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Friday, August 28, 2020

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Wednesday, August 26, 2020

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Tuesday, June 9, 2020

Policies Related To Trade Credit Finance Essay - Free Essay Example

Trade credit is very informal and is hard to monitor and therefore are often overlooked in policy and research (Paul and Boden, 2011). The common setback of trade credit management is late payment, which may arise from abusive power behavior by large companies towards small suppliers. The UK government authorities have created numerous policies that tackle the late payment. Many of existing reports have recommended the government intervention in tackling late payment problem but many of these policies were created based on empirical evidence and statistics few of small businesses which are used to represent the whole population (Auboin, 2010, Grave, 2011, Paul and Boden, 2011, ACCA, 2012, Pike and Cheng, 2002, Wilson, 2008). However, many still believe that the subject matter of late payment cannot be tackled through large sums of quantitative evidence only but through proper engagement with small business and SMEs, collecting enriching information into late payment and trade credit related issues. This chapter will examine the current policy stance of the UK government and the EU and will evaluate the proposals that are under consideration. Based on the theoretical understanding of trade credit developed in Chapter 3, this Chapter will seek to identify any theoretically sound policies that could be taken by government / the EU in order to improve the in addressing trade credit environment for SMEs. 5.2 Trade Credit Insurance Top-Up Scheme 2009 On 1st May 2009, the UK government had initiated the Trade Credit Insurance policy Top-Up Scheme (TCI) that ran from 1st April 2009 to the 31st December 2009  [1]  . The scheme is designed to tackle the sudden reduction in private sector insurance cover against customer non-payment and bad debts. The trade Credit Insurance Top-Up Scheme (TCI) was a  £5 billion initiative derived out of the UK government 2009 budget which allowed the businesses with trade credit insurance policies to buy an additional cover on top of their present policy cover. Under the TCI business with existing trade credit insurance policy may purchase additional insurance. The top-up Scheme was for eligible UK businesses that already have insurance cover after the 1st April 2009. The government scheme also involved various top trade credit insurance providers in such as; Euler Hermes, Atradius, and Coface e.t.c. Although, the legal relationship will be between the insurance holder and the credit insurance provider, the credit insurance provider will have a separate legal relationship with government in respect to the top-up scheme. Therefore businesses will not interact directly with the government in order to participate in the scheme. All applications, payments, claims and queries should be directed to the selected credit insurance provider and not the government. The scheme will top-up the insurance cover with a minimum credit limit of  £20,000 up to  £2 million as the maximum amount on any increase cover. For instance, if an insured cover of supplier has reduced from  £200,000 to  £100,000, the supplier can opt to buy a top -up cover from  £20, 000 to  £ 100,000 to restore its original value of the insurance cover. In other cases, if the cover is reduced from  £50,000 to  £20,000, then the level of cover provided by top-up policy will fall, since the minimum coverage limit is  £20,000. Instead of having  £50,000 the credit policy will be placed at  £40,0 00 to match the amount provided in the policy. The scheme does not guarantee top-up to those suppliers or businesses that have insurance cover that is below the minimum credit limit of  £ 20,000 (balance zero)  [2]  . Consequently many SME and business have expressed disappointment in the way the scheme has been operated, saying that the scheme only guarantees insurance cover that reduced after 1st April 2009. Many critiques the scheme as being a failure, as the scheme does not address the needs of businesses whose credit insurance limits have already been withdrawn as opposed to reduced. In addition, some companies could not benefit from the scheme because their insurance cover was reduced before 1 April 2009. A news report indicated that only  £18 million out of the  £5 billion have been claimed from inception in 2009, Euler Hermes also reported that 2 out of 3 clients have submitted claims to the scheme (AccountancyAge, 2012)  [3]  . It is therefore assumed th at the negative reaction of businesses towards the scheme is as a result of the financial crisis which saw a reduction in wholesale transaction with little or no accesses to finance. However the scheme needs to widen further to address the pressing needs of even more companies were not able benefit from the cover from when the beginning of the stipulated period. 5.3 Late Payment of Commercial Debts (Interest) Act 1998 The center piece of the statutory interest is that small business can charge a compulsory interest on any late payment of commercial transaction. The legislation was created in 1997 by the Labor government, after the Department of Trade and Industry published a Green Paper, entitled Improving the Payment Culture: A Statutory Right to Claim Interest on Late Payment of Commercial Debt. The publication outlined the best way to implement such legislation enabled the government to provide legislation that was aimed to improve the payment culture amongst UK business (Group, 2002). In the Green Paper, the Government proposed to test for smallness on the two out of three criteria test stated in section 247 of the Companies Act. However, it became apparent that to take that test out of its context (i.e. Filing accounts in respect of a completed year by companies incorporated in the United Kingdom) and use it in another context would lead to difficulties of proof (Wilson, 2008). It was, ther efore, proposed that the legislation should define what a small business will be (with no more than 50 full-time employees). The legislation would apply to commercial contract across the UK including foreign transaction with the UK and foreign party. Where there is no significant connection between the contract and that part of the UK, and, but for the choice of law, the applicable law would be a foreign law. Where the choice of law is a foreign law, the Bill would apply if, but for that choice of law, the applicable law would have been a law of part of the UK and there was no significant connection between the contract and any country other than that part of the UK (Wilson, 2008). Consequently there were no minimum level set for which a claim for interest could not be made. The intention of the government was to increase formal contractual agreement credit period in accordance with trade custom and practice. The rate of interest has been prescribed at 8% which was above the bank of England official base rate of 5%. The act was broken down into three distinct phases. The main provisions of the bill are summarized in the table below  [4]  ; Main provisions of the Late Payment of Commercial Debts (Interest) Act 1998 PHASE 1 Statutory Interest on Late Payment will depend on the form of a contract term and the kind of debts the parties have right to claim over. Secretary of state has the power to determine the provisions of a contract and the interest rate charge on late payment that could be claimed (8% over the base rate) PHASE 2 This states the provisions made over late payment with the claims that will be made once a payment is deemed late. They also restrict the freedom of the contracting parties to make any other provisions that have the effect of varying the right to statutory interest. PHASE 3 This section deals with the payment of the contract price which is due before the supplier has fully performed his obligation under the c ontract. This bill also covers the factoring and debt collection services that the parties to assign the statutory rights on late payment to a third party. 