Financing Education in Developing Countries

Financing Education in Developing Countries How should developing countries finance university education? Explain your answer with cross reference to developed country experiences of financing University Education. Word Count: 4023 1. Introduction Education, its nature, purpose, its provision, and most importantly, its funding, are major topics of cultural and ideological debates which remain a central point of concern even today. Till the 1980s, the social democratic consensus, in England and New Zealand for example, considered education to be a public good, and therefore an indispensable service, provided by the state, to all citizens equally, without direct charge. The New Zealand Treasure writers, for example, argue that education doesnt belong to the marketplace. It should be considered a Natural Sphere and a public good which needs state intervention (The New Zealand Treasury, 1987). However, New-Right arguments of the 1980s challenged this school of thought, asserting education is a commodity which should be left to the market forces with minimum state intervention (Grace, 1994). Barr (1993), for example, asserts education is not a public good since it does not exhibit the three reflections of public goods: non-rivalnes s, non-excludability and non-rejection (Barr, 1993). This lead to the dilemma of financing higher education: How should countries finance higher education? This essay begins with a theoretical framework, looking at the human capital theory to understand why education is important followed by a brief discussion on the key issues concerning financing higher education to understand why cost sharing has become a popular phenomenon over the years. Major alternatives to state financing are discussed using examples from different countries followed by a conclusion and a brief policy recommendation. 2. Theoretical Framework 2.1 Human Capital Theory Education is considered to be, both, a consumer and capital good (Okemakinde, 2008), because not only does it offer utility to a consumer, but also acts as input towards the production of other goods and services. It is, therefore, also considered to be highly effective and even necessary, to bring about an improvement in the production capacity of a country.   (Okemakinde, 2008) With the increase in economic development and structural change the requirement for skilled workers is increasing across all economies, resulting in an increasing demand for employees with higher education ( Department of Education and Training, 2015). Authors including Okemakinde (2008 ) and Psacharopoulos (1986) consider formal education to be an investment in human capital (table 1). The human capital theory, thus, encourages investment in education both in developing and developed countries (I. Fà ¤gerlind, 2002). Figure 1 Returns to investment in education by country type and level (Psacharopoulos, 1986) Education and development policies have largely been based on the theoretical framework of the Human Capital Theory, which stresses on the high returns of education, in terms of productivity and efficiency of workers, and eventually economic development (Ozturk, 2001). 2.2 State funding and the need for alternatives Countries with socio-political ideologies consider education to be a public good and, consequently, should be free or considerably subsidised. This ideology claims the society to be the major beneficiary of higher education and asserts substantial taxes can be raised, progressive in nature, if there is political will and proper leadership. Such taxes will cover costs of education, allowing students, especially among the poor, to have equal access to education (Johnstone, 2003). Previously, higher education in most developing countries was predominantly financed and provided by the government (Psacharopoulos, 1986), such as majority of Sub-Saharan Africa (Teferra, 2013) (McGavin, 1991), India (Tilak, 1995) and China (Cheng, 1995).   However, Psacharopoulos (1986) argues such a system lacks sustainability, efficiency and quality. In fact, till the 1960s most universities in the UK were funded by the state. As seen in figure 2, the shift away from public funding has increased the participation rate in higher education in the UK (Haynes, 2003). Figure 2 Index of student numbers and public funding for higher education, 1980/1-1999/2000 (Haynes, 2003) A dominant theme of higher education throughout the world in the 1990s has been financial distress (Johnstone, 1998). The upsurge in the demand for financing higher education (Johnstone, 2003), coupled with constrained public budgets, has been a major challenge faced by governments in both, developing as well as developed countries (Woodhall 2007,   Akpochafo 2009).   However, as the number of students enrolled in higher education increased, the subsidies introduced when enrollments were low proved to be unsustainable (Woodhall, 2007). According to Woodhall (2007), with the expansion of higher education systems and the difficulty addressing the costs of higher education through public expenditure, the last twenty years have seen major changes in how higher education has been financed worldwide. These include; an introduction of tuition fees in countries where higher education was free, a substantial increase in tuition fees and a shift towards student loans (Woodhall, 2007). Therefore, parallel systems of financial assistance and cost sharing have been introduced so that students and parents arent burdened by the cost of university education and equality and accessibility isnt compromised (Johnstone, 1998). 