Investor Portfolio: Strategy And Critique.

The financial backer, a 35-year-old individual, has moderate gambling resistance and partakes in a stable monetary circumstance. With a significant 15-year speculation skyline, the essential economic goal is capital appreciation to get a familiar retirement. Also, the financial backer tries to designate assets for potential instruction costs for future kids. The picked speculation system mirrors this profile, consolidating a mix of significant worth and development to tackle open doors across market cycles. The portfolio, involving 60% values, 30% bonds, and 10% elective speculations, finds some harmony between development and security. The stock choice includes a careful investigation of basics and development potential. This thorough methodology is customized to guarantee the portfolio lines up with the financial backer’s drawn-out objectives and developing life achievements.

Financial Situation:

The investor’s financial position provides a solid foundation for implementing efficient long-term investing strategies. This monetary dependability ingrains certainty and is considered a more proactive and crafty way to deal with abundance creation. The ideal background of monetary dependability gives the financial backer the ability to weather conditions and market variances and benefit from development situated open doors. A portfolio that is both diversified and focused on growth is especially beneficial in this setting. Enhancement mitigates chances related to market instability, while the quest for development aligns with the financial backer’s objective of increasing capital value over the drawn-out 15-year skyline. The mix of solidness and a development-centered methodology positions the financial backer well for the powerful idea of the market, cultivating the potential for supported monetary achievement.

Investment Time Horizon:

The financial backer’s significant speculation time skyline of 15 years mirrors a patient and groundbreaking way to deal with abundance gathering. This lengthy period gives the scope to a fastidiously created and key growth strategy. It considers the thought of both transient market variances and long-haul amazing learning experiences, empowering the financial backer to explore the unique idea of monetary business sectors. The lengthy skyline enables the financial backer to brave impermanent market slumps, gaining the potential for intensifying returns throughout the long term. This patient and long haul point of view adjust flawlessly with the picked speculation technique, which mixes worth and development, contributing to outfit open doors across various market cycles. The 15-year skyline is an important resource, permitting the portfolio to adjust and benefit from a horde of economic situations for supported abundance gathering.

Risk Tolerance/Perception/Preference:

The financial backer’s moderate gamble resilience connotes a reasonable position between hazard avoidance and an eagerness to embrace market unpredictability for likely better yields. This deliberate gamble profile lays the foundation for a balanced and enhanced speculation technique. The portfolio means finding harmony by consolidating both development and worth parts. The moderate gamble resistance empowers the incorporation of development arranged resources, which might display higher unpredictability yet present open doors for significant returns, close by more steady worth ventures. This mix adjusts consistently with the financial backer’s monetary objectives of capital value increase over the 15-year skyline. The methodology recognizes the certainty of market variances while utilizing the potential for development, encouraging a vital and versatile venture procedure that aligns with the financial backer’s gamble inclinations and long-haul goals.

Financial Objectives and Goals:

The financial backer’s essential monetary goal, fixated on capital appreciation, highlights a pledge to create economic momentum over the long run. This emphasizes the necessity of a robust and expanding financial portfolio and fits seamlessly with the overarching objective of ensuring a comfortable retirement. Besides, the financial backer’s forward-looking methodology is clear in reserving assets for potential schooling costs for future youngsters. This comprehensive and thoughtful financial planning strategy reflects a proactive approach to achieving life’s milestones. The financial backer exhibits a thorough and foresighted monetary methodology by tending to long-haul retirement necessities and likely future instructive costs. The investor’s aspirations for sustained economic well-being and security across various life stages are met by the chosen investment strategy, which emphasizes growth and diversification. This aligns strategically with these objectives.

Portfolio Investment Strategy:

Investment Style:

This portfolio’s chosen venture style addresses an agreeable mix of significant worth and development contributing, decisively intended to enhance returns across different economic situations. By combining these two particular methodologies, the portfolio looks to take advantage of underestimated open doors intrinsic in esteem stocks while at the same time profiting from the unique development expected displayed by specific organizations. This double-pronged technique is a nuanced reaction to the recurring pattern of market cycles. Esteem financial planning gives strength and flexibility during market slumps, while development contributing tackles the potential for significant returns in times of monetary extension. This decent mix aligns with the financial backer’s moderate gamble resilience, planning to accomplish a capital value increase over the 15-year speculation skyline and satisfy the drawn-out monetary objectives, including retirement and potential training costs for future youngsters. (Jamal et al., 2014).

