The 2007-2008 Financial Crisis Causes, Impacts and the Need for New Regulations Essay Example

The 2007-2008 Financial Crisis: Causes, Impacts and the Need for New Regulations Paper THE 2007-2008 FINANCIAL CRISIS: CAUSES, IMPACTS AND THE NEED FOR NEW REGULATIONS The initial cause of the financial turbulence is attributed to the U. S. sub-prime residential mortgage market. The sustained rise in asset prices, particularly house prices, on the back of excessively accommodative monetary policy and lax lending standards during 2002-2006, increased innovation in the new financial instruments, unusual low interest rates resulted in a large rise in mortgage credit to households; particularly low credit quality households, the greed of investors’ for ever higher returns coupled with very minimal down payments, along with the dependence on major global rating agencies, allowed complex investments products to be sold to an extremely wide range of investors. The repacking of credits with some other financial instruments, the rising complexity of the products, emerging â€Å"monoline’ guarantors in the marketplace – that are not being regulated, and the governments came into rescue, sometimes even difficult who’s the one to be blamed for the crisis. These would address the issue of transparency, conflict of interests among the market participants, regulatory and supervisory system, in particular their cooperation. Development of the Crisis In order to keep recession away, the Federal Reserve lowered the Federal funds rate 11 times from May 2000 (6. %) to December 2001(1. 75%), and this creating a flood of liquidity in the economy. Cheap money, created a favorable breeding ground for reckless risk taking. It found easy prey in restless financial institutions, and even more restless borrowers who had no income, no job and no assets. These subprime borrowers wanted to realize their lifes dream of acquiring a home. For t hem, holding the hands of a willing banker was a new way of hope. There were more home loans, more home buyers, more appreciation in home prices. We will write a custom essay sample on The 2007-2008 Financial Crisis: Causes, Impacts and the Need for New Regulations specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The 2007-2008 Financial Crisis: Causes, Impacts and the Need for New Regulations specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The 2007-2008 Financial Crisis: Causes, Impacts and the Need for New Regulations specifically for you FOR ONLY $16.38 $13.9/page Hire Writer The Federal continued slashing interest rates, perhaps, by continued low inflation despite lower interest rates. In June 2003, the Fed lowered interest rates to 1%, the lowest rate in 45 years. The whole financial market started turn just like a candy shop where everything was selling at a huge discount and with a very minimal down payment. Unfortunately, no one was there to warn about the tummy aches that would follow. The financial institutions thought that it just was not enough to lend out the loans with just minimal interest rates. They decided to repackage the mortgage loans with other financial instruments such as collateralized debt obligations (CDOs) or asset-backed commercial paper (ABC paper), or structured investment vehicles (SIVs) and pass on the debt to another candy shop. As appeared by the Central Banks Governors, these risk-based instruments was an aid for the investors in the marketplace since enabled them to purchase the precise degree of risk they willing to tolerate with, at given alternate returns. And also the mortgage market would become more liquid as sales were facilitated. The new financial instruments gave options to the banks to hold the loans they made as an off-balance sheet vehicle, or sell to others, or pay another institution to accept the risk of default. This was coupled with the belief one can sell or get ride off the risk via synthetic CDOs which was impossible to the system as a whole. One of the investment vehicles of the new instruments is the hedge funds. Investors of the hedge funds included financial institutions for example pension funds and non-for-profit institutions. Many of these hedge funds just ignore the warning signals of their insolvency early in the financial crisis. Most of the hedge fund industry required no public reporting since was located in offshore tax havens and that experienced no supervision. Nevertheless, it was unclear on what level this industry to get negatively impacted by the financial crisis. Apart from these, it was a need in improving transparency. There were also dramatic rises where corporations offered guaranteed debts, with promising to the investors to pay debt if there were default, and the issuer would pay a premium for this guaranteed. These corporations are known as the â€Å"monoline† insurers or â€Å"monoline† guarantors, and it became another casualty of the financial crisis. Globally, many financial institutions had purchased these new promising guaranteed of debts. But, every good item has a bad side, and several of these factors started to emerge alongside one another. Insolvency on one of these institutions could threaten the solvency of many others. When the â€Å"monoline† insurers started to fall into insolvency problem, the market was illiquid. Suddenly, emerging financial institutions were short of cash, as well as become insolvent. Some of the affected are such Goldman Sachs, Merrill Lynch, and Bear Stearns. But, at the end of the day, the worst effected from this financial crisis were the mortgage borrowers. Most of these â€Å"monoline† insurers did not have adequate capital to fulfill their guarantee promises. Investors’ dependence lied mostly on the high ratings placed by major global rating agencies for these institutions put the investors in a position where they could experience enormous losses. In order to survive, many banks turned to sovereign wealth funds to obtain new capital. Bad news continued to pour in from all sides. In August 2007 that the financial market could not solve the subprime crisis on its own and the problems spread beyond the U. S borders. Lehman Brothers filed for bankruptcy, Bear Stearns was acquired by JP Morgan Chase, Merrill Lynch was sold to Bank of America, and the Federal National Mortgage Association (â€Å"Fannie Mae†) and the Federal Home Mortgage Corporation (â€Å"Freddie Mac†) were put under the control of the U. S. federal government. Governments started took over banks as done by the UK government on a bank named Northern Rock (a British bank) after a loan pumped nearly reached $50 billion. The idea was to enhance liquidity, to put the interbank market back on its feet and to restore confidence in financial system. Injections of liquidity by central banks include lending government’s paper, accepting high-quality assets owned by banks as collateral, and increased the loans maturity. On the other hand, central bank’s intervention indirectly would be a trigger to a global inflation. The action would increase the prices of products based on oil, increase the price of food, increased in demand for agriculture products in manufacturing ethanol to substitute the gasoline. Few recommendations regarding central bank’s intervention for instance base any future government interventions on a clearly stated diagnosis of the problem and a rationale for the interventions, and keep policy interest rates on track in a globalized economy because it would help to introduce the notion of a global inflation target. This would help prevent rapid cuts in interest rates in one country if they perversely affect decisions in other countries. This is because in monetary policy of different central banks will looking at each other. Number of debates arose whether the central banks should create new regulations instead of using monetary policy and interest rates when it comes to inflation in asset prices to recurrent. One of the ideas is new regulations to control the new financial instruments imposed by the government of Germany. Others such government intervention in reduction in the face value of the mortgage, and a need to regulate the very used of financial instruments (of CDOs, for instance) so that the transparency of the market be restored and investors be adequately informed. Other than that, to enhance the monitoring process of non-transparent off-balance sheet financing, coordinating supervision and regulating activities in the short run and remodeled the Federal Reserve in the longer run. In terms of bank’s capital adequacy, the ratio should be raised above the eight percent as under the Basel Accord 1988. Conclusion As to conclude, cutting interest rates below their natural level distorts time preferences and investment decisions, causing individuals and companies to take on more risk, the risk that they will later regret having taken. In effect, the central bank is leading people into miscalculating the riskiness of the decisions they are making by keeping interest rates artificially low. A perfect example is the previous housing bubble. If interest rates should be 5% but they are 1%, then home builders are going to increase their indebtedness to take on more projects with longer and longer completion time frames. A project that comes online 5 years out looks much less risky when you can borrow money for 4 or 5% less. It is, therefore, very important that to identify the causes of the current crisis accurately so that can then find, first, appropriate immediate crisis resolution measures and mechanisms; second, understand the differences among countries on how they are being impacted; and, finally, think of the longer term implications for monetary policy and financial regulatory mechanisms. It was also possibility the government actions and interventions caused, prolonged, and worsened the financial crisis. They caused it by deviating from historical precedents and principles for setting interest rates, which had worked well for 20 years. They prolonged it by misdiagnosing the problems in the bank credit markets and thereby responding inappropriately by focusing on liquidity rather than risk. Central banks should adopt a broader macro-prudential view, taking into account in their decisions asset price movements, credit booms, leverage, and the buildup of systemic risk. The timing and nature of pre-emptive policy responses to large imbalances and large capital flows needs to be re-examined† (IMF, 2009b).

MASSED PRACTICE AND DICTRIBUTIVE PRACTICE essays

MASSED PRACTICE AND DICTRIBUTIVE PRACTICE essays Running head: MASSED PRACTICE AND DICTRIBUTIVE PRACTICE The Effects of Massed Practice and Distributive Practice on Motor Skill Task. Queens College/ City University of New York Over a century scientist have wonder if massed practice conditions are superior to distributive practice conditions or visa versa. According to a mete-analytic review scientists have researched this very phenomenon and have concluded that distributive practices conditions are superior to those of massed practice conditions in a variety of situations. These results are supported by Maureen Bergondys experiment on team practice schedules as well as William C. Chaseys experiment on distribution of practice on learning retention and relearning. This experiment deals with the relationship between conditions of massed practice and distributive practice with respect to task performance. The motor skill task performed by subjects in this study wrote the English alphabet upside down fifty times. One group was given the massed practice motor task; while subjects from the five other groups practiced the motor task under five different distributions of time. However, our findings do not support those of previous findings. Our mixed factorial experiment with 51 subjects indicates that neither massed practice conditions or distributive practice conditions were superior. Therefore, the subjects acquisition of the motor task did not improve as a result of massed or distributed practice, but rather as the result of practice alone. Massed Practice and Distributive Practice Massed practice conditions are those in which individuals practice a task continuously without rest. While distributive practice conditions are those in which individuals are given rest intervals within the practice session. This mixed factorial experiment with 51 subjects deals with the effects of massed practice and distributive practice with respect to acqui...