3. Alternative Methods of Financing Higher Education 3.1 Tuition fees, selective scholarships and grants Most developed countries shifted costs of education from taxpayers to students, in the form of tuition fees, decades ago. Tuition and fees in public and private universities have established in the US for a long time (Johnstone, 1998).The tuition fees for UK full-time undergraduates at a university in the UK were paid from public funds until 1998, when tuition fee was introduced (Barr, 1998).   This trend is now being followed by developing countries as well (Johnstone 1998, Salmi 1998, Hans de Wit 2005). Chile, Colombia, Costa Rica, Ecuador, and Jamaica have higher levels of student financing, similar to those seen in Ireland, the Republic of Korea, and Spain. (Hans de Wit, 2005) Figure 3   cost recovery at public universities in Latin America and the Caribbean (Hans de Wit, 2005) In countries like as Bolivia, Guatemala and Thailand, cost recovery is low, or nonexistent like Brazil and Argentina, as seen in figure 3. It is important to note the drop-out rates in these countries. According to Hans De Wit (2005), the annual number of graduates in Columbia has risen over time as opposed to Argentina, where education is publically funded and drop-out rate is higher (figure 4). Figure 4 annual number of students admitted to and graduated universities in Argentina and Columbia, 1982-2001 (Hans de Wit, 2005) Johnstone   (1998) notes higher education in Hungary faced problems like inefficiency, inequality and lack of responsiveness to the market economy. The public sector was financing higher education, spending 86% per capita GDP on higher education in 1993 alone. This, compared to 45% in OECD countries and 30% in Germany, is a considerably high amount. As a result, the need for a shift in cost burden was felt. In 1995 full-time students paid a monthly tuition fee of HUF 2000 in public universities, while part-time students paid up to HUF 8000 per month. In order to ensure equality in access, tuition fee was fully or partially waived, based on academic merit or financial need, for one-fifth of the students (Johnstone, 1998). Figure 5 Higher education in Hungary, 1990/91 versus 2006/07 (Marcucci, 2008) The state support per student was 40 % lower in 1998 than it had been in 1990. Reforms in 2005 recommend state funding for at least 35% of graduate students and 10% for doctoral students and in 2007 the Ministry of Education allotted 60% of its scholarship funds to merit based students and 35-40% to students in need of financial aid (Marcucci, 2008). This shift of the cost burden away from the government resulted in an increase in overall participation rate in Hungary (figure 5). According to Rosovsky (2001), during the 1990s, Makerere University in Uganda moved from a situation where the government covered all running costs and students did not pay for education to one where more than 70 % of the students paid, resulting in twice the amount of student enrolment and development of infrastructure. While imposing tuition fee is considered to shift the burden of financing higher education away from the government, it is argued that tuition fees or increasing it at a rapid rate might exclude potential students from disadvantaged families. (Johnstone, 2003), thus compromising on the access and equity of university education. 3.2 Loans and deferred payment schemes Financial aid such as loans, means-tested grants and selective scholarships are being introduced to preserve equity and access to university education (Psacharopoulos 1986, Johnstone 1998). Comparing grants and scholarships to loans and other types of deferred payments, the latter tends to relieve the burden of the cost of higher education on the government and raise the universitys revenue. Loans are also more likely to encourage the involvement of market forces, thus leading to efficiency and increased responsiveness of the university (Johnstone, 2003). Furthermore, the problem of exclusion associated with rising tuition fees can be met with the availability of loans and deferred payment schemes that dont consider the financial worth of students and their families (Johnstone, 2003). Student loans in Hungary, sponsored and guaranteed by the government, were introduced by a student loan company owned by the Hungarian State, Dià ¡khitel Kà ¶zpont, in 2001 (Marcucci, 2008). These loans cover tuition fees and living costs, are not means-tested and are available to all students enrolled in public and private higher education institutions in Hungary or the European Economic Area (ibid), thus ensuring equity and access. Other forms of deferred payments, where students bear a certain share of the cost burden and repay the amount gradually, once they have been employed, are also an alternative to recovering expenses. (Johnstone 1998, 2003). Examples of such payment schemes are graduate taxes, a concept never fully adopted (Barr, 1998), the income surtax implemented in Australia (Johnstone, 1998, 2003), and the drawdown pension payment system implemented to repay the student loan fund in Ghana (Johnstone, 2003). In the graduate tax system, the current cost burden incurred by the government for the support of education is not immediately relieved. However, over time, future income surtax payments, which are collectively (potentially) sizeable, albeit highly uncertain, shift the ultimate financial burden away from the government (Johnstone, 1998).   