5.3.1 Late Payment of Commercial Debts (Provision) Act 2002 An amendment was made to the late payment of commercial debt of 1998 on the 22nd June 2002 and was enforced on 7th August 2002. Under the rule, all business owners and manager are responsible for claiming reasonable interest on late payment on any transactions. This legislation came as a result of the UK obligation to fulfil the European Directive 2000/35/EC on combating late payment in commercial transaction (Group, 2002). Changes made to the provision to the Late Payment of Commercial Debts (Interest) Act 1998 are as follows; Under this provision, the power of the Secretary of State to determine the provisions of a contract was removed especially the power to define statutory interest on late payment. This removed the excessive power of the government to dictate how business is to be run in the country. The parties can agree a different rate of interest or an alternative remedy for late payment. In the case of interest, this is usually then termed as Contractual Interest. H owever, the Act requires that the agreement must provide for a substantial remedy to commercial debts. Purchasers are not allowed to force suppliers to accept a low or nominal rate of interest, as a way of getting round the Act. Any such clause is likely to be struck out, in which case interest can be claimed at the rate described. The right for an appropriate representative body to change grossly unfair contractual terms on behalf of SME. The high court may grant an injunction to restrain the use of contract if the contract is deemed void under the 1998 interest Act. This suggests that both legislations are provisions made to help lift the burden of late payment by enforcing prompt payment culture through their trade credit practice. Unfortunately, the reality is far from the expectations, as businesses and MPs like the Minster of Enterprise, Mark Prisk, have admitted that the legislation was an ineffective tool for combat late payment. In a transaction circumstance between a small supplier and large customer, the legislation is less effective when the power asymmetry is present in that transaction. In theory, a customer may have a bargaining advantage over the supplier in cases where the credit policies are properly laid out. In that instance, the small supplier may find it difficult to take legal action on large customer because it may have serious transaction cost to the small business (Paul and Boden, 2011, Summers and Wilson, 2000, Wilson and Summers, 2002). When it comes down to promoting business and building customer relationships, the small business is sometimes reluctant to speak out against the large customer because they fear of order cancelling reprisal. Furthermore, an issue with the interest rate of 8%+base that this was set with a view to compensating small businesses based on their average cost of capital. However the same rate also applies to large businesses and public liability companies; which generally have a much lower cost of cap ital. This is assumed that large businesses are more compensated and in fact have an incentive to enforce interest penalties. This is particularly the case if they are less fearful of losing business by applying penalties. Other likely users of the Acts are debt collection agents and factoring companies. Commercial debt collection agents can use the act to guarantee that interest is collected on the overdue debts of their clients along with some collection costs and can pass this benefit onto their clients in the form of lower commission rates. Insolvency practitioners can apply interest charges on the trade debts of insolvent companies and collect the interest going back up to 6 years on late payments. Finally, suppliers are advised to plan the period of collecting the payment using a combination of formal and informal practice of calling the customer before due date. 5.4 Project Merlin, UK (2011) This is an agreement between the present conservative government and the four major high street banks in the UK. The bank has agreed to make lending to SME under the program the bank will lend  £190bn to business during 2011 out of which  £ 76bn of the loan will be available to the small business (Treasury, 2011). The program will be monitored by the bank of England to check the influence of impact on business. The bank that was involved in the deal include; HSBC, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Santander bank; which had agreed with the lend parts of the deal (Treasury, 2011). Although there were some positive results, various reports show that the lending program did not go that far enough. Bank of England Trends in Lending figure of 2011 showed that bank loans to small business was totalled to about 74.9 which is about  £1.1bn short of the proposed  £76bn in 2011. The assumption is that many SME ignored the use of bank finance and lending becaus e of the interest charged on bank loans. However, the number could also be interpreted to show those banks are actually committed to lending as they came close to their target. However the results show that banks failed to meet their lending targets for the smallest of UK businesses a particular cause for concern since these are the companies that usually exhibit the most growth and innovation and employ the biggest percentage of UK workers. The Federation of Small Businesses (FSB) survey 2011 did not reflect the banks claims that demand for bank loans have been reduced. The results of their June survey found just 20 percent of small firms had applied for a bank loan in the previous 12 months, and the December results showed that this figure was even lower at 19 percent (FSB, 2011). In June, 12 percent of those who did not apply for a loan said it was to avoid the unsuitable terms and conditions surrounding the process, a further 12 percent did not try because they believed their a pplication would be refused and 7 percent said previous negative experiences with bank loans put them off. Whilst this is merely a reflection of business owners perception of bank lending and not