A summary on the Article Bare, Bones and a Few Stones Essay

A summary on the Article Bare, Bones and a Few Stones - Essay Example Their minds and brains were not developed as Ehrlich describes, ‘they grabbed for roots, grabbed for an occasional mouthful’. What the author wants to discuss here is how our ancestors used the bigger brains to evolve the general kinds of nature that we have today and how they spread from Africa to all over the planet. He also points out that bones, skeletons and the stones brought about certain but not conclusive evidence of the evolution process. Ehrlich describes the genus, Homo used the forelimbs to carry and use tools and weapons. The early human beings were the original makers of the stone tools. The author expresses doubt if this is correct. Uncertainties remain with the human fossil record. From the samples it is not possible to draw conclusions about how many species of homos were there long ago. The evolutionary process, the physical appearance, the shape and size of the teeth, the jaws, all had a definite function and changed as human beings evolved from one stage to another. The teeth was used as a tool while the hair provided protection against insects. Our ancestors had the manual dexterity to produce tools and the foresight that these would be needed. Research suggests that technology differed from place to place, which depended on the environment as well as the skills of the homos making the tools. Human nature too differed geographically. Ehrlich suggests that although people share a common genetic code, the human nature is not a result of genetic coding. Cultural conditioning and environmental factors influence it. The molecular biologists are able to determine the sequence of molecular building blocks in Mitochondial DNA. MtDNA is passed from the mother to the child. These energy producing organs are present in the eggs and not in the sperm that penetrates the eggs. Analysis of mtDNA helps determine when two different populations of people last had a common ancestor. It is difficult to imagine how genes

Health and iPhone research Essay Example | Topics and Well Written Essays - 4000 words

Health and iPhone research - Essay Example One of the ways in which good health care organization can be managed is through app that are available for various Smartphone technologies. The mobile devices create a convenient resource from which to keep the information about daily care with an individual at all times. The iPhone, in particular, is a device that has a wide variety of apps that can be used for health related purposes. As well, the device is designed to be user friendly, both to those using the product and those using the design possibilities for apps. In looking at a way to effectively use the device for a health care related app, the iPhone provides an easily accessed resource from which to facilitate a good design. This report looks at the feasibility of creating an app for the iPhone in which organization and information is readily available for those who must make lifestyle changes in regard to their chronic illness, either from having diabetes or high blood pressure. A literature review will look at the diseases in question and their needs, followed by an overview of the Smartphone technology. The iPhone will be examined for its history and the ways in which it has the most positive potential for such an app. Finally, the report will be an overview of a potential project looking at how the potential for such an app would have use. The aim of this report is to develop a plan for creating an iPhone application in which those who are suffering from diabetes or high blood pressure can utilize the information in an interactive environment in order to better facilitate the management of their care. The main users of such technology will be those who have diseases related to diabetes and high blood pressure, their daily monitoring possible through a system that can keep them in touch with outside resources that will aid in their care. The following literature review will look at the multiple

Removal of junk foods from vending machines Research Paper

Removal of junk foods from vending machines - Research Paper Example This paper aims to discuss concerns related to the junk food being delivered with the aid of vending machines. Many people find these junk food stuff like pizza, burger and french-fries tastier and easier to eat than the regular meal. They are getting more fame, especially with kids from school ages as they easily get fantasized by the appearance and taste of these junk food items and start avoiding the healthy food to get some of the junk food. Most of the schools and colleges have junk food items in their cafeteria and vending machines that allow students to choose between the home-cooked food and junk food. The vending machines are not just restricted to schools and colleges, but now they can be found at shopping malls and cinemas, where people cannot bring any eatables or water along with them and therefore, they are not left with any option but to consume junk food only (JimB, 2011). To me, this is another one of the unhealthy habits that people have adopted, without realizing w hat price they might have to pay for it. Therefore, my opinion is that this new trend of increased consumption of junk foods rather than nutritional food items, and soft drinks instead of water should be discouraged, as it certainly has an adverse impact on one’s life, both physically and socially. ... evealed that not only heart diseases but also lack of energy, depression, and lowering of one’s I.Q are some of the adverse effects caused by consuming high amount of junk foods in the daily lives (JimB, 2011). Also, soft drinks that are now mostly part of every day’s meal can effect one’s health badly due to the high proportion of carbonated soda in them that softens the tooth enamel gradually and could result in inner tooth damage over the period of regular consumption (Keefer, 2011). Not only this, but the fast food trend has also eliminated the element of eating together to a great extent. A family having more home-cooked food typically sits together and shares their day’s experience and other things on the dinner table, but as these junk foods have eliminated the need of sitting and eating, the tradition of a combined meal has also started to fade. The government should see this issue as a matter of concern, and should come up with measures to reduce consumption of junk foods. One thing that can be done in this regard is to remove these junk food items from the vending machines. This could result in a profound decrement in the schools and cinemas revenue however, for the sake of people’s health it is not something which is too much to ask for. A practice carried out by the California High Schools to remove junk food items from schools’ canteens, resulted in lowering of the calorie intake of their schools students in comparison to other state students (O'Connor, 2012). This makes it clear that other than just the potato chips, there are several other junk foods too that people consume daily from the vending machines, thus adding a significant amount to their fat and calories levels. Another disadvantage of this is that serving junk foods to school kids