In this system, students incur low or no tuition and living costs. However, once they start earning they have to pay more income tax than they would have otherwise (ibid). The more one earns the more one pays back, thus argued to be progressive in nature and believed to prevent high debt rates among graduate students (BBC, 2010). The Australian Higher Education Contribution Scheme launched in 1998 provided income contingent loans through the Higher Education Loan Programme to help students pay their tuition fee (Johnstone, 1998). Students start repaying the debt once their income is above a certain amount ($54,126 in 2015-2016).   The amount is readjusted on a yearly basis to reflect any changes in Consumer Price Index, thus maintaining the real value of the debt. Participation levels of domestic students in higher education have increased from 3.7% of the population between the ages of 15 to 64 in 1989 to 6.6% in 2014 ( Department of Education and Training, 2015). Figure 6 and 7 show a sharp increase in participation of students after income contingent loans, or graduate taxes, were introduced. Figure 6 Domestic higher education participation and bachelor or higher attainment 1989-2014 ( Department of Education and Training, 2015) Figure 7 University participation by SES: 1988-99 persons (Chapman, 2005) However, such schemes are also critiqued to be inefficient and politically costly (Johnstone, 2003). High earners might choose to work out of the country to avoid the graduate tax. Not only will this result in tax being evaded but also may lead to a brain drain (BBC, 2010). Other than student emigration, payments are often lost due to high defaults and lack of tax records. As Johnstone (1998) notes, applicability of graduate tax to developing countries depends on the degree to which the income tax system can be trusted. Additionally high costs associated with servicing and collecting make such schemes a less attractive option (Johnstone, 2003). According to Psacharopoulos (1986), loans encourage expenditure on education. If the returns to investment in university education are high, loans will help students invest in education, or human capital, consequently increasing the demand for higher education and the flow of private resources into the sector (Psacharopoulos, 1986). However, problems associated with lending loans, such as high collection costs and substantial cases of evasion, have discouraged the development of effective schemes for financing higher education in developing countries. Private banks find the risks and costs of lending too large to incur without charging a prohibitive interest rate, resulting in the governments providing or funding loan programs for students (Psacharopoulos, 1986). Repayment, especially in developing countries, is a major cause of concern associated with lending loans. According to Tilak (1995), only 5.9% of the investments made on student loan programmes in India during 1963-64 to 1987-88 were recovered. Furthermore, according to Johnstone (2003), the willingness to borrow and lend is important since students prefer their financial aid to be non-repayable 3.3   Expansion of private universities Since most developing countries have a highly centralised education sector, stringent rules and barriers restrict the operation and contribution of community run and private institutions. Easing these controls and decentralising management will allow mobilisation of private and local resources in the education sector, reducing the fiscal burden on the government (Psacharopoulos, 1986). The lack of available places in state universities led to the establishment of private universities (Oyebade, 2008). Romania had no private universities before 1989. Laws passed in 1990 resulted in the creation of 70 private institutions, almost all of them claiming university status and enrolling one-third of total enrolments in higher education (Johnstone, 1998). In 1981 in Chile the number of private and public universities charging tuition fees increased. In 1990, 52.4% of the total enrolment was provided for by private universities with no funding from the state. The state, previously incurring all costs, financed only 27% in 1990.   The increasing number of private universities helped meet the rising demand for university education, increased access to higher education and increased diversity, with no costs incurred by the government. However, this change also resulted in an increased tuition fee, falling quality and an uncontrolled rise in the number of private institutions (Johnstone, 1998). Oyebade (2008) finds private universities in Nigeria have increased from 3 institutions in 1999 to 24 in 2006. However, Oyebade adds, the cost of private university education and the poverty level may lead to problems like lack of access and equity. With 90 million people living in absolute poverty in Nigeria, the enrolment of students in private universities is effected considerably. Only one of the seven universities operational in 2005, were fully enrolled and the remaining six, despite being functional for over six years, were not. Private institutions are widely criticized for their lack of quality, as seen in Chile in 1990, and equity, as seen in Nigeria. Additionally, Johnstone (1998) adds, their sustainability is also questionable since their major source of revenue is tuition fees alone. 