Islam Essays (1406 words) - Canadian Muslims, Criticism Of Islam

Islam the Islamic Congress's president, Mohamed Elmasry. Mr. Elmasry said there are bad Muslims just as there are bad Christians and Jews. We treat them as such and so should you. But Islam is a religion of peace. Muslims have a religious duty to be tolerant of other faiths and other ideologies.'' Mr. Elmasry said journalists need to differentiate between the peaceful teachings of Islam and the claims of some Muslim extremists that their actions are justified by their interpretations of Islam. He likened the situation of Canadian Muslims today to that of Canadian Jews 50 years ago. Jewish children were being (wrongly) called Christ-killers just as Muslim children are called terrorists today.'' In their letter to the editor in the April 27 issue of the College Hill Independent, Jumana Musa and Shadi Nahvi made some excellent points. They rightly asserted that the Western press tends to portray Arabs and Muslims according to stereotypes and these myths persist partly due to Western popular ignorance about Arabs and Muslims. Since the Muslims students at Brown condemned the bombing of a Tel Aviv bus last year, I am learning to separate the handful of Muslim and Arab extremists who commit terrorist attacks against Israeli and Jewish civilians from the millions of Muslim believers who do not participate in this violence and sometimes express opposition to it. Since I began interacting with Muslims students through the kosher/hallal meal plan this year, I am changing my perceptions of Muslims and seeing them as people instead of abstractions. I think that many, many people in the United States and in western countries, in Europe, are afraid of a monster called Islam. And as the honorable Congressman Dana Rohrabacher said, it is an insult to consider the whole of Muslims, to take them into one side, and make them extremists. Really it is not correct. It is a little bit insulting. What is the definition of extremism? We can see in all of history: even when the first settlers came to the United States they were from different countries; Spain, England, France, European Countries. They were fighting on this land and fighting with the Indians. Do we call this extremism? A fight for a better living, which you understand you are doing not for a religious motive, is not extremism. Extremism in Islam, or in religion, is when you use religion to label intolerance, to turn from religion and take ideas that you can extract for yourself, or deduce for yourself, and use to make a militant movement and disturb the peace in your country or around the world. That is called extremism, and Islamic Extremism. But a movement for better living, that is not extremism. These people nowadays are developing two ways of understanding the situation of Islam. From one side they think that they have to reform it; it is a duty on them, they have been brainwashed to think that they have to cleanse the world of devils and demons and of countries that suppress them, oppress them, and try to shut them down. Logicians argue that one cannot pass a judgment on something unless one has a clear conception of it, because the unknown and the undefined cannot be judged. Therefore, we first have to determine what religious ,extremism means before we can condemn or applaud it. We can do so by considering its reality and its most distinguishing characteristics. Literally, extremism means being situated at the farthest possible point from the center. Figuratively, it indicates a similar remoteness in religion and thought, as well as behavior. One of the main consequences of extremism is exposure to danger and insecurity.! Islam, therefore, recommends moderation and balance in everything: in belief, ibadah, conduct, and legislation. Islam is frequently misunderstood and may even seem exotic in some parts of today's world. Perhaps this is because religion no longer dominates everyday life in Western society; whereas, for Muslims, Islam is life. Muslims make no artificial division between the secular and the sacred. bin laden: The treacherous attack has confirmed that Britain and America are acting on behalf of Israel and the Jews, paving the way for the Jews to divide the Muslim world once again, enslave it and loot the rest of its wealth, the US magazine quotes bin Laden saying. What particularly interested me in the report was the military demand that terrorism be eliminated and extremism be abolished. Both terrorism and extremism, however, seem to include, at least in their minds, most

Emergance of modern china essays

Emergance of modern china essays By the nineteenth century, China was experiencing growing pressures of economic origin, there were over 300 million Chinese, but there was no industry or trade to absorb the excess labor. The scarcity of land led to widespread breakdown in law and order. Localized revolts erupted in various parts of the empire. As elsewhere in Asia, in China the Portuguese were the pioneers, establishing a foothold at Macao, from which they monopolized foreign trade at the Chinese port of Guangzhou (Fitzgerald 743). Soon the Spanish arrived, followed by the British and the French, trade between China and the West was carried on in the aspect of tribute, foreigners were forced to follow the elelaborate, centuries-old ritual imposed on agents from Chinas tributary states. There was no conception at the imperial court that the Europeans would expect or deserve to be treated as cultural or political equals. The only exception was Russia, the most powerful inland neighbor. The Manchus were sensitive to the need for security along the northern land frontier and therefore were prepared to be realistic in dealing with Russia. The treaty of Nerchinsk (1689) with the Russians, drafted to bring to an end a series of border incidents and to establish a border between Siberia and Marchuria along the Heilong Jiang, was Chinas first bilateral agreement with a European power (Fairbank 201). Western diplomatic efforts to expand trade on equal terms were opposed; the official Chinese assumption was that the empire was not in need of foreign products. Despite this attitude, trade flourished, even though after 1760 all foreign trade was confined to Guangzhou, where the foreign traders had to limit their dealings to a dozen officially licensed Chinese merchant firms (Fitzgerald 762). Trade was not the sole basis of contact with the West. Since the thirteenth century, Roman Catholic missionaries had been attempting to establish their church i...

Change Management Simulation Essay Example | Topics and Well Written Essays - 1250 words

Change Management Simulation - Essay Example The lever that was pulled in week 1 was to tell a success story to Deborah Edge, Luke Filer, and Bob Ingram. The effect of this lever was that 2 people entered the awareness stage, and 1 person entered the interest stage. The rationale for this step was that these individuals were previously opposed to the process and such a move would gain their confidence. The next step was to get the CEO’s public support; the target was the entire organization. The effect was that four people entered the interest stage. The rationale behind this was that it would shift the organizational culture in favor of the project. The next step was to get consultant support. The effect of this was no noticeable effect. This was rationalized, as it would improve the project’s feasibility. In week 6 a pilot project was conducted; specifically targeted were Henry Adams, Deborah Edge, and Yao Li; the effect was that 1 person entered the awareness stage, 2 people entered the interest stage, and 1 pe rson entered the trial stage. The rationale for this decision was that it would demonstrate the project’s feasibility and begin the steps to establish the innovation. In week 12 progress reports were posted; this was targeted at the entire organization and had no noticeable effect. Again the intention was to advance the project and further demonstrate its feasibility to individuals opposed. The week 13 level was to provide internal skill building to Walt James, Diane McNatt, and Sam Puffer; 4 people entered the awareness stage. The rationale was that this would both gain support for the project and begin to establish the necessary intellectual infrastructure. Week 15 built on these earlier elements through attempting to build a coalition of support; still there was no noticeable impact on the project. Week 19 used the recognize an adopter lever on Henry Adams, again noticeable effect occurred. Week 22 implemented the ‘walk the talk’ level; this had a significant impact 3 people entered the interest stage and two people entered the trial stage. The rational was that this decision would demonstrate to the organization the plan’s action. In week 22 progress reports were posted again simply as a means of moving the project along. In week 25 an e-mail notice was issued and 2 people entered the interest stage. In week 26 the goals and deadline were accounted; 6 people entered the awareness stage, 1 person entered the interest stage, and 2 people entered the trial stage. The rationale for this was both to gain support, both also for the pure functional aspect of moving the project along. Week 30 implemented the ‘revise reward system’ level; 6 people entered the interest stage, 6 the trial, and 5 the adoption. Rewards are recognized as a prominent aspect of effective leadership and motivation. Week 42 implemented ‘walk the talk’ as a means of gaining further support; 4 people entered the trial stage. Week 46 conduct ed private interviews with four people as a means of gaining further development insight on the project; 3 people entered the trial stage, 1 person the adoption. Week 47 goals and deadlines were announced and 2 people entered the adoption stage. Week 51 further worked towards advancing the new aspects of the project by building a coalition of support; this had no noticeable effect. The rationale between week 62 and week 64 was to gain the organization’s complete support, as a result week 62 told a success story, week 63 conducted private

Summarize the reasons for the failure of Lehman Brothers Essay

Summarize the reasons for the failure of Lehman Brothers - Essay Example hat the problems of the Lehman Brothers were well published over the media which gave time to the derivatives market to prepare for the worst (The Economist, 2008). The statement was pretty correct as the credit-default swaps market had not been broken but buckled up (The Economist, 2008). The bank was unable to assess the risk of the borrower or trading partner which resulted in defaults paralyzing the cash flows of the bank. According to The Economist, a senior bank executive quotes this mistake of deregulated leasing â€Å"the mistake of a lifetime† (The Economist, 2008). The Lehman Brothers was caught up amidst US$ 613 billion of debt of which US$ 160 billion was held by international investors as unsecured bonds. The European pension funds and the individuals in Asian markets had believed in the high rating of the Lehman Brothers and put their investments in this unsecured bonds. The price of this unsecured bonds collapsed quickly destroying the share price of the company to half overnight. The shareholders had already witnessed downfall of the prices of shares in the past few months. These losses caused a spiral in the money market. International investors pulled off US$ 400 billion from the money market funds which was supposed to be a safer investment. This action was taken when a fund suffered losses which were loaded on Lehman’s debts (The Economist, 2008). Dick Fuld was the CEO of the Lehman Brothers at the time of the collapse of the bank. The Lehman Brothers has been the 4th largest investment bank in the US since 1994. Mr. Fuld has been partly blamed for the collapse of the bank and the losses made by the investors. The CEO enforced many policies and precautions to avoid any financial storm, but still the bank revealed US$ 2.8 billion losses in the next quarter. On the 15th of September, 2008, the share price of the bank went down 94% as compared to the previous year. The redundancy of 24,000 employees caused a great human cost. All these factors

Pathological Processes in the CNS and the Rest of the Body Essay

Pathological Processes in the CNS and the Rest of the Body - Essay Example Abnormal insulin signalling is not only involved at the glucose level but also at numerous degenerative processes. Another common feature of these two diseases is that their prevalence increases as age advances (Abbas, et al., 2009). This paper will review the common inflammatory and pathological processes in the CNS and the rest of the body. Alzheimer’s disease is the most common form of dementia among older people. It is associated with the loss of cognitive functions like thinking, remembering and reasoning to an extent where it interferes with the patient’s day to day functioning (Russell, et al., 2007). Most patients diagnosed with Alzheimer disease are over 65 years old although the Alzheimer process can start earlier. In 2010, there were 27 million people diagnosed with Alzheimer’s disease. It is projected that by the year 2050, 1 in 85 people globally will be suffering from Alzheimer’s disease (Holscher, 2011). Research has associated the disease with plaques and tangles in the brain. Alzheimer’s disease is characterized by loss of synapses and neurons in the cerebral cortex and some areas of the subcortical regions. This leads to the loss in gross atrophy of the affected parts of the brain (Irwin, 2010). In Alzheimer’s disease, an unknown protein causes amyloid precursor protein to be divided into smaller fragments by enzymes in a process called proteolysis. One of these fragments becomes fibrils of beta-amyloid that form deposits in dense formations referred to as senile plaques. A protein called tau stabilizes microtubules. In Alzheimer’s disease, tau undergoes chemical changes and begins to pair with other threads that create neurofibrillary and disintegrates the neuron transport system (Thompson, et al., 2007). Type 2 diabetes is the most common form of diabetes. Unlike type 1 diabetes, the bodies of type 2 diabetes patients make insulin, but either the body does not use the insulin well or the pancreas does not make enough insulin.  Ã‚  