Comparison of Pneumonia Management Methods

Comparison of Pneumonia Management Methods INTRODUCTION 1.1 Background: Pneumonia is the inflammation and consolidation of lung tissue due to an infectious agent (Marrie TJ, 1994). Pneumonia has the highest mortality rate among infectious diseases and represents the fifth leading cause of death (Brandstetter, 1993). Pneumonia causes excess morbidity, hospitalization, and mortality, especially among the elderly, the fastest growing sector of the population.According to first- or second-listed diagnosis, approximately 1 million persons were discharged from short-stay hospitals after treatment for pneumoniain the United States in 1990, and elderly persons aged 65 years or more accounted for 52% of all pneumonia discharges (Fedson Musher, 1994). Pneumonia has the highest mortality rate among infectious diseases and represents the fifth cause of death (Brandstltter, 1993). In addition fine (2000) reported that lower respiratory tract infections affect three million persons annually and is the leading cause of death of infection in the United States. †¢ Pneumonia represented one of the 10th leading causes of hospitalization and deaths in Malaysia through 1999-2006 (Ministry of Health, Malaysia, 1999, 2000, 2001, 2002b, 2003, 2004, 2005band 2006b) Because of differences in pathogenesis and causative micro-organisms, pneumonia is often divided into: hospital acquired and community-acquired pneumonia.Community acquired pneumonia (CAP) is caused mainly by streptococcus pneumoniae. Its symptoms include coughing (with or without sputum production), change in colour of respiratory secretion, fever, and pleuritic chest pain (Fine, 2000). Nosocomial pneumonia or hospital acquired pneumonia is the second most common nosocomial infection in the United States and it causes the highest rates of morbidity and mortality. It is caused mainly by streptococcus pneumoniae and pseudomonas aeruginosa. The highest mortality rates occurred in patients with pseudomonas aeruginosa or acineobacter infection. It is characterized by fever and purulent respiratory secretion. Nosocomial pneumonia results in increase length of hospitalization and cost of treatment (Kashuba, 1999; Levison, 2003; Wilks et al., 2003). The clinical criteria for the diagnosis o f pneumonia include chest pain, cough, or auscultatory findings such as rales or evidence of pulmonary consolidation, fever or leucocytosis. In addition, there must be radiographic evidence, such as the presence of new infiltrates on chest radiograph, and laboratory evidence that supports the diagnosis. Because of differences in pathogenesis and causative micro-organisms, pneumonia is often divided in hospital acquired and community-acquired pneumonia. Pneumonia developing outside the hospital is referred to as community-acquired pneumonia (CAP). Pharmacoeconomic study Pharmacoeconomics is defined as the description and analysis of costs of drug therapy or clinical service to health care systems and society (Bootman et al., 1996). It has risen up as the discipline with the increase interst in calculating the value and costs of medicines (Sanches, 1994). Cost is defined as the value of resources consumed by the program or drug therapy of interest while a consequence is defined as the effect, outputs, or outcomes of a program. When identifying the costs associated with a product or service, all possible costs that include or related to the study are calculated (Sanchez, 1994). With the increase in financial pressure to hospitals to minimize their medical care costs, pharmacoeconomics can define costs and benefits of both expensive drug therapies and pharmacy based clinical services (Destache, 1993; Touw, 2005).Furthermore pharmacoeconomics can assist practitioners in balancing cost and quality that may result in improving patient care and cost saving to the institution (Sanches, 1994). Bootman and Harison (1997) stated that pharmacoeconomics and outcome research are very important to determine the efficient way to present a quality care at realistic rate. They suggested that pharmacoeconomics should have a remarkable authority on the delivery and financing of health care throughout the world. Different methods have been used to perform pharmacoeconomics analysis which includes: Cost-benefit analysis: Cost-benefit analysis two or more alternatives that do not have the same outcome measures. It measures all costs and benefits of a program in monetary terms (Bootman et al., 1996; Fleurence, 2003). Cost-benefit analysis could play a major role in identifying the specific costs and benefits associated with the pneumonia. Cost-effective analysis Cost-effective analysis compares alternatives that differ in safety, efficacy and outcome. Cost is measured in monetary terms, while outcome is measured in specific objectives or natural units. The outcome are expressed in terms of the cost per unit of success or effect (Bootman et al., 1996). Cost-utility analysis Cost-utility analysis compares treatment alternatives; benefits are measured in terms of quality of life, willingness to pay, and patient preference for one intervention over another, while cost is measured in monetary terms. It has some similarity to cost-effectivness with more concentration on patient view. As an example, looking for new druig therapy; benefits can built-in together with expected risks. Cost-minimization analysis Cost-minimization analysis is one of the simplest forms of pharmacoeconomics analysis. It is used when two or more alternatives are assumed to be equivalent in terms of outcomes but differ in the cost which is measured in monetary terms (Fleurence, 2003). Cost of illness analysis Cost of illness analysis is the determination of all costs of aparticular disease, which include both direct and indirect costs. Since both costs were calculated, an economic evaluation for the disease can be performed successfully. It has been used for evaluating many diseases (Bootman et al., 1996). 1.2 Study problems and rationale The management of pneumonia is very straight forward. However this is not always true for the diagnosis and selection of therapy. As there are some issues related to pneumonia that need to be addressed : The first issue pertains to the inappropriate diagnosis of the pneumonia. Some physicians do not properly identify the causative organism, I.e, whether, it is bacterial or viral. Bartlet et al (1998) found that the viral infections have been associated with at least 10% to 15 % of CAP in hospitalized adults (Bartlet et al, 1998). Secondly is the use of inappropriate medications. The prescription of inappropriate or un-indicated drug therapy such as the prescription of antibiotics for pneumonia caused by nonbacterial infection may increase the incidence of bacterial resistance (Steinman, 2003). Thirdly the adherence to guidelines improves quality of care and reduces the length of hospital stay (Marrie TJ et al, 2000). Fourthly the adherence to guidelines reduces the cost of treating pneumonia (Feagan BG, 2001). Fifthly Teaching hospitals are widely perceived to provide good outcome, and that reputation is thought to justify these institutions comparatively higher charges relative to non-teaching (general) hospitals. Despite their reputation for specialized care, teaching hospitals have traditionally relied on revenue from routine services, such as treatment of pneumonia, and the costs of specialized services and medical training. However, with managed care and competition creating pressures for cost containment, these higher costs have come into question: Do a teaching hospital provide good outcome for management of pneumonia, or do a general hospital provide comparable outcome at lower costs? 1.3 Significance of the Study This study has the following important issues: To the researchers: Several studies have compare the management of pneumonia in a university hospital versus a general hospital, but most of these studies were conducted in the USA and other parts of the world. There are no published studies in Malaysia or Asia to our knowledge. This study also provides the difference in the outcome, cost and cost-effectivness of treating pneumonia between a university hospital and a general hospital. To the practitioners: This study will provide information about the adherence to guidelines will reduce the length of hospital stay, reduce the cost of treating pneumonia and improve outcomes of treating pneumonia. To the patients: This study attempts to highlight the benefits associated with adherence to the guidelines. To the policy makers: This study will help policy makers to develop new strategies for management of pneumonia. This study will help policy makers to develop new guideline for management of pneumonia according to the microorganisms and the population in Malaysia. This study also provides the difference in the management of pneumonia between a university hospital and a general hospital. This study will provide information about how we can reduce the length of hospital stay, reduce the cost of treating pneumonia and improve outcomes of treating pneumonia. The results of this study will help in improving the management of pneumonia. It is the time to know whether a university hospital (H-USM) provide good outcome for treating pneumonia or do a general hospital (Penang-GH) provide comparable outcome at lower costs. By analyzing the cost and effectiveness of the regimens being used, the most effective therapy can be defined and the information can be offered to the policy makers to improve the deciosion making in treating pneumonia. The study will be able to help on: How we can make the drug therapy cost effective keeping effectiveness and outcome in our mind and try to suggest the best and most appropriate drug therapy which should be cost effective which help to decrease the financial burden on patients as well as Ministry Of health. This study will help to suggest how we can reduce the cost of therapy of treating pneumonia. The study will be able to provide data on: The incidence of pneumonia in (H-USM and Penang-GH). The most common organisms causing pneumonia in (H-USM and Penang-GH). The pattern of drugs used and management of pneumonia in in (H-USM and Penang-GH). The outcome of treating pneumonia in (H-USM and Penang-GH). The cost of treating pneumonia in (H-USM and Penang-GH). The cost-effectivness of treating pneumonia in (H-USM and Penang-GH). Whether a university hospital provide a good outcome for management of pneumonia, or a general hospital provide comparable quality at lower costs. 1.4 Hypothesis of the Study: H0: There is no significant difference of the management of pneumonia between a universiry hospital (H-USM) and a general hospital (Penang-GH). H1: There is a significant difference of the management of pneumonia between a universiry hospital (H-USM) and a general hospital (Penang-GH). 1.5 Aim of the study The aim of this study is to compare the management of pneumonia in a university hospital (H-USM) versus a general hospital (Pinanag-GH). 1.6 Objectives The objectives of this study are: To compare the incidence of pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the most common organisms associated with pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the drug therapy for pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the outcome of treating pneumonia (mortality rate, length of hospitalization, pneumonia related symptoms at discharge and complications of pneumonia) at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the cost of treating pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the cost-effectivness of treating pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). 1.7 Research Questions What are the difference between the organisms that is commonly associated with pneumonia at H-USM and Penang-GH? What are the difference between the antibiotics that is commonly used for the treatment of pneumonia at H-USM and Penang-GH? What are the difference between the outcome of treating pneumonia (mortality rate, length of hospitalization, pneumonia related symptoms at discharge and complications of pneumonia) at H-USM and Penang-GH? What are the difference between the cost of treating pneumonia at H-USM and Penang-GH? And how can these costs be reduced? What are the difference between the cost-effectivness of treating pneumonia at H-USM and Penang-GH? Do a university hospital (H-USM) provide good outcome for treating pneumonia or do a general hospital (Penang-GH) provide comparable outcome at lower costs? CHPTER 2 LITERATURE REVIEW 2.1 Community-acquired pneumonia 2.1.1 Introduction Community-acquired pneumonia (CAP) is defined as an acute infection of the pulmonary parenchyma that is associated with at least some symptoms of acute infection, a new infiltrate on chest x-ray or auscultatory findings such as altered breath sounds and/or localized rales in community-dwelling patients (Infectious Diseases Society of America 2000). It is a common condition that carries a high burden of mortality and morbidity, particularly in elderly populations. Although most patients recover without sequellae, CAP can take a very severe course, requiring admission to an intensive care unit (ICU) and even leading to death. According to US data, it is the most important cause of death from infectious causes and the sixth most important cause of death overall (Adams et al. 1996). Even though the mortality from pneumonia decreased rapidly in the 1940s after the introduction of antibiotic therapy, it has remained essentially unchanged since then or has even increased slightly (MMWR 1995 ). Furthermore, significant costs are associated with the diagnosis and management of CAP. Between 22% and 42% of adults with CAP are admitted to hospital, and of those, 5% to 10% need to be admitted to an ICU (British Thoracic Society 2001). In the US, it is estimated that the total cost of treating an episode of CAP in hospital is about USD $ 7500, which is approximately 20 times more than the cost of treating a patient on an outpatient basis (Lave et al. 1999). CAP also contributes significantly to antibiotic use, which is associated with well-known problems of resistance. In treating patients with CAP, the choice of antibiotic is a difficult one. Factors to be considered are the possible etiologic pathogen, the efficacy of the substance, potential side-effects, the treatment schedule and its effect on adherence to treatment as well as the particular regional resistance profile of the causative organism and the co-morbidities that might influence the range of potential pathogens (such as in cystic fibrosis) or the dosage (as in the case of renal insufficiency). It may be a primary disease occurring at random in healthy individuals or may be secondary to a predisposing factor such as chronic lung disease or diabetes mellitus. CAP represents a broad spectrum of severity, ranging from mild pneumonia that can be managed by general practitioners outside the hospital to severe pneumonia with septic shock needing treatment in intensive care unit. Depending on severity of illness, about 20% of patients with pneumonia need hospitalization and approximately 1% of all CAP patients require treatment in ICU. Elderly persons and those with underlying conditions, such as cerebro and cardiovascular diseases, chronic obstructive pulmonary disease (COPD) and alcoholism, are at increased risk for developing lower respiratory tract infections and complicated courses of infection. 2.1.2 Definition: Community-Acquired pneumonia (CAP) is defined as inflammation and consolidation of lung tissue induced by infectious microbes such as bacteria, viruses, or parasites. When the onset of symptoms and signs of this disease is before or within 48 hours after admission, it is considered as CAP (Bartlett JG et al., 1995). 2.1.3 Epidemiology Incidence: In the industrialized world, the annual incidence of CAP in community dwelling adults is estimated at 5 to 11 cases per 1000 adult population (British Thoracic Society 2001). The incidence is known to vary markedly with age, being higher in the very young and the elderly. In one Finnish study, the annual incidence for people aged 16-59 years was 6 cases per 1000 population, for those 60 years and older it was 20 per 1000, and for people aged 75 and over, 34 per 1000 (Jokinen et al. 1993). Annual incidences of 30-50 per 1000 population have been reported for infants below 1 year of age (Marrie 2001). Seasonal variations in incidence are also significant, with a peak in the winter months (Marrie 2001). The annual incidence of CAP requiring hospitalisation has been estimated at 1 to 4 patients per 1000 population (Marrie 1990, Fine et al. 1996). The proportion of patients requiring hospitalisation varies from country to country and across studies and has been estimated as ranging anywhe re between 15% and 56% (Foy et al. 1973, Minogue et al. 1998). Of those, 5% to 10% required admission to an intensive care unit (ICU) (British Thoracic Society Research Committee and Public Health Laboratory Service 1992, Torres et al. 1991). Conversely, about 8% to 10% of admissions to a medical ICU are due to severe CAP (Woodhead et al. 1985). Community acquired pneumonia (CAP) is a leading infectious disease cause of death throughout the world (WHO Statistical Information System (WHOSIS). WHO Mortality Database. Released: January 2005; Health, United States, 2005; Annual Report, Hong Kong, 2003/2004). Adult community-acquired pneumonia is a serious, life-threatening illness that affects more than 3 million people each year and accounts for more than half a million annual hospital admissions in the United States alone (Lynch JP, 1992). Each year, more than 900 000 cases of pneumonia occur in the United States, accounting for nearly 3% of all hospital admissions,(National Hospital Discharge Survey, 1988) and about 50 000 people die as a result of community-acquired pneumonia (Farr BM et al 203). Bartlet et al (1998) found that viral infections have been associated with at least 10% to 15 % of CAP in hospitalized adults. Adult community-acquired pneumonia is a serious, life-threatening illness that affects more than 3 million people each year and accounts for more than half a million annual hospital admissions in the United States alone. Each year, more than 900 000 cases of pneumonia occur in the United States, accounting for nearly 3% of all hospital admissions, and about 50 000 people die as a result of community-acquired pneumonia. In the USA, community acquired pneumonia is the fifth leading cause of death in people over the age of 65 years and an estimated 60 000 seniors die annually. Most of the excess deaths and hospitalizations due to lower respiratory infections occur in older adults, as reflected by the more than 44 000 hospitalizations for pneumonia and influenza in people aged 65 and older in 1997 in Canada. It is estimated that the age-specific incidence of pneumonia increases from 15.4 cases per 1000 in those aged 60-74 years to 34.2 for those 75 years and older. Residents of long-term care facilities, a distinct subpopulation of elderly people, are at particularly high risk for developing nursing-home acquired pneumonia. Health costs for this sector are growing at an accelerated rate as the age of dea th increases. Thirteen percent of the population is over the age of 65 in the United States and this is expected to increase to 20% by 2030. In Canada, the proportion of individuals over the age of 65 is expected to rise to 20% in the year 2021. Presently, while making up 12% of the Canadian population, older adults account for 31% of acute hospital days and half of all hospital