4. Entrepreneurial Activities Another alternative to finance higher education is generating income through entrepreneurial activities such as selling services, contracting research and renting out facilities. Exploring new ways of generating revenue is a great way for universities to improve quality, be more innovative and increase their relevance in the society by providing services in response to the societys needs (Hans de Wit, 2005). Universities in Mexico began to realise the need for internal revenue generation since government support was not likely to grow, consequently, turning towards entrepreneurial activities, involving faculty and students to raise extra income. Different departments began to generate revenue by providing services and specialised courses (Johnstone, 1998). According to Rena (2006), the University of Zambia and Eduardo Mondlane University in Mozambique have benefited from entrepreneurial activity in the form of improved capacity, information and revenue by establishing and linking internet nodes to local electronic networks and selling their subscriptions. Rena (2006) also adds Ghana and Nsukkas initiatives of consulting activities have proven to be a successful entrepreneurial activity. Ghana claimed a profit of 9% on total revenue of US$22700 in 1991 by providing consultancies through their consultancy centre. Nsukka indicated a profit of US$35,238 through its consultancies between 1982 and 1991. With an income of US$90,398, the consultants received 50% of the profits while the university received 30% and the department received 20%. In Makerere University in Uganda, where previously the government incurred all costs of education, recent entrepreneurial activity generated more than 30% of revenue (Rosovsky, 2001). Makerere has raised revenue through evening classes, commercially running their bookshop and bakery and establishing a consultancy bureau with staff where a portion of the generated revenue goes back into the university (ibid). Universities in China generated income through university enterprises, commissioned training programs and educational services, research (Cheng, 1995) and consultancies and logistic services (World Bank, 1997). According to World Banks report (1997) revenue generated from universities contribute to around 3.7% of total higher education revenue in China. In Shanghai, 50 universities ran approximately 700 enterprises with the total revenue of Y 1 billion in 1992 alone. Fudan Universitys entrepreneurial activities raised a total revenue of Y 20 million, out of which Y 2 million was invested back into the university (World Bank, 1997). Commissioned training, an effective way to earn additional revenue due to the rising demand for skill upgrading, was the second largest source of revenue, constituting around 2.3% of total higher education revenue.   Provision of educational services added up to about 1.1% of the total revenue. For example, the Department of Law of Peking University gene rated revenue by providing short training courses on recently implemented laws to employees belonging to public and private organisations. Income from research and consultancy added up to 1.3% of the revenue in 1992. Income from research in 36 national universities added up to Y1.12 billion. Additionally, logistical services such as running dining halls and hostels, although not highly lucrative, constituted around 0.7% of the revenue (ibid). According to Johnstone (1998), most risks associated with entrepreneurship in developing countries can be overcome by ensuring the activities are legalised and are supported with clear regulations and transparency and efficiency in management and procedures. Entrepreneurial activities, such as those carried out in China, Africa and Mexico, have not only benefitted the universities by raising extra revenue, but also benefitted the economy by increasing responsiveness to consumer needs. 5. Philanthropic: Philanthropic activities and initiatives targeted towards higher education can build up funds for scholarships and grants in public and private universities. Although many cultures and societies have a strong tradition of charity, however, these contributions often ignore higher education since it is either considered a private good or the responsibility of the government (Johnstone, 2003) The Aga Khan University and the Lahore University of Management Sciences, top ranking universities in Pakistan (HEC, 2016), are good examples of successful philanthropic initiatives, established and partly operated through private philanthropy (Rosovsky, 2001). Donations made to educational institutes in china are either used as merit scholarships for students, for faculty training overseas or construction of university buildings bearing the name of the donor (World Bank, 1997). However, most initiatives cannot depend on such financial generosity in developing countries (Rosovsky, 2001). Small provincial universities in underdeveloped, far-flung areas are rarely the recipients of such donations, augmenting the problem of rising disparity between universities and inequalities (World Bank, 1997). 