necessarily accurate, the statistics did show that of the companies that did apply for a loan, 33 percent was turned down and only 43 percent received the full amount they requested (FSB, 2011). The FSB surveys have also shown the consequences of businesses not getting enough financial support. Of the businesses whose loan requests were turned down (whether wholly or partially) only 16 percent avoided a negative business impact by securing finances elsewhere whereas 46 percent said they had to delay, scale down or abandon their investment plans, 40 percent said they had continued financial concerns, 31 percent missed a growth opportunity and 18 percent believed they were put at a competitive disadvantage (FSB, 2011). Long term effects were also evident, with 13 percent reporting they end ed up having to make staff redundant to survive without the extra support. The Bank of England report reveals that many SME are not satisfied with the lending condition of the bank set and is particularly frustrating when banks have exceeded their overall gross lending targets of  £190 billion by nearly  £25 billion increase. It can be deduced that a large part of the loan was used by medium to large firms, with enough cash flow have the ability to repay the loan. In terms of trade, the program shows to that more SME are refusing to take lending because to for the transaction cost compared to transaction in supplier credit. 5.5 National Loan Guarantee Scheme This is another initiative that was created by the government on the 20th March 2012. The scheme allowed the high street banks to provide up to loan of up to  £20 billion to small businesses and will be guaranteed by the government. . The scheme was designed to reduce borrowing costs for small and medium-sized companies (SMEs), and in doing so the interest rate charged on the guaranteed loan was one percentage point lower than those outside the initiative. For instance the business can receive a discount of  £10,000 for a  £1million loan from the bank. Banks apply for Government guarantees against the borrowing within a 2 year window for a fee. They can use the guarantee to raise funds at a lower cost. The fees received from banks will reduce borrowing and debt. If a bank were to default, the Government would have to meet obligations arising from the guaranteed debt, but as a general creditor would have some claim on the banks assets. Any losses resulting from the guarantee w ould increase borrowing and debt. The common characteristics of the National Loan Guarantee Scheme were seen on the participating banks are; Available to new and existing customers Loan amounts from  £25,001 to  £5million Terms from 1-25 years (discounted for the first 5 years) Interest only and repayment terms available Fixed or variable rate To ensure that the businesses benefited from the scheme, the HM Treasury had put in place strong scheme rules for participating banks in passing on the guaranteed loan. The bank will have to demonstrate that the rate charged on the loans covered by the scheme will be expected to be lower than rates charged on the loan not covered by the scheme. The scheme was unsuccessful as nearly  £3 billion out of the 20 billion was given to businesses. In an assessment of the scheme carried out by Syscap limited. They reported that the scheme has had no impact on small business lending. According to the analysis the interest r ate on the loan was the same with the normal interest rate charged by the bank. Syscap indicated that the scheme did not assist small business at the bank provides loans to a few businesses based on the collateral that the business possess (Syscap, 2012). It is assumed that the bank were only lending to business that can afford to provide high security for an average loan and small businesses are considered not to have high collateral to back up their loans. The interest rate on the business loan under  £1 million fell only by a 0.08% difference than the 1% difference. In other words, the average rate on loans below  £ 1 million still remained at 3.8% even in the month the scheme was launched in March 2012 (Syscap, 2012). Difficult economic conditions in the UK and Euro zone have also led banks to dramatically tighten lending criteria as borrowing costs increase (Dun Bradstreet, 2010). Banks have had to protect themselves and as a result lending has been restricted in many inst ances to established and well-run businesses. It is therefore suggested that the government should consider giving guarantees for alternative sources of finance like asset finance. 5.6 Better Payment Practice Group (BPPG) The Better Payment Practice Group (BPPG) was formed in 1997 as a partnership between the public and private sectors. The original Payment Practice Group included: British Bankers Association, Association of British Insurers, British Chambers of Commerce, CBI, SME Council, Factors and Discounters Association, Federation of Small Businesses, Forum of Private Business, Institute of Credit Management, Institute of Directors, National Farmers Union, The Union of Independent Companies, Department of Trade and Industry and CMRC (Wilson, 2008). Its aim was to improve the payment culture of the UK business community and reduce the incidence of late payment of commercial debt  [5]  . Their research on late payment was incorporated into a guide to effective credit management Better Payment Practice: a guide to credit management published by the Department of Trade and Investment on behalf of the Better Payment Practice Group. It provided straightforward guidance and advice on how to g et paid on time (Wilson, 2008). The Better Payment Practice Group was a consortium of small business support and representative organizations, Government and other interested bodies. It formed an integral part of the Governments commitment to work in partnership with the business community to bring about a better payment culture in the UK. 5.7 Prompt payment Code UK It is a joint initiative that involves the public authority and the specialized organization like the institute of credit management and the department of the business , innovation and skills seeking to identify business that are prompt payers (ICM, 2008). Prompt payment Code is about promoting best payment practice between organizations and their suppliers. Mark Prisk, MP, Minister of State for Business and Enterprise, has stressed the impact of paying on time to smaller businesses within the supply chain (ICM, 2008). He also stated that what is important in payment practice is not only the speed at which payment is made but the certainty of getting paid that is important. This initiative encourages businesses to adopt the payment code by signing up to the code, committing them to paying supplier on time and to provide clear guidance on payment procedures. The code had been endorsed by several high street banks and professional organizations. The provisions of the Prompt Paymen t Code stipulated the that signatories must pledge to the following  [6]  ; To always pay their supplier within the agreed credit term. The customer must ensure not to change payment terms within giving reasons to the supplier promptly. The code also stipulates to their signatures to make payment procedures clear to the supplier, ensuring that disputes and complains about the payments are dealt with before goods are delivered. The customer must also ensure to contact the supplier on time in case payment cannot be made on time. Our normal payment terms for an approved invoice are 30 days from invoice date. Exceptions to this may arise where there is disagreement over the invoice or it is received with insufficient time for processing. In the exception cases payment is made as soon as possible after agreement or receipt of the invoice as relevant. 