stays. To meet their health-care needs and alleviate the burden onthe health-care system, we must improve our understanding of the management and prevention of pneumonia in this age group. Elderly people constitute an ever-increasing proportion of the population. CAP has traditionally been recognized as problems that particularly affect the older individuals. According to western studies, the overall rate of pneumonia requiring hospitalization increase with age, from 1 per 1,000 persons in the general population but increases to 12 per 1,000 persons for those over age 75 years3. As the population of those ov er age 65 years is predicted to rise from its current level of 11% to 25 % of the total population in the year 20504, respiratory tract infection will assume a greater degree of importance to the overall public health. In Hong Kong, pneumonia was the fourth leading death from a specific diagnosis in 2001. A total of 3026 people died of pneumonia in 2001 which 1526 cases were male. Out of the 3026 deaths, 2794 patients were 65 or older which accounted for more than 90% of the total death. Pneumonia in the elderly population is a major cause of morbidity and mortality and in some series represents the leading cause of death. The annual cost of treating patients age > 65 years with pneumonia to be $4.8 billion, compared with $3.6 billion for those 85 years need help with bathing and 10% need help in using the toilet and transferring. The present of any or all of following identifies elderly persons at greatest risk for functional decline: pressure ulcer, cognitive impairment, functiona l impairment, and low level of social activity. The attack rate for pneumonia is highest among those in nursing homes. It is found that 33 of 1,000 nursing home residents per year required hospitalization for treatment of pneumonia, compared with 1.14 of 1,000 adults living in the community. Pneumonia is a major cause of morbidity and mortality worldwide. In the UK as a whole, pneumonia is responsible for over 10% of all deaths (66,581 deaths in 2001), the majority of which occur in the elderly. Community-acquired pneumonia (CAP) remains a common cause of morbidity. Because CAP also is a potentially fatal disease, even in previously healthy persons, early appropriate antibiotic treatment is vital. In Japan, pneumonia is the fourth leading cause of death, and from 57 to 70 persons per 100,000 populations died per year of this disease in the last decade. Community acquired pneumonia (CAP) is a leading infectious disease cause of death throughout the world, including Hong Kong, Pneumonia is the second most common infectious disease in Thailand. Whereas diarrhea is more common, pneumonia is associated with more fatalities. CAP remains the leading cause of death due to infectious diseases, with an annual incidence ranging 1.6-10.6 per 1,000 adult populations in Europe According to the Ministry of Health Malaysia (MOH), pneumonia is the 5th cause of death in Malaysia and the 4th cause of hospitalization. A prospective observational study by Jae et al (2007) of 955 cases of adult CAP in 14 hospitals in eight Asian countries found that the overall 30-day mortality rate was 7.3%. A prospective study by Liam CK et al (2001) of 127 cases of CAP in Malaysia found that the Mortality from CAP is more likely in patients with comorbidity and in those who are bacteraemic. A prospective study by LOH et al (2004) of 108 cases of adult CAP in urban-based university teaching hospital in Malaysia found that the mortality rate from CAP in hospital was 12%. 2.1.4 Syndromes of CAP The presence of various signs and symptoms and physical findings varies according to the age of the patients, therapy with antibiotics before presentation, and the severity of illness. Patients with pneumonia usually present with cough (>90%), dyspnea (66%), sputum production (66%% pleuritic chest pain (50%), and chills is present in 40-70% and rigor in 15%. However, a variety of nonrespiratory symptoms can also predominate in pneumonia cases, including fatigue (91%), anorexia (71%), sweating (69%), and nausea (41%). Metlay et al. (1997c) divided 1812 patients with CAP into four age groups: 18 through 44 years (43%), 45 through 64 years (25%), 65 through 74 years (17%), and 75 years or older (15%). For 17 of the 18 recorded symptoms there were significant decreases in reported prevalence with increasing age (p 37 °C at presentation. Crackles were present on auscultation in 80% of patients, and rhonchi in 34% to 47% (more common in the nursing home patients). About 25% had the physical findings of dullness to percussion, bronchial breathing, whispered pectoriloquy, and aegophony. Alteration in mental status was common. Marrie and coworkers (1989) reported confusion in 48% of the patients with nursing home-acquired pneumonia and in 30% of the other patients with CAP. Fine and colleagues (1998) define altered mental status as stupor, coma, or confusion representing an acute change from the usual state prior to presentation with pneumonia. This was present in 17.3% of the hospitalized patients. The decrease in symptoms with increasing age, tachypnea increased with increasing age (Metlay et al., 1997c). Thirty-six percent of 780 patients with CAP in the 18-44 year age group had tachypnea on admission versus 65% of the 280 patients who were = 75 years old. There were minimal differences in the proportion of patients with tachycardia and hyperthermia in the different age groups Pneumonia in the elderly are quite different from that in a younger population. These differences are due to age-related alterations in immunology, different epidemiology and bacteriology. It is important to remember that pneumonia in the elderly may report fewer respiratory signs and symptoms. The clinical presentation may be more subtle than in younger population, with more gradual onset, less frequent complaints of chill and rigors, and less fever. The classical finding of cough, fever, and dyspnea may be absent in over half of elderly patients8. Instead they may be manifest as delirium, a decline in f unctional status, weakness, anorexia, abdominal pain, or decrease general condition. The incidence of fever may decline with age, and the degree of fever appears lower in old population10. Tachypnea which respiration rate greater than 24-30 breaths per minute is noted more frequently in up to 69% of patients. Although rales are common and are noted in 78% of patients, signs of true consolidation are found in only 29%. Bacteremia, metastatic foci of infection and death are more frequent in older populations. As many elderly present with non-specific clinical symptoms and nonspecific functional decline that makes an accurate diagnosis difficult and may lead a life-threatening delay of diagnosis and therapy. Metlay et al. compared the prevalence of symptoms and signs of pneumonia in a cohort of 1812 patients and found that patients aged 65-74 years and over 75 years had 2.9 and 3.3 fewer symptoms, respectively, than those aged 18 through 44 years. The reduced prevalence of symptoms was most pronounced for symptoms related to febrile response (chills and sweats) and pain (chest, headache, and myalgia). These findings are consistent with those of Marrie et al. demonstrating reduced prevalence of non-respiratory symptoms among elderly patients. In a retrospective chart review by Johnson et al., the presence of dementia seemed to account for non-specific symptoms. However the sample size of the study was small and precluded a multivariable analysis. Roghmann et al found a significant inverse correlation between age and initial temperature in 320 older patients hospitalized for pneumonia. Evidence therefore does exist for a less distinct presentation of nonrespiratory symptoms and signs of pneumonia in the elderly. 2.1.5 Radiographic findings in CAP Radiographic changes usually cannot be used to distinguish bacterial from nonbacterial pneumonia, but they are often important for diagnosis of CAP, evaluating the severity of illness, determining the need for diagnostic studies, and selecting antibiotic agents. A chest radiograph usually shows lobar or segmental opacification in bacterial pneumonias and in the majority of atypical infections. Patchy peribronchial shadowing or more diffuse nodular or ground-glass opacification is seen less commonly, particularly in viral and atypical infections. The lower lobes are most commonly affected in all types of pneumonia. Small pleural effusions can be detected in about one-quarter of cases. Multilobar pneumonia is a feature of severe disease, and spread to other lobes despite appropriate antibiotics is seen in Legionella and M. pneumoniae infection. Hilar lymphadenopathy is unusual except in Mycoplasma pneumonia, particularly in children. Cavitation is uncommon but is a classic feature of S . aureus and S. pneumoniae infections. False negative results can be attributed to dehydration, evaluation during the first 24 hours, pneumonia due to Pneumocystis carinii, or pneumonia with profound neutropenia. 2.1.6 Etiology: More than 100 microorganisms have been identified so far as potential causative agents of CAP (Marrie 2001). They can be classified according to their biological characteristics as either bacteria, mycoplasma and other intracellular organisms, viruses, fungi and parasites. The most common causative agent of CAP is the bacteriumStreptococcus pneumoniae, which is implicated in 20% to 75% of cases of CAP (Marrie 2001) and about 66% of bacteremic pneumonia (Infectious Diseases Society of America 2000). Another causative bacterium is Haemophilus influenzae. So called â€Å"atypical† organisms have also been implicated as causal agents. These include Chlamydia pneumoniae, Mycoplasma pneumoniae and Legionella pneumophila (Marrie 2001). Influenza is the most common serio Comparison of Pneumonia Management Methods Comparison of Pneumonia Management Methods INTRODUCTION 1.1 Background: Pneumonia is the inflammation and consolidation of lung tissue due to an infectious agent (Marrie TJ, 1994). Pneumonia has the highest mortality rate among infectious diseases and represents the fifth leading cause of death (Brandstetter, 1993). Pneumonia causes excess morbidity, hospitalization, and mortality, especially among the elderly, the fastest growing sector of the population.According to first- or second-listed diagnosis, approximately 1 million persons were discharged from short-stay hospitals after treatment for pneumoniain the United States in 1990, and elderly persons aged 65 years or more accounted for 52% of all pneumonia discharges (Fedson Musher, 1994). Pneumonia has the highest mortality rate among infectious diseases and represents the fifth cause of death (Brandstltter, 1993). In addition fine (2000) reported that lower respiratory tract infections affect three million persons annually and is the leading cause of death of infection in the United States. †¢ Pneumonia represented one of the 10th leading causes of hospitalization and deaths in Malaysia through 1999-2006 (Ministry of Health, Malaysia, 1999, 2000, 2001, 2002b, 2003, 2004, 2005band 2006b) Because of differences in pathogenesis and causative micro-organisms, pneumonia is often divided into: hospital acquired and community-acquired pneumonia.Community acquired pneumonia (CAP) is caused mainly by streptococcus pneumoniae. Its symptoms include coughing (with or without sputum production), change in colour of respiratory secretion, fever, and pleuritic chest pain (Fine, 2000). Nosocomial pneumonia or hospital acquired pneumonia is the second most common nosocomial infection in the United States and it causes the highest rates of morbidity and mortality. It is caused mainly by streptococcus pneumoniae and pseudomonas aeruginosa. The highest mortality rates occurred in patients with pseudomonas aeruginosa or acineobacter infection. It is characterized by fever and purulent respiratory secretion. Nosocomial pneumonia results in increase length of hospitalization and cost of treatment (Kashuba, 1999; Levison, 2003; Wilks et al., 2003). The clinical criteria for the diagnosis o f pneumonia include chest pain, cough, or auscultatory findings such as rales or evidence of pulmonary consolidation, fever or leucocytosis. In addition, there must be radiographic evidence, such as the presence of new infiltrates on chest radiograph, and laboratory evidence that supports the diagnosis. Because of differences in pathogenesis and causative micro-organisms, pneumonia is often divided in hospital acquired and community-acquired pneumonia. Pneumonia developing outside the hospital is referred to as community-acquired pneumonia (CAP). Pharmacoeconomic study Pharmacoeconomics is defined as the description and analysis of costs of drug therapy or clinical service to health care systems and society (Bootman et al., 1996). It has risen up as the discipline with the increase interst in calculating the value and costs of medicines (Sanches, 1994). Cost is defined as the value of resources consumed by the program or drug therapy of interest while a consequence is defined as the effect, outputs, or outcomes of a program. When identifying the costs associated with a product or service, all possible costs that include or related to the study are calculated (Sanchez, 1994). With the increase in financial pressure to hospitals to minimize their medical care costs, pharmacoeconomics can define costs and benefits of both expensive drug therapies and pharmacy based clinical services (Destache, 1993; Touw, 2005).Furthermore pharmacoeconomics can assist practitioners in balancing cost and quality that may result in improving patient care and cost saving to the institution (Sanches, 1994). Bootman and Harison (1997) stated that pharmacoeconomics and outcome research are very important to determine the efficient way to present a quality care at realistic rate. They suggested that pharmacoeconomics should have a remarkable authority on the delivery and financing of health care throughout the world. Different methods have been used to perform pharmacoeconomics analysis which includes: Cost-benefit analysis: Cost-benefit analysis two or more alternatives that do not have the same outcome measures. It measures all costs and benefits of a program in monetary terms (Bootman et al., 1996; Fleurence, 2003). Cost-benefit analysis could play a major role in identifying the specific costs and benefits associated with the pneumonia. Cost-effective analysis Cost-effective analysis compares alternatives that differ in safety, efficacy and outcome. Cost is measured in monetary terms, while outcome is measured in specific objectives or natural units. The outcome are expressed in terms of the cost per unit of success or effect (Bootman et al., 1996). Cost-utility analysis Cost-utility analysis compares treatment alternatives; benefits are measured in terms of quality of life, willingness to pay, and patient preference for one intervention over another, while cost is measured in monetary terms. It has some similarity to cost-effectivness with more concentration on patient view. As an example, looking for new druig therapy; benefits can built-in together with expected risks. Cost-minimization analysis Cost-minimization analysis is one of the simplest forms of pharmacoeconomics analysis. It is used when two or more alternatives are assumed to be equivalent in terms of outcomes but differ in the cost which is measured in monetary terms (Fleurence, 2003). Cost of illness analysis Cost of illness analysis is the determination of all costs of aparticular disease, which include both direct and indirect costs. Since both costs were calculated, an economic evaluation for the disease can be performed successfully. It has been used for evaluating many diseases (Bootman et al., 1996). 1.2 Study problems and rationale The management of pneumonia is very straight forward. However this is not always true for the diagnosis and selection of therapy. As there are some issues related to pneumonia that need to be addressed : The first issue pertains to the inappropriate diagnosis of the pneumonia. Some physicians do not properly identify the causative organism, I.e, whether, it is bacterial or viral. Bartlet et al (1998) found that the viral infections have been associated with at least 10% to 15 % of CAP in hospitalized adults (Bartlet et al, 1998). Secondly is the use of inappropriate medications. The prescription of inappropriate or un-indicated drug therapy such as the prescription of antibiotics for pneumonia caused by nonbacterial infection may increase the incidence of bacterial resistance (Steinman, 2003). Thirdly the adherence to guidelines improves quality of care and reduces the length of hospital stay (Marrie TJ et al, 2000). Fourthly the adherence to guidelines reduces the cost of treating pneumonia (Feagan BG, 2001). Fifthly Teaching hospitals are widely perceived to provide good outcome, and that reputation is thought to justify these institutions comparatively higher charges relative to non-teaching (general) hospitals. Despite their reputation for specialized care, teaching hospitals have traditionally relied on revenue from routine services, such as treatment of pneumonia, and the costs of specialized services and medical training. However, with managed care and competition creating pressures for cost containment, these higher costs have come into question: Do a teaching hospital provide good outcome for management of pneumonia, or do a general hospital provide comparable outcome at lower costs? 1.3 Significance of the Study This study has the following important issues: To the researchers: Several studies have compare the management of pneumonia in a university hospital versus a general hospital, but most of these studies were conducted in the USA and other parts of the world. There are no published studies in Malaysia or Asia to our knowledge. This study also provides the difference in the outcome, cost and cost-effectivness of treating pneumonia between a university hospital and a general hospital. To the practitioners: This study will provide information about the adherence to guidelines will reduce the length of hospital stay, reduce the cost of treating pneumonia and improve outcomes of treating pneumonia. To the patients: This study attempts to highlight the benefits associated with adherence to the guidelines. To the policy makers: This study will help policy makers to develop new strategies for management of pneumonia. This study will help policy makers to develop new guideline for management of pneumonia according to the microorganisms and the population in Malaysia. This study also provides the difference in the management of pneumonia between a university hospital and a general hospital. This study will provide information about how we can reduce the length of hospital stay, reduce the cost of treating pneumonia and improve outcomes of treating pneumonia. The results of this study will help in improving the management of pneumonia. It is the time to know whether a university hospital (H-USM) provide good outcome for treating pneumonia or do a general hospital (Penang-GH) provide comparable outcome at lower costs. By analyzing the cost and effectiveness of the regimens being used, the most effective therapy can be defined and the information can be offered to the policy makers to improve the deciosion making in treating pneumonia. The study will be able to help on: How we can make the drug therapy cost effective keeping effectiveness and outcome in our mind and try to suggest the best and most appropriate drug therapy which should be cost effective which help to decrease the financial burden on patients as well as Ministry Of health. This study will help to suggest how we can reduce the cost of therapy of treating pneumonia. The study will be able to provide data on: The incidence of pneumonia in (H-USM and Penang-GH). The most common organisms causing pneumonia in (H-USM and Penang-GH). The pattern of drugs used and management of pneumonia in in (H-USM and Penang-GH). The outcome of treating pneumonia in (H-USM and Penang-GH). The cost of treating pneumonia in (H-USM and Penang-GH). The cost-effectivness of treating pneumonia in (H-USM and Penang-GH). Whether a university hospital provide a good outcome for management of pneumonia, or a general hospital provide comparable quality at lower costs. 