 12/31/84 363 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1%

01/03/83 12/30/83 361 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6% 16.6%

01/04/82 12/31/82 361 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7% 31.7%

01/02/81 12/31/81 363 7.6% 7.6% 7.6% 7.6% 7.6% 7.6%

01/02/80 12/31/80 364 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6% 31.6%

01/02/79 12/31/79 363 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5%

01/01/78 12/31/78 364 9.6% 9.6% 9.6% 9.6% 9.6% 9.6% 9.6% 9.6%

01/03/77 12/30/77 361 4.5% 4.5% 4.5% 4.5%

01/02/76 12/31/76 364 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2% 16.2%

01/02/75 12/31/75 363 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4% 23.4%

01/02/74 12/31/74 363 7.6% 7.6% 7.6% 7.6% 7.6% 7.6%

01/02/73 12/31/73 363 5.0% 5.0% 5.0% 5.0% 5.0%

01/03/72 12/29/72 361 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%

01/04/71 12/31/71 361 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%

01/02/70 12/31/70 363 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3%

01/02/69 12/31/69 363 2.9% 2.9%

01/02/68 12/31/68 364 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4%

01/03/67 12/29/67 360 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5%

01/03/66 12/30/66 361 8.4% 8.4% 8.4% 8.4% 8.4% 8.4% 8.4%

01/04/65 12/31/65 361 12.3% 12.3% 12.3% 12.3% 12.3% 12.3% 12.3% 12.3% 12.3% 12.3%

01/02/64 12/31/64 364 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5%

01/02/63 12/31/63 363 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6%

01/02/62 12/31/62 363 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2%

01/03/61 12/29/61 360 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1% 21.1%

01/04/60 12/30/60 361 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4%

01/02/59 12/31/59 363 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0%

01/02/58 12/31/58 363 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2% 32.2%

54 54 53 52 50 49 46 43 40 36 29 27 26 24 20 17 16 15 13 12 11 10 9 7 5

100% 100% 98% 96% 93% 91% 85% 80% 74% 67% 54% 50% 48% 44% 37% 31% 30% 28% 24% 22% 20% 19% 17% 13% 9%

COMPARING THE CLOSING PRICE TO THE LOWEST PRICE

TAB Journal

Days in

the

period

High Low Average Close

Close

greater or

less than

average

% change

1 01/03/11 12/30/11 361 1363.61 1099.23 1267.64 1257.6 (10.04)$ -0.79%

2 01/04/10 12/31/10 361 1,259.78$ 1,022.58$ 1,139.97$ 1,257.64$ 117.67$ 10.32%

3 01/02/09 12/31/09 363 1,127.78$ 676.53$ 948.05$ 1,115.10$ 167.05$ 17.62%

4 01/02/08 12/31/08 364 1,447.16$ 752.44$ 1,220.04$ 903.25$ (316.79)$ -25.97%

5 01/03/07 12/31/07 362 1,565.15$ 1,374.12$ 1,477.19$ 1,468.36$ (8.83)$ -0.60%

6 01/03/06 12/29/06 360 1,427.09$ 1,223.69$ 1,310.46$ 1,418.30$ 107.84$ 8.23%

7 01/03/05 12/30/05 361 1,272.74$ 1,137.50$ 1,207.23$ 1,248.29$ 41.06$ 3.40%

8 01/02/04 12/31/04 364 1,213.55$ 1,063.23$ 1,130.65$ 1,211.92$ 81.27$ 7.19%

9 01/02/03 12/31/03 363 1,111.92$ 800.73$ 965.23$ 1,111.92$ 146.69$ 15.20%

10 01/02/02 12/31/02 363 1,172.51$ 776.76$ 993.94$ 879.82$ (114.12)$ -11.48%

11 01/02/01 12/31/01 363 1,373.73$ 965.80$ 1,194.18$ 1,148.08$ (46.10)$ -3.86%

12 01/03/00 12/29/00 361 1,527.46$ 1,264.74$ 1,427.22$ 1,320.28$ (106.94)$ -7.49%