Rationale for Investment Style:

The reasoning behind embracing a mixed speculation style comes from an exhaustive assessment of verifiable market cycles, where unmistakable stages favor worth or development stocks. Perceiving the recurrent idea of monetary business sectors, this approach uses the qualities of both speculation styles. During monetary compressions, esteem stocks frequently outflank because of their soundness, while development stocks flourish in expansionary periods. By consolidating these styles, the portfolio acquires strength and adjusts to shifting economic situations. This system improves the potential for returns and broadens benefits, moderating dangers related to a solitary venture approach. Lined up with the financial backer’s moderate gamble resistance and broadened 15-year skyline, this fair approach endeavors to advance execution, accomplish the monetary goals of capital appreciation for retirement, and subsidize future training costs. (Akhtar et al., 2018).

Justification of the Chosen Investment Strategy:

The picked speculation technique, supported by an expanded portfolio, carefully joins essential investigation for esteem and subjective examination for development potential. This complete methodology adjusts consistently with the financial backer’s overall objective of long-haul capital appreciation. The basic examination considers the recognizable proof of underestimated protections with powerful financials, giving a steady groundwork to the portfolio. Meanwhile, subjective examination focuses on organizations with promising development directions, guaranteeing openness to dynamic open doors on the lookout. By coordinating the two examinations, the system catches quick market potential open doors and positions the portfolio for supported development over the lengthy 15-year skyline. This mix of significant worth and development situated protections encourages a balanced, strong portfolio that explores developing business sector elements while meeting the financial backer’s yearnings for enduring abundance gathering. (Agrawal & Hockerts 2019).

Portfolio Construction Process and Performance Evaluation:

Explanation of Decisions on Asset Allocation:

The essential resource distribution of the portfolio is fastidiously intended to mirror the financial backer’s moderate gamble resilience and long-haul venture skyline. This allocation aims to strike a harmonious balance between growth potential and stability, consisting of 60% equities, 30% bonds, and 10% alternative investments. Values, comprising the larger part, are ready to saddle useful learning experiences intrinsic to the securities exchange. This section acquaints a powerful component with the portfolio, exploiting the potential for capital appreciation. In the meantime, the 30% distribution to securities presents a balancing out part, giving support against market unpredictability and guaranteeing a safer methodology. The remaining 10% devoted to elective speculations improves enhancement further, lessening general portfolio risk. This essential mix lines up with the financial backer’s gamble profile and intends to enhance returns by exploring the different economic situations expected over the broad 15-year speculation skyline, supporting the general objectives of capital appreciation for retirement and potential schooling costs for future kids. (Peijnenburg, 2018).

Explanation of Decisions on Security Selection for Stock Sub-Portfolio (15 Stocks):

A careful and far-reaching approach portrays the security determination process for the stock sub-portfolio. The major examination is at the front, diving into monetary measurements, profit reports, and general economic situations to recognize underestimated stocks with powerful financials. This underlines a worth-situated technique, looking for protections that might have development potential yet are now evaluated underneath their natural worth. At the same time, subjective examination is utilized to pinpoint stocks with critical development potential given variables, for example, industry patterns, upper hands, and board quality. (McGee & Olmo, 2022).

A vital part of the security determination procedure is expansion across areas. This mitigates focus risk by guaranteeing that the exhibition of the stock sub-portfolio isn’t excessively reliant upon the fortunes of a specific industry. The point is to make a balanced and versatile portfolio that can climate area explicit difficulties while exploiting the development capability of chosen individual protections. This smart and broadened approach aligns with the financial backer’s moderate gamble resistance and long-haul speculation skyline, improving the potential for supported capital appreciation. (McGee & Olmo, 2022).