1.4 Hypothesis of the Study: H0: There is no significant difference of the management of pneumonia between a universiry hospital (H-USM) and a general hospital (Penang-GH). H1: There is a significant difference of the management of pneumonia between a universiry hospital (H-USM) and a general hospital (Penang-GH). 1.5 Aim of the study The aim of this study is to compare the management of pneumonia in a university hospital (H-USM) versus a general hospital (Pinanag-GH). 1.6 Objectives The objectives of this study are: To compare the incidence of pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the most common organisms associated with pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the drug therapy for pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the outcome of treating pneumonia (mortality rate, length of hospitalization, pneumonia related symptoms at discharge and complications of pneumonia) at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the cost of treating pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). To compare the cost-effectivness of treating pneumonia at a university hospital (H-USM) versus a general hospital (Penang-GH). 1.7 Research Questions What are the difference between the organisms that is commonly associated with pneumonia at H-USM and Penang-GH? What are the difference between the antibiotics that is commonly used for the treatment of pneumonia at H-USM and Penang-GH? What are the difference between the outcome of treating pneumonia (mortality rate, length of hospitalization, pneumonia related symptoms at discharge and complications of pneumonia) at H-USM and Penang-GH? What are the difference between the cost of treating pneumonia at H-USM and Penang-GH? And how can these costs be reduced? What are the difference between the cost-effectivness of treating pneumonia at H-USM and Penang-GH? Do a university hospital (H-USM) provide good outcome for treating pneumonia or do a general hospital (Penang-GH) provide comparable outcome at lower costs? CHPTER 2 LITERATURE REVIEW 2.1 Community-acquired pneumonia 2.1.1 Introduction Community-acquired pneumonia (CAP) is defined as an acute infection of the pulmonary parenchyma that is associated with at least some symptoms of acute infection, a new infiltrate on chest x-ray or auscultatory findings such as altered breath sounds and/or localized rales in community-dwelling patients (Infectious Diseases Society of America 2000). It is a common condition that carries a high burden of mortality and morbidity, particularly in elderly populations. Although most patients recover without sequellae, CAP can take a very severe course, requiring admission to an intensive care unit (ICU) and even leading to death. According to US data, it is the most important cause of death from infectious causes and the sixth most important cause of death overall (Adams et al. 1996). Even though the mortality from pneumonia decreased rapidly in the 1940s after the introduction of antibiotic therapy, it has remained essentially unchanged since then or has even increased slightly (MMWR 1995 ). Furthermore, significant costs are associated with the diagnosis and management of CAP. Between 22% and 42% of adults with CAP are admitted to hospital, and of those, 5% to 10% need to be admitted to an ICU (British Thoracic Society 2001). In the US, it is estimated that the total cost of treating an episode of CAP in hospital is about USD $ 7500, which is approximately 20 times more than the cost of treating a patient on an outpatient basis (Lave et al. 1999). CAP also contributes significantly to antibiotic use, which is associated with well-known problems of resistance. In treating patients with CAP, the choice of antibiotic is a difficult one. Factors to be considered are the possible etiologic pathogen, the efficacy of the substance, potential side-effects, the treatment schedule and its effect on adherence to treatment as well as the particular regional resistance profile of the causative organism and the co-morbidities that might influence the range of potential pathogens (such as in cystic fibrosis) or the dosage (as in the case of renal insufficiency). It may be a primary disease occurring at random in healthy individuals or may be secondary to a predisposing factor such as chronic lung disease or diabetes mellitus. CAP represents a broad spectrum of severity, ranging from mild pneumonia that can be managed by general practitioners outside the hospital to severe pneumonia with septic shock needing treatment in intensive care unit. Depending on severity of illness, about 20% of patients with pneumonia need hospitalization and approximately 1% of all CAP patients require treatment in ICU. Elderly persons and those with underlying conditions, such as cerebro and cardiovascular diseases, chronic obstructive pulmonary disease (COPD) and alcoholism, are at increased risk for developing lower respiratory tract infections and complicated courses of infection. 2.1.2 Definition: Community-Acquired pneumonia (CAP) is defined as inflammation and consolidation of lung tissue induced by infectious microbes such as bacteria, viruses, or parasites. When the onset of symptoms and signs of this disease is before or within 48 hours after admission, it is considered as CAP (Bartlett JG et al., 1995). 2.1.3 Epidemiology Incidence: In the industrialized world, the annual incidence of CAP in community dwelling adults is estimated at 5 to 11 cases per 1000 adult population (British Thoracic Society 2001). The incidence is known to vary markedly with age, being higher in the very young and the elderly. In one Finnish study, the annual incidence for people aged 16-59 years was 6 cases per 1000 population, for those 60 years and older it was 20 per 1000, and for people aged 75 and over, 34 per 1000 (Jokinen et al. 1993). Annual incidences of 30-50 per 1000 population have been reported for infants below 1 year of age (Marrie 2001). Seasonal variations in incidence are also significant, with a peak in the winter months (Marrie 2001). The annual incidence of CAP requiring hospitalisation has been estimated at 1 to 4 patients per 1000 population (Marrie 1990, Fine et al. 1996). The proportion of patients requiring hospitalisation varies from country to country and across studies and has been estimated as ranging anywhe re between 15% and 56% (Foy et al. 1973, Minogue et al. 1998). Of those, 5% to 10% required admission to an intensive care unit (ICU) (British Thoracic Society Research Committee and Public Health Laboratory Service 1992, Torres et al. 1991). Conversely, about 8% to 10% of admissions to a medical ICU are due to severe CAP (Woodhead et al. 1985). Community acquired pneumonia (CAP) is a leading infectious disease cause of death throughout the world (WHO Statistical Information System (WHOSIS). WHO Mortality Database. Released: January 2005; Health, United States, 2005; Annual Report, Hong Kong, 2003/2004). Adult community-acquired pneumonia is a serious, life-threatening illness that affects more than 3 million people each year and accounts for more than half a million annual hospital admissions in the United States alone (Lynch JP, 1992). Each year, more than 900 000 cases of pneumonia occur in the United States, accounting for nearly 3% of all hospital admissions,(National Hospital Discharge Survey, 1988) and about 50 000 people die as a result of community-acquired pneumonia (Farr BM et al 203). Bartlet et al (1998) found that viral infections have been associated with at least 10% to 15 % of CAP in hospitalized adults. Adult community-acquired pneumonia is a serious, life-threatening illness that affects more than 3 million people each year and accounts for more than half a million annual hospital admissions in the United States alone. Each year, more than 900 000 cases of pneumonia occur in the United States, accounting for nearly 3% of all hospital admissions, and about 50 000 people die as a result of community-acquired pneumonia. In the USA, community acquired pneumonia is the fifth leading cause of death in people over the age of 65 years and an estimated 60 000 seniors die annually. Most of the excess deaths and hospitalizations due to lower respiratory infections occur in older adults, as reflected by the more than 44 000 hospitalizations for pneumonia and influenza in people aged 65 and older in 1997 in Canada. It is estimated that the age-specific incidence of pneumonia increases from 15.4 cases per 1000 in those aged 60-74 years to 34.2 for those 75 years and older. Residents of long-term care facilities, a distinct subpopulation of elderly people, are at particularly high risk for developing nursing-home acquired pneumonia. Health costs for this sector are growing at an accelerated rate as the age of dea th increases. Thirteen percent of the population is over the age of 65 in the United States and this is expected to increase to 20% by 2030. In Canada, the proportion of individuals over the age of 65 is expected to rise to 20% in the year 2021. Presently, while making up 12% of the Canadian population, older adults account for 31% of acute hospital days and half of all hospital stays. To meet their health-care needs and alleviate the burden onthe health-care system, we must improve our understanding of the management and prevention of pneumonia in this age group. Elderly people constitute an ever-increasing proportion of the population. CAP has traditionally been recognized as problems that particularly affect the older individuals. According to western studies, the overall rate of pneumonia requiring hospitalization increase with age, from 1 per 1,000 persons in the general population but increases to 12 per 1,000 persons for those over age 75 years3. As the population of those ov er age 65 years is predicted to rise from its current level of 11% to 25 % of the total population in the year 20504, respiratory tract infection will assume a greater degree of importance to the overall public health. In Hong Kong, pneumonia was the fourth leading death from a specific diagnosis in 2001. A total of 3026 people died of pneumonia in 2001 which 1526 cases were male. Out of the 3026 deaths, 2794 patients were 65 or older which accounted for more than 90% of the total death. Pneumonia in the elderly population is a major cause of morbidity and mortality and in some series represents the leading cause of death. The annual cost of treating patients age > 65 years with pneumonia to be $4.8 billion, compared with $3.6 billion for those 85 years need help with bathing and 10% need help in using the toilet and transferring. The present of any or all of following identifies elderly persons at greatest risk for functional decline: pressure ulcer, cognitive impairment, functiona l impairment, and low level of social activity. The attack rate for pneumonia is highest among those in nursing homes. It is found that 33 of 1,000 nursing home residents per year required hospitalization for treatment of pneumonia, compared with 1.14 of 1,000 adults living in the community. Pneumonia is a major cause of morbidity and mortality worldwide. In the UK as a whole, pneumonia is responsible for over 10% of all deaths (66,581 deaths in 2001), the majority of which occur in the elderly. Community-acquired pneumonia (CAP) remains a common cause of morbidity. Because CAP also is a potentially fatal disease, even in previously healthy persons, early appropriate antibiotic treatment is vital. In Japan, pneumonia is the fourth leading cause of death, and from 57 to 70 persons per 100,000 populations died per year of this disease in the last decade. Community acquired pneumonia (CAP) is a leading infectious disease cause of death throughout the world, including Hong Kong, Pneumonia is the second most common infectious disease in Thailand. Whereas diarrhea is more common, pneumonia is associated with more fatalities. CAP remains the leading cause of death due to infectious diseases, with an annual incidence ranging 1.6-10.6 per 1,000 adult populations in Europe According to the Ministry of Health Malaysia (MOH), pneumonia is the 5th cause of death in Malaysia and the 4th cause of hospitalization. A prospective observational study by Jae et al (2007) of 955 cases of adult CAP in 14 hospitals in eight Asian countries found that the overall 30-day mortality rate was 7.3%. A prospective study by Liam CK et al (2001) of 127 cases of CAP in Malaysia found that the Mortality from CAP is more likely in patients with comorbidity and in those who are bacteraemic. A prospective study by LOH et al (2004) of 108 cases of adult CAP in urban-based university teaching hospital in Malaysia found that the mortality rate from CAP in hospital was 12%. 2.1.4 Syndromes of CAP The presence of various signs and symptoms and physical findings varies according to the age of the patients, therapy with antibiotics before presentation, and the severity of illness. Patients with pneumonia usually present with cough (>90%), dyspnea (66%), sputum production (66%% pleuritic chest pain (50%), and chills is present in 40-70% and rigor in 15%. However, a variety of nonrespiratory symptoms can also predominate in pneumonia cases, including fatigue (91%), anorexia (71%), sweating (69%), and nausea (41%). Metlay et al. (1997c) divided 1812 patients with CAP into four age groups: 18 through 44 years (43%), 45 through 64 years (25%), 65 through 74 years (17%), and 75 years or older (15%). For 17 of the 18 recorded symptoms there were significant decreases in reported prevalence with increasing age (p 37 °C at presentation. Crackles were present on auscultation in 80% of patients, and rhonchi in 34% to 47% (more common in the nursing home patients). About 25% had the physical findings of dullness to percussion, bronchial breathing, whispered pectoriloquy, and aegophony. Alteration in mental status was common. Marrie and coworkers (1989) reported confusion in 48% of the patients with nursing home-acquired pneumonia and in 30% of the other patients with CAP. Fine and colleagues (1998) define altered mental status as stupor, coma, or confusion representing an acute change from the usual state prior to presentation with pneumonia. This was present in 17.3% of the hospitalized patients. The decrease in symptoms with increasing age, tachypnea increased with increasing age (Metlay et al., 1997c). Thirty-six percent of 780 patients with CAP in the 18-44 year age group had tachypnea on admission versus 65% of the 280 patients who were = 75 years old. There were minimal differences in the proportion of patients with tachycardia and hyperthermia in the different age groups Pneumonia in the elderly are quite different from that in a younger population. These differences are due to age-related alterations in immunology, different epidemiology and bacteriology. It is important to remember that pneumonia in the elderly may report fewer respiratory signs and symptoms. The clinical presentation may be more subtle than in younger population, with more gradual onset, less frequent complaints of chill and rigors, and less fever. The classical finding of cough, fever, and dyspnea may be absent in over half of elderly patients8. Instead they may be manifest as delirium, a decline in f unctional status, weakness, anorexia, abdominal pain, or decrease general condition. The incidence of fever may decline with age, and the degree of fever appears lower in old population10. Tachypnea which respiration rate greater than 24-30 breaths per minute is noted more frequently in up to 69% of patients. Although rales are common and are noted in 78% of patients, signs of true consolidation are found in only 29%. Bacteremia, metastatic foci of infection and death are more frequent in older populations. As many elderly present with non-specific clinical symptoms and nonspecific functional decline that makes an accurate diagnosis difficult and may lead a life-threatening delay of diagnosis and therapy. Metlay et al. compared the prevalence of symptoms and signs of pneumonia in a cohort of 1812 patients and found that patients aged 65-74 years and over 75 years had 2.9 and 3.3 fewer symptoms, respectively, than those aged 18 through 44 years. The reduced prevalence of symptoms was most pronounced for symptoms related to febrile response (chills and sweats) and pain (chest, headache, and myalgia). These findings are consistent with those of Marrie et al. demonstrating reduced prevalence of non-respiratory symptoms among elderly patients. In a retrospective chart review by Johnson et al., the presence of dementia seemed to account for non-specific symptoms. However the sample size of the study was small and precluded a multivariable analysis. Roghmann et al found a significant inverse correlation between age and initial temperature in 320 older patients hospitalized for pneumonia. Evidence therefore does exist for a less distinct presentation of nonrespiratory symptoms and signs of pneumonia in the elderly. 2.1.5 Radiographic findings in CAP Radiographic changes usually cannot be used to distinguish bacterial from nonbacterial pneumonia, but they are often important for diagnosis of CAP, evaluating the severity of illness, determining the need for diagnostic studies, and selecting antibiotic agents. A chest radiograph usually shows lobar or segmental opacification in bacterial pneumonias and in the majority of atypical infections. Patchy peribronchial shadowing or more diffuse nodular or ground-glass opacification is seen less commonly, particularly in viral and atypical infections. The lower lobes are most commonly affected in all types of pneumonia. Small pleural effusions can be detected in about one-quarter of cases. Multilobar pneumonia is a feature of severe disease, and spread to other lobes despite appropriate antibiotics is seen in Legionella and M. pneumoniae infection. Hilar lymphadenopathy is unusual except in Mycoplasma pneumonia, particularly in children. Cavitation is uncommon but is a classic feature of S . aureus and S. pneumoniae infections. False negative results can be attributed to dehydration, evaluation during the first 24 hours, pneumonia due to Pneumocystis carinii, or pneumonia with profound neutropenia. 2.1.6 Etiology: More than 100 microorganisms have been identified so far as potential causative agents of CAP (Marrie 2001). They can be classified according to their biological characteristics as either bacteria, mycoplasma and other intracellular organisms, viruses, fungi and parasites. The most common causative agent of CAP is the bacteriumStreptococcus pneumoniae, which is implicated in 20% to 75% of cases of CAP (Marrie 2001) and about 66% of bacteremic pneumonia (Infectious Diseases Society of America 2000). Another causative bacterium is Haemophilus influenzae. So called â€Å"atypical† organisms have also been implicated as causal agents. These include Chlamydia pneumoniae, Mycoplasma pneumoniae and Legionella pneumophila (Marrie 2001). Influenza is the most common serio