5.8 EU Directive on Late Payment (2002) This directive enforced on 8th August 2002 for official member of the European Union. The directive was designed to bring member state (which were 18 member states) into line with all payments made as remuneration for commercial transactions. The Directive was designed to remedy this situation and to ensure that the sellers of goods and the providers of services would have a number of instruments at their disposal which permit them to obtain payment on time. Due to the close link with the free circulation of goods and services, the Directive is based on Article 95 (ex-100a) of the EC Treaty (Europa, 2000). The EU legislation does not apply to contracts made before 7 August 2002, claims for interest of less than ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬5 ( £3.95)  [7]  , transactions with consumers or debts that are subject to other laws, e.g. Insolvency proceedings (Wilson, 2008). Only if the payment period and interest rate on late payment have not been fixed in the contract, the statutory interest automatically becomes payable within 30 days after the goods have been received by the customer. The legislation provides the statutory rate of interest on late payment when payment is not made within the contract period, but also allows parties to agree to their own terms as well.  [8]  . The general principles of this directive are; The directive only reacts to transaction between private business and top public sector business. The directive stipulates that 30 days as the credit term after which interest will be charged, unless another payment period has been agreed upon by the parties. The interest rate was set the same as the rate for European Central Bank of its main refinancing operations. 5.8.1 EU Directive on Late Payment (2011) The directive 2011/7/EU on combating late payment in commercial transaction was published on 23rd February 2011 and came into force on 15th March 2011 (Europa, 2011). This new directive attempts to modernized the previous directive (2000/35/EU)  [9]  . Changes made to the provisions are summarized below; Commercial transaction between commercial parties The new provision states that the standard deadline for a payment period of commercial transaction between businesses should be a 30 day period, if the payment period is not set out in the contract. If a payment period is not set out in the contract the debtor must make payment within 30 calendar days as the latest alters: Receiving the creditors invoice; Receiving the goods or services; and Completion of acceptance procedures which commence on the date of receipt of those goods or services. Such procedures shall not last more than 30 calendar days but this period can be varied by express Any payment period that exceeds more than the stipulated period will be considered grossly unfair. This same principle stated above can also be applied to transactions between businesses with a 60 day payment period. Any payment period that exceeds more than stipulated period will be considered grossly unfair. Commercial transaction between commercial entity and public authorities The new directive can also be applied to transaction between private or public business and public authorities or central government. This is likely due to the general scope of the European Union, which is characterized by 27 member states transacting with each other. The payment period is put at 30 days on contract on the debtor public authority unless payment period is not stated in the contract within 60 days or in very exceptional circumstances. Interest Public authorities are not allowed to fix any interest for late payment. The relevant interest rate applicable will be increased to 8% above the European central bank reference rate. In retrospect, a creditor may charge interest on the amount due directly from the first day after the term of payment has expired. The debtor no longer needs to be in default, which means that he need not be reminded of his payment obligation, for example by sending him a reminder. Claims/ recovery cost All creditors to a contract are entitled to a 40 Euros ( £ 31.5p) minimum cost by the debtor. This sum is payable without the need for a reminder and as compensation for the creditor own recovery costs. Unfair contractual terms The provision specifies several clauses that will determine whether a contract possesses grossly unfair terms. A contract can be considered unfair when; There is a change from good commercial practice, and fair dealing; The nature of the product or service; and The debtor had any reason to deviate from paying the statutory rate of interest for late payment. If the statutory rate of interest is excluded in the contract term. Conclusion Despite the fact that various existing studies have pointed out the shortcoming on the government policy, one cannot dispute the positive impact of legalization have on business activities in certain power, with relative satisfaction from individual business (Project Merlin, 2011 and Prompt Payment Code). In particular the government needs to promote the culture of lending to small business at favorable rates and open up alternative routes apart from bank lending. The FSB survey 2012 shows that, 22% of small businesses use own saving and 20% use retained earnings as a major finance source apart from the bank overdraft (FSB, 2012). In addition the government ensures to promote the guarantee schemes for alternative sources of finances for businesses like trade credit and asset financing. Many of business and industry participant are advocating for more attention by government personnel into many business practices. Ultimately, businesses cannot expect that every policy or action t aken by the government will completely eradicate late payment. This is because government their policy based are supported by various statistics and research papers. Moreover trade credit relationship is heterogeneous in nature, there cannot be single solutions to trade credit issues because business are different. There are general obligation expectations that are expected of the next government in tackling late payment. Since the previous governments have tried at one time or the others have failed to meet the general expectation of businesses and SME and the general public. Policies should also help to monitor the administrative practices of small businesses, whereby various regulations are to set the standard for the micro and small businesses trading practices.