Analysis of Risk Management in Banking Activity

Analysis of Risk Management in Banking Activity The Case of Mauritian Banks Financial deregulation, globalization and liberalization have heightened considerable banking risks. Moreover, banks necessitate effective risk management strategies to promote banking welfare, protect outside agencies transacting with banks and to ensure stable banking operations. Risk managers need to focus on the diversity of risks and secure the interests of the overall banking sector. Risk Management is nowadays segregated where there is inconsistency in reporting, insufficient evaluation and low quality of management and becomes ineffective due to lack of pertinent information and improper analysis of the risk factors (Prabir Sen, 2009). Nonetheless, banks are unable to keep equilibrium in the situations of risks with huge losses and slight possibility of occurrence and risks of minimal losses with propensity of occurrence.   According to Talmimi and Hussein, Mazroezi and Mohammed (2007), risk management enables profits maximization and entails restrictions in risky activities. Risks can be averted by ordinary banking procedures, can be shifted to other institutions and can be managed actively in banks (Oldfield and Santemero, 1997). 1.1 Objectives of the Study The core objectives of the study are: To probe into the methodologies and aspects of the risk identification, assessment, monitoring, management and mitigation in Mauritian banks. To ascertain the effects of risk management on Mauritian banks. To determine to which extent risk management strategies like Basel II, derivatives, stress testing and Asset and Liability Management are applicable in Mauritian banks. To analyze the factors which improve Risk Management Practices in Mauritian banks and the perspectives about Banking Risk Management. To explore the reasons for managing risks in Mauritian banks. 1.2 Statement of the Problem There is an increasing awareness that the gradual intensification of banking risks impacts adversely on banking transactions which raises the concerns for risk management. The basis concern of this study is whether the Mauritian banks are using diverse risk management tactics and whether they are able to cope with the present and prospective challenges of risks and risk management requirements. 1.3 Significance and Contribution of the Study Bank managers can be conversant with divergent risk management techniques, their implications, effects and their relevance in banks through the practical aspects of risk management application. Bank managers can analyze the mechanisms resulting in the increasing level of risk exposures. Business administrators and management practitioners can use this study as guide to design efficient measures to mitigate risks in the process of developing marketing tactics. 1.4 Structure of the Project Chapter 2 elaborates on the literature review related to the risk management. Chapter 3 uncovers the general overview of Mauritian Banking Sector. Chapter 4 focuses on the detailed research methodology that has been used. Chapter 5 discusses the analysis and interpretation of the Mauritian banking risk management information. Chapter 6 probes on the recommendations to improve Risk Management practices in Mauritian banks. Chapter 7 concludes the whole findings of the project. PART 1- THEORETICAL ASPECTS 2.1 Introduction The advent of technology, globalization and the competition has encouraged banks in risk taking activities exposing banks to risks. Regulatory and supervisory institutions have emphasized the need for banks to enhance their risk management practices. Risks arise from the probabilities of the occurrence of losses and usually emerge from the internal and external banking transactions. 2.2 Banking Failures determinants The past decades have encountered numerous bank turbulences where high costs have been incurred on both local and overseas level (Gaytà ¡n and Johnson 2002, p.1), hindering the credit facilities, minimizing investment and consumption and generating bankruptcy cases (Demirguc-Kunt and Detragiache, 1998a, p.81). According to them, the expensive monetary policy was used to force the sound banks to sustain the failures of insolvent banks which dissuade risk management. Fluctuations in interest rates post abolition of Brettons Woods System, higher banking competition, the non existence of intermediation margins, unskillful lending and investment tactics (Hellwig 1995, p.724-726 ) , the diminishing role of the oligopoly rents as stated by Gehrig (1995 cited Hellwig 1995, p.726 ), the lower level of capital reserves in banks, companies high reliance on banks for external finance mentioned by Rajan and Zingales (1998 cited Randall S. Kroszner 2007),systemic shocks caused by credit risks, the inability to diversify loans, trade deterioration and decrease in asset prices caused bank failures argued by Gorton (1988 cited Demirguc-Kunt and Detragiache1998b, p.85). Moreover, regime changes like financial repression, liberalization and severe macroeconomic conditions encourage the entry of inexperienced players and preference for the acquisition of useless loans stated by Honohan (1997 cited Gaytan and Johnson 2002, p.4) have generated banking turbulences.   Non-performing loans increase where the asset returns are less than the returns to be paid on liabilities. Banks borrow in international currency and lend in local currency where the latter depreciates if the foreign exchange currency risk is shifted to local borrowers if they loaned in foreign currency. Banks buy insurance protection which encourages risk taking activities in the absence of prudential supervision and regulation. Bank managers engage in fraudulent actions by taking a portion of money for their personal use (Demirguc-Kunt and Detragiache 1998c, p.85-87). Diamond and Dybrig (1983 cited Demirguc and Detragiache 1988d, p.86) argued that banks portfolio assets can worsen and depositors believe that other depositors are removing their money. Obstfeld and Rogoff (1995 cited Demirguc and Detragiache 1988e, p.87) mentioned that an anticipated devaluation could occasion bank runs in local banks and these deposits are shifted overseas and render the domestic banks without l iquidity. 2.3 Banking risks alsamakis et al (1996 cited Young 2001, p.57) argued that risks can be classified as pure risks and speculative risks. Pure risks which embody market risks, credit risks, interest rate risks, liquidity risks, country risk and settlement risk are associated with the probability of occurrence of loss or no loss and can be curtailed by risk management strategies. However, speculative risks comprising of operational risks, technology risk, reputational risk, compliance risk, legal risk and insurance risks involve an opportunity for gain or loss which can be hedged. 2.3.1 Credit Risks These major risks occur in banks when the borrower defaults on his obligation to reimburse the principal amount and the interest charged of the loan. Credit risks consist of three types of risks like (Arunkumar and Kotreshwar 2005, p.9): Transaction risk emerges from the fluctuations in the credit type and capital depending on how the bank underwrites individual loan transactions. Intrinsic Risk is risk prevailing in some institutions and on granting credit to some firms. Concentration risk is the average of transaction and intrinsic risk within the portfolio and encourages granting of loans to one borrower or one firm. 2.3.2 Interest rate risks Koch (1995 cited Beets and Styger 2001, p.9) defined interest rate risk as the future changes in a banks net interest income and market value of equity due to changes in the market interest rates. Kropas (1998 cited Martirosianien) enumerated three types of interest rate risks like: Reappraisal risk stems from the diverse periods of assets and liabilities Profitableness curve risk entailselements affecting the reappraisal risk. Basic point risk concernsflawed association between the receivable and payable interest rate. Option risk is where the benefits of options can adversely affect the banks equity. 2.3.3 Liquidity risks Liquidity risks occur when the banks are unable to meet the demands of the depositors because of lack of funds and the illiquid assets resulting eventually in bank insolvency. Credit, strategic, interest rate and reputation risks build up liquidity risks (Gaulia and Maserinskieno 2006, p.49). 2 types of liquidity risks are (ADB Report 2008, p.9): Funding liquidity risk is the potentiality to obtain money via the sale of bank property and by borrowing. Trading Liquidity risk arises from making a constant entry in market activities and dealings. 2.3.4 Market risks These risks arise when the value of the financial products changes negatively and consist of currency risk, interest rate risk, equity or debt security price risk (Gaulia and Maserinskieno 2006, p.49). 2.3.5 Operational Risks Basel Committee (2004) which imposes a capital charge defined operational risks as the risk of direct or indirect losses resulting from inadequate or failed internal processes, people, and systems, or from external events. This definition includes legal risk, but excludes strategic and reputational risk. 2.3.6 Reputational Risks These risks emerge when the number of clients decreases as they hold negative perspectives about the quality of services offered by the banks. 2.3.7 Strategic risks Strategic risks arise when bad decisions and projects are undertaken to develop a special system in banks due to the lack of resources, technological tools and the expert staff. 2.3.8 Foreign Exchange Risks These risks come when the prices of the currency fluctuate when engaging in foreign activities. There are 3 types of foreign exchange currency risks. (Deloitte Treasury and Capital Markets 2006) Transaction risk entails the future of original cash flows like imports and exports. Translation risk is concerned with the disparities between foreign exchange encountered when again transforming a foreign exchange value into the functional currency of the company concerned. Translation risks are usually converted into transaction risks on a late basis as earnings are repatriated or assets and liabilities are realized. Economic risk arises when indirectly exposed to buying and selling of goods from someone who buys goods overseas. 2.3.9 Systemic risks The bank cannot collect money from an organization it is dealing owing to the political, economic and social conditions prevailing in the country where the organization is situated. Country risk includes political, economic risk and transfer risk (National Bank of Serbia). 2.3.10 Legal Risks Legal Risks are losses incurred when the bank is sanctioned by a court for the non-compliance with the lawful rules and regulations and on not fulfilling its obligations towards the other parties (National Bank of Serbia). 2.3.11 Financial Fraud There is mismanagement of money and fraudulent actions from the members of the banks who embezzle some deposited money and when there is lack of security controls. 2.4 Bank risk management methods Greenspan (2004 cited in Lam 2007, p.3) said that It would be a mistake to conclude..that the only way to succeed in banking is through ever-greater size and diversity. Indeed, better risk management may be the only truly necessary element of success in banking. 2.4.1 Risk Management in Banking Sector Flaker (2006, p.4-8) proposes three methods: 2.4.1.1 Risk Identification The board must set the risk profile of the bank and identify the risk-return tradeoff. The bank should understand and identify types of risks exposures, their sources and their effects on the overall banking stability. 2.4.1.2 Risk management and reduction Risk management and minimization embody the following: (1) Allow loans after considering their financial status of the borrowers. (2) Comparison of the expected risks with the actual ones to diminish the loan losses in a bigger portfolio. (3) Loan losses will decrease due to diverse borrowers in the lending transactions. (4) Actual risks can be compensated through the opposite movement of other risks in particular financial activities. (5) Insurance negotiations can be used to protect against diverse risks. 2.4.1.3 Risk Management System This flexible system encompasses the combined structure of identification, evaluation and risk mitigation techniques. The Board must set up a strong risk culture and an effective governance structure where the risk management system aligns with the existing structure of the bank. Risk management procedures are possible when retaining higher level of capital to cushion the risks. Furthermore, the risk management functions comprises of: (1) Delegation of responsibilities to each banking segment (2) Auditing system to deal with the internal control processes and proper execution of risk controls (Nikolis, 2009). (3) Ongoing reviews, reporting, updating and the control of risk management system must be executed to ensure that they tailor with the banking aims (4) Training courses gaining know-how about the design of the risk management system and risk models must be offered to avert banking failures. (5) Establish rules and regulations and take necessary actions to those who contravene with them regarding risk management practices. (6) Participation of the banks, regulatory and supervisory bodies where information is disseminated externally and internally in the banks (Kroszner, 2007). 2.4.2 Asset and Liability Management Asset and Liability Management entails the design of organizational and governance models which define the risk approaches subject to the banking operations (ADB 2008, p.10). 2.4.2.1 ALM operations are as follows (ADB 2008, p.10-12): ALM ensures a risk and return management process where the combination of expertise and risk appetite is needed. ALM unit manages bank risks either through a passive or aggressive approach thus increasing its value. ALM unit investigates upon the static and dynamic mismatch; sensitivity of net interest income; and, market value under multiple scenarios -including under high stress. The net interest income evaluates the sophisticated banks operating results. It does not project the effects of risk compared to the economic value which can identify banking risks but is inaccessible to most banks. 5. Funds Transfer Pricing eradicates the interest rate risks by securing a spread in loan and deposits by allocating a transfer rate that mirror the repricing and cash flows of the balance sheet. Liquidity risks can be managed like diversification of financing sources, correlate the liquidity risks with other risks and use stress testing analysis. 2.4.3 Stress testing Practices Stress testing is another risk management strategy where Stress testing is a generic term used to describe various techniques and procedures employed by financial institutions to estimate their potential vulnerability to exceptional but plausible event (Kalfaoglou 2007, p.1). It uses statistical data analysis to risk management techniques, interpret and control the unfavorable outcomes. JP Morgan Chase has integrated stress testing equipment to manage and analyze the sources of possible banking risks, implement tests on the value of its portfolio, analyze its risk profile and contemplate the effects while applying diverse scenarios. An effective risk management scheme, stress testing project and bank staff expertise are requisite to tackle the statistical and economical fundamentals of stress testing with a data measurement tool. Board of directors should monitor the inputs of stress testing system (Seminar on Stress Testing Best Practices Risk Management Implications for Egyptian Banks 2007, p.2-3). Furthermore, the 2 types of stress testing strategies in banks like: (1) Simple Sensitivity Test deals with the rapid fluctuations of the portfolio value due to a risk factor on a short term basis. (2) Scenario analysis is used by large complex banks and is associated with a realistic and econometrics approach towards shifts in portfolio value due to changes in many risk factors. 2.4.4 Basel II Basel II published in June 2004, promotes banking supervision and emphasizes the specified capital requirements to cushion against potential losses. Basel II uses qualitative and quantitative requirements to monitor risk management strategies, to ensure compliance with regulations and reinforce corporate governance structure. The risk based supervision has enabled the supervisors to concentrate on the origins of banking risks. 2.4.4.1 Pillars of Basel II Pillar 1 entails capital needed for credit risk, market risk and operational risk. Moreover, banks under this regime must have a capital adequacy of 8 %. The methods for the computation of the capital charge to measure operational and credit risks (Ma, 2003)are: Basic Indicator Approach The size and capital requirements of the operational risk are estimated as a fixed proportion of the banks net interest income and non-interest income, measured as the average over the last three years. The Standardized Approach –The activities of the banks are allocated risk ratios weights related proportionally to the quantity distributed to every category. The aggregate capital requirements are the addition of all the requirements for the categories. Advanced Measurement Approach Computation of credit and market risks and the capital requirements are founded on the banks internal system for the measurement and management of operational risk for large banks An Internal Rating Based System The BIS stated that capital requirements must be founded on a qualitative and quantitative analysis of credit risk and must be used for diverse bank units. Founded IRB approach indicates that large banks should calculate probability default related to a borrowers grade to demonstrate the capital requirement level. However, under advanced IRB approach, these banks with an internal capital allocation can furnish the loss given default and exposure at defaults which are processed. Pillar 2 A supervisor must ensure that the bank has the adequate capital requirements to deal with risks. Banks estimate the internal capital adequacy by adopting quantitative and qualitative techniques. On-site investigation and ongoing reviews probe in capital adequacy. Pillar 3- Market discipline framework provides with detailed information about the banks risk profile to evaluate and report capital adequacy where risk exposures can be analyzed through quantitative and qualitative approach regularly. The risk based capital ratios and qualitative information about the internal procedures are needed for capital adequacy purposes. 2.4.5 Derivatives olatility of financial market, the liberalization and deregulation in the 1980s and 1970s has founded derivative markets (Hehn no date a, p.100). Derivatives are financial tools (like futures, commodities futures, options, swaps, forwards) whose returns, values and performance are derived from the returns, values and performance of the underlying assets. Hedging is covering against potential risk through an opposite position in the derivative markets. Bank International Settlements (2004 cited Bernadette A. Minton et al 2008, p.2) noticed that the quantity for derivatives has leveled from $698 billion in 2001 to $ 57,894 billion in 2007. Proper derivatives trading can insure against market risks and interest rate risks without retaining additional capital requirements in the balance sheet (Kaudman no date a, p.85). The determinants of derivatives use are banking size, balance sheet constituents, aggregate risk exposures, profitability, performance and risk taking incentives. Jason and Taylor (1994 cited in Hundman b, p.86) argued that speculation used with derivatives to make profitable returns can engenders more interest rate risks. Moreover, Tsetsekos and Varangis (1997 cited Roopnarine and Watson 2005a, p.9) argued that financial derivatives promote increase in resource allocation and increase the productivity of investments projects. Jorion (1995 cited Roopnarine and Watson 2005b, p.9) argued that in price discovery, market participants are offered information on balance prices that mirror the present demand on the supplies which enable effective decision making and reveal the position of the cash prices. Besides, liquid funds are increased and transaction costs are reduced and the futures market reflects the large transactions at prevailing prices (Roopnarine and Watson 2005c, p.10).   