Ijcbs Vol 1 No 1 October 2010 Issn 2156-7506

October
ISSN 2156-7506
Indian Primary Market - A Review

K.C.John Sasi Kumar . India
……………………………………………………………………
Determining Effective way of career management practices in Pakistan
(An exploratory study)
Khalid Khan, Muhammad Haroon, Muhammad Zia-ur-Rehman. New Zealand
……………………………………………………………………
The Credibility of Management Earnings Forecasts in Tehran Stock
Exchange
Dr.Mansour Garkaz . Iran
……………………………………………………………………
The Role and Significance of Operation Management
Muhammad Usman . UK
……………………………………………………………………
Domestic companies combat international giants – An analysis of rising
Pakistan pharmaceutical industry
Mahreen Hussain . Pakistan
……………………………………………………………………
An International Journal Published by

Academy of Knowledge Process
www.akpinsight.webs.com
International Journal of Contemporary Business Studies
Vol. 1, No. 1 October 2010. ISSN 2156-7506
International Journal of Contemporary Business Studies publish monthly (one volume per year), it has open
access and fast publication, its editorial board and reviewers comprise of renowned scholars across the globe, and
scholarly supported by academy of knowledge process. IJCBS quality policy includes indexing according to APA
manual and its current status is international.
Copyright
To protect the copyright of the journal enable, IJCBS and the Publisher, authors must assign copyright in their
manuscripts to IJCBS. Authors should make sure on submission that the article is original, is not under consideration
for publication by another journal, has not previously been published elsewhere and that its content has not been
anticipated by previous publication.
Indexing & Listing
“International Journal of Contemporary Business Studies” (Ijcbs) has been

added to Ulrich’s journal Database as “Announced for publication.”(One of the largest Research database
of world).
“International Journal of Contemporary Business Studies” (Ijcbs)

has also been added to ProQuest’s as “Announced for publication”.
Open Access Policy

This journal provides immediate open access to its content on the principle that making research freely
available to the public supports a greater global exchange of knowledge.
Copyright © 2010. Academy of Knowledge Process

2
Saddal H.A
Chief Editor
Editorial Board
Editorial Board consists of PhD doctors from allover the world
Prof. Dr. Nada k. Kakabadse Assoc. Prof. Dr. Elena Druica

Professor - Management & Business Research PhD Microeconomics & Risk Economics
University of Northampton Business School Head of Department, Business &
UK Administration
University of Bucharest
Dr. M. A. Sharifian Romania
PhD Industrial/Organizational Sociology
University Jussieu, (Paris VII), Prof. Dr. Jorgen L. Pedersen
France PhD
Ass. Prof. Dept. of Manufacturing
Dr. Salaheldin Ismail Engineering & Management
PhD. University of Glasgow, UK Technical University of Denmark
Head of Department Marketing & Denmark
Management
College of Business & Economics Dr. Saeid Saeida
Qatar University PhD Business Administration
Assistant Professor
Prof. Dr. Luiz Moutinho Dept. of Economics, Management &
Professor of Marketing Accounting
University of Glasgow Yazd University
Scotland Iran
Dr. Ali Salaman Saleh Dr. Azlan Amran

PhD PhD
University of Wollongong Assistant Professor
Australia School of Management, University Sains
Malaysia
Prof. Dr. Viorel Cornescu
PhD Economics Dr. Ah Pak
Vice Rector of "Nicolae Titulescu" Ass. Professor
University Department of Management Xi'an Jiaotong-
Romania Liverpool University
China
Prof. Dr. Vasyl Gerasymchuk Dr. A. Pourezzat

PhD Economics Assistant Professor
National Technical University of Ukraine, School of Management, University of
Kyiv Politechnic Institute Tehran
Ukraine Iran

3
Sasan Ghasemi Magdalena Radulescu

CEO Ala Excellence Consulting Group PhD. Lecturer
International Speaker Scientific Secretary
Faculty of Economics Study
Prof. Dr. Moaddi M. Almeth-hib University of Petesti
College of Business Administration Romania
Department of Management
King Saud University Prof. Dr. Michela Cortini
Kingdom of Saudi Arabia PhD, Ass. Prof.
Department of Work and Organizational
Dr. Mohammad Ali Feizpour Psychology
PhD Industrial Economics University of Bari
Assistant Professor Italy
Dept. of Economics, Management &
Accounting Prof. Dr. Sven Voelpel
Yazd University Professor of Business Administration
Iran Jacobs Center on Lifelong Learning and
Institutional Development
Jacobs University
Germany

4
Contents
1. Indian Primary Market - A Review
K.C.John Sasi Kumar. India 6
2. Determining Effective way of career management practices in Pakistan

Khalid Khan, Muhammad Haroon, Muhammad Zia-ur-Rehman. New Zealand 16
3. The Credibility of Management Earnings Forecasts in Tehran Stock Exchange

Dr.Mansour Garkaz. Iran 27
4. The Role and Significance of Operation Management

Muhammad Usman. UK 37
5. Domestic companies combat international giants – An analysis of rising Pakistan

pharmaceutical industry
Mahreen Hussain. Pakistan 45

5
Indian Primary Market - A Review

K.C.John Sasi Kumar
Professor
Velammal College of Egg & Tech
Madurai -9
Abstract
There is a flourishing market for public issues in India. The instruments
commonly offered are equity, debentures, and a variety of convertibles
including debentures bundled with warrants. Both private and public sector
companies make public issues. An initial public offer (IPO) is the selling of
securities to the public in the primary market by the unlisted companies either a
fresh issue of securities or an offer for sale of existing securities are both for
the first time to the public. The Indian IPO market is one of the promising
markets for the investors. During the period 1993-94 to 2007-08 4,538
companies had been raised Rs.1,49,671 crore from the primary market through
IPOs. Resources rose through public issues declined by 91.5 per cent to Rs.
2,031 crore during April-June 2008 over those in the corresponding period of
last year. The number of issues declined from 24 in April-June 2007 to 15 in
April-June 2008. The average size of public issues also declined to Rs.135 crore
during April-June 2008 from Rs.994 crore during April-June 2007. All public
issues during April-June 2008 were in the form of equity. Out of 15 issues
during April-June 2008, 13 issues were initial public offerings (IPOs),
accounting for 78.4 per cent of total resource mobilization.The study
“performance review of IPOs in India” has aimed to find out the fundamental
risk and returns involved in investment of IPOs and the performance of initial
public offers for the last five years. The performance of the IPOs during the last
five years has been studied with the help of secondary data collected from NSE,
BSE and other relevant data sources. The researcher assumes that the
investments in IPOs are very safe, risk free, and make good returns. The
performance of IPOs has been evaluated on the basis of returns on the day of
listing and the next day, three months, six months 12 months, 24months,
36months,48 months and 60 months. It was found from the research that returns
out of IPOs during the short period is very promising. In the recent past several
large equity offerings including those from reputable business houses has failed
to reach their price targets. Out of the 285 companies that raised Rs.99, 218
crore money from Investors in India through IPO, many are quoting below their
issue price.
Keywords
Initial Public Offer (IPO), Short-term returns, Long-term returns, Performance Review
INTRODUCTION
There is a flourishing market for public issues in India. The instruments commonly offered in the
primary market are equity, debentures, and a variety of convertibles including debentures
bundled with warrants. Public issues are made by both private and public sector companies.
Unlike many other countries, where issues are privately placed, public issues in India are directly

6
marketed to retail investors all over the country. Investment returns of the Indian primary market
have been condensed largely during 2007-08 and 2008-09. Associated Chambers of Commerce
and Industry of India (ASSOCHAM) found that retail investors and financial institutions
including foreign institutions (FIIs), are gradually withdrawing from the capital market
particularly from initial public offerings (IPOs).
Since the current market sentiments are not positive many investors are exploring other options
such as bond, mutual funds and security markets as demand for raising IPOs has been subsiding
a great deal," the ASSOCHAM analysis said. "FIIs are pulling out of IPOs because of high
inflation, and alongside, the debt and bond markets are growing phenomenally," ASSOCHAM
president Sajjan Jindal said. "The price band of IPO is also no longer attractive for retail
investors. Under such circumstances, being optimistic about IPO market would not be realistic as
the fear factor against the primary market is becoming more visible and pronounced," Jindal
added. At least 74 companies which were close to going for IPOs and collectively raise Rs 440
billion (Rs 44,000 crore) are now awaiting better times.
Indian Financial Market
Development of an economy is based on sound financial system. It’s a well-known fact that
finance is the lifeline for any business enterprise. The efficient functioning and success of
business operations depend upon the availability of adequate fund at the right time and required
amount of funds as and when required. Financial Market is the place where the investors and
fund seekers meet for mutual benefits. Indian stock market has about 6,000 listed companies in
22 stock exchanges. The number of listed companies in India is similar to that of United States.
.Financial Market is divided into Money market and Capital market. Money market refers to
open market operations in highly marketable short-term debt instruments and the capital market
deals in long-term debt issues and stocks. Capital market deals in financial assets excluding coin
and currency - is essentially a market for securities, which have either long-term or infinite
maturities consists of two segments:
Primary market
Secondary market
New issue of shares and debt securities are made in the primary market and the existing
securities are traded in the secondary market. Thus, whenever a company has to raise funds, it
approaches the primary market with one of the three options:
Public Issue
Rights Issue
Private Placement
An initial public offer (IPO) is the selling of securities to the public in the primary market by the
unlisted companies either a fresh issue of securities or an offer for sale of existing securities are
both for the first time to the public. The Indian IPO market is one of the promising markets for
the investors. During the period 1993-94 to 2007-08 4,538 companies had been raised Rs.1,
49,671 crore from the primary market through IPOs. Resources rose through public issues
declined by 91.5 per cent to Rs. 2,031 crore during April-June 2008 over those in the
corresponding period of last year. The number of issues declined from 24 in April-
June 2007 to 15 in April-June 2008. The average size of public issues also declined to Rs.135
crore during April-June 2008 from Rs.994 crore during April-June 2007.

7
All public issues during April-June 2008 were in the form of equity. Out of 15 issues during
April-June 2008, 13 issues were initial public offerings (IPOs), accounting for 78.4 per cent of
total resource mobilization. Rich and Gumpert (1992) offer the following assessment, "Because
risk and reward are closely related, investors believe companies with fully developed products
and proven management teams should yield between 35 percent and 40 percent on their
investment, while those with incomplete products and management teams are expected to bring
in 60 percent annual compounded returns".
Investment decision in IPOs is appeared to be very attractive and encouraging to many of the
retail investors. Before investing in an IPO, investors need to have an understanding of the
company, including various aspects of its business, its track record in executing projects, future
earning potential, future orders, adaptability with the changing micro and macro economic and
political environment, credentials of promoters and the valuation compared with its peers.
Table: 1 Fund Generated Through IPO

Year No. IPOs Amount(crore)
1993-94 692 7864
1994-95 1239 16572
1995-96 1357 10924
1996-97 717 5959
1997-98 52 1048
1998-99 18 404
1999-2000 51 2719
2000-01 114 2722
2001-02 7 1202
2002-03 6 1039
2003-04 21 3434
2004-05 23 13749
2005-06 79 10936
2006-07 77 28504
2007-08 85 42595
Source: Handbook of statistics on the Indian securities market 2008
The above table reveals the number of IPOs during period 2005-2008 has been steadily
increasing and found generated from the IPO market also considerably high during 2007-08.
The share market operations are fine during the period. The economic crises and international
market trend has been forcing thread both secondary market and primary market. The statistics

8
revels that the new IPOs issues has been reduced considerable amount during 2008-09. During
the year 2009 IPOs in India dried up all of a sudden. In recent weeks, several large equity
offerings, including those from reputable business houses, have struggled to hit their targets.
India's stock markets have been volatile, reacting to fears of a widening global credit crunch
and fears of a U.S. recession.
Table : 2 Foreign investment inflows

Year Direct Portfolio Total (Rs.
investment investment crore)
1990-91 174 11 185
1991-92 316 10 326
1992-93 965 748 1713
1993-94 1838 11188 13026
1994-95 4126 12007 16133
1995-96 7172 9192 16364
1996-97 10015 11758 21773
1997-98 13220 6696 19916
1998-99 10358 -257 10101
1999-2000 9338 13112 22450
2000-01 18406 12609 31015
2001-02 29235 9639 38874
2002-03 24367 4738 29105
2003-04 19860 52279 72139
2004-05 27188 41854 69042
2005-06 34188 55306 89494
2006-07 88446 31713 120159
Source: Handbook of statistics on the Indian securities market 2008
The above table revels that even though the foreign direct investment increased considerably
over a period of time the investment in portfolio i.e. in stock market has been reduced
considerably during 2006 onwards. This indicates the economic recession has affected
considerably the flow of foreign investment in the stock market.