Sunday, May 17, 2020

Before You Buy a Chemistry Textbook

Youve gotten the list of textbooks for your course. Before you sell your soul to the bookstore, find out which texts you really need and which ones to skip. Ask yourself these important questions: Will you keep the book? Thumb through the book and ask yourself whether or not you think the book will serve as a handy reference after the course is concluded. If yes, buy it, preferably new. If not, keep reading... Does the course actually use the text? Words to the wise: A book might be listed as required, but that doesnt necessarily mean you have to buy it! Some required texts really dont get used (ask upperclassmen) or can be borrowed. If you dont plan on keeping the book after the class, consider buying a used copy. When in doubt, wait until the first day of class to make a decision. Is this a lab book? Laboratory workbooks need to be purchased and they need to be new. Dont try to sneak in a used laboratory book. Your instructor will not be amused. Is the text available used? Really popular texts are usually available in used form. However, the text is probably popular because it is useful! If you need a book and will use it after the course ends, buy it new. If you are strapped for cash or the usefulness of the book is questionable, buy it used. Will the book help you? Sometimes a book is recommended, but not required. This is true for many study guides. Ask yourself whether or not you will benefit from using the book. Can the book be borrowed? Is it useful enough to buy, new or used? When in doubt, talk with your instructor. Can I afford it? Although this is a good question to raise regarding buying books, it is NOT a question to ask when deciding whether or not to obtain a book. The difference? Buying a book involves money. Obtaining a book might involve money, but it also could include borrowing from a student or professor. I dont recommend sharing important books. If you need a book, then get it!

Wednesday, May 6, 2020

Deforestation Did The Mayan Way Of Deforestation Change...

Deforestation: Did the Mayan’s way of deforestation change the climate? It is widely known climate change is occurring because of multiple factors including greenhouse gases, human activity, and some scientists say solar irradiance. What most people do not know or simply have not thought of is how far back in history was climate change a problem or if it was an issue for early civilizations. It is apparent that early civilizations weakened for several reasons, but one reason in particular is affecting the world today. One particular civilization that is popular for their agriculture are the Mayans. The Maya empire occupied land that is now Guatemala. They were the most dominant native people before the 16th century and were intelligent in the way they did agriculture. With new research available, it is plausible to say the Mayans, did in fact, change the climate due to their way of deforestation. Environmental effects of deforestation are pressing. Due to the significant amount of tree lost, animals have lost shelter, regulates temperatures, increased greenhouse gases, less water in the air to be returned to the soil, and soil erosion. There are different methods of deforestation which include clean-cut, selective logging, perennial shade, and the most used, slash-and-burn. Slash-and-burn is mostly used by small farmers and ranch owners in the tropics including the famous Amazon rainforest. The process of slash-and-burn was to cut down the tress in a particular plot ofShow MoreRelatedClimate Change And Its Effects On The World Today1001 Words   |  5 PagesIt is known climate change is occurring because of multiple factors, including greenhouse gases, human activity, and some scientists say solar irradiance. What most people do not know or simply have not thought of is how far back in history was climate change a problem or if it was an issue for early civilizations. 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The Effect of Leadership Styles on The Business Performance

Question: a) Identify from research and academic theory, two of the paired topic areas from parts 3 of the module that apply an organisations effectiveness. Work groups and teams Management and Leadership Power and Politics Conflict and Negotiation b) Analyse and critically discuss the impact that your topic areas have on the culture of an organisation and the way in which employees are managed. Answer: Introduction Snap-on UK holdings limited is the organization selected for the purpose of this research assessment. The organization has been used to identify from research and literature three, 2 areas that influence this organization's effectiveness as per the opinion of De Wit et al. (2012). The two areas selected are, management and leadership Conflict and negotiation. The scope of this paper further lies in critically discussing the influence that the selected areas have on the selected organizations culture and the way in which employees are appropriately managed. Management and Leadership: Literature Review Definitions Even though leadership has been conceptualized from several perspectives as per Northouse (2010), the key to these conceptualizations lies in the following 2 features of leadership: It is a process that involves influence It occurs in groups, involves general goals, aims, and requires managing the workforce to lead them in the right direction (Eden et al. 2013). Based on these characteristics, leadership is a process wherein individuals influence individual groups by managing them to achieve a general goal. Leadership according to Kelloway and Barling (2010) is defined as a process that offers societal influence generally enacted through people in power based formal positions such as supervisors or managers. According to De Wit et al. 2012, leadership does not hold management tantamount to it even though both share general features. For example, both have their focus on influence, working with individuals and meet with the desired goals. The management function, however, is distinguished from that of leadership. Specifically, management focuses on making plans, budgets, organizing, recruiting staff and managing them as well as controlling and solving problems. As per Eisele et al. (2013) Leadership, on the other hand, involves the establishment of control and direction, alignment of individuals with the goals of an organization, motivating them and inspiring them to achieve the goals of the organization. Even after these distinct functions, often