However, derivatives have generated enormous failures in Barings Collapse, Merill Lynch and Procter Gambler (Hehn b, p.101). Bank staff must be trained and educated about derivatives use. Derivatives trading can be constrained with the liquidity problems and legal uncertainties that emerged from the market price movement which is argued by Bhaumik (1998 cited Roopnarine and Watson 2005d, p.11). Pricing of assets becomes difficult if there is insufficient information about the derivatives use. Principal agent problem is aggravated (Roopnarine and Watson 2005e, p.12). The derivatives market must be regulated properly to avert fraudulent actions and insolvency. Partnoy and Skeel (2006 cited Minton et al. 2008a, p.2) claimed that derivatives intensify systemic risks as banks do not control the lending activities. Hunter and Marshall (1999 cited Roopnarine and Watson 2005f, p.28) argued that derivative markets attract investors whose private information are assimilated in the observable p rices and diminish the bid ask spread. The underlying cash prices reduce the transaction costs and the demand for money thereby affecting the operations of the monetary policy. Bedendo and Bruno (2009a, p.2-4) argued that credit transfer tools like securitization, credit derivatives and loan sales reduce regulatory capital requirements, motivate lending and enhance the banking liquidity positions. Moreover, they remedy the issues of information asymmetries as stated by Greenbaum and Thakor (1987 cited in Bedendo and Bruno 2009b, p.2). Duffee and Zhou (2001 cited Minton et al. 2008b, p.11) mentioned that credit derivatives are used if the loan sales or securitization techniques become expensive due to moral hazard problem and can shift default risk where information advantage is insignificant and retain some portion of risks where information advantage is huge. Banks use credit transfer tools as they have little access to inter-bank funding, huge funding expenses, low capital and want loan transfer (Bedendo and Bruno 2009c, p.8-9). CRT tools encourage banks to use originate-to-distribute models via aggressive lending occasions (Bedendo and Bruno 2009d, p.10) . Pricing of CRT tools is preferred by large banks having higher skills. Some loans sales have loan characteristics like small size, asymmetric issues and standardization convenient for securitization (Bedendo and Bruno 2009e, p.11). PART 2- EMPIRICAL REVIEW There is a growing literature that examines the relationship of banking risks with other many economic and financial variables. Moreover, this section describes the diversity of banking literature where different types of risk management strategies were tested and criticized. Even the links between different types of risks were experimented using banking information and models derived from other authors empirical work. Peek and Rosengren (1996) found that the large users of derivatives for speculation purposes are the troubled organizations using derivative information of 25 active banks in the United States from 1990 to 1994 in the US dummy regression model.   Banks are unable to track the risky aspects of these derivatives and guide their risk profile because of insufficient derivative information which could jeopardize the overall banking system. The onsite targeted examinations can enable banks to window dress their derivatives. Regulatory rules and formal transactions must be imposed on the banks taking unfavorable speculation and to constrain the moral hazard problem related to the derivative transactions. The use of speculative derivatives constitutes a stringent criminal penalty for breaching the established rules and regulations. Cebenoyan and Strahan (2001) used data of the sale and purchase of bank loans and those loans sold or purchased without recourse from all domestic commercial banks in the US from 1987 to 1993 in a regression model. They found that banks that engage in loan sales market to manage credit risks retained minimum level of capital which can be modified. Moreover, these banks retained more risky loans since they managed credit risks and were exposed to an unsafe position despite they endured lower level of risks compared to the other banks who manage risks without the loan sales market. Banks that employed the risk management techniques are more inclined to engage in risk taking activities. In fact, banks that manage credit risks lend to more risky loans depicting that complex risk management practices enhanced the bank credit position rather than minimizing the risks. Gatev et al (2006) investigated upon the presence of liquidity risk from both sides of bank balance sheets using some aspects of the Kashyap, Rajan and Stein (2002) model (that liquidity risks originating from the two fundamental businesses of banking promotes a diversification benefit) to analyze the link between deposit taking and commitment lending for large, publicly traded banks using regression analysis. Pooling deposits and commitment lending insure against banking liquidity risks and deposits activities insure against liquidity risk from idle loan activities. Bank stock-return volatility increases with idle loan transactions which is insignificant for banks with huge amount of depository dealings. The deposit-lending risk management becomes more reinforced when there is low level of liquidity and when troubled market participants deposit money in banks. Shao and Yeager (2007) used information of large publicly traded U.S BHCs from 1997 to 2005 using regression models to find the link between credit derivatives and their risk, return and lending issues. Banks buy credit derivatives to hedge against risks, to increase their equity and to compensate for the risky loan losses. However, they sell credit derivatives exposing themselves to risks to gain a premium charge. Moreover, the credit derivatives users enjoyed minimal returns and increase risks which are compensated. Their findings implied that on a general basis, the impact of credit derivatives on risk relies on the risk management strategies. Holod and Kitsul (2008) used panel data of stock returns from 53 U.S BHCs from 1986 to 2007. They found that after 1996, poor capitalized banks engaged in active trading transactions are more exposed to systemic risks compared to well capitalized banks. Banks cannot always have enough capital to cushion the market risks and must sell their illiquid assets or invest in the financial markets to compensate for the lack of capital to adhere to the market-based capital requirements. Capital requirements in Basel II do not help to reduce banking risks totally but contribute towards increasing systematic risks. Topi (2008) used a model of Allen and Gale (2004) where banks offer deposit contracts to ex ante identical, risk averse depositors who face heterogenous liquidity shocks for Bank of Finland which shows that the liquidity can impact on the banks motivations to minimize the default losses. The bank runs encourage the banks to avert the credit losses after the sub-prime mortgage crisis. However, the bank runs without a signal of the credit risks will reduce the banks willingness to curb the incidence of credit losses. The central bank can mitigate the propensity of liquidity stress for solvent banks rather than insolvent banks. In addition, this research provides an area for further research where the policy interventions and financial market innovations can be integrated in the model to identify the impact on banks motivations. Achou and Tenguh (2008) used regression model for Qatar Central Bank by executing a time-series analysis of financial data from 2001-2005 to examine the correlation between profitability and loan losses. They showed that effective credit risk management improves the financial result of the bank with the aim to secure the banking property and to work in the welfare of the market participants. Besides, their study revealed that credit risk management infrastructures are used to minimize the credit losses. Banks with efficient credit risk management system have insignificant loan default ratios, good revenues, minimal non-performing loans and are able to tackle credit losses. Minton et al. (2008) investigated the use of credit derivatives using U.S BHCs (assets overtakes $ 1 billion) and non-missing data on credit derivatives use from 1999 to 2005. Few companies use credit derivatives for dealer activities rather than for hedging against default losses. Credit derivatives use is constrained because the liquidity of credit derivatives market is favorable for investment grade companies since they can use derivatives to insure against the default losses. Therefore, the illiquidity of credit derivatives market affects the non-investment grade companies as they need confidential information for loans where higher cost of hedging will dissuade banks to hedge. Nevertheless, the bank borrowers get loans at a cheap price and banks are more on a competitive stance with the capital markets to provide loan facilities if the credit derivatives can help bank to retain capital. Credit derivatives can only promote the financial health of banks if they generate lesser ban king risks. The sub-prime crisis prior to 2007 has shown that the dealer activities via the credit derivatives contain many risks and in 2008 generated systemic risks. This study provides an avenue to assess the risks posed by credit derivatives when engaging in dealers transactions dealers. Bedendo and Bruno (2009) differentiated between the application of loan sales, securitization and credit derivatives for a sample of US large domestic commercial banks (total assets greater than one billion USD) for June 2002-2008   They found that the most CRT users employ conservative tools and large international banking corporations utilize credit derivatives. They detected that highly capitalized banks with less risky portfolios purchase credit derivative protection to hedge against capital inadequacy.   Moreover, banks with riskier loan portfoli Analysis of Risk Management in Banking Activity Analysis of Risk Management in Banking Activity The Case of Mauritian Banks Financial deregulation, globalization and liberalization have heightened considerable banking risks. Moreover, banks necessitate effective risk management strategies to promote banking welfare, protect outside agencies transacting with banks and to ensure stable banking operations. Risk managers need to focus on the diversity of risks and secure the interests of the overall banking sector. Risk Management is nowadays segregated where there is inconsistency in reporting, insufficient evaluation and low quality of management and becomes ineffective due to lack of pertinent information and improper analysis of the risk factors (Prabir Sen, 2009). Nonetheless, banks are unable to keep equilibrium in the situations of risks with huge losses and slight possibility of occurrence and risks of minimal losses with propensity of occurrence.   According to Talmimi and Hussein, Mazroezi and Mohammed (2007), risk management enables profits maximization and entails restrictions in risky activities. Risks can be averted by ordinary banking procedures, can be shifted to other institutions and can be managed actively in banks (Oldfield and Santemero, 1997). 1.1 Objectives of the Study The core objectives of the study are: To probe into the methodologies and aspects of the risk identification, assessment, monitoring, management and mitigation in Mauritian banks. To ascertain the effects of risk management on Mauritian banks. To determine to which extent risk management strategies like Basel II, derivatives, stress testing and Asset and Liability Management are applicable in Mauritian banks. To analyze the factors which improve Risk Management Practices in Mauritian banks and the perspectives about Banking Risk Management. To explore the reasons for managing risks in Mauritian banks. 1.2 Statement of the Problem There is an increasing awareness that the gradual intensification of banking risks impacts adversely on banking transactions which raises the concerns for risk management. The basis concern of this study is whether the Mauritian banks are using diverse risk management tactics and whether they are able to cope with the present and prospective challenges of risks and risk management requirements. 1.3 Significance and Contribution of the Study Bank managers can be conversant with divergent risk management techniques, their implications, effects and their relevance in banks through the practical aspects of risk management application. Bank managers can analyze the mechanisms resulting in the increasing level of risk exposures. Business administrators and management practitioners can use this study as guide to design efficient measures to mitigate risks in the process of developing marketing tactics. 1.4 Structure of the Project Chapter 2 elaborates on the literature review related to the risk management. Chapter 3 uncovers the general overview of Mauritian Banking Sector. Chapter 4 focuses on the detailed research methodology that has been used. Chapter 5 discusses the analysis and interpretation of the Mauritian banking risk management information. Chapter 6 probes on the recommendations to improve Risk Management practices in Mauritian banks. Chapter 7 concludes the whole findings of the project. PART 1- THEORETICAL ASPECTS 2.1 Introduction The advent of technology, globalization and the competition has encouraged banks in risk taking activities exposing banks to risks. Regulatory and supervisory institutions have emphasized the need for banks to enhance their risk management practices. Risks arise from the probabilities of the occurrence of losses and usually emerge from the internal and external banking transactions. 2.2 Banking Failures determinants The past decades have encountered numerous bank turbulences where high costs have been incurred on both local and overseas level (Gaytà ¡n and Johnson 2002, p.1), hindering the credit facilities, minimizing investment and consumption and generating bankruptcy cases (Demirguc-Kunt and Detragiache, 1998a, p.81). According to them, the expensive monetary policy was used to force the sound banks to sustain the failures of insolvent banks which dissuade risk management. Fluctuations in interest rates post abolition of Brettons Woods System, higher banking competition, the non existence of intermediation margins, unskillful lending and investment tactics (Hellwig 1995, p.724-726 ) , the diminishing role of the oligopoly rents as stated by Gehrig (1995 cited Hellwig 1995, p.726 ), the lower level of capital reserves in banks, companies high reliance on banks for external finance mentioned by Rajan and Zingales (1998 cited Randall S. Kroszner 2007),systemic shocks caused by credit risks, the inability to diversify loans, trade deterioration and decrease in asset prices caused bank failures argued by Gorton (1988 cited Demirguc-Kunt and Detragiache1998b, p.85). Moreover, regime changes like financial repression, liberalization and severe macroeconomic conditions encourage the entry of inexperienced players and preference for the acquisition of useless loans stated by Honohan (1997 cited Gaytan and Johnson 2002, p.4) have generated banking turbulences.   Non-performing loans increase where the asset returns are less than the returns to be paid on liabilities. Banks borrow in international currency and lend in local currency where the latter depreciates if the foreign exchange currency risk is shifted to local borrowers if they loaned in foreign currency. Banks buy insurance protection which encourages risk taking activities in the absence of prudential supervision and regulation. Bank managers engage in fraudulent actions by taking a portion of money for their personal use (Demirguc-Kunt and Detragiache 1998c, p.85-87). Diamond and Dybrig (1983 cited Demirguc and Detragiache 1988d, p.86) argued that banks portfolio assets can worsen and depositors believe that other depositors are removing their money. Obstfeld and Rogoff (1995 cited Demirguc and Detragiache 1988e, p.87) mentioned that an anticipated devaluation could occasion bank runs in local banks and these deposits are shifted overseas and render the domestic banks without l iquidity. 2.3 Banking risks alsamakis et al (1996 cited Young 2001, p.57) argued that risks can be classified as pure risks and speculative risks. Pure risks which embody market risks, credit risks, interest rate risks, liquidity risks, country risk and settlement risk are associated with the probability of occurrence of loss or no loss and can be curtailed by risk management strategies. However, speculative risks comprising of operational risks, technology risk, reputational risk, compliance risk, legal risk and insurance risks involve an opportunity for gain or loss which can be hedged. 2.3.1 Credit Risks These major risks occur in banks when the borrower defaults on his obligation to reimburse the principal amount and the interest charged of the loan. Credit risks consist of three types of risks like (Arunkumar and Kotreshwar 2005, p.9): Transaction risk emerges from the fluctuations in the credit type and capital depending on how the bank underwrites individual loan transactions. Intrinsic Risk is risk prevailing in some institutions and on granting credit to some firms. Concentration risk is the average of transaction and intrinsic risk within the portfolio and encourages granting of loans to one borrower or one firm. 2.3.2 Interest rate risks Koch (1995 cited Beets and Styger 2001, p.9) defined interest rate risk as the future changes in a banks net interest income and market value of equity due to changes in the market interest rates. Kropas (1998 cited Martirosianien) enumerated three types of interest rate risks like: Reappraisal risk stems from the diverse periods of assets and liabilities Profitableness curve risk entailselements affecting the reappraisal risk. Basic point risk concernsflawed association between the receivable and payable interest rate. Option risk is where the benefits of options can adversely affect the banks equity. 2.3.3 Liquidity risks Liquidity risks occur when the banks are unable to meet the demands of the depositors because of lack of funds and the illiquid assets resulting eventually in bank insolvency. Credit, strategic, interest rate and reputation risks build up liquidity risks (Gaulia and Maserinskieno 2006, p.49). 2 types of liquidity risks are (ADB Report 2008, p.9): Funding liquidity risk is the potentiality to obtain money via the sale of bank property and by borrowing. Trading Liquidity risk arises from making a constant entry in market activities and dealings. 2.3.4 Market risks These risks arise when the value of the financial products changes negatively and consist of currency risk, interest rate risk, equity or debt security price risk (Gaulia and Maserinskieno 2006, p.49). 2.3.5 Operational Risks Basel Committee (2004) which imposes a capital charge defined operational risks as the risk of direct or indirect losses resulting from inadequate or failed internal processes, people, and systems, or from external events. This definition includes legal risk, but excludes strategic and reputational risk. 2.3.6 Reputational Risks These risks emerge when the number of clients decreases as they hold negative perspectives about the quality of services offered by the banks. 2.3.7 Strategic risks Strategic risks arise when bad decisions and projects are undertaken to develop a special system in banks due to the lack of resources, technological tools and the expert staff. 2.3.8 Foreign Exchange Risks These risks come when the prices of the currency fluctuate when engaging in foreign activities. There are 3 types of foreign exchange currency risks. (Deloitte Treasury and Capital Markets 2006) Transaction risk entails the future of original cash flows like imports and exports. Translation risk is concerned with the disparities between foreign exchange encountered when again transforming a foreign exchange value into the functional currency of the company concerned. Translation risks are usually converted into transaction risks on a late basis as earnings are repatriated or assets and liabilities are realized. Economic risk arises when indirectly exposed to buying and selling of goods from someone who buys goods overseas. 