6. Part-time employment for students According to Johnstone (2003), many American students hold jobs that require 20 to 40 hours a week. The encouragement and financial support of the Federal Work-Study Program, which partially subsidises education, and an economy that has an abundance of summer and term-time, part-time employment opportunities, has allowed students in the US to finance their education to a great extent. However, for this to be possible, a robust economy with widespread availability to such low-paying but readily available jobs is necessary. This feature may be largely absent in many countries, especially in developing countries (ibid). 7. Distance learning The trend of distance education has quickly spread across various countries including Bangladesh, China, India, Indonesia, Korea, Pakistan, Sri Lanka, the Philippines, and Thailand (Johnstone, 1998). China, for example, has a network of provincial universities, and a television university, for distance learning programs and education (Johnstone, 1998). After the 1986 National Policy on Education in India, open and distance universities became a means of overcoming the problem inequity and unmet demand for higher education (Tilak, 1995). Approximately 3 million part-time students and 4 million full-time students in India were enrolled in correspondence courses (Johnstone, 1998), which are considered to generate revenue much above the correspondence costs (Tilak, 1995). Distance education and open learning programs can be an effective way of increasing access to university education at moderate costs (Johnstone, 1998). 8. Policy recommendations and conclusion Psacharopoulos (1986) posits generous scholarship schemes covering tuition costs and living expenses are not suitable in the long run because over time, as lower income students start to enrol in higher education, the cost of providing grants and scholarships will become a burden on the government. An increase in the role of private actors in the provision of, and contribution to, higher education is a   popular recommendation (Psacharopoulos   1986,   Johnstone 1998). However, some oversight and regulation may be needed to ensure standards are maintained fraudulent operators are kept at bay.   As Johnstone (1998) suggests, privatisation should be used as a tool to increase access to education, however, the government should continue to provide monitoring and regulation.   Additionally, a greater role of private and community-run schools will encourage competition, eventually leading to higher efficiency and managerial accountability (Psacharopoulos, 1986). Furthermore, Oyebade (2008) stresses on the need for effective student aid programmes, like loan facilities that have a repayment system that is easily traceable, so that students are able to incur the costs of private university education. Psacharopoulos (1986) emphasises on complementing the shift towards increased private financing with the provision student loans and limited selective scholarships, thus not compromising on access of education. Loans allow students to finance their current studies so that those with limited funds arent denied selection into higher education.   Furthermore, to further avoid selection bias and ensure access, the Psacharopoulos (1986) suggests the use of selective scholarships granted on the basis of financial need and academic merit. This will not only provide students with an incentive to perform better but also ease the financial burden of students belonging to poor families, thus minimising inequalities in access to university education. Johnstone (1998) suggests the introduction of private higher education supported through tuition fees, thus shifting the cost away from the government. He further suggests the introduction of loans and means-tested grants to ensure equity and access to higher education. Psacharopoulos (1986) recommends developing a credit market for higher education, where access to education can be augmented through widely available loans and deferred payment schemes. In countries where collection of loans poses a problem,   an alternative being used is repayment in kind through national service (Psacharopoulos, 1986). Educations institutions can raise significant income by offering various products and services such as training programs, marketing the expertise of faculty, carrying out laboratory tests, renting facilities, research and consultancies and centralised programs for teacher training (Rosovsky, 2001). In recent years, it has become possible and permissible for companies to pay for manpower supplied by higher education, for example commissioned training where employers pay a fee in return for a training course for their employees. Another means is rewarded allocation where institutions ask for a fee from the employers in return for the employment of a graduate. The fees being a compensation for the training cost of the manpower provided (Cheng, 1995). Policies encouraging such activities will not only generate additional revenue but encourage innovation and allow educational institutions to provide products and services the society needs. Lastly, part-time and seasonal jobs should be encouraged through state policies and programs, such as the Federal Work-Study Program in the US. Part-time jobs should be readily available for students so that they are able to finance their studies. Additionally, this method not only shifts the cost burden of higher education away from the students families but also decreases the dependency of students on other means of financing such as state funding, loans, scholarships or grants. References Department of Education and Training, 2015. Higher Education in Australia. Barr, N., 1993. The economics of the welfare state. Barr, N. A., 1998. Economics of the Welfare State. BBC, 2010. Tuition fees and graduate tax: Whats the difference?, s.l.: s.n. Bruce Chapman, C. R., 2005. The access implications of income-contingent charges forhigher education: lessons from Australia. Cheng, K.