leaders are involved in tasks organizing and planning so as to get the tasks done and, in the same manner, managers often help in the achievement of group goals. Influence of leadership and management on organizational effectiveness: Case of Snap-on UK holdings limited According to De Wit et al. (2012) the theory of flexible leadership depicts the way in which top management and other leaders influence business organizations financial performance. Two essential financial performance determinants are efficiency, adaptation and human capital. Large range of behaviours in leadership, programs of management, structure forms and external initiatives can be used for influencing the determinants of performance. Eisele et al. (2013), believes that the theory of flexible leadership is conceptualized at the levels of organizations and includes four variable sets inclusive of effectiveness, determinants of performance, variables of a situation and decision and actions taken under leadership. Organization effectiveness, on the other hand, can be defined as the range until which it is possible to survive and perform missions as well as maintain favourable income, resources of finances and value of assets. Essential indicators for firms doing business are inclusive of the growth rate of profitable nature in the long term, investment return and return for stakeholders as mentioned by De Church et al. (2013). Effectiveness furthermore is dependent upon the 3 key determinants of performance inclusive of reliability in process and efficiency, capital in human resource form and the ability to adapt to the external environment. Such performance determinants are impacted through firm leader's decision an d action. As per the opinion of (Parris and Peachey 2013), the amount of profit this company makes depends upon the decisions of its leaders. The performance determinants are essential for this company and it is problematic to influence these determinants as they are subjected to external environment turbulence. Walstrom (2012) opines that leaders can improvise the organization performance through performance determinants influence. One way of influence used at Snap-on UK holdings limitedis using specific behaviors of leadership when interacting with subordinates and outsides. A second influence form involves decisions on programs of management and systems as well as structure of the organization. Eden et al. (2013) stated another form of influence evident at Snap-on UK holdings limited involves decisions taken about organizations competitive strategy. These forms of influence should be used collectively in a consistent manner for effective leadership to strategically foster. In several years of research over leaders and managers, various behavior types for leaders and managers have been recognized. Griffin (2011) has stated that a difficult barrier for researchers lies in organizing the various types of behaviors into hierarchical taxonomies that are implied with regard to behavioral influence. Task oriented behaviors are inclusive of planning in the short term and work activities scheduling, determine resources and staffing needs, assign tasks, clarify objectives and priorities, focus on efficiency and reliability, direct and coordinate activities, operations monitoring and deal with everyday operational issues. As per Eisele et al. (2013), Behaviors oriented on tasks are used for improving productivity and reducing costs through the removal of not required activities, effort duplication, managing wasted resources, errors, and risk. Kehinde (2011) mentioned that relationship oriented behaviors include to show support and positive respect, provide achiev ement recognition and contribution, provide training and to coach, consult with individuals on their decisions that will individually influence them, delegate and empower the managers, encourage collaboration and working in the team along with building an informational source network internally and externally. At Snap-on UK holdings limited, the main leadership behavior evident was the change oriented attitude. This was involved in making a maximum influence on the organization and enhancing its effectiveness. According to Macdonnell (2012), these behaviors are inclusive of monitoring environment to understand threats, opportunities, interpret events and explain why main change is required, articulate a vision to inspire, take risks for promoting change, build supporters coalition for the main change and determine the way in which new initiatives should be implemented. Jones and Brinkert (2007) stated that such leadership according is termed as transformational leadership as it offers inspiration based motivation and intellect stimulation showing that such behavior results in enhancing people and their performance when working in teams. Such behaviors oriented to change are particularly essential for top executives and management. Various recent researches have depicted that relationship b etween transformational CEO or charismatic leader with their company's relationship and effectiveness cannot be side-lined. According to , the behavior of a leader influences not just one determinant of performance but many at the same time when leaders know to manage along with lead. For example, at Snap-on UK holdings limited, consulting with team members for top executives is essential when formulating a new product based action plan. This, in turn, influences the commitment of the employees and makes then enhance their productivity at the individual level. This results in organizational effectiveness. Diagnostic tools for enhancing leadership to yield maximum organization effectiveness As stated by Griffin (2013), diagnostic tools are mediums to measure the improvement areas of leaders to enhance their effectiveness and the organizational effectiveness of the whole. An example of such a diagnostic tool is organizational effectiveness diagnostic which is a tool based on the survey. This is used for assessing with rigor and systematics, the relative strengths and weaknesses in every area specific to organization effectiveness. Israel (2012) opined,this tool is essential for organizations ability to enhance and implement its strategy and create influence. This tool has been implemented by Snap-on UK holdings limited in order to gain insight into five essential areas inclusive of leadership, making decisions and structure, individuals, work processes and systems as well as culture. Influence of leadership and management on organization culture According