2.3.9 Systemic risks The bank cannot collect money from an organization it is dealing owing to the political, economic and social conditions prevailing in the country where the organization is situated. Country risk includes political, economic risk and transfer risk (National Bank of Serbia). 2.3.10 Legal Risks Legal Risks are losses incurred when the bank is sanctioned by a court for the non-compliance with the lawful rules and regulations and on not fulfilling its obligations towards the other parties (National Bank of Serbia). 2.3.11 Financial Fraud There is mismanagement of money and fraudulent actions from the members of the banks who embezzle some deposited money and when there is lack of security controls. 2.4 Bank risk management methods Greenspan (2004 cited in Lam 2007, p.3) said that It would be a mistake to conclude..that the only way to succeed in banking is through ever-greater size and diversity. Indeed, better risk management may be the only truly necessary element of success in banking. 2.4.1 Risk Management in Banking Sector Flaker (2006, p.4-8) proposes three methods: 2.4.1.1 Risk Identification The board must set the risk profile of the bank and identify the risk-return tradeoff. The bank should understand and identify types of risks exposures, their sources and their effects on the overall banking stability. 2.4.1.2 Risk management and reduction Risk management and minimization embody the following: (1) Allow loans after considering their financial status of the borrowers. (2) Comparison of the expected risks with the actual ones to diminish the loan losses in a bigger portfolio. (3) Loan losses will decrease due to diverse borrowers in the lending transactions. (4) Actual risks can be compensated through the opposite movement of other risks in particular financial activities. (5) Insurance negotiations can be used to protect against diverse risks. 2.4.1.3 Risk Management System This flexible system encompasses the combined structure of identification, evaluation and risk mitigation techniques. The Board must set up a strong risk culture and an effective governance structure where the risk management system aligns with the existing structure of the bank. Risk management procedures are possible when retaining higher level of capital to cushion the risks. Furthermore, the risk management functions comprises of: (1) Delegation of responsibilities to each banking segment (2) Auditing system to deal with the internal control processes and proper execution of risk controls (Nikolis, 2009). (3) Ongoing reviews, reporting, updating and the control of risk management system must be executed to ensure that they tailor with the banking aims (4) Training courses gaining know-how about the design of the risk management system and risk models must be offered to avert banking failures. (5) Establish rules and regulations and take necessary actions to those who contravene with them regarding risk management practices. (6) Participation of the banks, regulatory and supervisory bodies where information is disseminated externally and internally in the banks (Kroszner, 2007). 2.4.2 Asset and Liability Management Asset and Liability Management entails the design of organizational and governance models which define the risk approaches subject to the banking operations (ADB 2008, p.10). 2.4.2.1 ALM operations are as follows (ADB 2008, p.10-12): ALM ensures a risk and return management process where the combination of expertise and risk appetite is needed. ALM unit manages bank risks either through a passive or aggressive approach thus increasing its value. ALM unit investigates upon the static and dynamic mismatch; sensitivity of net interest income; and, market value under multiple scenarios -including under high stress. The net interest income evaluates the sophisticated banks operating results. It does not project the effects of risk compared to the economic value which can identify banking risks but is inaccessible to most banks. 5. Funds Transfer Pricing eradicates the interest rate risks by securing a spread in loan and deposits by allocating a transfer rate that mirror the repricing and cash flows of the balance sheet. Liquidity risks can be managed like diversification of financing sources, correlate the liquidity risks with other risks and use stress testing analysis. 2.4.3 Stress testing Practices Stress testing is another risk management strategy where Stress testing is a generic term used to describe various techniques and procedures employed by financial institutions to estimate their potential vulnerability to exceptional but plausible event (Kalfaoglou 2007, p.1). It uses statistical data analysis to risk management techniques, interpret and control the unfavorable outcomes. JP Morgan Chase has integrated stress testing equipment to manage and analyze the sources of possible banking risks, implement tests on the value of its portfolio, analyze its risk profile and contemplate the effects while applying diverse scenarios. An effective risk management scheme, stress testing project and bank staff expertise are requisite to tackle the statistical and economical fundamentals of stress testing with a data measurement tool. Board of directors should monitor the inputs of stress testing system (Seminar on Stress Testing Best Practices Risk Management Implications for Egyptian Banks 2007, p.2-3). Furthermore, the 2 types of stress testing strategies in banks like: (1) Simple Sensitivity Test deals with the rapid fluctuations of the portfolio value due to a risk factor on a short term basis. (2) Scenario analysis is used by large complex banks and is associated with a realistic and econometrics approach towards shifts in portfolio value due to changes in many risk factors. 2.4.4 Basel II Basel II published in June 2004, promotes banking supervision and emphasizes the specified capital requirements to cushion against potential losses. Basel II uses qualitative and quantitative requirements to monitor risk management strategies, to ensure compliance with regulations and reinforce corporate governance structure. The risk based supervision has enabled the supervisors to concentrate on the origins of banking risks. 2.4.4.1 Pillars of Basel II Pillar 1 entails capital needed for credit risk, market risk and operational risk. Moreover, banks under this regime must have a capital adequacy of 8 %. The methods for the computation of the capital charge to measure operational and credit risks (Ma, 2003)are: Basic Indicator Approach The size and capital requirements of the operational risk are estimated as a fixed proportion of the banks net interest income and non-interest income, measured as the average over the last three years. The Standardized Approach –The activities of the banks are allocated risk ratios weights related proportionally to the quantity distributed to every category. The aggregate capital requirements are the addition of all the requirements for the categories. Advanced Measurement Approach Computation of credit and market risks and the capital requirements are founded on the banks internal system for the measurement and management of operational risk for large banks An Internal Rating Based System The BIS stated that capital requirements must be founded on a qualitative and quantitative analysis of credit risk and must be used for diverse bank units. Founded IRB approach indicates that large banks should calculate probability default related to a borrowers grade to demonstrate the capital requirement level. However, under advanced IRB approach, these banks with an internal capital allocation can furnish the loss given default and exposure at defaults which are processed. Pillar 2 A supervisor must ensure that the bank has the adequate capital requirements to deal with risks. Banks estimate the internal capital adequacy by adopting quantitative and qualitative techniques. On-site investigation and ongoing reviews probe in capital adequacy. Pillar 3- Market discipline framework provides with detailed information about the banks risk profile to evaluate and report capital adequacy where risk exposures can be analyzed through quantitative and qualitative approach regularly. The risk based capital ratios and qualitative information about the internal procedures are needed for capital adequacy purposes. 2.4.5 Derivatives olatility of financial market, the liberalization and deregulation in the 1980s and 1970s has founded derivative markets (Hehn no date a, p.100). Derivatives are financial tools (like futures, commodities futures, options, swaps, forwards) whose returns, values and performance are derived from the returns, values and performance of the underlying assets. Hedging is covering against potential risk through an opposite position in the derivative markets. Bank International Settlements (2004 cited Bernadette A. Minton et al 2008, p.2) noticed that the quantity for derivatives has leveled from $698 billion in 2001 to $ 57,894 billion in 2007. Proper derivatives trading can insure against market risks and interest rate risks without retaining additional capital requirements in the balance sheet (Kaudman no date a, p.85). The determinants of derivatives use are banking size, balance sheet constituents, aggregate risk exposures, profitability, performance and risk taking incentives. Jason and Taylor (1994 cited in Hundman b, p.86) argued that speculation used with derivatives to make profitable returns can engenders more interest rate risks. Moreover, Tsetsekos and Varangis (1997 cited Roopnarine and Watson 2005a, p.9) argued that financial derivatives promote increase in resource allocation and increase the productivity of investments projects. Jorion (1995 cited Roopnarine and Watson 2005b, p.9) argued that in price discovery, market participants are offered information on balance prices that mirror the present demand on the supplies which enable effective decision making and reveal the position of the cash prices. Besides, liquid funds are increased and transaction costs are reduced and the futures market reflects the large transactions at prevailing prices (Roopnarine and Watson 2005c, p.10).   However, derivatives have generated enormous failures in Barings Collapse, Merill Lynch and Procter Gambler (Hehn b, p.101). Bank staff must be trained and educated about derivatives use. Derivatives trading can be constrained with the liquidity problems and legal uncertainties that emerged from the market price movement which is argued by Bhaumik (1998 cited Roopnarine and Watson 2005d, p.11). Pricing of assets becomes difficult if there is insufficient information about the derivatives use. Principal agent problem is aggravated (Roopnarine and Watson 2005e, p.12). The derivatives market must be regulated properly to avert fraudulent actions and insolvency. Partnoy and Skeel (2006 cited Minton et al. 2008a, p.2) claimed that derivatives intensify systemic risks as banks do not control the lending activities. Hunter and Marshall (1999 cited Roopnarine and Watson 2005f, p.28) argued that derivative markets attract investors whose private information are assimilated in the observable p rices and diminish the bid ask spread. The underlying cash prices reduce the transaction costs and the demand for money thereby affecting the operations of the monetary policy. Bedendo and Bruno (2009a, p.2-4) argued that credit transfer tools like securitization, credit derivatives and loan sales reduce regulatory capital requirements, motivate lending and enhance the banking liquidity positions. Moreover, they remedy the issues of information asymmetries as stated by Greenbaum and Thakor (1987 cited in Bedendo and Bruno 2009b, p.2). Duffee and Zhou (2001 cited Minton et al. 2008b, p.11) mentioned that credit derivatives are used if the loan sales or securitization techniques become expensive due to moral hazard problem and can shift default risk where information advantage is insignificant and retain some portion of risks where information advantage is huge. Banks use credit transfer tools as they have little access to inter-bank funding, huge funding expenses, low capital and want loan transfer (Bedendo and Bruno 2009c, p.8-9). CRT tools encourage banks to use originate-to-distribute models via aggressive lending occasions (Bedendo and Bruno 2009d, p.10) . Pricing of CRT tools is preferred by large banks having higher skills. Some loans sales have loan characteristics like small size, asymmetric issues and standardization convenient for securitization (Bedendo and Bruno 2009e, p.11). PART 2- EMPIRICAL REVIEW There is a growing literature that examines the relationship of banking risks with other many economic and financial variables. Moreover, this section describes the diversity of banking literature where different types of risk management strategies were tested and criticized. Even the links between different types of risks were experimented using banking information and models derived from other authors empirical work. Peek and Rosengren (1996) found that the large users of derivatives for speculation purposes are the troubled organizations using derivative information of 25 active banks in the United States from 1990 to 1994 in the US dummy regression model.   Banks are unable to track the risky aspects of these derivatives and guide their risk profile because of insufficient derivative information which could jeopardize the overall banking system. The onsite targeted examinations can enable banks to window dress their derivatives. Regulatory rules and formal transactions must be imposed on the banks taking unfavorable speculation and to constrain the moral hazard problem related to the derivative transactions. The use of speculative derivatives constitutes a stringent criminal penalty for breaching the established rules and regulations. Cebenoyan and Strahan (2001) used data of the sale and purchase of bank loans and those loans sold or purchased without recourse from all domestic commercial banks in the US from 1987 to 1993 in a regression model. They found that banks that engage in loan sales market to manage credit risks retained minimum level of capital which can be modified. Moreover, these banks retained more risky loans since they managed credit risks and were exposed to an unsafe position despite they endured lower level of risks compared to the other banks who manage risks without the loan sales market. Banks that employed the risk management techniques are more inclined to engage in risk taking activities. In fact, banks that manage credit risks lend to more risky loans depicting that complex risk management practices enhanced the bank credit position rather than minimizing the risks. Gatev et al (2006) investigated upon the presence of liquidity risk from both sides of bank balance sheets using some aspects of the Kashyap, Rajan and Stein (2002) model (that liquidity risks originating from the two fundamental businesses of banking promotes a diversification benefit) to analyze the link between deposit taking and commitment lending for large, publicly traded banks using regression analysis. Pooling deposits and commitment lending insure against banking liquidity risks and deposits activities insure against liquidity risk from idle loan activities. Bank stock-return volatility increases with idle loan transactions which is insignificant for banks with huge amount of depository dealings. The deposit-lending risk management becomes more reinforced when there is low level of liquidity and when troubled market participants deposit money in banks. Shao and Yeager (2007) used information of large publicly traded U.S BHCs from 1997 to 2005 using regression models to find the link between credit derivatives and their risk, return and lending issues. Banks buy credit derivatives to hedge against risks, to increase their equity and to compensate for the risky loan losses. However, they sell credit derivatives exposing themselves to risks to gain a premium charge. Moreover, the credit derivatives users enjoyed minimal returns and increase risks which are compensated. Their findings implied that on a general basis, the impact of credit derivatives on risk relies on the risk management strategies. Holod and Kitsul (2008) used panel data of stock returns from 53 U.S BHCs from 1986 to 2007. They found that after 1996, poor capitalized banks engaged in active trading transactions are more exposed to systemic risks compared to well capitalized banks. Banks cannot always have enough capital to cushion the market risks and must sell their illiquid assets or invest in the financial markets to compensate for the lack of capital to adhere to the market-based capital requirements. Capital requirements in Basel II do not help to reduce banking risks totally but contribute towards increasing systematic risks. Topi (2008) used a model of Allen and Gale (2004) where banks offer deposit contracts to ex ante identical, risk averse depositors who face heterogenous liquidity shocks for Bank of Finland which shows that the liquidity can impact on the banks motivations to minimize the default losses. The bank runs encourage the banks to avert the credit losses after the sub-prime mortgage crisis. However, the bank runs without a signal of the credit risks will reduce the banks willingness to curb the incidence of credit losses. The central bank can mitigate the propensity of liquidity stress for solvent banks rather than insolvent banks. In addition, this research provides an area for further research where the policy interventions and financial market innovations can be integrated in the model to identify the impact on banks motivations. Achou and Tenguh (2008) used regression model for Qatar Central Bank by executing a time-series analysis of financial data from 2001-2005 to examine the correlation between profitability and loan losses. They showed that effective credit risk management improves the financial result of the bank with the aim to secure the banking property and to work in the welfare of the market participants. Besides, their study revealed that credit risk management infrastructures are used to minimize the credit losses. Banks with efficient credit risk management system have insignificant loan default ratios, good revenues, minimal non-performing loans and are able to tackle credit losses. Minton et al. (2008) investigated the use of credit derivatives using U.S BHCs (assets overtakes $ 1 billion) and non-missing data on credit derivatives use from 1999 to 2005. Few companies use credit derivatives for dealer activities rather than for hedging against default losses. Credit derivatives use is constrained because the liquidity of credit derivatives market is favorable for investment grade companies since they can use derivatives to insure against the default losses. Therefore, the illiquidity of credit derivatives market affects the non-investment grade companies as they need confidential information for loans where higher cost of hedging will dissuade banks to hedge. Nevertheless, the bank borrowers get loans at a cheap price and banks are more on a competitive stance with the capital markets to provide loan facilities if the credit derivatives can help bank to retain capital. Credit derivatives can only promote the financial health of banks if they generate lesser ban king risks. The sub-prime crisis prior to 2007 has shown that the dealer activities via the credit derivatives contain many risks and in 2008 generated systemic risks. This study provides an avenue to assess the risks posed by credit derivatives when engaging in dealers transactions dealers. Bedendo and Bruno (2009) differentiated between the application of loan sales, securitization and credit derivatives for a sample of US large domestic commercial banks (total assets greater than one billion USD) for June 2002-2008   They found that the most CRT users employ conservative tools and large international banking corporations utilize credit derivatives. They detected that highly capitalized banks with less risky portfolios purchase credit derivative protection to hedge against capital inadequacy.   Moreover, banks with riskier loan portfoli