9
REVIEW OF RELATED STUDIES

Performance of IPO has been well researched over a long period of time through the world.
Reilly and Hatfield (1969) reported under pricing to the extent of 11% from their study of the
IPOs in US during the period 1963-65 Subsequently Ibbotson (1975),Reilly (1977), Aggarwal
and Rivoli (1989), Ritter (1991),Loughran and Ritter (1995), Ritter and Welch (2002),
Ljungqvist and Wilhelm (2003) all document under pricing in the U.S. market. Jog and Riding
(1987) report the same for the Canadian market; Ljungqvist (1997) for the German market; Gong
and Sekhar (2001) for the Australian market also report under pricing. Wong and Chiang (1986)
for the Singapore market; Chen et al (2004) for the Chinese market and Yong and Isa (2003)
provide evidence on under pricing of IPOs in the Asian markets. It is clear that most studies
agree that IPOs leave some money on the table where the money left on the table is the
difference between the listing day's close price and the offer price multiplied by the number of
shares outstanding.
In the Indian context Shah (1995) documents a phenomenal 105.6% excess return over the offer
price in a study of 2056 new listings over the period January1991 to May 1995. However, this
study provides evidence on the short run performance only while Madhusoodanan and
Thiripalraju (1997) from a study on IPOs offered on BSE during the period 1992 to 1995shows
that under pricing was higher than the international experiences in the short run and in the long
run too they yield higher returns compared to the negative returns recorded from the international
markets. Krishnamurti and Kumar (2002) working on as ample of IPOs that hit the market
between 1992 and1994 demonstrate that the under pricing is to the extent of 72.34% (market
adjusted returns). Kakati (1999) analyzed the performance of a sample of 500 IPOs that came to
the market during January 1993 to March 1996and documents that the short run under pricing is
to the tune of 36.6% and in the long-run the overpricing is40.8%.
RESEARCH METHODOLOGY
The research Indian Primary Market, a review has been carried out to find the performance of
IPO in India between 2004-2008. During the period there were 275 IPO issues. The study
includes sample of 71 new equity issues offered during the study period. The data has been
collected from NSE web site. The study examined the performance of the IPOs both in the short-
run as well as in the long-run, where short-run means the behavior of initial returns up on listing.
Short term performance has been studied by examining offer-to-open returns, offer to high
,offer to low and offer to average price, which will give us a clear idea of how much the IPO
gained or lost up on opening trades and an intra day return on the listing day. The second day
returns also examined in a similar manner with reference to the issue price. IPOs long run
performance is measured by examining the returns beyond the second day of their listing at
monthly intervals till 2008 subject to a maximum of 60 months.

10
Table: 3 IPO Issue & Status
2008 % 2007 % 2006 % 2005 % 2004 %

No. of issues 36 - 95 - 73 - 50 - 21 -
Withdrawn Issues 3 8 1 0 - 0 - 0 -
Not traded Issues 0 5 5 7 0 - 0 -
Not listed Issues 3 8 10 11 1 1 0 - 0 -
No. shares below 28 78 66 69 43 59 26 52 5 24
Issue price
No. shares Above the 2 6 13 20 24 33 24 48 16 76
Issue price
RESULTS AND DISCUSSION

The above analysis revels some of the very interesting facts, out of 36 issues during the year
2008 only two shares are selling above the issue price. This pretense so many questions like, is it
because of recession, overpriced, over confidence of the investors, FII action and so on. During
the year 2004 there is about 21 issues and even after 4 years only 5 issues are selling below the
issue price. Franklin Allen, a finance professor at Wharton, says primary markets will continue
to be "tricky" until the markets settle down. "When you have so much volatility [in the secondary
market] - it's up 2% one day and coming down 2% the next day - it is very difficult to do these
primary market operations; that is the underlying problem," he says. "This happens also in
developed markets when there is volatility.
The research revels even though the short term performance of the IPO market during the period
2008 it failed to sustain for long due to strong belief on economic recession. The performance of
IPOs that hit the markets during the later stage of the bull market in 2006 and 2007 has been
quite dismal. In all 43 out of the 73 IPOs that came in 2006 are trading below their issue prices,
while 66 out of 95 IPOs that hit the market in 2007 are trading in the red. The stock market
performance of majority of IPOs that came during the five-year-long bull-run (March 2003-
January 2008) was disappointing. Out of the 275 IPOs between 2004 and June 2009, 193 are
trading below their issue prices.
The public sector IPO s is doing better than private sector IPOs. Out of 13 public sector
undertaking (PSU) IPOs that came between 2004 and June 2009, 12 are trading above their issue
prices. On the other hand, out of 265 private sector IPOs during the same period, 189 are trading
below their issue prices.

11
Short term Performance of IPO

Table: 4 First days Performance
Offer to Offer to Offer to Offer to Average

Open High Low Price
(Earnings) (Earnings) (Earnings) (Earnings)
Average 24.41% 44.78% 13.24% 30.11%
SD 0.27 0.36 0.27 0.31
Median 16.8 36.8 8 23.50
Maximum 75% 163% 83% 123%
Minimum -25% -4% -52% -20%
p- 0.18 0.004 0.24 0.017
Value(Chi^2)
Skewness 0.49 0.98 0.510 0.87
kurtosis 2.41 3.52 3.16 3.24
N 71 71 71 71
N>0 63 71 54 64
The above analysis shows the fist day performance of the IPO s. The study reveals the average
earnings of the offer open IPO is 24.41% and it ranges to the maximum of 44.78% and the
minimum of 13%and at an average of 30% return on the first day of listing. Standard deviation
also calculated and presented in the above table. The maximum average return on the first day
163% and minimum average return on the first day is 75%. Out of 71 IPO studied only 8 are
listed below the issue price and 17 issues went below the issue price during the trading day. It is
interesting to note that all the 71 issues are gone above the issue price during the trading day
(listing day).
Table : 5 Second Day Performance
Offer to
Offer to Offer to
Offer to Second Second
Second day Second day
day high day
opening low
average
Average 32.67% 38.64% 26.96% 32.6%
SD 0.44 0.45 0.40 0.41
Median 22 26 17 21
Max 156% 192% 155% 183%
MIN -42 -39 -100 -45
Skewness 1.17 1.24 0.57 1.25
Kurtosis 4.22 4.87 5.67 5.26
p- 0 0 0 0
Value(Chi^2)
N 71 71 71 71
N>0 56 63 56 55

12
The second day's performance of the IPOs return analysis shows that all the IPO investors gain
on the listing day's performance and also on the second day. The investors who weighted for the
second day also gained considerably. The average return on the second day ranges from 38.67%
to 26.96%. The maximum return on the second day is ranges from 192% to 155% and the
minimum return on the second day ranges from -39% to 100%.On the second day trading out of
71 IPOs 56 stocks opened higher than the issue price and only 16 shares are opened below the
issue price.
Long-term earnings
Table :6 Fifty-two week high and low
No of Average 52 Average 52 Difference

sample wreaks high weeks low %
71 385.70 95.14 290.56 305
Index 6287 1163 5124 440
Table :7 Five years IPO Returns
Index
Trimmed
Sample From the issue Return Annualized
Earnings (%) Mean
Size price to From issue index return
(5%)
price
71 30 Days 55 56
71 3 Months 52 33 -3 -3.27%
71 6Months 30 24 -8 -5.03%
71 12 Months 27 15 -8 0.29%
55 24 Months 36 20 5 14.52%
46 36 Months 35 23 29 22.17%
29 48 Months 30 24 56 21.35%
7 60 Months 2 29 70 8.97%

13
The study revels that up to three months the average earning is more than 50%. During the
period of last four years the average earnings were 30%. The long term return for 5 years has
been reduced very much because of the fall in the stock market .The IPO investment has
provided a healthy and reasonable return during the previous periods except five years. The
researcher found that the economic recession has stroked the stock market to a greater extent
that has an impact on IPO earnings also. The study revels that the first 30 days performance of
the IPO is appear very attractive because 55% return has been registered during the period.
IPO performance in the long-run from earlier studies conducted in India is mixed.Kakati
(1999) reports under-performance in the long run while Madhusoodhanan and Raju (1997)
report that Indian IPOs have given higher returns compared to the negative returns reported
from other countries. The present study revels that IPOs generated positive returns even after
four years of listing.
CONCLUSION
The study “Performance review of IPOs in India” examines the performance of IPOs issued
during the period of 1004-2008. The sample comprises 71 firms that offered their shares to
the public during the study period. The statistics revels that the new IPOs issues has been
reduced considerable amount during 2008-09. The data has been collected from NSE web site
(www.nseindia.com). The study examined the performance of the IPOs both in the short-run
as well as in the long-run where short-run means the behavior of initial returns up on listing
and the second day.
The stock market performance of majority of IPOs that came during the five-year-long bull-
run (March 2003-January 2008) was disappointing. Out of the 275 IPOs between 2004 and
June 2009, 193 are trading below their issue prices. The public sector IPO s is doing better
than private sector IPOs. Out of 13 public sector undertaking (PSU) IPOs that came between
2004 and June 2009, 12 are trading above their issue prices. On the other hand, out of 265
private sector IPOs during the same period, 189 are trading below their issue prices. Out of 71
IPO studied only 8 are listed below the issue price and 17 issues went below the issue price
during the trading day
The performance of IPOs has been cheering to the investors. Retail investors can go for the
IPO market for safe and secured investment. Even though the recent economic downtrend has
slowed the process of IPO issues we could expect speedy recovery of both the economy and
IPO activities.
REFERENCES
Aggrawal, R and P. Rivoli,(1989), 'Fads, in the Initial Public Offering Market', Financial
Management Vol.19, 45-57
AGGARWAL, Reena. Stabilization Activities by Underwriters after Initial Public
Offerings.The Journal of Finance, 40, 1075-1099, 2000.
Barry, C B and Jennings. R.H (1993), 'The Opening Price Performance of Initial Public
Offerings OfCommon Stock', Financial Management, Vol. 22, 54-63.
Jaitly, Shailesh and SHARMA, Ruchira (2004), Pricing of IPOs and their after issue
performance in the Indian equity market. Managerial Finance, 30, 29-45,.
Krishnamurti Chandrasekhar and Pradeep Kumar (2002), 'The Initial Listing Performance of
Indian IPOs',Managerial Finance; Vol. 28, 39-51

14
Loughran, T., and Ritter, R. J. (2002). Why don’t issuers get upset about leaving money on
the table in IPOs? Review of Financial Studies, 15, 413-443.
Reilly, F K and Hatfield,K, (1969), 'Investor Experiencewith New Stock Issues', Financial
Analyst Journal, Vol.25, 73-80.
Rao, K.S. (2002). Stock market. Alternative Economic Survey, 2001-2001
Shah, A,(1995), 'The Indian IPO Market: EmpiricalFacts', Technical report, Centre For
Monitoring IndianEconomy, Mumbai
Shin, H., and Stulz, R. (1998). Are internal capital markets efficient? Quarterly Journal of
Economics, 113, 531-552.
Shah. A. and Thomas.S. (2001). Policy issues in the Indian securities market. Working Paper
No. 106, Stanford University.