Decisions on the Weighting Scheme and Benchmark for Stock Sub-Portfolio Performance Evaluation:

Weighting Scheme:

A value-weighted approach was chosen for the stock sub-portfolio’s weighting scheme. This includes expecting a steady number of offers while doling out higher loads to stocks with more prominent market capitalization. The portfolio manager’s strategy of prioritizing larger, more established businesses in the market is reflected in this approach. It lines up with the possibility that the market values bigger organizations more, making them more agents of the general market execution. This weighting plan guarantees that the presentation of the stock sub-portfolio is impacted more by the stocks with a bigger market capitalization, consequently mirroring their conspicuousness on the lookout.

Benchmark for Stock Sub-Portfolio Performance Evaluation:

The benchmark for assessing the exhibition of the stock sub-portfolio is a mixed record that addresses both worth and development files. This benchmark exemplifies the dual focus of the portfolio on companies with strong growth prospects and undervalued opportunities, which aligns with the chosen investment strategy. The performance evaluation becomes more comprehensive when a blended index is used, ensuring that the stock sub-portfolio’s outcomes are compared to a benchmark that reflects the entire investment strategy. This benchmark decision considers a nuanced evaluation of how well the portfolio catches worth and development components compared with the more extensive market patterns.

Discussion of Back-Testing Results:

Back-testing, directed more than a 2-year time frame, is an important instrument for evaluating the portfolio’s verifiable presentation against the chosen benchmark. It gives bits of knowledge into how the portfolio would have fared in past economic situations, offering a reason for assessing the vigor of the picked speculation technique. Notwithstanding, recognizing the inborn restrictions of back-testing is critical. Back-testing results may differ from actual performance due to unanticipated events and shifting market dynamics not fully captured by historical data. While the outcomes are helpful aids, they are not faultless indicators of future results. Past execution doesn’t ensure future outcomes; economic situations depend on consistent change. In this manner, persistent checking and changes are basic to adjust the portfolio to developing financial situations. This powerful methodology guarantees that the speculation technique stays versatile and successful, relieving chances and expanding valuable open doors as the monetary scene advances over the long run. (Óskarsson, 2021).

Critique of Chosen Portfolio Construction Approach and Performance Evaluation Method:

Benefits and Flaws of Back-testing Method:

Benefits:

Back-testing is a significant device by reviewing portfolio execution, conceding bits of knowledge into how the chosen speculation methodology would have explored past economic situations. This authentic point of view is instrumental in assessing the strength and adequacy of the method, permitting financial backers to check how well the system would have acted in various market situations. Financial backers can recognize examples, qualities, and shortcomings by examining the authentic results, working with informed direction and system refinement. Notwithstanding, it’s vital to perceive that while back-testing offers important experiences, it accompanies limits, including the suspicion of steady market elements and the potential for overfitting. Consequently, reasonable understanding and wary thought of the authentic outcomes are fundamental for a powerful portfolio on the board. (Óskarsson, 2021).

Flaws:

Overfitting Risk:

Back-testing has advantages, but it also has drawbacks, particularly the possibility of overfitting. Overfitting happens when a speculation methodology is unnecessarily custom-fitted to verifiable information, catching commotion as opposed to real market designs. While the method might perform well in verifiable circumstances, it could neglect to adjust actually to new and unexpected economic situations, bringing about unfortunate continuous execution. Overfitting can prompt an excessively hopeful evaluation of a procedure’s viability, as it might succeed in past situations yet battle while confronting developing business sector elements. To relieve this gamble, an equilibrium should be struck in creating a technique that uses verifiable bits of knowledge without being excessively dependent on unambiguous authentic market subtleties. Consistent refinement and versatility are critical to guarantee the technique’s flexibility and adequacy in different market conditions. (Óskarsson, 2021).

Assumption of Constant Market Dynamics:

One basic restriction of back-testing is its verifiable suspicion that authentic economic situations will endure, neglecting the potential for underlying changes and unanticipated occasions that can significantly impact future execution. Changes in the financial, geopolitical, and technological landscapes affect markets dynamically. Unexpected occasions, like monetary emergencies or worldwide pandemics, can present remarkable unpredictability and modify market elements. By depending entirely on verifiable information, back-testing might neglect to catch the flexibility expected for exploring evolving conditions. Investors must acknowledge the unpredictability of financial market conditions and their potential for change. Consolidating back-testing with continuous observing, adaptability, and a forward-looking point of view mitigates this restriction, considering a more exhaustive and versatile venture methodology. (Óskarsson, 2021).