The Cussing Trend :: essays research papers

Cussing Trend Present generation is rolling over cussing trend. Wherever you see from daily lexicon, whether on television, stored in kids? iPod?s or packed into soccer carpool, you will find them brimming with borderline expletives. In today?s generation there?s not list, but an entire volume touch the boundary or goes up to infinity. None is unabashed about cussing trend. Well, we?re light years away from 1950?s and 1960?s. During 50?s and 60?s it was so hard to write or describe borderline expletives. Back in 1953 the writers for ?I love Lucy? couldn?t describe Lucille ball?s pregnancy by using the word ?pregnancy?. Even though it was not allowed by TV censors or in book or in Newspaper. If I compare my personal experience with 50?s and 60?s, it will cross the boundary. Well, this is about my 12 years old cousin, he was playing Xbox all the time instead of studying. So in order to push him back to study my uncle took his Xbox and hide at the good place that he could not find it. And my cousin couldn?t find it, so he started cussing on everyone that who took his Xbox. Well, when I went to his house and I ask him that what happen? And he was like that basted hide it and I was like who? He said his dad. I got shocked when he said basted to his dad. I was thinking in my mind like why this new generation is cussing and using borderline expletives. After all I ask him that where did u hear that word? And he answered that he heard on TV. With that experience I could figure out that this