215
Determining Effective way of

Career management practices in
Pakistan
Khalid Khan - New Zealand
Muhammad Haroon
Faculty of Management Sciences, National University of Modern Languages (NUML)-Islamabad
Email:mhharoon@gmail.com,
Muhammad Zia-ur-Rehman
Faculty of Management Sciences, National University of Modern Languages (NUML)-Islamabad
Email:scholarknowledge@yahoo.com
Abstract
The study examines the career choice and career management strategy
among employees in the developing economy with a collective social setup.
With regard to career choice, it is found that there are other
considerations in making a choice of career that take precedence over
personal aspirations. Due to the nature of the study, an exploratory
research was conducted using focus groups as an instrument for data
collection. This research explored the factors that influence career
management to bring reforms in the HR practices which can be initiated to
create harmony with the career development objectives of the careerists.
Keywords: Career development, Human resource management, Developing

countries, Pakistan
INTRODUCTION
From a bi-polar world, in which the capitalist economic structure coexisted with the
communism-socialism, the world has slowly but surely moved towards a uni-polar capitalist
economic structure. This paved the way for the creation of global businesses which function
under the capitalistic principles of maximizing profits. The world has not stopped its
transition here as in the late twentieth century. The world moved towards what is known as
Knowledge-based capitalism. Describing this new system Richard Henderson noted that “to
be successful in knowledge based capitalistic world, a passion for learning must exist that
includes recognition of the need for education” (Henderson, 2003).
These global changes have had a profound effect on the relationship that exists between
organizations and their employees. Many authors (Atkinson, 2001) have signaled a transition
from Psychological contracts toward transactional contracts. A Psychological contract meant
that the organization would take a paternalistic approach towards the well being of the

3
16
employees, and the employees in return were expected to exhibit an unflinching loyalty to the
organization (Aryee and Samuel, 1999). The new transactional contracts on the other hand are
reflective of the capitalistic economic model and are short term and gain based (Adamson,
Doherty, and Viney 1998). A number of Human resource related issues have emerged from
the midst of these changes. Among the most important of these issues are those that pertain to
the concepts of “Career” (Budhwar, 2003).
A number of reputed journals are emerging on specific career issues specifically career
management and planning issues. The interest in career as whole can be traced backed to the
70’s, with research seeking to explain many different dimensions of career in general and
career development or career management in specific. But such research has been limited to
only the developed economies of world; where as research on the topic in developing
countries is just starting to gain momentum (Budhwar 2003, Aryee and Samuel 1999, Rees et
al 2005)
The present study tries to add to the body of literature by conducting an investigative
examination of the notions of career and career management in the context of private and
public sector in Pakistan. A study was done on the same topic by Pawan S. Budhwar in the
context of India. That study was conducted from the perspective of the organization. In order
to make a meaningful contribution to the literature this study has taken an individuals or an
employee’s perspective (i.e. what level of control employees have on managing their own
careers)
MORPHING OF “CAREER”
Traditionally a career was defined as the property of the organization and in the terms of
vertical progression up hierarchical system of roles. Paula M at el while quoting Wilensky
gave the following traditional definition of a career; “A succession of related jobs, arranged in
a hierarchy of prestige, through which persons move in an ordered, predictable
sequence”(Pula M, 2005).
But as discussed earlier, the emergence of the new economic system, knowledge-based
capitalism, has drastically altered they way business operate. The current business scenario is
that of hyper-competition where organizations are being forced to be flexible and yet
competitive (Baruch and Peiperl, 1997). While summing up the effects of these
environmental changes of HR practices Mohan Thite noted that they have affected the
organization HR policies both at the macro and micro level. At the macro-level HR has
become a strategic partner and human resource is being seen as a source of competitive
advantage. At the micro level organizations are increasing the use of flexible working hours,
pay for performance programs, multi-rater performance evaluations.
Organizations have adopted business strategies such as delaying and downsizing to become
flexible and increase productivity (Grzeda, 1999). Such measures have shaken the confidence
of the employees in their organizations. Employees on their part have responded by adopting
a “Careerist Orientation” towards their relation with their organization (Aryee, Samuel, 1999).
This orientation dictates that employees should only be concerned with their own career goals
and disregard organizational goal which collide with their self interests. This conflict of
interest between organization goal and individual goals has an adverse effect on the work
attitudes of the employees, specifically job involvement and organizational commitment.

417
One of the most accepted definition of career was given by Greenhaus, Callanan and
Godshalk in the third edition of their book “Career Management”. They defined it as “the
pattern of work-related experiences that span the course of a person’s life”. While explaining
the definition they have pointed out the “work-related experiences” include objective events
and their subjective interpretations (Godshalk, Page 9). Examples of objective events can be
job positions, job duties or activities. Where as their subjective interpretations would be work
aspirations, expectations, values, needs and feelings about particular work experience. The
implication of this definition is that an individual can manage his career by either changing
the objective environment, which could mean a change of job, or to change ones expectations
of the job. The later refers to a subjective change of work-related events.
This definition of career is also in alignment with the concept of “protean career” put forward
by Hall which considers career development as a responsibility of the individual and not the
organization, and also advocates a boundary less career or a career which spans multiple
organizations (Aryee, Samuel).
EMPLOYABILITY, THE NEW SECURITY

In the absence of job security organization need to present their employees with other forms
of incentives which motivate them to work towards the organizational goals. One such
14
measure is employability which refers or the human skills gained from a job which can result
in higher paying jobs in the future (Greer C.R., 2001).
Figure: 1
X A B Y
The concept of employability can be explained with following example. In figure 1 the circles
A,B and C represent three banks. Let’s assume that bank A is a public bank with bureaucratic
structures, and which employs an outdate personal system to manage the affairs of it human
resource. On the other hand bank B is a commercial bank which has extensive system of
Human resource Management implemented. There is proper use of job descriptions and the
bank also makes extensive use of job enrichment and job rotation techniques to develop it
personal. Bank C is a new bank which opens in the locality of bank A and B. When it posted
its job vacancy for a senior clerk in the local print media two applicants, one each from bank
A and Bank B applied of the post. Both had worked with their respective employers for the
same period and both had the same educational qualifications. Both were drawing the same
amount of pay from their respective banks which for the sake of this example lets assume was
5000$. And finally both were working as junior clerks in their banks. The applicant coming
from Bank A was offered a salary of 8000$ and the applicant coming from bank B was

185
offered a salary of 15000$. Though both had the same experience and the same level of
responsibility and both were equally qualified so why the discrepancy of 7000$ in the offer
that was made to the two applicants. This difference is reflective of the fact that Bank C
valued the applicant coming form Bank A as more employable than the one from Bank B.
In the absence of Career Management; researchers are unanimous in their opinion that if
there is no effort of career management undertaken, either by the organization or the
employee him/herself, there will be the possibility of skills obsolescence and career
plateauing (Greer C.R., 2001). Skills obsolescence occurs when the skills of the employee are
out dated by a change in the technology or business methods. This curtails the productivity of
the employee and the organizations productivity will be affected. On the other hand career
plateauing refers to a situation where a person has spent a long time at the same position and
there are no signs of promotions in the future. This adds to the dissatisfaction of the employee
which might lead to an increase in the turn over. A remedy to both these undesirable states is
to have a proactive approach to career management.
SOCIO-ECONOMIC SKETCH OF PAKISTAN

Since its independence from the British Rule in 1947, Pakistan’s economy has been strangled
by an alliance of local and neo-colonist bourgeoisie (the social class that, according to
Marxist theory, owns the means of producing wealth and exploits the working class). They
have maintained their hold by corroborating with the state machinery which because of its
corruption acts as a custodian of their rights.
As a means to their end, they have eroded the education system in the country. This has been
achieved on the one hand by limiting the reach of the educational systems to only urban
developed areas. On the other hand the educational infrastructure has been starved of funds.
This has resulted in an education system which churns out individuals who though being
educated are highly unemployable. Out of this pool of educated few, the best talent is hoarded
away by the neo-colonist to their home countries where they become critical ingredients of
the economy, a phenomenon termed as “Brain Drain”.
From the social perspective Pakistan is society deeply divided into classes. These classes are
formed based on income, creed and power. The later being present due to the over developed
bureaucracy and military left behind by the British Raj. It is the element of Power which
drives the masses toward careers in the public sector or the military.
In light of this crippled economic situation and depleted education system, a “Career” has
become some thing of a chance than a choice. Like its next door neighbor India, the social
makeup of Pakistan has a great influence on the choice of career (Budhwar, 2003). Pakistan’s
society also functions around a core nucleus that is the family, thus it has a collectivistic
culture. So a choice of career in most cases is a reflection of ones family background or the
social network one is a part of rather than the individual aspirations.
With limited employment opportunities people are more inclined towards job security, which
takes the precedence when it come to making choices about careers. Taking the benefit of
these conditions, organizations often exploit the employees and thus are no where interested
in offering any sort of career development opportunities to their human resource. Another
social factor affecting the choice of careers in Pakistan is religion. Pakistan is a predominant
Muslim country and Islam is the main religion. Islam puts restrictions on many kinds of
careers for example jobs in financial institution which are involved in the business of
barrowing and lending on interest.

619
Social restrictions intensify even more for the female gender. These include both religious and
social restrictions. There are a set number of professions which are accepted by the society as
feminine. These include teaching, Medicare and desk jobs. These factors still have a strong
impact on the career choices in Pakistan, but there is a steady change that is creeping into the
Pakistani society. The most important of which is the fore coming private educational
institution to fill the void in the educational sector. In addition to this the emergence of
information technology as an industry is also helping in increasing the demand for skilled
manpower. The privatization plan of government especially in the telecom sector is attracting
a lot of foreign investment into the country which has fueled the war for talent to run these
new setups. It is in this new context that the study of careers has gained importance in order to
facilitate both the organizations and the individual employees to make the right decisions with
regards to the career and thus push Pakistani economy forward.
RESEARCH QUESTIONS
The primary research of this paper focuses on the career choices of employees in a transitional
economy with a collectivistic culture (in this case Pakistan). The broad aim of this research is
to explore how the choice of career is made and to assess the role of the factors that interplay
in this selection.
In particular, the study investigates how the emergence of the new industries (telecom and
information technology) and role of increased educational opportunities have affected these
choices of careers.
The current study addresses two major questions:

RQ1: What affects the choice of a career in Pakistan?
RQ2: What major turning points are faced by careerist in Pakistan?
METHODOLOGY
A qualitative research design was taken using focus groups as an instrument. A total of 14
participants took part in the focus groups, which comprised of 8 males (mostly middle
managers from Private sector in Islamabad) and 6 females (middle managers and from
academia). In order to facilitate the female participant’s free expression, two separate sessions
was conducted one for male and another for females. Also as requested by some of the female
participants and keeping in line with the social norms in Pakistan, video recoding was not
used in the female focus group where as it was in the male focus group.
The data from the audio and video records of the focus groups were then transcripted and
copies of the transcript were sent to individual participant for verification. The transcripts
were then given for review to different individuals in order to verify that there was no
substantial change in the meaning of the text so individual biases of the researcher does not
occur. In order to maintain the confidentiality of the participants, which was agreed between
the researcher and the participants prior to the focus groups, only their designation and
industry types are mentioned.
This followed by the use of Computer Assisted Qualitative Data Analysis (CAQDAS)
software to derive inferences from the transcripts.