Billy Bathegate by EL Doctorow Essay -- Essays Papers

Billy Bathegate by EL Doctorow Billy Bathgate is an important American novel in it’s portrayal of one young man’s evolution from boyhood to maturity. The novel is about a fifteen year old boy that gets taken under the wing of Dutch Schultz, a 1930’s gangster trying to keep a hold of his diminishing empire. As the novel unfolds, so does the rising maturity of the tough young man introduced to us as Billy Bathgate. Billy finds himself in situations that most of us never see in our whole life. In difference to the reactions that most people would have in these situations, Billy learns from them in order to better his role in the crime family. It is for these reasons that the young fifteen year old boy quickly develops into a man. Author Overview The novel was written in 1989 by a contemporaneous author named E. L. Doctorow. Doctorow was born in 1931 and fantasized about the 1930’s crime life as a child. He is an American novelist, short story writer, editor, essayist, as well as a dramatist. His works include Big as Life, The Book of Daniel, Ragtime, Loon Lake, World’s Fair, , Lives of the Poets: Six Stories and a Novella, a play entitled Drinks Before Dinner and of course his most recent work Billy Bathgate. Billy Bathgate is Doctorow’s most famous piece of literature. In fact, the book grasped so much attention that it was later made into a movie with an all star cast including Bruce Willis, Dustin Hoffman and Nicole Kidman. Although the film left out a lot of detail, as so many movies based on novels tend to do, it was interesting to see the elaborate detail given to the clothing, attitude, and backdrop that so accurately reflect the inner city Bronx in the 1930’s. Doctorow’s ex plicit, graphic detail show his almost fascination with crime and murder. He almost glamorizes the life of crime in Billy Bathgate. Critical Analisys Although Billy Bathgate was written quite recently, there is an influx of critical opinion reflecting the admiration of Doctorow’s artistry in literature. "Critics marveled at Doctorow’s vivid description of New York City in the 1930’s and of the horrific murders committed by Dutch and his gang."(CLC volume 65 Author Overview) "Billy Bathgate is intended as pure myth, a sort of Robin Hood for grown-ups. Other novels may be more psychologically subtle or emotionally resonant. But few of those ... ...sting novel that I have ever had the pleasure of reading. It is one of those novels that you just can not put down if you try. Billy Bathgate is a vital American novel in it’s portrayal of a boy’s journey to become a man. Bibliography: Bemrose, John. "Growing Up in Gangland." in Maclean’s Magazine. March 1989: 58-9. Vol. 102, No 12 Clifford, Andrew. "True-ish Crime Stories." in The Listener. September 1989: p.29. vol. 122, no. 3131. Eder, Richard. "Siege Perilous in the Court of Dutch Schultz." in Los Angeles Times Book Review. March 1989. p. 3. Kazin, Alfred. "Huck in the Bronx." in The New Republic. March 1989. Pp.40-2. Leonard, John. "Bye Bye Billy." in The Nation. April 1989. pp. 40-2. Vol. 200 no. 12 Pease, Donald E. "Billy Bathgate- a Review" America. May 1989. P. 458-59 Rubin, Merle. "Bathgate: Technique Surpasses Tale." The Christian Science Monitor. March 1989. p. 13 Rushdie, Salman. "Billy the Streetwise Kid." The Observer. September 1989. P.51 Tonkin, Boyd. "A Round Table Story." New Statesman & Society. September 1989. P. 37 Tyler, Anne. "An American Boy in Gangland." The New York Times Book Review. February 1989. P. 1, 46