Marketing and Car Rental Companies

THE INFLUENCE OF INTERNAL MARKETING ELEMENTS ON BRAND IMAGE OF SELECTED CAR RENTAL COMPANIES IN SOUTH AFRICA STUDENT NAME XXXXXX (student number) Thesis submitted in fulfilment of the requirements for the degree PhD in Marketing Management in the Faculty of Management at the University of Johannesburg JOHANNESBURG September 2009 Supervisor: Prof xxxxx Co-supervisor: Dr yyyy Table of contents ____________________________________________________________________________ TABLE OF CONTENTS 1. INTRODUCTION AND BACKGROUND TO THE RESEARCH 1. 1 Overview of services and services marketing 1. Internal marketing 1. 3 Brand identity and brand image 1. 4 Car rental in South Africa 2. STATEMENT OF THE PROBLEM 3. RESEARCH OBJECTIVES 3. 1 Primary objective 3. 2 Secondary objectives 4. RESEARCH QUESTIONS 5. HYPOTHESES 6. SIGNIFICANCE OF THE RESEARCH 7. LITERATURE REVIEW 7. 1 Theoretical paradigm 7. 2 Research Constructs 7. 3 Relationship between variables 8. RESEARCH METHODOLOGY 8. 1 Research design 8 . 2 Research format 8. 3 Population and sample 8. 4 Data collection instruments, sources and procedures 8. 5 Data analysis 9. DELIMITATION OF THE STUDY 10. CONTRIBUTION OF THE STUDY 11.CLARIFICATION OF TERMS AND DEFINITIONS 12. DIVISION OF THE STUDY 13. TIME FRAME AND BUDGETARY CONSIDERATIONS 14. LIST OF REFERENCES 3 3 4 6 8 9 10 10 11 12 13 19 19 20 22 23 23 24 24 25 26 27 27 28 28 29 30 31 2 Research proposal 1. INTRODUCTION AND BACKGROUND Organisations across all industries recognise that services are becoming an important factor in all their business dealings to obtain a competitive advantage (Strydom, 2005:114). According to Palmer (2005:2), every industry is a service industry and the only aspect that separates industries is the size of their service component.Innovative organisations offering unique services to customers are now succeeding in markets where established organisations have failed (Lovelock and Wirtz, 2004:4). Services marketing management is about servicing and caring about people (Kasper, van Helsdingen and Gabbott, 2006:9). People encompass individuals, households, employees and organisations. In general, services deal with intangibles, in other words, things that cannot be hold, touched nor be seen before they are utilised (Gronroos, 2000:7). Services refer to deeds, processes and experiences (Kasper et al, 2006:9; Zeithaml, Bitner and Gremler, 2006:4). . 1 Overview of services and services marketing Many skills, activities, knowledge, performances, efforts, deeds, systems and processes are required when implementing processes which focus on people. Developing and implementing assets and capabilities, including motivating employees to serve the client well through the delivery of excellent service quality is a challenge to any services organisation. The interaction between customers and service employees is vital for the actual success of service delivery (Kasper, van Helsdingen and de Vries, 1999:513).Organisations have realised that m arketing and managing services presented issues and challenges not faced in manufacturing and packaged goods companies. Employees previously employed by manufacturing companies found that their skills and experiences were not directly transferable. Services organisations realised there are a need for new concepts and approaches for marketing and managing services organisations (Zeithaml et al, 2006:10). Customer expectations and experiences play a vital role in the success of a services organisation.Since customers mainly rely on the contact they have had with employees of the services organisation, personal contact between employees and customers will to a large extent determine the success of the services organisation (Lovelock, 1996:50). The 3 Research proposal success of the Disney brand results from the organisation placing emphasis on the importance of their employees. They have realised that satisfied employees deliver better service quality, resulting in satisfied customers (Papasolomou and Vrontis, 2006:39).To ensure consistency service brands have developed internal marketing programmes in order to recruit, train and manage employees to deliver on the brand? s promises (McDonald, De Chernatony and Harris, 2001:337). 1. 2 Internal marketing Internal marketing views the employee as an internal customer, jobs as internal products and holds the view that all employees in an organisation serve both a customer and a supplier even in the event where one or both of these are internal colleagues (Zeithaml and Bitner, 2003:319).The goal of internal marketing is to establish, implement and manage a customer-focused service culture, strategy and relationships, which should result in higher levels of service quality (Varey and Lewis, 2000:200). In order to achieve the goal of internal marketing service organisations need to recognise that marketing strategies should not only be aimed at external customers, but should also be implemented internally and achieve bet ter internal communication.Therefore the internal marketing mix have to be of central importance in services organisations as each element represents cues that customers rely on in judging quality and overall image (Mudie and Pirrie, 2006:6). Marketing activities are traditionally structured around the four Ps related to products, that is product, price, promotion and place (distribution). In the services marketing mix an additional three Ps were added referring to people, process and physical evidence. However, marketing theorists are forever debating the relevant number of Ps and subsequently a variety of marketing mixes are being used in the various industries.Although most literature focuses on the seven Ps of services, additional four Ps including positioning, personal relationships, packaging and performance were recently introduced to the market, resulting in a number of eleven elements of the marketing mix (Balmer, 1998:31; Simister, 2009:3). These eleven elements should be 4 Research proposal included in the internal marketing programmes service organisations are offering to employees to ensure improved interaction with customers as suggested by the literature. Irrespectively of the nature of the service, employees working in the front-line interact directly with customers.In many service organisations, they are the only contact customers have with the organisation. They need to understand the customer? s needs and match the company? s service offering with the specific customer need. Moreover, they collect intelligence on competition, they help the company clarify what the needs of customers exactly are and assess the company? s ability to satisfy them. These employees promote the company? s overall image and the brand image of the company? s services (Gounaris, 2008:402). However, the font-line employees are not the only employees who should be exposed to internal marketing.In a services organisation it is imperative that all employees should be tra ined, developed and informed of the vision and goals of the organisation enabling them to deliver excellent services. Internal marketing requires the involvement of a number of departments working in unison to improve performance (Ahmed and Rafiq, 2002:57). A study conducted by Harris and Ogbonna (2000) unfortunately displayed that service employees were reluctant and resisted the concept of market orientation. Employees also lacked service consciousness.Harris and De Chernatony (2001:441) argue that ignorance and lack of training may explain the resistance, while employees may also feel that they may lose political power and status in the organisation by becoming more customer focused (Harris, 2002:62). Furthermore, front-line and contact centre employees are often under paid which results in a lack of enthusiasm and customer orientation. This eventually becomes an important barrier of the effort to meet customers? expectations, thus jeopardising the entire image of a service brand (Gounaris, 2008:402).Therefore, internal marketing programmes should not only include the internal marketing mix, but should also include the organisational fit, identification with the company, employee participation in decision making, commitment, accuracy and openness of communication (Naude, Desai and Murphy, 2003:1215). Liu, Petruzzi and Sudharshan (2007:25) argue that training with an emphasis on the specific tasks that employees have to accomplish, employee empowerment, sharing information pertaining to customer needs and rewarding 5 Research proposal mployees based on the quality of customer service they deliver. Employees that complete tasks effectively become motivated to provide a high quality service which results in higher levels of customer satisfaction. As a result, customers are satisfied, since expectations are met or exceeded and the brand image of the company will be positive (Donaldson and O? Toole, 2002:155; Varey and Lewis, 2000:200,201). Internal marketing, a lso known as internal branding or employee branding is viewed as equally important to external brand building or the brand management of customers (O?Callaghan, 2009:4; Witt and Rode, 2005:278). Another factor playing a role in business success is the establishment of a favourable brand image (Park, Cho and Kandampully, 2009:134). Brands are often seen as a major relationship builder between a service organisation and its customers. Kasper et al (2006:163) argue that brands are not only the product or service an organisation sells or delivers, but represent everything an organisation does and specifically what an organisation represents to its employees and its markets. 1. 3 Brand identity and brand imageBrands are increasingly seen as valuable market assets and an essential source of differentiation in industries which are becoming saturated with similar service offerings. Additionally, brands have certain functions such as improving loyalty, identifying the provider of the service , reducing search costs, reducing perceived risk and signalling quality (Kasper et al, 2006:163; Aurand, Gorchels and Bishop, 2005:164). Service organisations have begun to realise that the importance of nurturing relationships between employees and customers adds to the development of employees? nd customers? respect for certain functional and emotional values of the brand (Papasolomou and Vrontis, 2006:38). Subsequently, an integrated branding strategy is required to align the organisation? s strategy, processes and resources to ensure consistency in the quality of the service delivery and a positive perception of the brand (LePla, Davis and Parker, 2003:3-5). 6 Research proposal One of the critical steps in building a strong brand is to create a brand identity. The brand identity is aspirational, since it refers to how the brand would like to be perceived.Creating a brand identity is more than determining what customers say they need, it should also reflect the soul and vision of the brand and what it hopes to achieve. Aaker (1996:68) stated that the brand identity which provides the direction and strategic vision of the brand consists of twelve dimensions organised around four perspectives: Brand-as-product (product scope, product attributes, quality/value, uses, users, country of origin) Brand-as-organisation (organisational attributes, local versus global) Brand-as-person (brand personality, brand-customer relationships) Brand-as-symbol (visual imagery/metaphors and brand heritage)The brand identity should be strategic, reflecting a business strategy that will lead to a sustainable advantage, while the brand image tends to be more tactical (Aaker, 1996:70). The brand image of a service organisation is even more important than a product company due to the intangibility that characterises services. Brand image consists of two categories, namely brand associations and brand awareness. One generally accepted view of brand image is that perceptions about a br and are reflected by a cluster of associations that customers connect to the brand name in memory.Brand associations are the informational nodes linked to the brand node in memory and contain meaning of the brand for customers (Aaker, 1991:110; Keller, 1998:45). Keller (1998:45) classifies brand associations into three major categories, i. e. attributes, benefits and attitudes. Attributes refer to the descriptive features that characterise the brand. Product related attributes are essentially defined as the components of the core product function sought by customers. In terms of services, the service related attributes refer to the process of the core service (O?Cass and Grace, 2003:453). Benefits are the personal value customers attach to the brand attributes and brand attitudes are customers? overall evaluation of the brand (Del Rio Vazquez and Iglesias, 2001:411). Low and Lamb, (2000:352) conceptualise brand image, that is functional and symbolic perceptions; brand attitude as th e overall evaluation of the brand; and 7 Research proposal perceived quality as the judgements of overall superiority as possible dimensions of brand associations.The literature regards brand attributes, perceived quality and brand attitude as separate dimensions of brand associations under less familiar brands and as one dimension under well known brands. Well known brands also tend to exhibit multi-dimensional brand associations, which is consistent with the idea that customers have more developed memory structures for more familiar brands (Low and Lamb, 2000:353). Brand associations are important to decision makers in services organisations to improve brand identity amongst employees, which should result in positive brand associations amongst customers.Brand awareness refers to the strength of a brand? s presence in the customer? s mind. Awareness is measured according to the different ways in which customers remember a brand, ranging from recognition (exposure to the brand) to r ecall (what can be recalled about the brand) to first in the mind (the brand appearing first in the mind) and finally to dominant (the only brand recalled) (Aaker, 1996:10). Brand awareness is created by increasing the familiarity of the brand through repeated exposure and strong associations with the relevant cues enabling the customer to recall the brand effectively (Keller, 2003:70). . 4 Car rental in South Africa The homogeneity and heightened competition in the car rental industry are forcing car rental companies to consider the connection between internal marketing and brand image to achieve competitive differentiation. Due to increased globalisation most car rental companies in South Africa have to compete on a local and international level. Currently in South Africa there are a number of car rental companies, of which seven are most recognised due to their location at airports in South Africa. These companies include Avis, Budget, Europcar, Hertz, National, Tempest Sixt and Thrifty.Car rental companies are in a complex industry with a number of role players involved such as government, car manufacturers and a variety of target markets. Besides providing a service to the various target markets, the products they offer are beyond their control, as the end product the customer receives are from different manufacturers. These end products 8 Research proposal include a large range of different car models from various manufacturers, for example, Toyota, Mercedes, BMW, Mazda, Volkswagen, and Opel to name but a few.Since the car rental companies in South Africa focus on the same customers and provide the same car models, both factors not fully controlled by them, it is imperative that they have to provide excellent services to customers to grow their businesses and to retain existing customers. The employees of car rental companies are their most important asset and therefore special attention is required to ensure loyalty and commitment from employees to deli ver service excellence. Irrespective of the fact that the service organisation may have developed a well conceived positioning for its brand, he brand? s successful positioning depends on the role the employees play in producing and delivering the service (Papasolomou and Vrontis, 2006:39). Providing a service is a people business. It is therefore important for car rental companies to determine if internal marketing has an influence on employees? associations with the brand image of the organisation. Car rental companies should realise that there is a need to instil a customer-focused service culture, which is a prerequisite for delivering consistently high quality services and for building successful service brands.Therefore they need to embark on a process of strengthening their brands as a source of sustainable competitive advantage by implementing an internal marketing programme to compete with first world countries (Papasolomou and Vrontis, 2006:39). Although most South African car rental companies? brands are well known, formal research is required as it is not evident that internal marketing implementation does have an influence on the brand image of car rental companies in South Africa. 2.STATEMENT OF THE PROBLEM The internal marketing mix elements that will be used in this study include product, price, promotion, place, people, processes, physical evidence, positioning, personal relationships, packaging and performance. In order to enhance the brand image of a service organisation the 9 Research proposal organisation has to adapt its marketing activities to mix and match the internal marketing mix elements that will reinforce the brand image (Kotler and Keller, 2009:288).Despite a strong interest in the subject amongst marketing researchers, little research has been conducted related to brand images in service brands (Del Rio et al, 2001:410; O? Cass and Grace, 2003:453). Although car rental companies have internal programmes, such as loyalty and othe r incentive programmes to motivate employees, the success of these programmes have not been researched nor linked to the internal marketing elements applicable to this study (Avis, 2009).Furthermore, the researcher could not find any direct studies related to the influence of internal marketing elements on brand image in the car rental industry in South Africa. This is relevant because if all elements do not contribute positively to the overall brand image of car rental companies in South Africa, it could receive reduced attention, which could damage the image of the brand of the car rental company. Additionally if certain activities prove ineffectively they could be altered and improved, thereby creating more competitiveness for car rental companies.The problem in this study is that the importance of brand image in a services industry, specifically the car rental industry, should be emphasised, therefore this study aims to determine the influence of product, price, promotion, place , people, processes, physical evidence, positioning, personal relationships, packaging and performance on brand associations and brand awareness as dimensions of brand image of car rental companies in South Africa, as perceived by employees and customers. 