-m., 1995. A Chinese model of higher education? Lessons from reality. In: L. B. a. K. King, ed. Learning from Experience: Policy and Practice in Aid to Higher Education. s.l.:s.n. Grace, G., 1994. Education is a Public Good: On the Need to Resist the Domination of Economic Science . In: Education and the Market Place. s.l.:Psychology Press. Hans de Wit, I. C. J. J. G.-à . a. J. K., 2005. Higher Education in Latin America: The International Dimension. Haynes, D. G. a. M., 2003. Funding Higher Education in the UK: The Role of Fees and Loans. HEC, 2016. 5 th Ranking of Pakistani Higher Education Institutions (HEIs) 2015. I. Fà ¤gerlind, L. J. S., 2002. Education and National Development: A Comparative Perspective. s.l.:s.n. Johnstone, B., 2003. Cost Sharing in Higher Education: Tuition, Financial Assistance, and Accessibility in a Comparative Perspective. Johnstone, D. B., 1998. The Financing and Management of Higher Education: A Status Report on Worldwide Reforms. Marcucci, M. S. a. P., 2008. Higher Education Finance and Cost-Sharing in Hungary. McGavin, P. A., 1991. Reform in the Financing of Higher Education in Papua New Guinea. Okemakinde, D. O. a. T., 2008. Human Capital Theory: Implications for Educational Development. Oyebade, G. I. a. S., 2008. From Public University Dominance to Private University Policy Initiatives in Nigeria: The Push and Pull Factors. Psacharopoulos, G., 1986. Financing Education in Developing Countries: An Exploration of Policy Options.. Rena, R., 2006. Higher Education in Africa A Case of Eritrea. Rosovsky, D. B. a. H., 2001. Higher education in developing countries: Peril and promise.. Salmi, J., 1998. Strategy for Higher Education Development in Latin America: Executive Summary.. Teferra, D., 2013. Funding Higher Education in Africa: State,Trends and Perspectives. The New Zealand Treasury, 1987. Government Management: Brief to the Incoming Government 1987 Volume II Education Issues. Tilak, J. B., 1995. Higher education in India at a cross-roads. In: L. B. a. K. King, ed. Learning from Experience: Policy and Practice in Aid to Higher Education. s.l.:s.n. Woodhall, M., 2007. Funding Higher Education: The Contribution of Economic Thinking to Debate and Policy Development. World Bank, 1997. China Higher education reform. A World Bank country study..

Characteristics of a Typical Western :: Film, Media, movies, Film Analysis

A typical Western would usually be set in the late 19th century in the mid-west of America in a remote town. The town is usually small, lonely and unwelcoming. Typically a western set looks like it is in the middle of a desert with sand, cacti and tumbleweed which gives a desert look, there are usually never any lakes or rivers around these features make the place look really hot and deserted. The buildings are generally timber board houses with swinging doors and outside the buildings are places to keep their horses, there is also always a General Store and a Saloon. Horses and carriages and cattle are used to give a western feel. The cowboys are typically dressed in western style clothing for example they wear simple shirts and jeans they may also wear ponchos, waist coats, hats, boots with spurs, guns and a belt to hold the gun and bullets, Hero's tend to wear lighter clothing and the villain’s tend to wear darker clothing. The storyline is normally about a hero who comes to a town to bring peace and drive the villains out. A hero is usually seen as a vigilante as he is not told to come to help but does anyway. The hero often appears as a quiet, secretive, mysterious person who may make the audience admire him one minute and dislike him the next, he is also a very smart, cunning and adaptable which are all good values in a hero. The villain is usually fixed to one idea he thinks it is a smart cunning person but in the end is always defeated. Many scenes are set around the Saloon (bar) and there is quite often a romance involved with the hero and a local girl, the villain competing for her affections! There are two different types of villains in typical westerns Native Americans and white villains (cowboys). Westerns are split down into sub genres for example classical westerns like "The Great Train Robbery" but there are also other western genres like revisionist westerns. Revisionist westerns occurred after the early 1960's, American film-makers began to change many traditional elements of Westerns. One major change was the increasingly positive representation of Native Americans who had been treated as "savages" in earlier films. Another example is Spaghetti westerns, Spaghetti westerns first came during the 1960's and 1970's, The changes were a new European, larger-than-life visual style, a harsher, more violent depiction of frontier life, choreographed gunfights and wide-screen close-ups.