720
FINDINGS
Career choice
Factors that influence the choice of a career;
The transcripts from the focus group reveled the role of different factors that affected the
selection of career.
Table :1
Factor Influence
Family Reflecting the collectivistic culture prevailing
in Pakistan, family dominated the list of
factors that influenced the career decision.
Lack of Career Most of the participants also counted the lack
Counseling of career Counseling in the educational
institutions as a reason for making a wrong
choice of career.
Situational Trends Most career choices were made on the bases
of the current prevailing trend in the market,
for example during the IT boom almost every
one chose a career in IT regardless of the
individual aptitudes.
First, concerning the role family plays in one’s career choice there was unanimity among the
participant that their family in general or the parents in particular played the leading role. For
some this role was inspirational, they got inspired by one of the parents or another prominent
member of the family:
It was in my mind that I will go to the field of electrical engineering
and the influential part for my career was my father (Male, GM
Marketing, Telecom Company)
For others the family is the deciding factor in the decision of career. This role of the family
starts from the selection of the field of education to the selection of the educational
institutions:
I belong to a family of eight siblings and our father had decided for
each one of us our professions from the very start (Female, Lecturer-1,
Public University)
Another interesting feature that came to light from the discussion is that there is a strong
perceived relationship between the educational institutions and job security. Due to the
limited number of reputed institutions in Pakistan which guaranty such employability, there is
a high level of competition to gain admission into these institutions. For students who fail to
reach these institutions the parents abandon the ownership of their career and they are let at
the mercy of their (the children’) own choice.
When I did not become a doctor like my father wanted me to, he just
told me to do what ever I wanted (Female, Lecturer-1, Public
University).
Some participants talked of the responsibility of being a part of family. These people argued
that though the family did not choose the careers for them but at times, for example if the

821
family is not doing financially well, your career takes second seat to the responsibilities
towards the family:
I did my MBA in marketing I looked up the news paper and sent five
CV’s to marketing job and didn’t get job, down the road after the third
week I’ll start sending my CV to every ad which is up in the news
paper. Now there are certain factors that may be my family pressure
my social status. If I’m from a good family might be I don’t do this than
what happens you enter an industry not of your choice. For example I
started my career with a bank which I did not want (Male, General
Manager, and BPO).
For females, marriage also plays a major impact on their careers. Being a male dominated
society, females have to do all the compromises on the careers when it comes to dual career
families.
After my marriage I have had to come to Islamabad from Lahore with
my husband. (Female, Lecturer-2, Public university)
The second factor discussed was the lack of career counseling in the education institution
and even the organizations. Unlike in the developed countries the education system has no
focus on employability. There are no career consolers or job placement centers at the
university level, baring few. One reason for this is that there is no linkage between the
corporate world and the educational setups.
I did a training session in Islamic university about career planning
there were a lot of students there who told me that they were not able to
find a job. There is no career planning in Pakistani universities. (Male,
HR Manager, Telecom Industry)
The participants, then, came to a conclusion that it was due to this lack of career
counseling that careerist initially joined some organization and after spending 3 to 5 years
in the field and having gained some exposure that is the time they find their natural
calling. This is a time when they do a self analysis and start managing their careers.
After having changed for jobs in a year I realized that I wanted to
teach. (Female, Lecturer-2, Public university)
I started my career with a Telecom Company. I worked there for four
years. When I completed my master my teachers and people who
guided me, told me you can enter an organization but to stay there and
to grow you have to perform and it depends on you skills and your
ability. For 5 year did not look at my salary my designation facilities
and only about 6 months ago I realized that I have passed that stage,
and now it’s better to think about it.(Male, Marketing Specialist,
Mobile phone operator)
With regards to the situational factors and their roll in shaping one’s career the participant
divulged that in Pakistan the careerist confer to the “follow the lead sheep” metaphor. For
example during the Telecom boom everyone is gearing himself towards a career in telecom.
Students are enrolling for higher education in the telecom subjects with even realizing that
four years down the road the telecom sector might not have the capacity to take them.
In our university we have 42 students taking up finance as majors in
their MBA, and 8 and 4 respectively in HR and marketing. And when I
ask them what they based their decisions on most replied that they saw

922
a majority of their friends going there (Male, Lecturer, Public

University)
Proactive or Reactive Approach to Career Management
After the first round, the second round of questioning focused on mid-career choices.
Participants were asked to elaborate on the career management initiatives they undertook after
being on a job for a while. Some of the interesting revelations from that discussion which
pertained to important issues discussed in the literature review are highlighted as follows;
Career plateauing
Some of the participants referred to the phenomenon of career plateauing as a cause for them
to change their employers and look for other jobs:
I started my career with a Telecom Company as a manger admin and
worked there for 8 years. At one point I thought career development is
no more here. Salary was not the issue, I decided to change. (Male,
CIO, BPO)
Most participants blamed the lapse on part of their organization for providing them with
opportunities for growth as reason for leaving their jobs.
You spend enough time to one place that you know what things are
about. If you are in an organization where you can see a career growth
for yourself then stay there. For me I could not see the future and most
people shift because they can’t see a future and when you tell them
(your employer) that you want to leave, what do they do? Do they guide
you? Or do they say thank you very much and part with you. This also
is one of the crucial turning points in your career planning. (Male,
Marketing Specialist, Mobile phone operator)
Organizational Career Development programs

Participants also agreed that organization with career development programs are employers of
choice and they have better retention rates because they are adding to your employability.
Organization who do career planning, who give you orientation
session, who tell you what to do and guide you are very few. Most
company you come across are the ones that you join and on the same
day they give you your seat next thing you know your email account or
box file come to your desk, start work that’s it. You have to then learn
what to do how I manage this, how do I manage that. Very few
companies have an excellent HR system. For example with my current
employer if I say to my manager I want to go to Dubai on training he’ll
say ok if it suits them and suits me. If I’m in a smaller company they’ll
say ok go back to your seat, simple is that. (Male, IT Manager,
Tobacco Company)
Ownership of Career Planning

Most of the participants also agreed that the ownership of career planning rest with the
employees themselves. The organization part is to facilitate the process by giving them
opportunities to grow. It is the careerist who has to take the initiative and take maximum
advantage of the opportunities offered to them.

10
23
The first sentence I heard when I joined my current employer was that
“Your career is your own responsibility”. And I asked my self why?
Later I realized that what it means that they are giving me the facilities
because the organization wants it’s to employees grow. They can not hire new
people every day and train them put them on the job. They want their people
to grow it is up to the employees to adjust to their (the organizations)
structure and culture. (Male, IT Manager, Tobacco Company)
Careerist Orientation
When the participants were asked to weigh the importance of organizational commitment
versus ones commitment to career, they agreed on one point that having a careerist orientation
is good but one should not have a CV that shows that this person is low on organizational
commitment, as that plays a major role in job selection.
You should stay with a company for at least 3 years for good
experience. If it’s a good organization if its no, yes you can change.
Changing too much will create a really bad impression on people they
think of you have an inconsistent temperament. You won’t be
considered for future growth and you will get stuck somewhere. (Male,
Marketing Specialist, Mobile phone operator)
LIMITATIONS AND FUTURE RESEARCH PROSPECTS

The findings of the current research can not be generalized across the entire working class of
Pakistan as the participants were from a limited number of industries.
Any future research can be carried out on a larger sample which should include participants
from all industries. A richer demographic sample will also increase the validity of the
research.
Further areas which can be researched could be;
The impact of organizational career development programs on the careerist
orientation.
Major causes of Turnover in a collectivistic economy such as Pakistan.
The existence of psychological or transactional contracts in Pakistan.
RECOMMENDATIONS
Choosing of the right career starts from the home, the family has to be sensitive to the
individuality of each of its member and should support the career choices other make for them
selves.
A change need to be brought into the education system to make it inline with the current
requirement of employability. This can be achieved by working out the syllabus of the
professional study programs with the relevant industries. This will ensure that the higher
education institutes are imparting the right kind of information which is online with the
requirements of the selected industry.
Career counseling measures have to be taken at least at the higher education level, if not at the
grass rote or elementary level. Students should be provided with counseling which will help
them chose the right jobs for themselves based on their desires and aptitudes.

11
24
Organization can also help by developing proper career management systems. Such
organization will instantly become employers of choice and will attract the best of talent.
They will also have a high retention rate and a more motivated workforce.
CONCLUSION
The study showed that career management plays an important role in the well being of a
careerist. People who have taken a proactive approach to managing their careers from the start
progress much faster in their careers than those who have not. In a collectivistic country like
Pakistan where the opportunities for employment are less, there is greater need for proper
management of careers so one can chose the right career for which he/she is suited.
With regards to the first research question the respondent of the focus groups were unanimous
in their opinion that the choice of career is not solely based on the aspirations of the careerist
there are other factors which influence this decisions.
With regards to the second research question the response was mix, some saying that they
adopted a proactive approach while as other favored the reactive approach.
REFERENCES
Armstrong M.,(1998), Managing People: A practical guide for line managers, Kogan Page,
London.
Adamson S.J., Doherty N and Viney C,(1998), ‘the Meanings of Career
Revisited:Implications for Theory and Practice’, British Journal of Management,
Vol.9.,251-259
Aryee, Samuel, (1999), ‘Potential moderating influence of career growth opportunities on
careerist orientation and work attitudes: evidence of the protean career era in Singapore’ ,
Journal of Organizational Behavior, Vol.20, No.5, pp.613-623
Ben Ball, 1997, “Career management competences – the individual perspective” Career
Development International Vol.2 No 2, 74-79
Bish A. J. and. Bradley L. M, (2004), ‘Career development for going beyond the call of duty:
is it perceived as fair?’, Career Development International, Vol. 9 No. 4, 391-405
Budhwar P.S., (2003), ‘Career management practices in India: an empirical study’,
International Journal of Manpower, Vol. 24 No. 6, 699-719
Carol Atkinson, (2002), ‘Career management and the changing psychological contract’,
Career Development International Vol.7 No 1, 14-23
Godshalk V.M, Greenhaus J.H., Callanan G.A.,(2000), Career Management, The Dryden
Press, Orlando.
Greer C.R., (2001), Strategic Human Resource Management: A general managerial approach,
2nd edition, Person Education, Singapore.
Grzeda M.M., (1999),’Re-conceptualizing career change: a career development perspective’,
Career Development International Vol.4, No.6,305-311
Henderson R.I., (2003), Compensation Management in a Knowledge-Based world, 9th edition,
Person Education, Singapore.
Paula M, Kerry Brown and Lisa Bradley, (2005), ‘Have traditional career paths given way to
protean ones? Evidence from senior managers in the Australian public sector’,
Career Development International, Vol. 10 No. 2, 109-129
Patrick Chang Boon Lee, (2002), ‘Career goal and career management strategies among
information technology professional’, Career Development International Vol.7 No 1, 6-13

12
25
Rees Christopher J., Jane Ja¨rvalt, Beverley Metcalfe, (2005), ‘Career management in
transition: HRD themes from the Estonian’, Career Development International Vol.29 No
71, 572-592
Steven H. Appelbaum, Victor Santiago, (1997), ‘Career development in the plateaued
organization’ Career Development International Vol. 2 No. 1,11-20
Stevens P.,(1996), ‘What works and what does not in career development programmes’,
Career Development International, Vol.1, No.1,11–18
Thite M., (2001), ‘Help us but help yourself: the paradox of contemporary career
management’ Career Development International Vol. 6 No. 6,312-317

13
26
The Credibility of Management Earnings

Forecasts in Tehran Stock Exchange
A Case study
Dr.Mansour Garkaz
Department of Accounting
Islamic Azad University- Branch of Aliabad katool- Iran
Abstract
One of the most significant issues posed in decision- making in capital markets
for many investors, analysts and users is information concerning earning. If
corporation earning forecast is not accurate enough. It will make people
worried and lower the investment Security. The studies in many different
countries portrayed that various variables have impact on Earnings Forecast
Accuracy (AFE). The main aim of this survey is to determine and evaluate the
impacts of variables on earnings Forecast Accuracy of accepted corporations
in Tehran Equity market from 2002 to 2006 in a period of 5 years. To do so,
135 corporations were selected as a sample of the study. A multi-variable
regression and one variable regression models and ANOVA test were used to
show the relationship between independent variables namely (size, forecast
accuracy, age , financial leverage ,forecast horizon, and superiority of
corporation).The findings in this study indicate that there is a significant
relationship between four variables of Lev2 , Lev3 , firm size( sale average) ,
forecast horizon and the dependant variable namely absolute forecast
error(AFE) and also there is a significant relationship between two
independent variables Lev2(debt ratio) and forecast horizon and the dependant
variable namely MSE.
Key words: Earning Forecast Accuracy, Firm Size, Age; Financial Leverage, Forecast
Horizon, Superiority of Corporation
INTRODUCTION
This paper examines the credibility of management earnings forecasts. Policy-makers, equity
analysts and investors have long been concerned with the credibility of this form of voluntary
disclosure. In recent years, corporate earnings management raised serious concerns among
financial markets regulators, operators, investors, and academic researchers, as reflected in
the speech of the former Tehran Stock Exchange. A series of recent financial disclosures
involving Enron, Worldcom, Tyco, Xerox, global crossing aggravated this concern. Based on
the existing witnesses and document, one significant and effective in formation on behavior
of stock price is EPS. Form long ago, the financial analysts were interested in the relationship
between stock price and EPS fluctuation.
Some professional institutions in some countries have been trying to find some logical
principals to provide the financial forecasting including the results obtained from the future
operations. Based on the regulations of Tehran stock exchange, from the corporations have to
provide their own forecasted information.
Copyright © 2010. Academy of Knowledge Process 27