to Aziz et al. (2013), there are several ways by which leaders and managers can influence organization culture, especially through their actions and behaviors.Organization culture according to various researches is the shared beliefs, values or perceptions that employees hold in an organization. The culture of an organization reflects beliefs, behaviors norms and values that are utilized by employees of an organization to give implication to a situation they find themselves in. According to Jones and Brinkert (2007), this can influence the staff's attitude and behavior. Understanding the core values of organizations can lead towards preventing internal conflict possibility as well. Moore (2014) said that culture is learned in the society and can be transmitted among members by providing the rules for behaving within an organization. Organizational culture from this perspective is the belief that can guide staff to know what has to be done and what not inclusive of values an d assumptions on their task. As stated by Macdonnell (2012), oorganization based key values within leadership evolve into the style of leaderships. The subordinates working under these leaders are led through the values and leaders behaviors such that the behavior of the parties involves becomes in alignment to each other. When behavior depicts strong unification of values and beliefs, the organizational culture of the organization becomes equally strong. According to Meslec et al. (2015), leaders need to appreciate their operational activities to maintain the culture of an organization. This, in turn, helps in ensuring consistent attitude between organizational members, reduce conflicts and create a health work environment for all those involved within the organization. There are primary mechanisms according to several studies required for embedding culture which is inclusive of: Leaders paying attention to measuring and controlling Leaders reacting to essential situations Resource allocation criteria Modeling role, training, and coaching Observed way to allocate rewards and position Observed criteria to recruit, select, promote, retire and excommunicate If the starting point of a leader is culture then the major determinate lies in understanding whether the leader has managed to gain organizational effectiveness. Snap-on UK holdings limited focuses on evolving its leaders through an open communication culture. The company has set up technological advancement based systems and applications to make communication across the levels of organization simple. As mentioned by Israel (2012), this allows the company the benefit of effective leaders as they are able to coordinate and bring cooperation among the team members in the organization. As a leader, the Snap-on UK holdings limited top management brings forward various management programs that help the company to motivate employees and enhance their trust in the leaders. In turn, this leads towards a positive influence on the entire organization. This section has elaborated the significance of effective leadership in order to sustain a positive environment of culture and management. Such theories and diagnostic tools as addressed in this section depending upon the right behavior style are essential to attain organizational effectiveness and cultural effectiveness. Conflict and Negotiation: Literature Review, models, and applications Definition According to Jones and Brinkert (2007), conflict is a process that starts when a party perceives that other party is negatively influencing them or is about to negatively influence them. It is the point in a consistent activity when interaction crosses over to become a conflict between parties. It encompasses wide conflicting ranges that individuals experience within organizations such as goals incompatibility, the difference in facts interpretation and disagreement depending upon behaviour expectations. Moore (2014) stated several types of conflict are inclusive of task conflict (over content and working goal), relationship conflict (based on relationships of interpersonal nature) and process conflict (conflict on how work is getting done). According to Meslec et al. (2014), intergroup conflict involves functional and dysfunctional conflict. Functional conflict leads towards enhancing the performance of organizations. It happens when groups are in disagreement over the best way to reach goals rather than over the goal itself. This conflict generally results in selecting better alternative means. Positive functional conflict contributions are as follows: Playing an essential role in group stagnation prevention and preventing resistance over change Has the ability to lead towards enhanced problem awareness that requires being addressed Can result in broad and highly productive solutions search Can lead towards facilitating change, adaptation and innovating Wang et al. 2014 have mentioned about dysfunctional conflict, which is a conflict that hinders organizational goal achievement. Management then looks into eliminating this conflict. Functional conflict can also turn into this type of conflict. The consequences of dysfunctional conflict are highly negative inclusive of changes in the groups and changes between groups. As stated by Aziz et al. (2013), negotiation, on the other hand, is a method to manage conflict and is also known as the conflict negotiation process. Using resolution and techniques for stimulation can help in achieving desired conflict management. Negotiation can be defined as an exchange of goods and services between parties and attempts at agreeing over the exchange rate to bring an end to the conflict. It is a process wherein an attempt is made to reach agreements of acceptable nature in a circumstance that is characterized by disagreement based same level. According to Pedler et al. (2013) there are 4 elements characterizing negotiations inclusive of trying to solve a conflict present, interdependence level between the parties involved, the circumstance is conducive to the interaction opportunities and there exists some agreement possibility without which negotiation cannot bring over positive conflict negotiation. Adopting a win-win approach according to David et al. (2012), is the best approach to gain conflict resolution as it offers both the parties something different. Influence of conflict and negotiation on organization effectiveness: a case of Snap-on UK holdings limited According to Robins and Judge (2013), conflict is a dynamic process. In modernized organizations, conflict is helpful