Competitive advantage of IKEA Essay

INTRODUCTION In this modern hypercompetitive marketplace, a company must be a powerful competitor to survive. A company must possess a powerful strategy in order to become a powerful competitor. But what makes a good strategy for the company? A good business strategy would be that to attain a competitive advantage over other competitors. So what is a competitive advantage? And how company can be able to have a competitive advantage over other competitors? This essay would now discuss what a competitive advantage is and how a company can build a competitive advantage over other competitors in the same industry by using two furnishing stores, Ikea and Courts as examples. COMPETITIVE ADVANTAGE Definition A company is said have competitive advantage over its competitors when the company earns profits that are above the normal average in the industry where it competes. Types of competitive advantages According to Michael Porter, there are two basic types of competitive advantage, namely: Cost Advantage- A cost advantage is the ability of the firm to deliver the same product or services at lower cost than competitors. This can be achieved through using economies of scale, production efficiencies, low labor cost or better access to raw material and etc. Differentiation advantage- A differentiation advantage is the ability of the firm to deliver products or services that are different from the product mix of competitors. Due to the added costs in achieving differentiation for the  product or services, differentiated products or services are often marketed at premium prices. Model of Competitive Advantage Source: www.quickmba.com Competitive advantage derives out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that reduce the price sensitivity of the buyer. Value can be achieved though utilizing the firm resources and capabilities that would then become core competencies of the particular firm. The core competencies created will allow the firm to position either as a cost leader or differentiation leader in the industry and this will in turn create value for the buyers which will become the firm competitive advantage in the industry. Resources and capabilities A firm needs to possess resources and capabilities that are better than its competitors in order to develop a competitive advantage over them. Any competitive advantage will disappear if the competitors can easily imitate what the firm was doing. Resources are assets of the company that its competitors cannot easily acquire. Some examples of a firm resource include the firm’s reputation, loyal customer base, patent and trademarks and strong branding. Capabilities refer to the ability of the firm to make the most of its resources. One good example of the capabilities of a firm is the ability to carry out a successful marketing campaign. The combination of both capabilities and resource will become the distinctive competencies of the firm. The competencies will allow the firm to achieve  innovation, efficiency, quality and customer responsiveness. The core competencies created will allowed the firm to position either as a cost leader or differentiation leader in the industry Cost advantage and differentiation advantage A firm will position itself as a cost leader or differentiation leader in the industry based on the distinctive competencies formed using its resources and capabilities which become the firm competitive advantage against other competitors. Value creation Value is created by firm through performing a series of value creating activities that Porter identified as the value chain. The value chain comprises 4 supporting activities (procurement, technology development, human resource and firm infrastructure) and 5 primary activities (inbound logistics, operation, outbound logistics, marketing as well as sales and service). On top of the firm own value creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members. In order to achieve competitive advantage, a firm must perform one or more value-creating activity that is more superior compared to other competitors. Superior value is created through lower costs or superior benefits to the buyers. IKEA Profile Ikea, the Swedish furniture giant was founded in 1943. It is the world’s largest furniture retailer that sells stylish but inexpensive Scandinavian designed furniture. It has outlets in 35 countries, including Singapore. The company is, perhaps, one of the World’s most successful multinational retailing firms operating as a global organization based on its unique concept that the furniture is sold in knock down form that are to be  assembled by the customer at home. Ikea mission statement Ikea’s mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that as many people as possible can afford to buy them (www.ikea.com) Ikea competitive advantage Ikea’s success in the retail furniture industry can be attributed to its vast experience in the retail market and its ability to integrate both product differentiation and cost leadership strategies successfully. As pointed out in Ikea’s mission statement, the company is in business to produce high quality products at a low cost. This would support a cost leadership strategy. However, the company is also applying differentiation strategy due to its unique way of incorporating the customer in the value chain and unique marketing strategies Cost advantage Ikea cost leadership strategy allowed it to have a competitive edge over other competitors in term of pricing. Ikea achieved this through tight cost control and production efficiencies. Under Ikea’s global strategy, suppliers are usually located in low-cost nations, with close proximity to raw material and reliable access to distribution channels. These suppliers produce highly standardized products intended for the global market, including Ikea. This allows Ikea to take advantage of economies of scale. Ikea also practice tight cost control in order to keeps its product price low and affordable. Some key cost control measures undertaken by Ikea includes: * Locating their outlet outside the city area on places where the lease or the cost of the land is cheaper * Flat packaging of its product allows Ikea to transport its goods from suppliers to its outlet at low cost as it efficiently maximizes the space during transportation. Flat packaging also means lower warehousing costs for them. * â€Å"No waste† policy when Ikea develops product. For example, the remnants of fabrics that are left over the heart shaped FAMNIG cushion, one of Ikea product, are used to make smaller FAMNIG cushion. Door manufacturer are used by Ikea to make their table-top with the leftover raw material thus reducing production cost. In addition to tight cost control and production efficiencies, Ikea also incorporate customer into the value chain approach as a mean of reducing costs. Customers are to use the information on the product price tag to collect from the racks in the store self-service area, transport the items themselves back home and to assemble by themselves. The costs saved are passed back to the consumer in term of charging lower price for their product rather then including the labor costs and delivery costs into the selling price, a usual practice of other furniture stores. Differentiation advantage Ikea had also successfully integrated its cost leadership strategy with differentiation strategy that allowed it to further distinguish itself from other furniture stores and develop a strong branding for the firm. Ikea differentiate itself from other competitors by performing the following: * As mentioned earlier in page 6, Ikea incorporate customer into the value chain approach to reduce cost. Customers are to use the information on the product price tag to collect from the racks in the store self-service area, transport the items themselves back home and to do assembling of the  furniture. Ikea is the only furniture store that adopts this practice in Singapore and it is accepted by all Ikea customers as they understood it as a cost saving method through education by Ikea to the customer on their catalogues. * Ikea adopted different marketing communication strategy from the rest of its competitors. Instead of choosing to advertise every weekend in the newspaper to reach out to consumer, which is the norm of most of the popular furniture stores in Singapore, Ikea main communication strategy lies in the complimentary catalogue mail to every household in Singapore annually. This allowed customer to read the catalogue at the comfort of their home. Furthermore, the dimensions of the furnitures are indicates in the catalogue that allowed the customer to measure up their place for the furniture and come up with a systematic shopping list. Thus, the catalogue is the best way to prepare the customer for a visit to Ikea compare to newspaper advertisement used by other competitors. * Ikea provides child care services and supervised play area in their outlets to ensure parents can focus on their shopping in Ikea store without having any worries for their children. * In-store restaurant (Rare among furniture stores), Burger King as in the case of Singapore, offer a chance for shoppers to take meal breaks without the hassle of leaving the store. Summary The cost leadership strategy adopted by Ikea allows it to set attractive price for their product compare to other competitors in the same industry. By setting attractive price, it also reduces the price sensitivity of the consumer. The cost advantage is achieved by Ikea through tight cost control and production efficiencies. The differentiation strategy approach such as the Ikea catalogue, in-store restaurant, the incorporation of customer in the value chain and providing of child care services undertaken by Ikea helps to create a highly differentiated picture of Ikea in the target  market’s mind. Ikea through successfully integrating cost leadership and differentiation strategy had become one of the most successful international furniture retailers.