13 01/04/99 12/31/99 361 1,469.25$ 1,212.19$ 1,327.33$ 1,469.25$ 141.92$ 10.69%

14 01/02/98 12/31/98 363 1,241.81$ 927.69$ 1,085.50$ 1,229.23$ 143.73$ 13.24%

15 01/02/97 12/31/97 363 983.79$ 737.01$ 873.43$ 970.43$ 97.00$ 11.11%

16 01/02/96 12/31/96 364 757.03$ 598.48$ 670.49$ 740.74$ 70.25$ 10.48%

17 01/03/95 12/29/95 360 621.69$ 459.11$ 541.72$ 615.93$ 74.21$ 13.70%

18 01/03/94 12/30/94 361 482.00$ 438.92$ 460.42$ 459.27$ (1.15)$ -0.25%

19 01/04/93 12/31/93 361 470.94$ 429.05$ 451.61$ 466.45$ 14.84$ 3.29%

20 01/02/92 12/31/92 364 441.28$ 394.50$ 415.75$ 435.71$ 19.96$ 4.80%

21 01/02/91 12/31/91 363 417.09$ 311.49$ 376.19$ 417.09$ 40.90$ 10.87%

22 01/02/90 12/31/90 363 368.95$ 295.46$ 334.63$ 330.22$ (4.41)$ -1.32%

23 01/03/89 12/29/89 360 359.80$ 275.31$ 323.05$ 353.40$ 30.35$ 9.39%

24 01/04/88 12/30/88 361 283.66$ 242.63$ 265.88$ 277.72$ 11.84$ 4.45%

25 01/02/87 12/31/87 363 336.77$ 223.92$ 287.00$ 247.08$ (39.92)$ -13.91%

26 01/02/86 12/31/86 363 254.00$ 203.49$ 236.39$ 242.17$ 5.78$ 2.45%

27 01/02/85 12/31/85 363 212.02$ 163.68$ 186.81$ 211.28$ 24.47$ 13.10%

28 01/03/84 12/31/84 363 170.41$ 147.82$ 160.46$ 167.24$ 6.78$ 4.23%

29 01/03/83 12/30/83 361 172.65$ 138.34$ 160.47$ 164.93$ 4.46$ 2.78%

30 01/04/82 12/31/82 361 143.02$ 102.42$ 119.62$ 140.33$ 20.71$ 17.31%

31 01/02/81 12/31/81 363 138.12$ 112.77$ 128.04$ 122.55$ (5.49)$ -4.29%

32 01/02/80 12/31/80 364 140.52$ 98.22$ 118.71$ 135.76$ 17.05$ 14.36%

33 01/02/79 12/31/79 363 111.27$ 96.13$ 102.99$ 107.94$ 4.95$ 4.81%

34 01/01/78 12/31/78 364 106.99$ 86.90$ 96.12$ 96.11$ (0.01)$ -0.01%

35 01/03/77 12/30/77 361 107.00$ 90.71$ 98.18$ 95.10$ (3.08)$ -3.14%

36 01/02/76 12/31/76 364 107.83$ 90.90$ 102.04$ 107.46$ 5.42$ 5.31%

37 01/02/75 12/31/75 363 95.61$ 70.04$ 86.18$ 90.19$ 4.01$ 4.65%

38 01/02/74 12/31/74 363 99.80$ 62.28$ 82.85$ 68.56$ (14.29)$ -17.25%

39 01/02/73 12/31/73 363 120.24$ 92.16$ 107.44$ 97.55$ (9.89)$ -9.21%

40 01/03/72 12/29/72 361 119.12$ 101.67$ 109.09$ 118.05$ 8.96$ 8.21%

41 01/04/71 12/31/71 361 104.77$ 90.16$ 98.31$ 101.95$ 3.64$ 3.70%

42 01/02/70 12/31/70 363 93.46$ 69.29$ 83.18$ 92.00$ 8.82$ 10.60%

43 01/02/69 12/31/69 363 106.16$ 89.20$ 97.77$ 92.06$ (5.71)$ -5.84%

44 01/02/68 12/31/68 364 108.37$ 87.72$ 98.37$ 103.86$ 5.49$ 5.58%

45 01/03/67 12/29/67 360 97.59$ 80.38$ 91.96$ 96.47$ 4.51$ 4.90%

46 01/03/66 12/30/66 361 94.06$ 73.20$ 85.18$ 80.33$ (4.85)$ -5.69%