for enhancing the effectiveness of organizations. There are various stages involved in the process of conflict from starting to end inclusive of a conflict situation, situational awareness, realization, conflict manifestation, suppressing conflict to resolve it and conflict situation after effects. These are described in the following figure: Source: (Robins and Judge 2013, p. 370) In each of these stages, the organization effectiveness is influenced. The influence is at times positive and mostly negative. When negative, the influence results in hampering effectiveness in the following ways: Diverting energy from tasks Threatening well-being of psychological nature Wasting resources Creating a negative atmosphere Interfering with communication Breaking down cohesion of group Increasing hostile nature and aggressiveness Leading towards increasing politics that is efforts for acquiring power for advancing their individual efforts Leading groups towards stereotyping one another Snap-On UK Holdings Limited benefitted from one of the functional conflicts that took place in the company. The positive influences, in turn, led towards organizational effectiveness because: It led towards newer thoughts It further led towards stimulating innovation and creativity The conflict motivated to change and took into consideration different approaches and ideas Promoting organizations strength through enhancing vitality The conflict helped individuals and teams to establish particular identities Increased loyalty and performance were evident in each group The conflict served as a safety aid as it led towards creating a positive environment where individuals and leaders are committed towards the company they work for rather than their individual self. According to Pondy (2006), it can be said that leaders played an efficient role and a significant role when dealing with the conflict as already stated, functional conflict can lead towards non-functional conflict that could hamper effectiveness gravely. In order to deal with the negotiation process effectively, the leaders as top managers of the company chose to adopt diagnostic tools that can help ease out the negotiation process and enhance the effectiveness of an organization. The tools were inclusive of Belbin inventory and Big 5 model. Belbin Team inventory modelwas used for the following benefits: According to Rahim (2002), providing a general, non-threatening and positive atmosphere where individuals are allowed to communicate with each other and work collaboratively with enhanced knowledge. Such knowledge can be utilized for bringing new teams together or for making current teams motivated as well as effective. The use of this tool furthermore helped in providing a base from which Snap UK Holding Limited could follow a consistent approach to building an effective team based on systems of management. However this model does not often work as literature illustrates this model to have several limitations: In cases where conflict is not involved between teams but conflict involves employees and top management, this model will not work for Snap-On UK Holdings Limited as this model is limitedly designed for teams only The model can be utilized for predicting the performance of a group when used within settings at work but at times, businesses face conflict within social settings as well Personality is not measured through this model, rather focus is over personality Conflict and negotiation influence over Organizational culture According to Robbins et al. (2013), different cultures have different perspectives on conflict and its management. An old man may negotiate in a different way than a young entrepreneur. Such differences are present in organizations ever since the advent of globalizations. Negotiation as well is influenced by cultural differences such as desiring for long-term relationship rather than a one-time relationship, preferring to win, having informal or formal attitude, communicational style differences (either direct or indirect), some cultures foster showing emotions while others prefer hiding it and in some cultures decisions are made through groups while in others it is through leaders. Conclusion At Snap-On UK Holdings Limited, the cultural effectiveness of the firm lies in the leadership capabilities that solve conflict using open communication style. As per Robbins et al. (2013), the company undertook research on different culture based negotiation styles so as to deal with conflict in alignment with the cultural differences present. In order to gain positive influence on its culture, the company uses cultural approaches to negotiation when in a conflict in order to in turn positively influence its effectiveness. Some of these approaches are: Time orientation: According to Riemann (2010), there are 2 distinct orientations to time existing across the world inclusive of monochromic and polychromic. Approaches that are monochromic have time in linearity and require a focus on only one thing at a time. Such approaches are common in cultures influenced by European region evident in U.S, Germany, Switzerland and Scandinavia. Negotiators from polychromic cultures such as those at Snap-On UK Holdings Limited, have a tendency to start and end meetings in flexible timing, take appropriate breaks, have comfort with free flow of information, expect to read and listening to others minds, overlapping talk at times and taking punctuality of time personally. Sustaining power distance: Negotiations are essential but they should not fail to consider power distance sustainability between them. Wang et al. (2014) utilized the power distance idea for describing the deference degree and unequal power acceptance among people. According to Tafel -Vija et al. (2009), cultures wherein there is comfort with higher power distance are those wherein some people are regarded more than the others due to status in the society, their gender, education, their personal rewards and related factors. Snap-On UK Holdings Limited is a company with low power distance with a tendency to assume equality between people. Such a culture helps Snap-On UK Holdings Limited from the perspective that when in conflict, all parties know that they are at an equal level without any partiality. Aziz et al. (2013) opined this confidence of the employees leads towards the positive effectiveness of the organization and a strong organizational culture. References: Aziz, R.A., Abdullah, M.H., Tajudin, A. and Mahmood, R., 2013. 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