Any Flaws in Choosing the Benchmark:

There are potential flaws in the chosen benchmark, which is a mix of growth and value indices. Making a benchmark that definitively mirrors the portfolio’s interesting methodology is testing, presenting the gamble of defective arrangement. The unique idea of significant worth and development resources could prompt hardships in precisely catching the portfolio’s nuanced venture approach. Furthermore, benchmarks advance over the long run, possibly bringing about disparities between the benchmark and the portfolio’s methodology. Notwithstanding these difficulties, cautious choice and occasional reassessment of the benchmark are fundamental to guarantee it successfully gauges the exhibition and arrangement of the portfolio with its planned venture style. (Óskarsson, 2021).

Difficulty in Precision:

Making an ideal benchmark reflecting the complexities of the portfolio’s technique is innately difficult. Finding an exact match in the benchmark universe is difficult due to the particular combination of growth and value components and specific security selection and weighting schemes. These differences may present challenges when comparing the portfolio’s performance to the benchmark. Flaws in benchmark arrangement could cloud the genuine viability of the picked venture system. Ordinary audits and acclimations to the benchmark, considering changes in economic situations and the advancing idea of the portfolio, are vital for upgrading the precision and importance of execution assessments. (Óskarsson, 2021).

Changing Composition:

The unique development of benchmarks presents a likely constraint, as the picked benchmark’s piece may not extensively catch the nuanced and dynamic nature of the portfolio’s speculation methodology. After some time, benchmark constituents might change, modifying the portrayal of the market fragments the portfolio plans to reflect. This development can prompt disparities between the benchmark and the portfolio, influencing the precision of execution assessments. Customary reassessment and likely acclimations to the benchmark are fundamental, guaranteeing it stays lined up with the portfolio’s developing methodology and filling in as a significant measuring stick for estimating the achievement and arrangement of the speculation approach. (Óskarsson, 2021).

Important Factors Not Considered When Selecting Securities or Implementing the Chosen Investment Strategy:

Macroeconomic Shifts:

The picked speculation methodology may not thoroughly consider unexpected macroeconomic movements, which can reshape economic situations and affect resource execution. The strategy’s efficacy can be profoundly affected by variables like interest rate fluctuations, inflationary pressures, or economic recessions. This highlights the basic requirement for versatility and situation arranging inside the speculation approach. By consolidating a unique reaction instrument that considers different macroeconomic situations, the methodology can all the more likely position itself to explore changing monetary scenes, guaranteeing versatility and the capacity to benefit from open doors while moderating dangers during times of vulnerability. (Ali, 2018).

Global Events:

Global unpredicted events, such as pandemics or geopolitical tensions, pose a significant threat to the market dynamics and the portfolio’s securities. To deal with this risk, the investment strategy must include preventative measures to avoid unexpected disruptions. Accentuating the basic job of chance administration and possibility arranging becomes vital. A strong procedure ought to incorporate systems to survey and quickly answer the effect of worldwide occasions, guaranteeing that the portfolio stays versatile, notwithstanding vulnerability. This demonstrates the significance of a dynamic and adaptable strategy for effectively managing risks brought about by unpredictability in global health-related and geopolitical developments. (Ali, 2018).

Liquidity Considerations:

Lacking the thought of liquidity inside the speculation procedure represents a critical gamble to the portfolio’s functional productivity, especially during market pressure or uplifted instability. Lacking thoughtfulness regarding liquidity can prompt expanded exchange costs and may hinder the convenient change of the portfolio. An absence of liquidity in specific resources can confine the capacity to quickly execute exchanges, possibly resulting in poor results and difficulties in answering immediately to changing economic situations. To ensure that the strategy is equipped to navigate various market environments and effectively implement necessary adjustments whenever required, it becomes critical to recognize the significance of liquidity management. (Ali, 2018).