Diversification Strategy Essay

The Videocon group’s core areas of business are consumer electronics and home appliances. They have recently diversified into areas such as DTH, power, oil exploration and telecommunication. Consumer electronics In India the group sells consumer products like colour televisions, washing machines, air conditioners, refrigerators, microwave ovens and many other home appliances, through a multi-brand strategy with the largest sales and service network in India.[4]   Mobile phones In November 2009, Videocon launched its new line of mobile phones.[5] Videocon has ever since launched a number of innovative handsets ranging from basic color FM phones to high-end Android devices. And in February 2011, Videocon Mobile Phones launched the revolutionary concept of ZERO paise per second with pre-bundled SIM cards of Videocon mobile services along with 7 of its handset models. Colour picture tube glass Videocon is one of the largest CRT glass manufacturers in the world, operating in Mexico, Italy, Poland and China. Oil and gas An important asset for the group is its Ravva oil field with one of the lowest operating costs in the world producing 50,000 barrels of oil per day.[6] DTH Main article: Videocon d2h In 2009, Videocon launched its DTH product, called ‘d2h’. As a pioneering offer in the Indian DTH market, Videocon offered LCD & TVs with built-in DTH satellite receiver with sizes 19†³ to 42†³. This concept in the DTH service is relatively new in the presence of other players like ZEE TV’s Dishtv, Tata Sky, Air tel Digital TV and Reliance’s BIG TV providing only the set top box. Telecommunication Videocon Telecommunications Limited has license for mobile service operations across India. It launched its services on 7 April 2010 in Mumbai. Acquisition of Thomson SA Videocon through its Wholly Owned Offshore Subsidiary acquired the Color Picture Tube (CPT) businesses from Thomson S.A having manufacturing facilities in Poland, Italy, Mexico and China along with support research and development facilities. Acquisition rationale The acquisition came at a time when Thomson was facing a fall in demand in developed markets for television with CPTs and was moving more towards Flat-screen and Plasma Television. However, Videocon saw an opportunity in the emerging countries for CPTs and hence pursued with the acquisition. Besides, the acquisition gave Videocon, the access to advanced technology giving the company control over an R&D facility in Agnani, Italy. The major reasons behind this acquisition were:[7] Cost cutting – Videocon was better positioned to shift the activities to low-cost locations and also it could integrate the operations with the glass panel facility in India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon wanted to leverage its position in the existing parts of the business and this acquisition would give it a strong negotiation position and could reduce impact of glass pricing volatility. Videocon could also reduce the costs by upgrading and improving the existing production lines. Vertical Integration – The acquisition helped Videocon in vertically integrating its existing glass-shell business where it had been enjoying substantially high margins.[8] Videocon’s glass division had the largest glass shell plant in a single location. This gave the company an unrivaled advantage in terms of economies of scale and a leadership position in the glass shell industry. The acquisition also gave Videocon a ready-market for its glass business and it was part of Videocon’s long-term strategy to have a global vertically-integrated manufacturing facility. Rationalization of Product Profile – Videocon modified its product profile to cater to the changing market needs like moving away from very large size picture tubes to smaller ones.[9] Apart from the overall strategy Videocon also had a plan on the technological front. It wanted to improve the setup for the production line and line speed post-merger. Its focus was to increase sales while reducing the costs and thereby improving the productivity of the existing line. The company also wanted to foray in a big way into LCD panels back-end assembly . On the sales front the company wanted to leverage on the existing clients of Thomson and build relation as a preferred supplier to maximise sales. Also, Videocon could benefit from OEM CTV business with the help of Videocon’s CTV division, invest for new models and introduction of new technologies.[10] Thomson’s perspective In 2004 Thomson planned entry into the high-growth digital media and technology business. Also, Thomson wanted to exit consumer and electronics businesses as they were incurring significant losses. After sale of its TV business to Chinese group TCL, and Tubes to Videocon, Thomson divested from the audio/video accessories business which was the last unit of its consumer electronics business. The need to divest are quite evident from the losses that it incurred in these businesses particularly that the unit that it sold off to Videocon, the Optical Modules activity, and the Audio/Video & Accessories businesses which totalled around â‚ ¬749 million for 2005. Moreover Thomson had done some acquisitions that were in line with boosting their revenues in the following years. [11] Other competitors for the acquisition When Videocon entered the race for the colour picture tubes manufacturing capacity of Thomson SA in November 2004, there were 16 other bidders. Videocon stood slim chances given the fact that it had to battle it out with players like LG, Philips, Samsung and Matsushita, Daewoo and several Chinese manufacturers but finally managed to close the deal. The deal catapulted Videocon into the No. 3 slot in the global pecking order for CPTs. An official of Videocon said on the deal â€Å"The word is out in the world that India and Indian companies are not just a good bet by themselves, but also a hedge against China.