3. RESEARCH OBJECTIVESThe following objectives will clearly define the objectives the study aims to determine: 3. 1 Primary objective The primary research objective of this study is to determine the perceived influence of the different elements of internal marketing on the brand image of selected car rental companies in South Africa. 10 Research proposal 3. 2 Secondary objectives The secondary objectives of the study aim to determine whether the various elements of the internal marketing mix have an internal influence on each of the brand image categories.The elements of the internal marketing mix that will be separately observed according to the classification of the Ps are firstly the traditional 4 Ps, product, price, promotion, place; secondly the additional 3 Ps for services marketing mix, people, processes, physical evidence and lastly the recently added 4 Ps, positioning, personal relationships, packaging and performance.Each element of the internal marketing mix will be observed to determine its influence on brand image, namely brand associations, specifically brand attributes, perceived quality and brand attitude, as well as brand awareness, such as recognition of the brand and brand recall of selected car rental companies. The influence of the internal marketing elements on the brand associations and brand awareness will enable car rental companies to focus future internal marketing programmes on the relevant internal marketing mix elements to ensure an improved brand image.Furthermore the influence of the internal marketing elements is relevant to determine the overall influence on brand image as set out in the following hypotheses formulated in this study (see next section). The secondary research objectives are: To determine the influence of the internal product on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of the internal price on the brand image of car rental companies amongst selected car rental companies and their clients.To determine the influence of internal promotion on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of the internal place on the brand image of car rental companies amongst selected car rental companies and their clients. 11 Research proposal To determine the influence of internal people on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of internal processes on the brand image of car rental companies amongst selected car rental companies and their clients.To determine the influence of internal physical evidence on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of internal positioning on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of internal personal relationships on the brand image of car rental companies amongst selected car rental companies and their clients. To determine the influence of internal packaging on the brand image of car rental companies amongst selected car rental companies and their clients.To determine the influence of internal performance on the brand image of car rental companies amongst selected car rental companies and their clients. 4. RESEARCH QUESTIONS As suggested by the title, the purpose of the study is to investigate the influence of the eleven internal marketing mix elements on brand image of car rental companies in South Africa. The research question can be phrased as: Do the eleven internal marketing mix elements ha ve an influence on the brand image of South African car rental companies? Sub-components of the primary research question include:What is the influence of the internal product, price, promotion, place, people, processes, physical evidence, positioning, personal relationships, packaging and performance on brand associations of car rental companies? 12 Research proposal What is the influence of the internal product, price, promotion, place, people, processes, physical evidence, positioning, personal relationships, packaging and performance on brand awareness of car rental companies? 5. HYPOTHESES In figure 1 the hypotheses derived from the research objectives are indicated.Figure 1 displays the organisation which imposes its values through internal marketing on employees with the external customer in mind to achieve its objectives (Mudie and Pirrie, 2006:14). The internal marketing mix elements are independent variables, since they are not dependent on one another to exist in the orga nisation. The brand image categories, that is brand associations and brand awareness are the dependent variables of the study as the research aims to prove the influence of the independent variables on the brand image.In order to establish the connection between the internal marketing mix and the brand image of the organisation an intervening variable is required. The intervening variable is brand identity, as it provides direction, purpose and meaning for the brand (Aaker, 1996:68). Through establishing that brand identity is dependent on the elements of the internal marketing mix and that brand image is dependent on brand identity, will allow the connection between the internal marketing mix and brand image to be established. The brand association dimensions that will be tested are brand attributes, perceived quality and brand attitude.The brand awareness dimensions are brand recognition and brand recall. In developing research hypotheses researchers normally frame relationships i n either the null or alternative format. In this study alternative hypotheses are formulated, indicating that there is a relationship between two variables that is significant. These hypotheses are depicted in figure 1 on the following page. 13 Brand identity Brand identity Employees Product v1 Traditional Ps Price v2 Place v3 Promotion v4 H2d, H2e H1a, H1b, H1c H3a, H3b, H3c H4a, H4b, H4c H1d, H1e CustomersAttributes v12 a b c H2a, H2b, H2c Perceived quality v13 Brand Attitude v14 Brand associations Recognition v15 H3d, H3e H4d, H4e d Brand image Brand awareness Recall v16 e People v5 Internal marketing Services Ps Processes v6 Physical evidence v7 H5a, H5b, H5c H6a, H6b, H6c H7a, H7b, H7c Attributes v17 a b Perceived quality v18 Brand Attitude v19 H5d, H5e c Brand associations H6d, H6e Recognition v20 H7d, H7e d Brand image Recall v21 e Brand awareness Positioning v8 Recent Ps H8a, H8b, H8c H9a, H9b, H9c H10a, H10b, H10c H11a, H11b, H11c H8d, H8e H9d, H9e H10d, H10eH11d, H11e Attr ibutes v22 a b Personal relationships v9 Packaging v10 Performance v11 Perceived quality v23 Brand Attitude v24 c Brand associations Brand image Recognition v25 Recall v26 e d Brand awareness Research proposal Based on the primary and secondary objectives and as indicated in figure 1, it is hypothesised that: H1a: Internal product does have an influence on brand attributes of car rental companies by increasing brand identity. H1b: Internal product does have an influence on perceived quality of car rental companies by increasing brand identity.H1c: Internal product does have an influence on brand attitude of car rental companies by increasing brand identity. H1d: Internal product does have an influence on recognition of the brand of car rental companies by increasing brand identity. H1e: Internal product does have an influence on brand recall of car rental companies by increasing brand identity. H2a: Internal price does have an influence on brand attributes of car rental companies by increasing brand identity. H2b: Internal price does have an influence on perceived quality of car rental companies by increasing brand identity.H2c: Internal price does have an influence on brand attitude of car rental companies by increasing brand identity. H2d: Internal price does have an influence on recognition of the brand of car rental companies by increasing brand identity. H2e: Internal price does have an influence on brand recall of car rental companies by increasing brand identity. H3a: Internal place does have an influence on brand attributes of car rental companies by increasing brand identity. H3b: Internal place does have an influence on perceived quality of car rental companies by increasing brand identity.H3c: Internal place does have an influence on brand attitude of car rental companies by increasing brand identity. 15 Research proposal H3d: Internal place does have an influence on recognition of the brand of car rental companies by increasing brand identity. H3e: Internal place does have an influence on brand recall of car rental companies by increasing brand identity. H4a: Internal promotion does have an influence on brand attributes of car rental companies by increasing brand identity. H4b: Internal promotion does have an influence on perceived quality of car rental companies by increasing brand identity.H4c: Internal promotion does have an influence on brand attitude of car rental companies by increasing brand identity. H4d: Internal promotion does have an influence on recognition of the brand of car rental companies by increasing brand identity. H4e: Internal promotion does have an influence on brand recall of car rental companies by increasing brand identity. H5a: Internal people do have an influence on brand attributes of car rental companies by increasing brand identity. H5b: Internal people do have an influence on perceived quality of car rental companies by increasing brand identity.H5c: Internal people do have an influence on bran d attitude of car rental companies by increasing brand identity. H5d: Internal people do have an influence on recognition of the brand of car rental companies by increasing brand identity. H5e: Internal people do have an influence on brand recall of car rental companies by increasing brand identity. H6a: Internal processes do have an influence on brand attributes of car rental companies by increasing brand identity. H6b: Internal processes do have an influence on perceived quality of car rental companies by increasing brand identity. 16 Research proposal H6c:Internal processes do have an influence on brand attitude of car rental companies by increasing brand identity. H6d: Internal processes do have an influence on recognition of the brand of car rental companies by increasing brand identity. H6e: Internal processes do have an influence on brand recall of car rental companies by increasing brand identity. H7a: Internal physical evidence does have an influence on brand attributes of car rental companies by increasing brand identity. H7b: Internal physical evidence does have an influence on perceived quality of car rental companies by increasing brand identity.H7c: Internal physical evidence does have an influence on brand attitude of car rental companies by increasing brand identity. H7d: Internal physical evidence does have an influence on recognition of the brand of car rental companies by increasing brand identity. H7e: Internal physical evidence does have an influence on brand recall of car rental companies by increasing brand identity. H8a: Internal positioning does have an influence on brand attributes of car rental companies by increasing brand identity.H8b: Internal positioning does have an influence on perceived quality of car rental companies by increasing brand identity. H8c: Internal positioning does have an influence on brand attitude of car rental companies by increasing brand identity. H8d: Internal positioning does have an influence on recogniti on of the brand of car rental companies by increasing brand identity. H8e: Internal positioning does have an influence on brand recall of car rental companies by increasing brand identity. H9a: Internal personal relationships do have an influence on brand attributes of car rental companies by increasing brand identity.H9b: Internal personal relationships do have an influence on perceived quality of car rental companies by increasing brand identity. 17 Research proposal H9c: Internal personal relationships do have an influence on brand attitude of car rental companies by increasing brand identity. H9d: Internal personal relationships do have an influence on recognition of the brand of car rental companies by increasing brand identity. H9e: Internal personal relationships do have an influence on brand recall of car rental companies by increasing brand identity.H10a: Internal packaging does have an influence on brand attributes of car rental companies by increasing brand identity. H10b : Internal packaging does have an influence on perceived quality of car rental companies by increasing brand identity. H10c: Internal packaging does have an influence on brand attitude of car rental companies by increasing brand identity. H10d: Internal packaging does have an influence on recognition of the brand of car rental companies by increasing brand identity. H10e: Internal packaging does have an influence on brand recall of car rental companies by increasing brand identity.H11a: Internal performance does have an influence on brand attributes of car rental companies by increasing brand identity. H11b: Internal performance does have an influence on perceived quality of car rental companies by increasing brand identity. H11c: Internal performance does have an influence on brand attitude of car rental companies by increasing brand identity. H11d: Internal performance does have an influence on recognition of the brand of car rental companies by increasing brand identity. H11e: In ternal performance does have an influence on brand recall of car rental companies by increasing brand identity. 8 Research proposal 6. SIGNIFICANCE OF THE RESEARCH Employees who are treated well and who believe in the company they are representing tend to deliver service excellence. Internal marketing provides the means to retrain employees and to motivate them to exceed customer expectations, resulting in a positive association with the brand, which customers are likely to share with others (Donaldson and O? Toole, 2002:155). In today? s crowded marketplace building a powerful brand is central in giving companies a competitive edge.The association clients make with a brand in the services industries will focus strongly on the service quality they receive from the company (Papasolomou and Vrontis, 2007:8). In South Africa no formal research study could be found on how the eleven internal marketing elements, that is product, price, promotion, distribution, processes, physical evidenc e, people, positioning, personal relationships, packaging and performance influence the brand image, being brand attributes, perceived quality and brand attitude of car rental companies.Formal research is required to determine the influence of internal marketing on brand image, as the internal marketing efforts will have an effect on service delivery by employees, which subsequently should improve the image clients have of the brand. Although some car rental companies claim they care about employees and provide special motivational programmes for employees, no formal research has been conducted to determine if these programmes as part of internal marketing have a positive influence on the service delivered by employees (Avis, 2009). . LITERATURE REVIEW The literature study is based on the most recent literature available in the fields of study. It includes inter alia books, journals, academic dissertations and literature available in an electronic format obtained from reputable acad emic and various research institutions via the Internet. The ensuing sections contain information obtained to gain an in-depth understanding of the research issues as defined within the problem statement. 19 Research proposal 7. 1 Theoretical paradigmFew topics of the commercial theory have inspired as well as divided the marketing academia as the four Ps Marketing Mix framework (Constantinides, 2006:407). Since Jerome McCarthy (1964) reduced Neil Borden? s (1964) twelve identified controllable marketing elements to four, product, price, place and promotion, practitioners and academics promptly embraced the mix paradigm that soon became the prevalent and indispensable element of marketing theory and operational marketing management (Gronroos, 1994:13).The wide acceptance of the mix among marketers is due to their profound exposure to this concept, since most introductory marketing manuals identify the four Ps as the controllable parameters likely to influence the consumer buying pro cess and decisions (Kotler, 2003). However, despite the background and status of the marketing mix as a major theoretical and practical parameter of contemporary marketing, several academics have at times expressed doubts and objections as to the value and the future of the mix, proposing alternatives that range from minor modifications to total rejection.It is often evident in both the academic literature and marketing textbooks that the mix is deemed by many researchers and writers as inadequate to address specific marketing situations like the marketing of services, the management of relationships or the marketing of industrial products (Constantinides, 2006:409). Early references identifying differences between tangibles and intangibles underlying the distinctive character of services marketing are found in the works of Branton (1969), Wilson (1972).The special character of services were emphasised by Blois (1974), Bessom and Jackson (1975) and Shostack (1977). Several alternati ve methodologies and marketing conceptual frameworks for services marketing have been proposed ever since. A key factor distinguishing the services marketing from marketing physical products is the human element. Booms and Bitner (1981) included people, physical evidence as an important environmental factor influencing the quality packaging and process of service delivery as additional marketing mix elements in services marketing. 