Environmental, Social, and Governance (ESG) Factors:

An eminent concern is the possible oversight in not completely consolidating Ecological, Social, and Administration (ESG) contemplations into the portfolio development. In the present scene, ESG factors are progressively basic for financial backers. Disregarding these variables might open the portfolio to gambles connected with advancing administrative scenes, reputational hurt, and botched open doors in organizations stressing solid maintainability rehearses. When ESG factors are considered when selecting securities, the portfolio’s long-term resilience is enhanced and aligned with shifting investor preferences. It positions the portfolio to explore changing cultural assumptions, administrative guidelines, and ecological difficulties while cultivating supportable and capable venture rehearses. (Ali, 2018).

Constant checking and flexibility are fundamental support points to explore and defeat the limits innate in the speculation methodology. Consistently examining macroeconomic movements, obliging unexpected worldwide occasions, surveying liquidity contemplations, and integrating Ecological, Social, and Administration (ESG) factors require progressing consideration. This powerful methodology considers opportune changes, guaranteeing the procedure stays receptive to developing economic situations. By encouraging a culture of cautiousness and versatility, the venture technique can more readily endure surprising difficulties, take advantage of rising chances, and line up with the financial backer’s targets over the drawn-out 15-year skyline. This iterative interaction fills in as a proactive means to improve the strength and viability of the general venture approach.

References:

Agrawal, A. and Hockerts, K., 2019. Impact investing strategy: Managing conflicts between impact investor and investee social enterprise. Sustainability, 11(15), p.4117.

Akhtar, F., Thyagaraj, K.S. and Das, N., 2018. The impact of social influence on the relationship between personality traits and perceived investment performance of individual investors: Evidence from Indian stock market. International Journal of Managerial Finance, 14(1), pp.130-148.

Ali, A.A., 2018. Strategic planning–organizational performance relationship: Perspectives of previous studies and literature review. International Journal of Healthcare Management, 11(1), pp.8-24.

Jamal, A.A.A., Ramlan, W.K., Pazim, K.H. and Budin, D.S.A., 2014. Decision-making style and investment success of retail investors in Malaysia. International Journal of Business and Social Science, 5(9).

McGee, R.J. and Olmo, J., 2022. Optimal characteristic portfolios. Quantitative Finance, 22(10), pp.1853-1870.

Óskarsson, M., 2021. Back-testing portfolio risk management strategies (Doctoral dissertation).

Peijnenburg, K., 2018. Life-cycle asset allocation with ambiguity aversion and learning. Journal of Financial and Quantitative Analysis, 53(5), pp.1963-1994.

Maha Chemicals (Asia) PTE LTD

This paper discusses how the concepts and theories learned in this class apply to Maha Chemicals Asia (Mahachem). Mahachem was established in 1975. The brand is committed to sustainable services and solutions in equipment and chemical market specialities in Asia (Southeast Asia, South Korea, and China). Mahachem began as a distributor of raw paint materials but has grown to become a solutions and chemicals provider with at least 188 specialists and experts in eighteen offices across 11 Asian countries. The company has headquarters in Singapore and strives to satisfy customers through digitalisation and innovation.

Topic 1: Business Structure that Aligns with Environment and Strategy

Organisations must align their structures with the environment to make better and sustainable strategies. Lecture 7 identifies cost leadership and differentiation as the main generic strategies that organisations can use to ensure their structures and strategies respond to environmental changes (Wong, 2021). Differentiation implies that an organisation develops innovative products/services unique to the target market. On the other hand, cost leadership emphasises internal efficiency. The information shared in Lecture 7 shows that organisational structures should foster internal freedom and flexibility to make organisations more adaptive. For instance, functional structure is valuable when an organisation operates in a predictable and defined setting (Wong, 2021). The central message from Lecture 7 is that companies should ensure a fit between structure, strategy, and environment.

From a structure, strategy, and environment perspective, Mahachem aligns its strategies after examining the external environment. The fundamental logic from Lecture 7 is that the business environment should bind a firm’s strategic options. In this case, Mahachem has a robust sustainability policy that aligns with market demands for sustainable products and services (Maha, 2023). Mahachem recognises the relevance of sustainability globally and leverages innovation and technology to develop sustainable solutions. The company strives to attain sustainability in 80 per cent of the solutions it provides by 2025 (“80 by 25” goal) (Maha, 2023). For example, Mahachem understands chemicals are threats to the environment despite being essential to humanity. As such, it developed Ecoori, a green chemistry concept to guarantee environmental sustainability.