47 01/04/65 12/31/65 361 92.63$ 81.60$ 88.15$ 92.43$ 4.28$ 4.86%

48 01/02/64 12/31/64 364 86.28$ 75.43$ 81.37$ 84.75$ 3.38$ 4.15%

49 01/02/63 12/31/63 363 75.02$ 62.69$ 69.86$ 75.02$ 5.16$ 7.39%

50 01/02/62 12/31/62 363 71.13$ 52.35$ 62.32$ 63.10$ 0.78$ 1.25%

51 01/03/61 12/29/61 360 72.64$ 57.57$ 66.27$ 71.55$ 5.28$ 7.97%

52 01/04/60 12/30/60 361 60.39$ 52.30$ 55.85$ 58.11$ 2.26$ 4.05%

53 01/02/59 12/31/59 363 60.71$ 53.58$ 57.41$ 59.89$ 2.48$ 4.32%

54 01/02/58 12/31/58 363 55.21$ 40.33$ 46.20$ 55.21$ 9.01$ 19.50%

COMPARING THE CLOSING PRICE TO THE AVERAGE PRICE

TAB Journal

COMPARING THE CLOSING PRICE TO THE AVERAGE PRICE

Days in

the

period

>1% >2% >3% >4% >5% >7% >8% >9% >10% >11% >13% >14% >15% >17%

1% less

then

the avg.

01/03/11 12/30/11 361

01/04/10 12/31/10 361 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3%

01/02/09 12/31/09 363 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6%

01/02/08 12/31/08 364 -26.0%

01/03/07 12/31/07 362

01/03/06 12/29/06 360 8.2% 8.2% 8.2% 8.2% 8.2% 8.2% 8.2%

01/03/05 12/30/05 361 3.4% 3.4% 3.4%

01/02/04 12/31/04 364 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%

01/02/03 12/31/03 363 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%

01/02/02 12/31/02 363 -11.5%

01/02/01 12/31/01 363 -3.9%

01/03/00 12/29/00 361 -7.5%

01/04/99 12/31/99 361 10.7% 10.7% 10.7% 10.7% 10.7% 10.7% 10.7% 10.7% 10.7%

01/02/98 12/31/98 363 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2%

01/02/97 12/31/97 363 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1%

01/02/96 12/31/96 364 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%

01/03/95 12/29/95 360 13.7% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7%

01/03/94 12/30/94 361

01/04/93 12/31/93 361 3.3% 3.3% 3.3%

01/02/92 12/31/92 364 4.8% 4.8% 4.8% 4.8%

01/02/91 12/31/91 363 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9% 10.9%

01/02/90 12/31/90 363 -1.3%

01/03/89 12/29/89 360 9.4% 9.4% 9.4% 9.4% 9.4% 9.4% 9.4% 9.4%

01/04/88 12/30/88 361 4.5% 4.5% 4.5% 4.5%

01/02/87 12/31/87 363 -13.9%

01/02/86 12/31/86 363 2.4% 2.4%

01/02/85 12/31/85 363 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% 13.1%

01/03/84 12/31/84 363 4.2% 4.2% 4.2% 4.2%

01/03/83 12/30/83 361 2.8% 2.8%

01/04/82 12/31/82 361 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3% 17.3%