Smart Car

‘ Case 10-2) 1 The Smart Car In 1991, Nicolas Hayek, chairman of Swatch, announced an agreement with Volkswagen to develop a battery-powered â€Å"Swatch car. † At the time, Hayek said his goal was to build â€Å"an ecologically inoffensive, highquality city car for two people† that would sell for about $6,400. The Swatchmobile concept was based on Hayek's conviction that consumers become emotionally attached to cars just as they do to watches. Like the Swatch, the Swatchmobile (officially named â€Å"Smart†) was designed to be affordable, durable, and stylish. Early on,Hayek noted that safety would be another key selling point, declaring, â€Å"This car will have the crash security of a Mercedes. † Composite exterior panels mounted on a cage like body frame would allow owners to change colors by switching panels. Further, Hayek envisioned a car that emitted almost no pollutants, thanks to its electric engine. The car would also be capable of gasolin epowered operation, using a highly efficient, miniaturized engine capable of achieving speeds of 80 miles per hour. Hayek predicted that worldwide sales would reach one million units, with the United States ccounting for about half the market. Some observers attributed the hoopla surrounding the Swatchmobile concept to Hayek's charismatic personality. His automotive vision was dismissed as being overly optimistic; less ambitious attempts at extending the Swatch brand name to new categories, including a brightly colored unisex clothing line, had flopped. Other products such as Swatch telephones, pagers, and sunglasses also met with lukewarm consumer acceptance. The Swatchmobile represented Hayek's attempt to pioneer a completely new market segment. Industry observers warned, oreover, that the Swatch name could be hurt i f the Smart car were plagued by recall or safety problems. In 1993, the alliance with Volkswagen was dissolved; Hayek claimed it was because of disagreement on the co ncept of the car (Volkswagen officials said low profit projections were the problem). In the spring of 1994, Hayek announced that he had lined up a new joint venture partner. The Mercedes-Benz unit of Daimler-Benz A G would invest 7 5 0 million Deutsche marks in a new factory in Hambach-Saargemuend, France. In November 1998, after several months of production delays nd repeated cost overruns, Hayek sold Swatch's remaining 19 percent stake in the venture, officially known as Micro Compact Car GmBH [MCC), to Mercedes. A spokesman indicated that Mercedes' refusal to pursue the hybrid gasoline/battery engine was the reason Swatch withdrew from the project. The decision by Mercedes executives to take full control of the venture was consistent with its strategy for leveraging its engineering skills and broadening the company's appeal beyond the luxury segment of the automobile market. As Mercedes chairman Helmut Werner said, â€Å"With the new car,Mercedes wants to combine ecology, emoti on, and intellect. † Approximately 8 0 percent of the Smart's parts are components and modules engineered by and sourced from outside suppliers and subcontractors known as â€Å"system partners. † The decision to locate the assembly plant in France disappointed German labor unions, but Mercedes executives expected to save 500 marks per car. The reason: French workers are on the i ob 2 75 days per year, while German workers average only 242 days; also, overall labor costs are 40 percent lower in France than in Germany.MCC claims that at Smart Ville, as the factory is known, only 7. 5 hours are required to complete a vehicle. This is 25 percent less time than required by the world's best automakers. The first 3 hours of the process are performed by systems partners. A Canadian company, Magna International, starts by welding the structural components, which are then painted by Eisenmann, a German company. Both operations are performed outside the central assembly hall; the body is then passed by conveyer into the main hall. There VDO, another German company, installs the instrument panel.At this point, modules and parts manufactured by Krupp-Hoesch, Bosch, Dynamit Nobel, and Ymos are delivered for assembly by MCC employees. To encourage integration of MCC employees and system partners and to underscore the need for quality, both groups share a common dining room overlooking the main assembly hall. The Smart City Coupe officially went on sale in Europe in October 1998. Sales got off to a slow start amid concerns about the vehicle's stability. That problem was solved with a sophisticated electronic package that monitors wheel slippage. Late-night TV comedians gave the odd-looking car o respect and referred to it as â€Å"a motorized ski boot† and â€Å"a backpack on wheels. † During the first quarter of 1999, the 150 Smart dealers in 19 countries in continental Europe sold a total of 8,400 cars, an average of 5 6 cars each. Thesales pictu re was brightest in the United Kingdom, where a London dealer sold 160 vehicles between the Smart launch in October 1998 and M a y 1999. The brisk sales pace in Britain was especially noteworthy because MCC was only building left-hand drive models (the United Kingdom is the only country in Europe in which right-hand drive cars are the norm).Industry observers noted that Brits' affection for the Austin Mini, a tiny vehicle that first appeared in the 1 9 60s, a ppeared to have been extended to the Smart. M C C reduced its annual sales target from 130,000 to 100,000. Robert Easton, joint chairman of DaimlerChrysler, went on record as being skeptical of the vehicle's future. In an interview with Automotive News, he said, â€Å"It's possible we'll conclude that it's a good idea but one whose time simply hasn't come. † In 2000, the Smart exceeded its revised sales target, and interest in the vehicle was growing. Wolf-GartenGmbH & Company, a German gardening equipment company, annou nced plans to convert the Smart to a lawn mower suitable for use on golf courses. A convertible and diesel-engine edition have been added to the product line. In 2001, executives at DaimlerChrysler announced plans to research the U. S. market to determine prospects for the Smart. The announcement came as Americans face steep increases in gasoline prices. Visit the Web site www. smart. com Discussion Questions 1 . Assess the U. S. market potential for the Smart. Do you think the car will be a success? Why or why not? 2.Identify other target markets where you would introduce this car. What sequence of countries would you recommend for the introduction? Sources: D n McCosh, â€Å"Get Smart: Buyers Ty to J m the Queue,† f ie New York Times a r up (March 19, 2004), p. Dl; Nicholas Foulkes â€Å"Smart S t G t Ee Smarter,† finonciol Times e e vn s (February 14-15, 2004), p W10; W Pinkston a d S o Miler, â€Å"DaimlerChrysler Se r . il n ct t es T w r ‘Smart' Debut in U . S. ,† The Woll Street Journol (August 20, 2001), pp. B 1, B4; o ad Miler, â€Å"Daimler May Roll O t Its Tiny Cr Here,† f ie Woll Street Journol (June 9, 2001), u a p.B1; Miler, â€Å"DaimlerChrysler'sSmart Cr M y Have a New Use,† f ie WollStreetlournol aa (February 15, 2001), pp. B1, B4; Haig Simonian, â€Å"Carmakers' Smart Move,† Financial Times (July 1,1997), p. 12; William Taylor, â€Å"Message a d Muscle: A Interviewwith S ac n n w th Itan Nicolm Hayek,† Horvord Business ~ eview ~ o r c h ~1993), pp. 99-1 10; Kevin ( ~ril Helliker, â€Å"Swiss Movement: Cn Wriiatch Whiz Switch Swatch Cachet to a Automobile? † a n f ie Woll Street Journal (March 4,1994), pp. A1,A3; Ferdinand Protrman, â€Å"Off the Wrist, w th n O t the Road: A S ac o Wheels,† f ie New York Times (March4,1994), p. (1. no Smart Car ‘ Case 10-2) 1 The Smart Car In 1991, Nicolas Hayek, chairman of Swatch, announced an agreement with Volkswagen to develop a battery-powered â€Å"Swatch car. † At the time, Hayek said his goal was to build â€Å"an ecologically inoffensive, highquality city car for two people† that would sell for about $6,400. The Swatchmobile concept was based on Hayek's conviction that consumers become emotionally attached to cars just as they do to watches. Like the Swatch, the Swatchmobile (officially named â€Å"Smart†) was designed to be affordable, durable, and stylish. Early on,Hayek noted that safety would be another key selling point, declaring, â€Å"This car will have the crash security of a Mercedes. † Composite exterior panels mounted on a cage like body frame would allow owners to change colors by switching panels. Further, Hayek envisioned a car that emitted almost no pollutants, thanks to its electric engine. The car would also be capable of gasolin epowered operation, using a highly efficient, miniaturized engine capable of achieving speeds of 80 miles per hour. Hayek predicted that worldwide sales would reach one million units, with the United States ccounting for about half the market. Some observers attributed the hoopla surrounding the Swatchmobile concept to Hayek's charismatic personality. His automotive vision was dismissed as being overly optimistic; less ambitious attempts at extending the Swatch brand name to new categories, including a brightly colored unisex clothing line, had flopped. Other products such as Swatch telephones, pagers, and sunglasses also met with lukewarm consumer acceptance. The Swatchmobile represented Hayek's attempt to pioneer a completely new market segment. Industry observers warned, oreover, that the Swatch name could be hurt i f the Smart car were plagued by recall or safety problems. In 1993, the alliance with Volkswagen was dissolved; Hayek claimed it was because of disagreement on the co ncept of the car (Volkswagen officials said low profit projections were the problem). In the spring of 1994, Hayek announced that he had lined up a new joint venture partner. The Mercedes-Benz unit of Daimler-Benz A G would invest 7 5 0 million Deutsche marks in a new factory in Hambach-Saargemuend, France. In November 1998, after several months of production delays nd repeated cost overruns, Hayek sold Swatch's remaining 19 percent stake in the venture, officially known as Micro Compact Car GmBH [MCC), to Mercedes. A spokesman indicated that Mercedes' refusal to pursue the hybrid gasoline/battery engine was the reason Swatch withdrew from the project. The decision by Mercedes executives to take full control of the venture was consistent with its strategy for leveraging its engineering skills and broadening the company's appeal beyond the luxury segment of the automobile market. As Mercedes chairman Helmut Werner said, â€Å"With the new car,Mercedes wants to combine ecology, emoti on, and intellect. † Approximately 8 0 percent of the Smart's parts are components and modules engineered by and sourced from outside suppliers and subcontractors known as â€Å"system partners. † The decision to locate the assembly plant in France disappointed German labor unions, but Mercedes executives expected to save 500 marks per car. The reason: French workers are on the i ob 2 75 days per year, while German workers average only 242 days; also, overall labor costs are 40 percent lower in France than in Germany.MCC claims that at Smart Ville, as the factory is known, only 7. 5 hours are required to complete a vehicle. This is 25 percent less time than required by the world's best automakers. The first 3 hours of the process are performed by systems partners. A Canadian company, Magna International, starts by welding the structural components, which are then painted by Eisenmann, a German company. Both operations are performed outside the central assembly hall; the body is then passed by conveyer into the main hall. There VDO, another German company, installs the instrument panel.At this point, modules and parts manufactured by Krupp-Hoesch, Bosch, Dynamit Nobel, and Ymos are delivered for assembly by MCC employees. To encourage integration of MCC employees and system partners and to underscore the need for quality, both groups share a common dining room overlooking the main assembly hall. The Smart City Coupe officially went on sale in Europe in October 1998. Sales got off to a slow start amid concerns about the vehicle's stability. That problem was solved with a sophisticated electronic package that monitors wheel slippage. Late-night TV comedians gave the odd-looking car o respect and referred to it as â€Å"a motorized ski boot† and â€Å"a backpack on wheels. † During the first quarter of 1999, the 150 Smart dealers in 19 countries in continental Europe sold a total of 8,400 cars, an average of 5 6 cars each. Thesales pictu re was brightest in the United Kingdom, where a London dealer sold 160 vehicles between the Smart launch in October 1998 and M a y 1999. The brisk sales pace in Britain was especially noteworthy because MCC was only building left-hand drive models (the United Kingdom is the only country in Europe in which right-hand drive cars are the norm).Industry observers noted that Brits' affection for the Austin Mini, a tiny vehicle that first appeared in the 1 9 60s, a ppeared to have been extended to the Smart. M C C reduced its annual sales target from 130,000 to 100,000. Robert Easton, joint chairman of DaimlerChrysler, went on record as being skeptical of the vehicle's future. In an interview with Automotive News, he said, â€Å"It's possible we'll conclude that it's a good idea but one whose time simply hasn't come. † In 2000, the Smart exceeded its revised sales target, and interest in the vehicle was growing. Wolf-GartenGmbH & Company, a German gardening equipment company, annou nced plans to convert the Smart to a lawn mower suitable for use on golf courses. A convertible and diesel-engine edition have been added to the product line. In 2001, executives at DaimlerChrysler announced plans to research the U. S. market to determine prospects for the Smart. The announcement came as Americans face steep increases in gasoline prices. Visit the Web site www. smart. com Discussion Questions 1 . Assess the U. S. market potential for the Smart. Do you think the car will be a success? Why or why not? 2.Identify other target markets where you would introduce this car. What sequence of countries would you recommend for the introduction? Sources: D n McCosh, â€Å"Get Smart: Buyers Ty to J m the Queue,† f ie New York Times a r up (March 19, 2004), p. Dl; Nicholas Foulkes â€Å"Smart S t G t Ee Smarter,† finonciol Times e e vn s (February 14-15, 2004), p W10; W Pinkston a d S o Miler, â€Å"DaimlerChrysler Se r . il n ct t es T w r ‘Smart' Debut in U . S. ,† The Woll Street Journol (August 20, 2001), pp. B 1, B4; o ad Miler, â€Å"Daimler May Roll O t Its Tiny Cr Here,† f ie Woll Street Journol (June 9, 2001), u a p.B1; Miler, â€Å"DaimlerChrysler'sSmart Cr M y Have a New Use,† f ie WollStreetlournol aa (February 15, 2001), pp. B1, B4; Haig Simonian, â€Å"Carmakers' Smart Move,† Financial Times (July 1,1997), p. 12; William Taylor, â€Å"Message a d Muscle: A Interviewwith S ac n n w th Itan Nicolm Hayek,† Horvord Business ~ eview ~ o r c h ~1993), pp. 99-1 10; Kevin ( ~ril Helliker, â€Å"Swiss Movement: Cn Wriiatch Whiz Switch Swatch Cachet to a Automobile? † a n f ie Woll Street Journal (March 4,1994), pp. A1,A3; Ferdinand Protrman, â€Å"Off the Wrist, w th n O t the Road: A S ac o Wheels,† f ie New York Times (March4,1994), p. (1. no