Mahachem aligns its structure, environment, and structure to respond to unfavourable conditions. Kim and Mauborgne (2009) hold that organisations should embrace a reconstructionist method and adopt a strategy that reshapes industry boundaries. Despite facing the technological disruption threat, Mahachem invested in digital transformation to expand its brand and engage customers. The digitalisation strategy focused on developing mobile applications for quoting, tracking purchase history, and inspecting inventory (Kan, 2019). The company acknowledges that the industry is vulnerable to technological disruptions that can affect its business model. As a result, the company always finds new skills, solutions, and technologies, positioning itself as a trusted brand. Besides, it creates value for clients through e-commerce, e-services, and Chabot. In 2015, Maha embraced the Business Excellence (BE) model, which helps it identify gaps, implement lasting solutions, and assess if the gap has been reduced (Kan, 2019). Maha expertly demonstrates how companies should use their resources to achieve strategic alignment.

Topic 2: Managing Planned Change

Kurt Lewin’s change model is a valuable tool that organisations can use to manage or navigate change. Cummings et al. (2016) argue that Lewin’s unfreezing-stabilising-refreezing change concept is still highly relevant today. Lecture 7 outlines how organisations can navigate change using Lewin’s model. The framework has three steps: unfreezing, changing, and refreezing (Wong, 2021). Unfreezing involves communicating why change is needed. Completing this phase entails building good relationships with the stakeholders involved, helping others understand why present behaviours are ineffective, and reducing change resistance. The second phase, changing, gets managers and workers to change their work practices and behaviours (Wong, 2021). Here, change leaders implement more effective and novel behaviours. Finally, refreezing institutionalises or embeds the new changes to organisational culture. Change managers achieve this by providing support, using positive reinforcements, and promoting acceptance of new behaviours.

Change is a shared strand which all organisations experience regardless of their industry, age, and size. Mahachem has implemented several changes successfully over the years. For instance, it initiated its digital transformational journey, adopted the BE framework, and launched new initiatives to attain its goals (Kan, 2019). In 2021, the company started classifying its chemicals as “less toxic,” “made from recycled or bio-based materials,” or “conventional” to achieve its “80 by 25” goal (Leow, 2023, para 11). As the company prepares for more changes, it can employ Lewin’s model to ensure they are successful.

Mahachem must continuously unfreeze its systems to ensure the staff provide innovative solutions to achieve its sustainability agenda. The company can do this by reducing restraining forces that can lower the motivation to provide sustainable solutions and enhancing the motivating powers that encourage the staff to challenge the status quo (Deborah, 2018). Maha must ensure the staff dynamically participates in identifying problems and recommending solutions to ensure they are receptive to change. For instance, Maha can use Lewin’s model to address the gaps identified using the BE framework. After preparing the people for change, the organisation should implement the intended change. During the change or transition phase, people resolve underlying ambiguities and adopt better solutions (Deborah, 2018). Here, the organisation should build a workforce that believes in new paths by moving away from undesirable practices. Once the change is implemented, the organisation must ensure the new equilibrium is sustainable through refreezing. This can be accomplished by using rewards to reinforce and institutionalise new outlies.

Topic 3: Attracting an Effective Workforce

Companies must attract and retain a highly talented workforce to consolidate their competitive advantage. Research has shown that competing in the global market requires strategic investment in attracting highly qualified individuals (Minghua, 2022). Undoubtedly, a firm’s workforce is an important determinant of success. Lecture 8 identifies the activities involved in attracting an effective workforce: HR planning, recruiting, and selecting (Wong, 2021). These activities are related and help attract candidates who can become valued, satisfied, and productive employees. Attracting an effective workforce begins with HR planning. HR planning predicts the number of new employees needed to fill existing or expected vacancies (Wong, 2021). Recruiting combines different activities tailored to attract qualified job applicants, while selecting entails choosing the best candidates to join the existing workforce. Training contributes to skill development through activities such as on-the-job training, self-directed learning, coaching, mentoring, and classroom training.