14
Before this regulation, in Iran stock exchange, the corporations did not have to provide
earning forecasted information although we expect the corporation’s transfer their own
forecasting information to capital market, there is a difference between the real
financial operation of corporations and forecast information. In this study, we have
been trying to find the significant relationship between some features and variables
with accuracy of profit forecast theoretically in stock exchange markets, the stock price
will be determined regarding the present value of the future cash flow and the
accounting profit is a basis for determining the stock price.
In order to buy and sell the stock, stock holders will use the forecast earning by the
corporations, since the real earning will be determined at the end of financial year. If
the information is not right and high accuracy, there will be a difference between the
stock price and its inherent value.
LITERATURE REVIEW
This study makes several contributions to the literature on management forecasting
behavior. Su (1996) believed that analysts are more attracted to larger companies, and
there are more incentives for them to follow large companies than small companies.
Therefore, the size of a company will affect the relative accuracy of analyst earnings
forecast. On the other hand, large companies possess excessive human and financial
resources and information which analysts have no access. This allows managers to
anticipate the corporate future earning with high accuracy. The result of his study
showed that analyst’s and management’s voluntary forecast accuracy is higher for
larger companies than small companies.
Firth (1998) demonstrates that profit forecasts can be an extremely important signal of
company valuation .Verrecchia (1983) demonstrates that earning forecasts have
signaling power since by their disclosure the management reveals private information
to less informed investor. Kim et al. (1995) investigate the role of information disclosed
through the prospectus in the new issue market in Korea. The evidence indicates that
the market price is significantly affected by financial variables, such as, offer type,
industry- wide prospects, and offer size.
Jelic et al (1998) studied the accuracy of the prospectus earnings forecasts and
identified its determinants. The data set that they used cover the period from January
1984 to September 1995 with a population of 122 IPOs. The calculation of the formulas
showed a mean forecast error of 33.37%, a mean absolute error of 54.1% and a mean
squared forecast error of 1373.74%. Two factors named age and industry classification
of the company are statistically significant and the management earning forecasts are
particularly inaccurate where firms experience declined in earnings.Jiang (1993)
examined the determinants associated with analysts’ and management’s earnings
accuracy under different assumptions. He used cross-sectional regression analysis to
investigate the relations the forecast and firm’s size, rate of earnings deviation,
forecasting time horizon, market situation, and rate of annual trading volume turnover.
His results show that earnings forecast provided by analysts are more accurate than
management earrings forecast.
Dev and webb (1972) ues 212 uk firms that went public in the Period 1968 – 1969
testing the impact of several factors on the accuracy of prospectuses profit forecasts.
28
Selva et al (1994) in study for Hong Stock Exchange report a forecast error and an
absolute forecast error of 14.12% and 18% respectively. Cheng and Firth (2000)
analyze the bias and rationality of profit forecasts published in offering prospectuses in
the Hong Kong Stock market. As forecasts by management are likely to contain new
information that was not previously available to investors, Ma and Miller(1979) argued
that the operations of the capital markets are Likely to improve. Xiu (1992) studied the
relative accuracy of management and analyst’s earnings .forecasts, and in particular
examined management’s earnings forecast accuracy with prior and posterior analyst’s
earnings forecasts. The result reveals that a management’s forecast is superior to prior
analyst’s forecast, but less accurate than posterior analyst’s earnings forecasts.
Eddy and Seifert (1992) suggest leverage may make earnings forecasting more difficult
because higher leverage would cause greater variability in earnings .it has been argued
that firms with relatively high debt levels are likely to experience more volatile
earnings. Francis et al (1998)shows that even a modest decline in sales relative to
management s expectations is likely to result in a large earnings shortfall for a with
high financial leverage .
HYPOTHESIS
In this study, we have been trying to find the effective factors on accuracy of profits
forecast in the corporation. The general hypothesis is that there is a significant
relationship between accuracy of profits forecast and some features of corporations. In
order to get some insight into the reasons for good food forecasting performance a
number of hypotheses were constructed and tested with respect to potential
determinants. These hypotheses have been examined in prior studies including those
relating to news issues and allow comparative analysis. Previous researches have
identified13 potential determinate of profit forecast accuracy. These are the (1) age
firm, (2) underwriters reputation, (3) forecast horizon, (4) past profit, (5) change of
regulation, (6) company size, (7) financial leverage, (8) cost of going public, (9)
industry classifying, (10) auditors, (11) Year of flotation, (12) general economic
conditions, (13) proportion of shares retained by in side owners.Is such a study, 5
variables have been Selected as the effective ones on the accuracy of profits forecast.
Since they are highly reach able and informative. Other variables have been deleted
since they are not of sufficient in formation and to the point So, the following
hypothesis have been posed logically.
Age of Firm (AGH)
Previous studies suggest that the longer a firm has been in existence, the greater the
forecasting accuracy and some firms with young history i.e less experience are of low
accuracy in profits forecast. Berlinger and Robbins (1986) jelic (1998) mentioned age
of a firm as a significant variable in profits forecast. They reported that forecasting
corporation with young history are of difficulty. Chen et al(2001) for Honk Kong report
that older Firms may be viewed as being less likely as they have more experience to
draw on when making forecasts of their profits.
In such a study, the age of firm has been measured by two ways.
1. To measure the age of a firm when it has been founded
2. Based on regulations of Tehran stock exchange. (When it has been listed in stock
exchange)
29
There are some specific regulations in stock exchange acceptance. As a result, many
corporations will be listed in stock exchange with a gap (duration) form their
establishment date and so measuring the age of firm will be taken into account in stock
exchange when they have listed. With the above mentioned ones, two following
hypothesis have been posed.
Hypothesis: There is a significant relationship between age of a firm (when it has been
founded exchange) and forecasting accuracy.
Hypothesis: There is a significant relationship between age of a firm (when it has been
listed in stock exchange) and forecasting accuracy.
Firm Size:
One internal factor effective on forecasting accuracy and firm programming is firm
size.
Many researchers reckon that big size firms are of more various activity and high
validity in capital markets and financing with low rate-interest will increase. The big
size firms which are of more experienced human resources are expected to have more
to the point for casting accuracy. Rees and Capstaff (1995) have found that there is
positive significance between company size and forecasting accuracy. Atias (1985),
Oppong (1976), Hegerman, Ruland (1976), have found that the big- size firma are of
high forecasting accuracy compared to small size firms. When studying the capital
market of New Zealand, Firth and Smith (1992) have found that there is negative
relationship between firm size and forecasting accuracy.
In such a study, average of sales, average of assets and average of Equity have been
seen as a firm size and based on this the following hypothesis has been posed.
Hypothesis: “There is a significant relationship between firm size (average of selling

sales) and forecasting accuracy.”
Hypothesis: “There is a significant relationship between firm size (average of assets)
and forecasting accuracy.”
Hypothesis: “There is a significant relationship between firm size (average of Equity)
and forecasting accuracy.”
Period of forecast
A control factor that may influence the accuracy of management forecasts of earnings is
the forecast horizon. So the longer the forecast (Horizon), the less to the point the
forecasting accuracy will be. Lee at al (1993) have found the same results. Therefore
based on such findings, the following hypothesis has been posed:
Hypothesis: “There is a significant relationship between forecasting horizon and
forecasting accuracy”.
Financial leverage (lev)

Financial leverage shows that how much a corporation has been relied on the financing
through debt rather that capital. To accommodate this factor as a determinant of
forecast accuracy we introduce the independent variable leverage.
Sefert and eddy (1992) and Chan (1998) reported in corporations, the higher the
financial leverage, the lower forecasting accuracy we will observe. In such a study three
ratio used as financial leverage are the same as follows:
30
( Lev1 ) Ratio of total debt

Average of total debt
Average of equity
( Lev2 ) Debt ratio
Average of equity
( Lev 3 ) Debt/market value of stock ratio

Average of equity
Thus the following hypotheses have been posed:
Hypothesis: “There is a significant relationship between financial leverage ( Lev1 ) and

Hypothesis: “There is a significant relationship between financial leverage ( Lev2 ) and
Hypothesis: “There is a significant relationship between financial leverage ( Lev 3 ) and
Superiority hypothesis
Based on different standards Tehran stock exchange announce 50 corporation quarterly.
Stock holders give much more credence to the superior corporations .Regarding to the
superiority of some corporations listed in the stock exchange; they expect high
accuracy from such corporations. In such a study, the studied corporations have been
classified in to the superior and non - superior ones and the following hypothesis has
been posed.
Hypothesis: “There is a significant relationship between Superiority of corporations
and forecasting and accuracy”.
METHODOLOGY
Sample selection
In this research we use a cross- sectional data to examine the relative accuracy of
management earnings forecasts. Samples used are managements earnings forecasts at
all publicly traded companies in Tehran stock exchange in a 5-year period (2002-2006)
including 135 corporations listed in (TSE). The financial data needed have been
extracted by data center in TSE. The studying corporation should be of the following
features.
1. Their financial year should be ended to end of financial year.
2. When the study has been done they should not change their financial year.
3. The studying corporations should not stop their selling’s and buying when the
research has been doing.
31
Measurement of forecasting accuracy

In such a study, the two following models have been used to measure the forecasting
accuracy.
Absolute Forecast Error (AFE)
In this study, the ‘absolute forecast error’ measures the relative deviation of Actual
earnings from forecast earning and provides indication of how close forecast were to
actual profits in absolute terms. The AFE is measured by:
FPit − AP
∑ FPit
AFE =
N
FPit = Forecast profit for company ( 1 ) for year t
AP = Actual profit
N = Number of forecasting
M.S.E
One of the advantages for (M.S.E) is that the bigger errors are of heavier weight, i.e. are
of higher ratio and its models the same as follows:
( FP 1 − AP ) 2 ( FP 2 − AP ) 2 ( FP n − AP ) n
+ ... +
FP FP 2 FP )
MSE =
N
Cross- sectional explanations for the forecast error
We examine factors that may help explain the magnitude of forecast errors. In our tests,
we employ cross- sectional regression models where the absolute forecast error enters
as a dependent variable.
Age1 = age of a firm (when it has been founded exchange
Age2 = age of a firm (when it has been listed in stock exchange)
Size1 = firm size (average of selling sales)
Size2 = firm size (average of assets)
Size3 = firm size (average of Equity)
Horizon = period of forecast
Lev1 = ratio of total debt
Lev2 = debt ratio
Lev3 = debt/market value of stock ratio
The regression model is:

AFE = α 0 + α1 Age1 + α 2 Age2 + α 3 Size1 + α 4 Size2 + α 5 Size3 + α 6 Horizon + α 7 Lev1 + α 8 Lev2 + α 7 Lev3 + ε
MSE = α 0 + α1 Age1 + α 2 Age2 + α 3 Size1 + α 4 Size2 + α 5 Size3 + α 6 Horizon + α 7 Lev1 + α 8 Lev 2 + α 7 Lev3 + ε
RESULTS
Results of AFE
The data has been normal with Kolmogorov- Smirnov test and when the data was not
normal, Log has been used.
A= Log AFE having made AFE normal, the following results have been observed.
Table: 1
32
In order to test a number of corporations, specific characteristics , for the accuracy of

earning forecast, we conduct two regression analysis. Including one-variable regression
analysis and multi-variable regression analysis.
The findings in AFE based on one- variable regression are the same as follows:
1- There is no significant relationship between Age of firm (establishment year) and
AFE as dependent variable.
2- There is a significant relationship between Age of firm (the year a firm has been
listed in stock exchange) and AFE a the dependent variable.
3. There is no significant relationship between firm size (average of selling) and
AFE as a dependent variable.
4- There is no significant relationship between firm size (average of assets) and
5- There is no significant relationship between firm size (average of equity) and
6- There is no significant relationship between Horizon of forecasting and AFE as a
dependent variable.
7. There is a significant relationship between financial leverage (lev1) and AFE as a
dependent variable.
8. There is no significant relationship between financial leverage (lev2) and AFE as
a dependent variable.
9. There is a significant relationship between financial leverage (lev3) and AFE as a
dependent variable.
Superiority is a dummy variable. Due to this, in studying the relationship between
corporation superiority and AFE , one way ANOVA method has been used , the results
obtained show that there is no significant relationship between corporation superiority
and for casting accuracy. Results obtained from multi- variable regression in AFE
model.
In such a study, Stepwise method has been used to use the multi- variable regression
model. And the results showed that four variables including Lev2, Lev3, size (selling
average) and horizon of forecasting are the effective ones in such a model.
Table:2
Lev2
Lev2
Lev3
Lev2
Lev3
Size1
Lev2
Lev3
Size1
Horizon
Now the results obtained by a multi- variable regression model are the same as follows.
y= -1.013 + .638 (Lev2) + .097 (Lev3) – 3.72E-08 (Size1) - .001 (horizon) + ε
33
Results of MSE
The data has been normal with Kolmogorov- Smirnov test, and when the data was not
normal, Log has been used. A= Log MSE having made MSE normal, the following
results have been observed.
Table: 3
The findings in MSE based on one- variable regression are the same as follows:
1- There is no significant relationship between Age of firm (establishment year) and
MSE as dependent.
2- There is no significant relationship between Age of firm (the year a firm has been
listed in stock exchange) and MSE as the dependent variable.
3. There is no significant relationship between firm size (average of selling) and
MSE as dependent variable.
4- There is no significant relationship between firm size (average of assets) and
MSE as dependent variable.
5- There is no significant relationship between firm size (average of equity) and
MSE as a dependent variable.
6- There is a significant relationship between Horizon of forecasting and MSE as a
dependent variable.
7. There is no significant relationship between financial leverage (lev1) and MSE as
Superiority is a dummy variable. Due to this, in studying the relationship between
corporation superiority and MSE, one way ANOVA method has been used, the results
obtained show that there is no significant relationship between corporation superiority
and for casting accuracy.
Table: 4
Lev2
Lev2
Horizon
Y=1.044+1.330(Lev2) - .003 (horizon) + ε
34
Results obtained from multi- variable regression in MSE model.

In such a study, Stepwise method has been used to use the multi- variable regression
model. And the results showed that two variables including Lev2 and horizon of
forecasting are the effective ones in such a model.
REFERENCS
Aggarwal, R. Lear. R. and Hernandez, L. (1993). The after market performance of
initial public in latin America, financial Management 22:42-53.
Armstrang, J. S. and F.collopy. (1992). "Error Measures for Generalizing about
forecasting methods: Empirical comparisons. "International journal of forecasting,
8:69-80.
Brown, L. D. , Richardson, G. D. and schwager, S. J. (1987). "An information
interpretation of financial analysts superiority in forecasting earning, Journal of
Accounting Research 25.
Clarkson, P.A. Donth, G. Richardson. and S.sefcik. (1989a). "An Analysis of Futures
Oriented information Included in the Initial Public offering perspectuses of Canadian
companies.”Working paper, May.
Chen, G. and Firth, M. (1999). The accuracy of profit and their roles and association
with Ipo Firm valuations, Journal of international Financial management and
Accounting NO:10.
Dev, S. and N.Webb (1972), "the accuracy of company profit forecasts.” Journal of
Business finance, 4.26-39.
Eddy, A. and Seifert, B. (1992). An Examination of hypotheses concerning earning,
forecast errors. Quarterly journal of Business and Economics 31:22-37.
Ferris, k.and D.Hayes (1977), "some evidence on the determinats of profit forecast
accuracy in the united kingdom, "the international journal of accounting edocation
and research, 27-36.
Firth, S. and A. Smith (1992), " the accuracy of profits forecasts in initial public
offerings prospectuses, " Accounting and business Research, 22, 239-47.
Hegeman, R. and W.Ruland (1979), "the accuracy of management forecasts and
forecasts of simple alternative models", Journal of Economics and Business, 172-92.
Imhoff, E.A. and Pare.P. (1982). Analysis and comparison of earning forecasts agents”
Journal of Accounting Research, Fall.
Jaggi, B, (1982)."Futher evidence on the accuracy of management forecasts vis-à-vis
analyst " journal of Accounting Research, Fall, , P. 429-432.
Jaggi, B. (1997)., Accuracy of forecast information disclosed in IPO Prospectuses of
Hong kong, International journal Accounting, No:32.
J.yongru, (1996)." comparison of relative accuracy of management and analysts
earnings forecast, unpublished thesis, Accounting Department, dong Wu University,.
Kim, J-B., krinsky, I., and lee, J. (1995). The role of financial variables in the pricing of
. Korean initial public offerings pacific- Basin Finance journal No: 3.
35
Keasey, K. and P.Mc Guinness. (1991).. " An Examination of the Accuracy and Bias of
Prospectus Earnings forecasts: Uk Evidence. "The international journal of
Accounting, 26(4): 252-263.
Lee, I., N. taylor, C. yee, and M.Yee (1993), "prospectus forecast earning, evidence and
explanations Australia, " Accounting Review, 3, 21-32.
Levis. M. (1993). The long-run performance of initial public offerning: the u.k.
experience 1980-1988 Financial Management No: 22.
Mak, Y. (1989), " the determinants of accuracy of management earning forecast: A
Newzealand study, "The international Journal of Accounting, 24,267-80.
Mc Donald, J. and fisher A. (1972), "New Issues Stock price Behaviour," jurnal of
finance, 27,97-102.
Pedwell, k., Warsame, H., and Neu, D. (1994). The accuracy of Canadian and
Newzealand earnings Forecasts: A comparison of voluntary versus compulsory
discloures. Journal of international Accounting, Auditing and taxation No:3.
Ruland,W. (1979).. "the time series of earnings for forecast Reporting and
Nonreporting firms. " Journal of Business & Accounting, 6 (summer): 187-201.
Selva, M., A. Ma and J. Wa. (1994).. "Reliability of prospectus Based profit forecasts
in Hong kong. " working paper, city polytechnic of Hong kong.
Su, yongru, (1996)."comparison of relative accuracy of management and analysts
earnings forecasts " Unpublished thesis, Accounting department, Dong Wu
University,.
Xu, Xiubin, (1990)."A examination of earning forecasts accuracy" unpublished thesis,
Accounting Department, politics university.
36
The Role and Significance of Operation

Management
Muhammad Usman
M.Sc. in Engineering Management, UK
Abstract
Operations are the activities that make an organization’s products.
These products can be any mixture of services and goods that
satisfy customer demands. In restaurants the operations focus on
preparing meals; in factories they make gods; in power stations
they generate electricity; in universities they educate. At heart of
every organization are the operation managers who are responsible
for making the products. As you can see, we take a broad view of
operations. We talk about every kind of ‘organization’ making any
kind of product, using any type of process. We make it clear that
everyone is affected by operations, and should be involved with
operations management. In recent years operations management
has become increasingly important. There are many reasons for
this, including more intense international competition, rising
productivity, more emphasis on product quality, more demanding
customers, and so on. The most important point has been the
recognition that organizations can only succeed if they supply
products that customers want and they can only do this by
managing their operations properly.
INTRODUCTION
Operations management is the management of systems or processes that create goods
and services. It deals with the design, operation and improvement of these systems or
processes. The term ‘production management’ was widely used in the past with the
early evolution of manufacturing sector, still in many companies this title is
appropriately in use. However, the enlargement of the rule to include responsibility for
other tasks in the supply chain ,such as purchasing and dispatch, led to a change in title
to that of ‘operations management’. Furthermore, the growth of the service sector in
industrially developed countries has reinforced this change to ‘operations management’
as a more appropriate general title.
OPERATIONS MANAGEMENT
Operation management deals with decision making related to productive processes to
ensure that the resulting goods or services are produced according to specifications, in
the amounts and by the schedule required, and at minimum cost. Inputs of materials,
labor, and resources are used to obtain goods or services using one or more
37
conversion/transformation processes, thereby adding value.

Let’s first summarize that what the operations management task comprises of, as this
will give us overall view of what is involved in this operation.
Companies sell services and goods to customers. To do this they purchase the
inputs they needs such as materials, services and energy. They then process these
inputs through the skills of the people, the equipment or processes and systems or
procedures into the required outputs (services and products) to be sold in their
markets. How complicated the ‘processing’ phase is will vary. For example
A retailer purchases products, unpacks and displays them and processes their
subsequent resale.
A hospital processes patients (its customers). The range of healthcare provided
can involve complicated procedures over a long period.
A restaurant buys in food and prepares this into a range of menus. On the other
hand, it buys in soft drinks, bottled water and wine, stores them and then serves
them with relatively little additional processing.
A garment manufacturer buys in a range of materials in terms of material types
and colors, cotton threads, trims, buttons, zips and other accessories. The
materials are then cut to meet different styles and sizes and sewn together, with
relevant trim, buttons, zips and other accessories added during the operation
process. After pressing and final inspection the finished garments are packed and
dispatched to different retail outlets.
The operations functions concerns managing the inputs into the systems (often referred
to as the ‘external phase of supply chain’) and also the processes used for converting
these into the output sold to customers.
Fig 2.0 Conversion of input to output. Source[3]
Underpinning these activities is the key task of managing the people within the
operations function in such a way that meets agreed schedules, productivity levels and
other business targets, while helping develop them in terms of broadening their skills
base and facilitating personal development opportunities. [1]
OPERATIONS STRATEGY
Operation is the process of delivering of products and services, so how it could be strategic? In
fact there is an issue of differentiate between the two words operational and operation which are
like same but have different meanings.Operations apply to those parts of the business which
deals with producing products and services. Operational is the opposite of strategic in the sense
that it means ‘short term’ and ‘limited in its influence’. Other side of the business such as
marketing or finance has both strategic and operational activities. For example, marketing
strategy covers the overall long term approach to how the organization wants to see itself in its
markets. The operational side of marketing deals with the day by day strategy and plans of how
38
to manage the things like advertising, pricing, sales and so on. It is just the same with the
operations .Operation strategies focused on the long term issues that how to manage the
resources and planning which produces the products and services. Operation strategy is based
on the two important factors, which are designing and implementation of operation strategy.
Designing of operation strategy