â€Å" [12] Pre-merger scenario analysis CPT industry is affected by many competitive factors such as change in the consumer preferences, the product offer strategy of retailers, the progress made by alternative technology manufacturers, capacity adjustment facility of competitors etc. Based on all of these factors there were two scenarios that emerged from the 2005 budget of Videocon. The first scenario is a conservative one. It mainly assumes Price pressures similar to those in the past(-8 to -12%),capacity reduction over a period of two years, a gradual shift to newer technologies like True Flat and good amount of growth for LCD makers. The second scenario is a more aggressive one in term of trends predicted. It assumes that the switch to TrueFlat would be faster, more overcapacity, more competition from LCD manufacturers and rising price strategy pressures in general. The second scenario obviously requires an industrial strategy which is more adapted to the environment. However even if the second scenario arises,Videocon believes there is an opportunity in the CRT business. Though it is very obvious that in the developed markets of the western world the demand is shifting towards the flat panel side(FPD it is expected to contribute 70% of TV market in these regions),in the emerging markets like BRIC CRT still holds fort. CRT holds a dominant 70% share in these markets. When translated into number of units the demand is more than 100 million units. As Videocon is primarily based in these countries, it hopes to harness the value of the Thomson acquisition in the coming years.[citation needed] [edit] Post merger situation (2008) Videocon has not been able to turn the plant around in Italy still. However it is getting support from the local government(which want to prevent job cuts) in form of grants. The government is in fact trying to set up a Greenfield venture in form of a LCD manufacturing facility in partnership with Videocon. The banks are also supporting Videocon and with help from all these quarters Videocon expects to turn around the plant in Italy.[13] The Thomson plant has not turned around in Mexico as well and in fact production has been reduced over there.In Poland,the situation is more promising and Videocon hopes that plant over there will get in black in the very near future.[14] However the surprise has been in the Chinese market .Despite facing a highly competitive market Videocon has managed to turn a plant around while the other is on its way. In China Videocon is adopting a different strategy for manufacturing CTVs as the local players dominate the market .It plans to supply these players by taking advantage of low-cost nature of mainland(the number targeted by it about 6 million CPTs).[15] [edit] Thomson’s exit from Videocon Thomson is looking to sell out its stake in Videocon (a 10 percent stake via GDRs) and in most likelihood it would be bought by Videocon itself. Thomson would be exiting at a loss as it had acquired the stake at around Rs 400 per share (approximately equal to $10 per share).The deal is expected to happen at current market prices. Videocon’s GDR is currently traded at around $5.06 on the Luxembourg Stock Exchange. On the Bombay stock exchange its trading around INR150 against the 52 week high of INR868 in Jan 2008. Another point to be noted is that this won’t attract the market regulator’s â€Å"creeping acquisition† norm which comes into force once they acquire more than 5% stake,as the deal would be an overseas. [16]

Public Prices In Health Care - 1833 Words

High prices are hurting American families. Americans pay exorbitant prices for all kinds of care. High prices are why medical debt remains a leading cause of bankruptcy in the United States, and nowhere else. The US healthcare delivery system differs from those of other developed countries in three notable ways: It relies on multiple sources of private financing, it covers less of the population, and it costs much more. Shaped by the institutions, ideas, and interests that drive American policymaking, the US health care delivery system is uniquely complex, costly, and unequal. Initially private, it has become an increasingly complex public/private mix, as incremental reforms adopted over many decades have sought to correct market failures†¦show more content†¦The median household income in the United States in 2014 was $53,697 so the average household with a median income would have spent almost 46 percent of its income on health care† were costs and income evenly dist ributed across the population. However, health care costs are not evenly distributed. In any given year, 1 percent of the population is responsible for over 21 percent of health care costs, 5 percent for half. On the other hand, half of the population spends almost nothing on health care in any given year. Because of this disparity in the distribution of health care costs, the United States, like every other developed nation, depends on health insurance. Health insurance puts health care consumers into a common pool and moves money from those who are healthy at any given time to those who are not. It allows high-cost users to gain access to health care that they could never otherwise afford. Indeed, few Americans would be able to afford really expensive, intensive hospital care or some specialty pharmaceuticals if they had to pay out-of-pocket. A cash and carry health care system is also not possible because of another great disparity in the United States -- the disparate distribution of income and wealth. Almost half of our nation’s income goes to the top 10 percent of the population. Distribution of wealth is even more inequitable: the wealthiest 3 percent of the population own over half of the nation’s assets, while theShow MoreRelatedHealthcare Systems Of The Healthcare System Essay1541 Words   |  7 Pageshome health care, hospice care, and palliative care and assisted living. 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