20 Research proposalSubsequently various researchers have added a variety of proposed elements and some changed existing elements. Currently there are additions of up to eleven elements in the marketing mix. Based on the recent contributions of researchers such as Fryar (1991) who introduced positioning, English (2000) who added personal relationship, Grove, Fisk and John (2000) who claim that performance should be included and Beckwith (2001) who indicated that packaging is lacking, these four elements are included in the internal marketing mix elements a s theoretical foundation for this study.The creation of a brand implies communicating a certain brand image in such a way that all the target groups of an organisation link its brand with a set of associations (Del Rio et al, 2001:410; Low and Lamb, 2000:350). Brand associations are important to organisations and customers. An organisation uses brand associations to differentiate, position and extend brands, to create positive attitudes towards a brand and to suggest attributes or benefits of purchasing or using a specific brand. Customers use brand associations to help process, organise and retrieve information in memory, nd to assist them in making purchasing decisions (Aaker, 1991:110). Brand associations play a central role in brand strategy development. In particular, Aaker (1992:25) suggests that brand associations should be organised into groups that have meaning. This meaning should define the brand? s positioning – its point of reference with respect to the competiti on. Thus, a well positioned brand will represent an attractive set of strong associations (De Chernatony and McDonald, 2003:254; Hankinson, 2005:25). The second category of brand image is brand awareness.Brand awareness consists of brand recognition and brand recall performance. Brand recognition relates to customers? ability to confirm prior exposure to the brand when given the brand as a cue. In other words, customers are able to distinguish the brand as having been previously seen or heard. Brand recall relates to customers? ability to retrieve the brand from memory when given the product category, the needs fulfilled by the category or a purchase or usage situation as a cue. In other words, customers are able to correctly generate the brand from memory when receiving a relevant cue (Keller, 2003a:67).Brand awareness is critical for services organisations, as customers have to actively seek the brand and be able to recall it from memory when appropriate. 21 Research proposal Toge ther with the eleven internal marketing mix elements, brand image, broken down into brand associations and brand awareness form the theoretical paradigm on which this study is based. 7. 2 Research constructs Research constructs are described as unobservable abstract concepts that are measured indirectly by a group of related variables.Variables are described as observable measurable elements of an object and are measured directly (Hair, Bush and Ortinau, 2009:233). In practice, the term variable is used as a synonym for constructs or the property being studied and in this context, a variable is a symbol to which numerals or values are assigned (Cooper and Schindler, 2001:44). Therefore, the variables that will be measured in this study are the eleven internal marketing elements, product, price, promotion, place, people, processes, physical evidence, positioning, personal relationships, packaging and performance.These elements are the independent variables or constructs, since they p redict or explain the outcome variable of interest (Hair et al, 2009:234). Brand image consists of the two classifications, namely brand associations and brand awareness. Brand associations as described by the literature can be measured in terms of brand attributes, perceived quality and brand attitude, while brand awareness can be measured as recognition of the brand and recall of the brand (Aaker, 1996:10; Keller, 1998:45).The brand attributes, perceived quality, brand attitude, brand recognition and brand recall are the dependent variables or constructs as they are the variables the researcher is seeking to explain (Hair et al, 2009:234). Brand identity is the intervening variable as it is the factor which theoretically affects the observed phenomenon but cannot be seen, measured, or manipulated; its effect must be inferred from the effects of the independent and dependent variables on the observed phenomenon (Cooper and Schindler, 2001:47). 22 Research proposal 7. 3 Relationship between variablesAs indicated in the formulated hypotheses, this study aims to indicate that there is a relationship between the variables that are being tested. The relationship can either be positive or negative. A positive relationship between two variables indicates that the two variables increase or decrease together, comparing to a negative relationship that suggests that as one variable increases, the other one decreases, or vice versa (Hair et al , 2009:234). Should there be no relationship between the eleven internal marketing elements and the brand image of selected car rental companies in South Africa, the null hypothesis will be relevant.If the null hypothesis is accepted, it concludes that the variables are not related in a meaningful way (Hair et al, 2009:235). If, on the other hand, the null hypothesis is rejected, the alternative hypothesis indicates that the two variables are related in some way that may prove useful for the car rental companies. 8. RESEARCH METHOD OLOGY A well-designed research plan forms the basis of the entire research process (Cooper and Schindler, 2001:6). Research can be described as a practical activity that intends to find out things in a systematic way.It is a process of designing, gathering, analysing and reporting information to uncover opportunities and reduce the risks of decision-making (Coldwell and Herbst, 2004:10). Previously gathered information which was not gathered for this study, but that was gathered for another purpose is called secondary data (Churchill and Brown, 2007:146). Secondary data, including books, academic accredited research journals, websites, dissertations, theses, internal company information and other written and verbal communications will be used to develop the theoretical background of the study.Primary data, which is data initiated by the researcher for the purpose of the proposed study, is extracted in the form of perceptions of the sample population that will be investigated (Church ill and Brown, 2007:146). 23 Research proposal Cooper and Schindler (2001:14) state that the term „empirical? points to the requirement for the researcher to test subjective beliefs against objective reality and have findings open to further scrutiny and testing. In this study, empirical research is used to test the objectives stated previously in this chapter. . 1 Research design The objectives of the study form an integral part of the research design, since objectives ensure that information will be collected from appropriate sources by using the correct data gathering techniques. They also influence the sampling methodology, the schedule and cost of the research project (Zikmund, 2003:58). According to Mouton (2001:37), the research method that is partly derived from the methodological paradigm (qualitative or quantitative) fits the research objectives.In quantitative research, the methods are well planned, structured and formal because the findings play an important role i n decision-making (Boyce, 2002:37). Quantitative research makes use of structured close-ended questions that have predetermined response possibilities in questionnaires or surveys and are distributed to a vast number of respondents (Hair et al, 2006:171). In this study a quantitative process will be used to seek data that can be expressed in numbers and statistically analysed. 8. 2 Research format The research format of the study is described as descriptive research.According to Cooper and Schindler (2001:136) descriptive research attempts to answer questions such as who, what, where, when or how much. Data collected through descriptive research can provide valuable information about the study units along relevant characteristics and also about associations among those characteristics (Aaker, Kumar and Day, 2001:73; Parasuraman, Grewal and Krishnan, 2004:72). As recommended by Solomon, Marshall and Stuart (2006:113), this study will include a descriptive survey design to gather the necessary data from a large sample size. 24 Research proposalThe descriptive format is broken down in two types, longitudinal and cross-sectional. Longitudinal designs rely on panel data in which the same variables are measured over time. Cross-sectional designs rely on a sample of elements from the population of interest that are measured at a single point in time (Churchill and Iacobucci, 2002:122). As the objectives of this study are to describe a current situation, a cross-sectional format is appropriate. 8. 3 Population and sample The population for this study will include employees and customers of selected car rental companies in South Africa.There are 7 car rental companies, being Avis, Tempest, Budget Car Rental, First Car Rental, Europcar, Hertz and Argus Car Rental. Avis, Budget and Europcar will be the sample drawn from the population, as these three are the largest and world leading car rental companies in South Africa. All three companies have more than 75 branches and fleets in excess of 8500, compared to the other car rental companies with less than 50 branches and fleets smaller than 6000. Since Avis, Budget and Europcar have a market share of more than 80% it is believed that they will be a fair representation of the car rental industry in South Africa.Probability sampling will be used for selecting the sample frame. Probability samples are distinguished by the fact that each sampling unit has a known, non-zero chance of being included in the sample (Hair et al, 2006:330). The two independent sample frames that will be used in the study include: Sample frame 1: The sampling units in this frame include all employees of the Avis, Budget and Europcar groups stationed at major airports in South Africa. These airports include OR Tambo, Cape Town, Durban, Bloemfontein, Port Elizabeth, East London, George, Nelspruit and Lanseria.There will be 800 employees targeted within this sample selected by the management of the three car rental groups. 25 Rese arch proposal Sample frame 2: The sampling units in this frame include customers who rented cars during a period of three months from October to December 2009 of the Avis, Budget and Europcar groups stationed at OR Tambo, Cape Town, Durban, Bloemfontein, Port Elizabeth, East London, George, Nelspruit and Lanseria airports. There will be 4000 clients targeted within this sample, selected by the management of the three car rental groups.It is important to consider both two independent sample frames, as the employees in sample frame one will measure the internal marketing aspects of the study. The customers of sample frame two will aid in measuring the brand image of the selected car rental groups. 8. 4 Data collection instruments, sources and procedures The data collection of this study will be conducted by means of a survey. According to Rubin, Rubin and Piele (2000:193) surveys allow the researcher to observe and gather evidence. Questionnaires will be designed for each of the sampl e frames.Questionnaires will include a demographic section to classify respondents, being customers or employees. In the second section of both questionnaires the eleven internal marketing mix elements will be tested based on information from the literature. The third section of both questionnaires will focus on brand associations, specifically brand attributes, perceived quality and brand attitude, as well as brand awareness, namely recognition of the brand and brand recall as described in the theory of the relevant chapter.A five point Likert scale, ranging from „strongly disagree? to „strongly agree? , will be used for all questions within both questionnaires. The Likert scale is a highly used rating scale that requires respondents to indicate a degree of agreement or disagreement with each of a series of statements about the objects (Cooper and Schindler, 2001:234). The survey, comprising of an online questionnaire will be administered through email and upon completi on will be sent directly to the Statistical Consultation Service of the University of Johannesburg.An online survey format will allow for a wide reach that will be relatively inexpensive and will be faster than offline methods. Furthermore, there will be no interaction between the researcher and the respondents, therefore interviewer error and bias will be 26 Research proposal diminished (Hair et al, 2006:230). Confidentiality and anonymously of respondents will also be guaranteed. A pre-test will be conducted to detect possible weaknesses in the questionnaire.An important purpose of the pre-test is to discover the respondents? reactions to questions and it also helps to discover repetitiveness or redundancy (Cooper and Schindler, 2001:236). 8. 5 Data analysis Statistical procedures to test the research hypotheses include descriptive statistics, factor analyses, analyses of variance and measures of association. Internal marketing and brand image involve numerous factors. Factor anal ysis will be used to compare and find correlations between these factors.The statistical method for testing the null hypothesis that the means of several populations are equal is analysis of variance (ANOVA) (Cooper and Schindler, 2001:509). ANOVA will be used to determine if internal marketing and brand image are related. The pre-test of the questionnaire will be conducted amongst five experts in the industry to ensure reliable data. Cronbach-Alpha will be used to measure the reliability of the pilot. All calculations will be done by means of SPSS. Analyses will be conducted by the Statistical Consultation Service of the University of Johannesburg. 9. DELIMITATION OF THE STUDYThis study will focus on the three largest car rental companies in South Africa and although it is believed that they will be representative of the car rental industry, it might not be the case, as smaller car rental companies might have different or no internal marketing focuses and therefore the results and recommendations may not be generalised to a wider context. The dimensions of brand associations and brand awareness will only be investigated amongst car rental companies in South Africa, which is a service industry. If the approach is extended to other services industries or even products the result might differ. 7 Research proposal Furthermore, no previous research has been conducted on the eleven internal marketing mix elements and brand image of the car rental industry in South Africa. Therefore, this study may lack in-depth information related to the car rental industry. 10. CONTRIBUTION OF THE STUDY The eleven internal marketing mix elements are still a new concept to many South Africans. No previous studies could be found that have been conducted on the influence of the eleven internal marketing mix elements on brand image of car rental companies in South Africa.This study aims to contribute to the body of knowledge in three ways. Firstly, it describes the complexity of the c ar rental industry in South Africa. This is followed by a description of the current understanding and debate amongst researchers of the relevance of the eleven marketing mix elements, specifically their influence on brand image of an organisation. Thirdly, the study aims to provide guidelines to car rental companies in South Africa on how to improve internal marketing programmes which will enable them to improve their brand image.Brand image is important to any organisation, as a good and well recognised brand will lead to higher profitability of the organisation. 11. CLARIFICATION OF TERMS AND DEFINITIONS In the previous sections, certain terms and definitions were used. However, for the sake of uniformity, these terms and definitions have to be clarified (Mouton, 2001:36). The services marketing literature contain many definitions of services, but there are some common features in all of these definitions. The first commonality is that services deal with something that is intangi ble.Services refer to efforts, deeds or processes consisting of activities or a series of activities performed by the service provider, quite often in close cooperation and interaction with the customer, aimed at creating customer satisfaction (Kasper et al, 2006:57). Papasolomou and Vrontis (2006:37) postulate that service can be 28 Research proposal described as essentially intangible, not resulting in the ownership of anything and is a form of product that consists of activities, benefits, or satisfactions offered for sale.Internal marketing is defined as â€Å"a planned effort using a marketing-like approach directed at motivating employees, for implementing and integrating organisational strategies towards customer orientation† (Ahmed and Rafiq, 2002:11). Branding is a name, term, sign, symbol, or design, or a combination of these that identifies the seller of a product or service and seeks to differentiate them from those of competitors (Kotler and Keller, 2006:274; Pap asolomou and Vrontis, 2006:37). Brand identity is defined as â€Å"a unique set of brand associations that the brand strategist aspires to create or maintain.These associations represent what the brand stands for and imply a promise to customers from the organisation members† (Aaker, 1996:68). Brand image as identified by Keller (2003:70) is perceptions about a brand as reflected by the brand associations held in a customer? s memory. Keller (1998:71) defined brand associations as â€Å"informational nodes linked to the brand node in memory that contains the meaning of the brand for consumers†. Brand awareness refers to the strength of a brand? s presence in the customer? s mind (Aaker, 1996:10). 12. DIVISION OF THE STUDYThe current chapter provides an introduction to the study, including the problem statement, objectives and research methodology. The rest of this study is divided into the following chapters: 29 Research proposal Chapter 2 describes the complexities an d current state of the car rental industry in South Africa. An overview of the three companies, Avis, Budget and Europcar, which are participating in this study, is provided. Chapter 3 focuses on internal marketing. The history of the elements of the internal marketing mix is discussed, as well as the development of the traditional four Ps up to the eleven currently in existence is described.The culture of organisations and the influence of internal marketing are furthermore explained. Chapter 3 discusses brand identity, brand image and the dimensions thereof. The importance of building a successful brand is also described. Chapter 4 outlines the research methodology with detailed reference to the research design, population, sample, measuring instrument, and the proposed statistical analysis. Chapter 5 records the analysis of the empirical research. Chapter 6 summarises the study. Recommendations concerning the outcome of the study are discussed and suggestions for further research are presented. 3. TIME FRAME AND BUDGETARY CONSIDERATIONS The researcher? s aim for completion of the study is October 2010. However, due to the change of direction taken in the research, the aim might have to be postponed to April 2011. The possibility of obtaining a bursary for the empirical part of the study was explored, but since the researcher is a part-time student, she does not qualify for most bursaries. If no bursary can be obtained, the researcher will complete most of the empirical work herself and where required, make use of her own available funds. 30 References 14. LIST OF REFERENCESAaker, D. A. (1991). Managing Brand Equity: Capatilising on the Value of a Brand Name. New York: The Free Press. Aaker, D. A. (1992). The Management of Brand Equity. New York: The Free Press. Aaker, D. A. (1996). Building Strong Brands. 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