There is no single ‘best’ operations strategy for an organization. Instead managers try to
identify the features that they think will give the best results. There are many factors to
consider in these decisions, particularly:
Higher strategies – which give the aims and context for the operation strategy;
Other internal constrains and strength- including the experience and skills of
the organization, existing products and processes, reputation, location and so on
;
Customer demand – including the type of products, quality ,timing , price, after
sales support etc
Competitors – other organizations trying to meet the same customer demands;
Other external constraints and features, including economic conditions, legal
requirements, market conditions etc
There is no analysis that can find the best balance of these factors, so manager use a
mixture of analysis, reasoning and experience. A more logical approach to designing an
operation strategy has the following steps.
Analyze the business strategy – and other strategies- from an operations point of
view, this gives the context and overall aim of the operation strategy.
Analyze the aims and set goals to show what the operations strategy must
achieve.
Now look at the existing operation strategy to see how well they achieve these
goals, and identify areas that need improving.
Understand the environment, in which the operation strategy works, this
identifies customers, competition, constraints and so on.
Describe the general feature of the process that can best deliver these products,
this include the capacity, technology used, location and so on.
Design the best organizational structure, controls and functions to support the
process.
Implement the plans, setting the aims and condition for other levels of operation
decisions.
Monitor actual performance, continually look for improvements, keep the
strategies up to date, and give feedback.
These steps may not give a recipe for designing an operation strategy, but they do list
the main considerations.
Strategies only become effective when they are implemented. Implementation means
that all the plans are actually carried out and translated into lower decisions. Some
decisions are very important to an organization, with consequences felt over many
years; other decisions are less important, with effect felt over days, or even hours.
Strategic decisions are most important; they are long term, use many resources
and are made by senior managers.
39
Tactical decisions are less important; they are medium term, use fewer
resources and are made by middle managers.
Operational decisions are least important; they are short term, use few resources
and are made by junior managers.
Table3.1 Features of different levels of decisions

Source:[1]
The following are some examples of these types of decisions.
Quality, for example, is a strategic issue when a company is planning its competitive
strategy, perhaps aiming for very high-quality products. It becomes a tactical issue
when the organization is deciding how to measure quality and set reasonable targets for
performance. Then it becomes an operational task when testing production to see if
quality targets are being met.
Figure 3.1.2 Flow of information and decisions in an organization. Source[2]
Inventory is a strategic issue when deciding whether to build a warehouse for finished
goods or ship directly to customers, a tactical issue when deciding how much to invest
in stock, and an operational issue when deciding how much to order this week.
Problems with implementation

An obvious point when designing a strategy is to make sure that it can actually be
implemented and the long –term plans leads to realistic tactical and operational
decisions. Implementation is particularly is difficult when the organization has a rigid
hierarchy. Then one group of senior managers designs the strategies, while a different
group of more junior managers implements them. The two groups have different
objectives, goals, information, experience and skills. Even with good communications,
senior managers become remote from operation- they see the financial ratios, but have
little idea how the operations are really done. On the other hand, people working with
the details of day-to-day operations have little time for corporate ideals.
Some common problems with strategies are:
40
People who design the strategy are not responsible for its implementation;
Strategies are badly designed;
They are not implemented properly
They are not realistic;
Enthusiasm for the strategies declines over time
One surprisingly common mistake is to design an operations strategy and then think
about implementing it. The obvious way to avoid this is to consider implementation all
the way through the design, and always consider the practical effects of any decisions.
Managers always have to keep their feet on the ground, and one way of achieving this
is to have widespread participation in the design process. In particular, those most
closely involved with implementing the strategy should be closely involved in its
design.
DESIGNING THE PRODUCT

After the process of operations strategies, product engineering comes up which goes
through different phases of product planning, product development, quality
management and quality control.
Product planning
Product planning is concerned with all decisions about the design and introduction of
new products, changes to existing products and withdrawal of old products. Every
organization aims at making products that satisfy customer demand. Traditionally these
products have been classified as either goods (such as cars, mobile phones, houses) or
services (such as transport holidays, websites and education).In reality, every product is
a package that contains both goods and services. A washing machine manufacturer also
gives an after-sales service and a health service also supplies medicines. Organizations
have to design every aspect of this package to give a product that customers want. This
is the function of product planning. A serious problem for product planning is that
customer demand changes overtime. In winter we want warm clothing, but in summer
we want clothes that keep us cool; now we want portable videophones, but next year
we will want some other new electronic gadget. Organizations respond to these changes
by continually checking demand and adjusting their products. This is clearly an area
where operations management and marketing work closely together; they assess
customer demands and suggest products that satisfy them.
Product life cycle

Demand for a product changes over time. It usually follows a standard life cycle, which
has the five stages;
41
Figure 4.2 Stages in a product life cycle

Source [2]
Introduction. The product is new, and demand is low while people learn
about it, try it and see if they like it. Current examples include WAP
telephones, e-mail and ordering from super markets.
Growth. New customers buy the product, it becomes more popular and a
demand rises quickly. For example, telephone banking, clothes shopping
via the internet and adventure holidays.
Maturity. Demand stabilizes as most potential customers know about the
product, and they buy it in steady numbers. For example, television sets
insurance and postal services.
Decline. The product is now getting old, and sales fall as customers start
buying new alternatives. For example, tobacco, full-cream milk and porters
in hotels.
Withdrawal. Demands decline to the point where it is no longer worth
making the product. For example, black and white television sets and
telegrams.
QUALITY MANAGEMENT
Quality is the ability of a product to meet and preferably exceed customer expectations.
Unfortunately this definition is still not clearly expressed, especially as different
customers have different expectations. Some typical definitions of quality include the
following
Performance
Reliability
Durability
Specific features, perhaps for safety or convenience
Customer service before and during sales
On time deliveries
After sales service
In an organization, all decisions about quality are joined together under the general title
of quality management. Quality management is the management function that is
responsible for all aspects of a product’s quality. In recent years there have been so
many developments in quality management that some people refer to a ‘quality
revolution’. This happened for four main reasons.
42
Improved processes can make products with guaranteed high quality;

High quality gives producers a competitive advantage;
Consumers have become used to high quality products, and will not accept
any thing less;
High quality reduces costs.
These show why organizations must make high quality products. If you make poor
products, customers will simply move to a competitor who is better at meeting their
expectations.
Quality Control
It is the process in which independent inspections and tests on manufactured products
been done in order to get the designed quality. With quality at source, no defective units
should be made. So the purpose of quality control is not to find faults, but to give
independent evidence that the process is working properly and that there really are no
defects. If everything is working properly, quality control quality control inspections
should not find any faults. If they do find a defective unit, it means that something has
gone wrong with the process. Then we should find the cause of the problem and correct
it before any more defects are made. Typical causes of faults are;
Human errors of various kinds;
Machine faults, perhaps caused by poor maintenance;
Poor materials;
Faults in operations, such as speed or temperature changes;
Errors in monitoring equipment, such as errors in measuring tools;
THE SUPPLY CHAIN

Organizations- even those making the most intangible services- have to deliver
products to customers. They move a mixture of raw materials, goods, information,
messages, consumables or anything else needed to support operations. Materials are all
the items that move through an organization to produce its goods and services. These
movements do not happen by chance, but need careful planning and this is done by
logistics. Logistics is responsible for the movement of all materials into, through and
out of an organization.
Materials can be often divided into three different types:
Raw materials: move from suppliers into the organization. Here logistics is
concerned with purchasing, inward transport, receiving and storage of
goods.
Work in progress: materials move within the organization. Here logistics
looks at retrieval of goods, handling, movement and storage of goods
during operations.
Finished goods: materials move from the organization out to customers.
Here logistics look at packaging, storage and retrieval from warehouses,
transport and distribution to customers.
Most materials move through a series of organizations between the original supplier
and the final customer. When you buy a toothbrush, for example, its journey starts with
a company extracting crude oil, and then it passes through pipelines, refineries,
chemical works, plastic companies, manufacturers, importers, wholesalers and retailers
before finishing as a toothbrush in your bathroom. All of these steps taken together
43
form the supply chain; some people use the term supply chain management to mean the
same thing as ‘logistics’. Each product has its own supply chain. Logistics is
responsible for getting all materials through this chain and delivering the product to the
final customer at the time it is needed. This can be very difficult, as supply chain are
surprisingly complicated, as we see a product like a cotton shirt has a long journey from
the farm growing cotton to the final customer, and several chains merge as buttons,
polyester, dyes and other materials arrive to join the main process.
Functions of logistics
An organization has to make good decisions in several related areas to get an efficient
flow of materials. It has, for example, to choose reliable suppliers, negotiate terms for
delivery, use appropriate transport, store materials properly until they are needed, locate
facilities in the best places, and so on. Continuing with this line of reasoning, you can
see that the work done in logistics forms a series of related functions.
These include:
Procurement or purchasing- buys the raw materials from suppliers.
Traffic and transport- move the ram materials from suppliers to the
organization’s receiving area.
Receiving- check materials delivered against orders, unloads delivery
vehicles, inspects goods for damage.
Warehousing or stores- stores materials and takes care of them until they are
needed.
Stock control- sets the policies for inventory, including stock levels and
order sizes.
Material handling- moves materials during operations.
Distribution- organizes delivery or finished goods to customers.
Transport- moves finished products and runs delivery vehicles.
Location- decides how many facilities should be built, and where they should
be.
Communication- keeps and reports all records for the logistic system.
You can probably imagine these functions in a manufacturer, but the same
principles apply to other organizations. When a rock band goes on tour they carry huge
amounts of equipment. Purchasing buys everything that is needed on the tour, transport
moves it to the next destination, receiving makes sure that every thing arrives safely,
warehousing keeps things until they are needed, materials handling move things
between trucks and the stage, location decides where to perform, and so on.[4]
Aim of logistics
Logistics has a number of objectives, which we can summarize as getting ‘the right
materials, to the right place, at the right time, from the right source, with the right
quality, at the right price’. To be more specific we can phrase these aims in terms of:
Finding reliable suppliers and developing business relationships;
Making purchases at lowest long-term cost;
Giving uninterrupted flows of materials into the organization;
Maintaining the quality of materials;
Giving efficient movement of finished goods out to customers;
Protecting materials and avoiding damage;
44
Guaranteeing customer service and maintaining good relations;

Getting high turnover of stock and minimizing the associated costs.
CONCLUSIONS
In business world there are many essential parts to a successful operation. Some may
say that marketing, production, finance or sales are the most important part of any
business, but after studying the process of operations management, it is found to be the
backbone of any business process.
ACKNOWLEDEMENT
The author acknowledge with gratitude the support and facilities provided by the
Nottingham Trent University to collect information for preparing this paper.
REFERENCES
[1] Terry Hill, operations management,
Palgrave Macmillan, ISBN 1403934655,
New York, USA 2005
[2] Donald waters, OM producing goods and services, Prentice hall, ISBN 0201398494, London, Uk
2002
[3] Alison Bettley, OM a strategic approach, sage publications, ISBN 1412919037, London, Uk
2001
[4] Frans A.J. Ruffini, Harry Boer, Maarten

International Journal of Operations & Production Management; Volume: 20 Issue: 7; 2000 Research
paper
44
Domestic companies combat

international giants – An analysis of
rising Pakistan pharmaceutical
industry
Mahreen Hussain
Pakistan Institute of Development Economics (PIDE)
Quaid-e-Azam University Campus
Islamabad, Pakistan.
Abstract
Pakistan’ pharmaceutical industry is a success story, starting with a
scratch and then losing a part of the country. There were many
hindrances in the growth and development of this sector but still the
industry is growing at a faster pace. The problems the industry is facing
are of administrative nature and could me resolved easily if a little
attention is paid to it. In the early years the market was captured by the
multinationals but in the latent years the local industry started to grow
and now it’s competing with them by entering the international market.
This all happened in the deregulation era that the industry faced, if the
prices were hiked then a low price substitute was also available for that
drug. Now the government is trying to control the mushroom growth of
the companies and has established authorities for that matter. For the
first time policies and guidelines are being prepared for the
pharmaceutical industry. It is a good precursor reflecting the prosperity
and sustainability of this sector.
INTRODUCTION
Half of the world’s pharmaceutical production comes from the companies whose
headquarters are situated in the USA, Germany, France, Japan and Britain. Only 10 of the
pharmaceutical firms are responsible for that. In the year 2000 only USA was turning out half
of the global production that valued around 320 billion US dollars. But after the lapse of a
few years the trends have started to change and the production plants are being shifted to the
more competitive and emerging Asia-Pacific economies of China, India, Pakistan and many
others.
After the independence of subcontinent, the Pakistani pharmaceutical sector observed growth
till the year 1971. Country’s pharmaceutical consumption patterns have shown a shift towards
the un-licensed products because of the low and medium income levels, as where there is an
increase in income level, a shift towards the licensed products is observed. According to the
statistics the national production has increased to 55%-60% and 70-75%. Unit-wise share has
increased in comparison to the MNC’s operating in the country. However there are certain
licensed pharmaceutical companies operating in Pakistan. The produce of these
pharmaceuticals is not only used within the country, but it is also exported to other countries.
45
Now, Pakistan is launching the domestic product in the UAE. The health minister stated that,
if 1 billion Indians and 140 million Pakistanis can survive on these drugs then why the Arabs
can’t. So the importance of these pharmaceuticals is not only evident from the consumption
but also from the boost it is giving to the economy.
ROLE OF PHARMACEUTICALS IN THE ECONOMY