01/02/81 12/31/81 363 -4.3%

01/02/80 12/31/80 364 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4%

01/02/79 12/31/79 363 4.8% 4.8% 4.8% 4.8%

01/01/78 12/31/78 364

01/03/77 12/30/77 361 -3.1%

01/02/76 12/31/76 364 5.3% 5.3% 5.3% 5.3% 5.3%

01/02/75 12/31/75 363 4.7% 4.7% 4.7% 4.7%

01/02/74 12/31/74 363 -17.2%

01/02/73 12/31/73 363 -9.2%

01/03/72 12/29/72 361 8.2% 8.2% 8.2% 8.2% 8.2% 8.2% 8.2%

01/04/71 12/31/71 361 3.7% 3.7% 3.7%

01/02/70 12/31/70 363 10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6%

01/02/69 12/31/69 363 -5.8%

01/02/68 12/31/68 364 5.6% 5.6% 5.6% 5.6% 5.6%

01/03/67 12/29/67 360 4.9% 4.9% 4.9% 4.9%

01/03/66 12/30/66 361 -5.7%

01/04/65 12/31/65 361 4.9% 4.9% 4.9% 4.9%

01/02/64 12/31/64 364 4.2% 4.2% 4.2% 4.2%

01/02/63 12/31/63 363 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%

01/02/62 12/31/62 363 1.3%

01/03/61 12/29/61 360 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

01/04/60 12/30/60 361 4.0% 4.0% 4.0% 4.0%

01/02/59 12/31/59 363 4.3% 4.3% 4.3% 4.3%

01/02/58 12/31/58 363 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5%

38 37 35 32 22 20 17 15 14 9 8 5 4 3 12

70% 69% 65% 59% 41% 37% 31% 28% 26% 17% 15% 9% 7% 6% 22%

TAB Journal Page 97

TAB Journal

Submission Form to TAB Journal

Please use the form below when submitting students’ papers for publication in the TAB Journal.

Email the form and the papers to [email protected]. Watch out for approaching deadlines

set by Dean Bressler in the future.

Student’s Name

Submitting Professor’s Name

Type of Paper

a) Short <=3 pages b) Long > 3 pages

c) Quantitative Analysis d) Qualitative Analysis

Area of Focus

Marketing, Management, Finance, Accounting etc.

Date

Evaluation Criteria Rate on a scale from 1-5

(1 – very weak; 2 – weak; 3 – neither strong or weak;

4 – strong; 5 – very strong)

1. Content Depth: The extent of research effort,

analysis, and depth of knowledge that is covered in

the paper.

1……...2……....3…….....4……...5

2. Practical Implication: The level of applicability to

business life that can be of interest to students. 1……...2……....3…….....4……...5

3. Organization & Structure: Structure of the paper is

clear and easy to follow. Content and purpose of

the writing are clear. Paragraph transitions are

logical and maintain the flow of thought throughout

the paper. Conclusion is logical and flows from the

body of the paper.

1……...2……....3…….....4……...5

4.. Format and Citations: Paper follows designated

guidelines. The document has the appropriate

length as described for the assignment. Format

enhances readability of the paper.

1……...2……....3…….....4……...5

5. Style and Grammar: Rules of grammar, usage, and

punctuation are followed; spelling is correct.

Language is clear and precise. The document is

professional in appearance.

1……...2……....3…….....4……...5

6. Comments: Qualitative assessment of the paper’s

strengths, weaknesses, and ideas for improvement.

Lander College of Arts

and Sciences

Division of

Touro College

1602 Ave J

Brooklyn, NY 11230

Phone: 718-252-7800

Fax: 718-253-9455

E-Mail: [email protected]

We’re on the Web!

Visit us at:

www.touro.edu

Another Reason to Excel


The mission of the TAB Journal is to recognize faculty

and highly dedicated students who exceed scholarly

expectations and demonstrate rigorous research,

analysis, and writing capabilities in their papers.

The vision of the TAB journal is to become a highly

regarded publication of top student and faculty

research studies in the field of business administration

for the Touro College and University System worldwide.

Student Editorial Board:

Lilian Hamadani*

Shimon Kreiger*

Sol Lerner, Lead Student Editor

*TAB Society Presidents 2013-2014

Editorial Board:

Dr. Barry Bressler

Dr. Julita Haber, Editor in Chief

Journal Coordinator & Editorial Manager:

Esther Widroff

MANUSCRIPT SUBMISSION PROCESS

Faculty

We encourage Touro College business faculty to submit their top student papers from all

business administration courses for publication in the TAB Journal. Submitted manuscripts

need to be formatted according to the APA style and demonstrate high scholarly standard and

exceed analytical and research expectations. Top papers are selected for publishing by the

editorial board based on rating of content depth, analysis, research, practical implication, paper

organization, structure, format, style, and grammatical rigor. The submission form and

requirements are available from [email protected]. Submission for the next issue is

ongoing. The decision for publication of manuscripts will be announced by the TAB editorial

board.

Students

All current Touro College students taking business administration courses are encouraged to

enhance their efforts on research and writing class term papers so that professors can nominate

their papers for publication in the TAB Journal. Selected authors will be able to acknowledge

their publishing accomplishments on resumes that will surely enhance their academic and

professional advancement. For the next issue, the best student paper will also receive an award

of $100 American Express gift certificate.

Award of $100 Gift Certificate to the Best Student Paper!

tab fall 2014

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