Pharmaceutical industry of Pakistan is playing an eminent role in the economic development of
the country. Entire local production and consumption of pharmaceuticals is presently estimated
at $1.5 billion. There are about 400 pharmaceutical manufacturing companies including 28
multinationals (47 percent share of the total market share), which aggregates around 80% of the
country’s needs. Approximately 95% of the vital raw materials used are imported from China,
India, Japan, UK, Germany and others.
12
10
4
Billions $
2
0
E
F
C
Market Share
%
46
MULTI-NATIONALS VS DOMESTIC MANUFACTURERS

Previously when MNC’s been a part of PPMA, their disputes and differences with the local
pharmaceutical industry used to be on the transfer pricing import of raw material on higher
prices from their parent companies though the same quality material is available in Pakistan at
economical prices with the reputable vendors. Now the scenario of the industry has changed a
lot. The foremost problem that the pharmaceutical industry faced was of the patent rights.
MNC’s have introduced the innovative products at economical prices and have reported to have
initiated the legal proceedings against them claiming the infringement of their innovative
products.
45%
55%
Multinatioanls
Domestic
GOLDEN PRODUCTS
Like India anti-effective and antibiotics segment (Augmentin, Amoxil, Velosef, Ampiclox)
dominates the sales in Pakistan pharmaceutical market followed by the cardiac, muscular
pain drugs, multivitamins and others. Majority of the pharmaceuticals firms in the country
produce the systematic anti-effective, non-steroidal and extensive variety of penicillin.
According to Ministry of Health overall investment in this industry is about 0.5 billion US$
with approximately equal shares among the local and multi-nationals.
2.5
1.5
Billions $
1
0.5
0
Pons
Augm
Vel o
Unife
Pega
Flag
Am p
Am o
Bruf
Meth
sef
yl
ic lox
en
x il
sy s
t an
ycob
ron
ent in
al
Market share
47
MARKETING CAMPAIGN
Pakistani pharmaceutical market is Pharmaceutical market in Pakistan is in undated with
superfluous of “me-too” products concerning the solid marketing power for the promotion of
the product. The strategy implemented are “push” then “pull” which requires more finances
in terms of promoting the product on the distribution level as well as the end consumer.
Pricing
Prices of many pharmaceuticals are much higher in Pakistan as compared to the
neighboring country of India. The prime reason for that is the imported raw material.
According to the figures of the Ministry of Health 41.2% of the total population cannot
afford to buy the drugs because of inflation in the country. The other reason for the rise in
prices is the semi deregulation adopted by the government in the year 1993 which resulted
in 400% increase in few months. A study shows that the prices are hiked 30% in the
regulated era of 1980-90 and tremendous increase of 87% in the deregulated era. Shortage
of medicines was also a reason as it leads to the black marketing. The government has
established an independent DPRA to control the abuse, yet the scope and mandate has not
been made public.
Government Interventions
Keeping in view the patents and copy rights infringements PPMA has adopted a stern
attitude about these matters and the implementations of these laws are in process. There
existed confusion that who would be fixing the prices of these medicines either the ministry
of health or the ministry of industry. But after the price wars that caused the 400% increase
in the prices within 4 years. To avoid any further unlawful raise the ministry is working on
the formulation of pricing policy for the first time.
Company A:
A is the world’s largest pharmaceutical company with its headquarters in USA and its
branches in 44 countries. It has recently gained more of the Pakistani market share through
the acquisition of other pharmaceuticals. The workforce hired by them totals around
137,127. They had total revenues around 71,000 millions US dollars with the net income of
14,000 million US dollars. The major emphasis of the company has been the research and
development in the fields of cancer, HIV/AIDS, diabetes and etc. and 11,318 million US
dollars are spent each year on R&D.
Company A wants to be a prosperous company by making the health of their customers
their primary goal and develop new medicines. Their objective is to be customers’ choice
and being valued. To achieve all that they, emphasizes on maintaining the same quality of
products and services everywhere they operate. Their primary focus is aligning their
interests and their stakeholders’ interests’ in order to achieve a balanced society by
contributing in it.
Company B:
Company B is the primary health care company of the world and has more than 70,000
employees working for them. Abbott has its existence in more than 130 countries and its
headquarters situated in USA. B is dedicated to humanizing the health care facilities that
are cost effective and constantly meet the needs of the market. The revenues generated by
the company sums up to 30,000 million US dollars and the net income of 4,900 million US
dollars. The company annually spends 2,700 million US dollars annually on R&D. They
are not only doing the R&D in the field of pharmacy, but also in diagnostics and nutrition
with an emphasis on the diabetes.
48
A key element of their definition of citizenship instead of CSR is the use of leadership skills,
knowledge, products and financial resources to attend to the needs of the people around the
world. It focuses on improving and adding value to patients’ lives. The success of Global
Citizenship program is that the cores of the company values are built upon proactive ness and
the initiation. Employees are optimistic about their role they play for the development and
promotion of the policy. Their vision of being the world’s leading health care organization,
employer of choice, healthcare provider, business associate and fellow citizen can only be
achieved through such a strategy.
Company C:
Company C is the outcome of acquisitions and mergers. And is growing at an alarming speed
and markets have it that till 2012 Company A will be owned by them. The reasons behind that
are the continuous hard work and the company’s belief in R&D and consumer response. It has
total revenues of 41,000 million US dollars and a net income of 10,500 million US dollars. The
company has 103,483 employees working for them. The company is spending about 6,373
million US dollars annually on R&D.
They became the prime pharmaceutical company to present a comprehension of the deserted
non- tropical disease. Their intention was to be flexible in their approach and to join forces to
cater the problems of global health care and the therapies for Neglected Tropical Diseases,
where market forces are not driving discovery. That is why the company is stressing on the
strong patent protection as the public could be put under the threat in this dynamic and
developing world.
Company D:
Company D origins could be traced back to the 1668 in a small town of Germany. It started off
as a partnership company in the United States which was later confiscated during the First
World War. Then they had to setup an independent company in New York.
Company generates 27.4 billion US dollars and their net income is 13 billion US dollars. It has
been working on the research and design of Oncology, neurodegenerative diseases, fertility,
endocrinology, autoimmune and inflammatory diseases, Cardio Metabolic Care. D also
publishes the manuals and the manual of diagnosis and therapy which is the world’s best selling
medical text book. It is spending 5.8 billion annually on the undergoing research projects.
D is working to improve the human life and preserve it. The company is working on improving
the standards of the society they operates in. As they believe that the external environment is
continuously effecting the internal growth and success. And they believe that entrepreneurial
success of their business partners and their stake holders is benefiting for them ultimately. D
company foundation that was established in the 1957 disbursed over 480 million US$ to the
educational sector and non-profit organization.
Company E:
Company E is one of the world’s leading pharmaceuticals with its headquarters in Paris,
France. It is present in more than 100 countries with 10,000 scientists, 100,000 employees
working for the well being and development of humanity. The total revenues generated by the
company are 40.78 billion US dollars and the net income is 8.471 billion US dollars. The
annual expenditure on research and development is about 4.58 billion US dollars.
The purpose of their research is to provide the well-tolerated medicines at the earliest feasible
time. The scope of their research is in the therapeutic division specializing in cardiovascular
disease, Thrombosis, Cancer, Diabetes and metabolic disorders and Neurodegenerative
diseases.
49
OVER VIEW OF PHARMACEUTICAL INDUSTRY
Total Revenues Net Income Expense on R&D
50
40
30
Billions $ 20
10
0
A
Industries E
CONCLUSION
The pharmaceutical industry of Pakistan is growing at the rate of 11% annually. For the
past seven years the expenditures on this sector of the economy is 0.6% of the GDP which
is expected to increase to 1.73% of the GDP a well beyond the local and global standards
i.e. 5.12% and 7.14% respectively. But the percentage of spending is higher than many of
the other South Asian countries. In the year 2007 the import turnover in the international
market was 100 million US$. The export vision is paying attention on achieving the target
of 573 million US$. The domestic market is supposed to gain more share in coming times
as many of the drugs are coming off-patent benefiting the generic-dominated industry.
Pakistani pharmaceutical industry is a success story as its providing essential and quality
drugs to the millions of people at an affordable price. The technically strong and self-reliant
pharmaceutical industry is playing an eminent role in the promotion and sustainable
development in the fundamental field of health within the country and also in the
international market.
Questions:
١. What was the reason behind the hike in prices?

٢. How did the local producers gain more market share then the MNC’s?
٣. Did “me-too” marketing strategy work for the local producers?
٤. How will the DRPA affect the pharmaceutical industry?
٥. What were the results of deregulation?
50

Ijcbs Vol 1 No 1 October 2010 Issn 2156-7506

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Ijcbs Vol 1 No 1 October 2010 Issn 2156-7506

Hochgeladen von

Copyright:

Verfügbare Formate

October

Indian Primary Market - A Review

An International Journal Published by

Indexing & Listing

“International Journal of Contemporary Business Studies” (Ijcbs) has been

“International Journal of Contemporary Business Studies” (Ijcbs)

Open Access Policy

Copyright © 2010. Academy of Knowledge Process

Prof. Dr. Nada k. Kakabadse Assoc. Prof. Dr. Elena Druica

Dr. Ali Salaman Saleh Dr. Azlan Amran

Prof. Dr. Vasyl Gerasymchuk Dr. A. Pourezzat

Copyright © 2010. Academy of Knowledge Process

Sasan Ghasemi Magdalena Radulescu

Copyright © 2010. Academy of Knowledge Process

2. Determining Effective way of career management practices in Pakistan

3. The Credibility of Management Earnings Forecasts in Tehran Stock Exchange

4. The Role and Significance of Operation Management

5. Domestic companies combat international giants – An analysis of rising Pakistan

Copyright © 2010. Academy of Knowledge Process

Indian Primary Market - A Review

Copyright © 2010. Academy of Knowledge Process

Indian Financial Market

Copyright © 2010. Academy of Knowledge Process

Table: 1 Fund Generated Through IPO

Copyright © 2010. Academy of Knowledge Process

Table : 2 Foreign investment inflows

Copyright © 2010. Academy of Knowledge Process

REVIEW OF RELATED STUDIES

Copyright © 2010. Academy of Knowledge Process

Table: 3 IPO Issue & Status

2008 % 2007 % 2006 % 2005 % 2004 %

RESULTS AND DISCUSSION

Copyright © 2010. Academy of Knowledge Process

Short term Performance of IPO

Offer to Offer to Offer to Offer to Average

Table : 5 Second Day Performance

Copyright © 2010. Academy of Knowledge Process

No of Average 52 Average 52 Difference

Table :7 Five years IPO Returns

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

Determining Effective way of

Keywords: Career development, Human resource management, Developing

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

EMPLOYABILITY, THE NEW SECURITY

Copyright © 2010. Academy of Knowledge Process

SOCIO-ECONOMIC SKETCH OF PAKISTAN

Copyright © 2010. Academy of Knowledge Process

The current study addresses two major questions:

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

a majority of their friends going there (Male, Lecturer, Public

Organizational Career Development programs

Ownership of Career Planning

Copyright © 2010. Academy of Knowledge Process

LIMITATIONS AND FUTURE RESEARCH PROSPECTS

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

Copyright © 2010. Academy of Knowledge Process

The Credibility of Management Earnings

Improved processes can make products with guaranteed high quality;

Guaranteeing customer service and maintaining good relations;