Maha has always focused on attracting talent to accomplish its goals. The company recognises that attracting reliable human capital is the backbone of fostering close relationships with its customers and suppliers (Kan, 2019). Maha can attract an effective workforce through HR planning, designing recruiting activities, and establishing selection procedures to hire highly qualified personnel. HR planning is crucial in meeting the organisation’s current or future talent demands as it grows its business (Ellinger & Svendsen, 2021). Thereby, Maha must develop a framework for forecasting HR needs and matching applicants with expected positions. In order to ensure successful HR planning, Maha should know how emerging technologies affect work systems. Again, it should evaluate its turnover rate to identify the best ways to avoid it. These are essential components of HR planning.

Recruiting involves practices or activities that communicate applicants’ characteristics to attract the right people. Today, recruiting depicts talent acquisition, reflecting the relevance of human capital in organisational success (Daft & Marcic, 2009). Policies like promote-from-within or internal recruiting can help Maha create an effective workforce. External recruiting can be improved through online recruiting, advertising, and using the services of private employment companies. Successful recruitment exercises should include approaches like assessment of organisational needs, job previews, legal considerations, and other modern recruitment methods (Daft & Marcic, 2009). After designing recruitment activities, Maha should select applicants whose values align with its strategic goals. During selection, it is necessary to assess applicants’ attributes to ensure they fit with job demands. Selection methods include application forms, employment tests, and interviews. Maha must ensure its HR planning, recruitment, and selecting policies are up-to-date as it expands.

Topic 4: Developing an Effective Workforce

As the backbone of modern organisations, employee accomplishments dictate organisational performance or success. Therefore, organisational leaders must provide employee training and development opportunities to enhance their capabilities, skills, and knowledge. Notably, workforce capabilities are the foundation of a company’s competitive advantage in contemporary markets (Rodriguez & Walters, 2017). Topic 4 in Lecture 8 outlines approaches companies can use to develop an effective workforce, including employee orientation, training, and performance appraisal (Wong, 2021). Orientation helps employees familiarise themselves with their colleagues, jobs, and other organisational aspects like policies, procedures, and values. Organisations can also use computer-based training to develop an effective workforce. Performance appraisal observes and evaluates employee performance, records the assessment, and provides constructive feedback (Wong, 2021). Approaches used to appraise performance include performance review ranking systems, behaviourally anchored scales, and 360-degree feedback. It is essential to avoid halo effects and stereotyping when providing feedback.

As an organisation that aspires to achieve success through innovative and sustainable solutions, Mahachem is dedicated to developing an effective workforce through training programs. Rodriguez and Walters (2017) contend that training and development initiatives allow employees to influence organisational outcomes positively. In line with the organisational mission of enriching lives, Maha has a Go On Learning Forever (GOLF) program that encourages lifelong learning among its workers (Maha, 2023). The program helps employees unlock their potential by gaining life and work skills to achieve their professional and personal goals. Lifelong learning contributes to professional growth, success, and adaptability. With this in mind, Maha offers a Graduate Talent Development program designed to assist those seeking opportunities to develop leadership potential and commercial skills. Thus, workforce development is a part of Maha’s culture.

As Maha continues to develop its workforce, it must design a comprehensive orientation policy to promote individual-organisation fit. Employee orientation helps new hires familiarise themselves with the organisational aspects needed to excel in their new positions. Hina (2014) argues that orientation should be the first step in developing an effective workforce. It cultivates a welcoming attitude promoting loyalty. It also introduces new hires to the organisation’s structure, standards, and culture (Hina, 2014). Thus, Maha should include suitable orientation activities to retain and motivate employees, lower turnover, improve morale, and increase productivity.

References

Cummings, S., Bridgman, T., & Brown, K. G. (2016). Unfreezing change as three steps: Rethinking Kurt Lewin’s legacy for change management. Human Relations69(1), 33–60. https://doi.org/10.1177/0018726715577707

Daft, R.L. & Marcic, D. (2009). Understanding Management (8th Ed.). South-Western College Publication.

Deborah, O.K. (2018). Lewin’s theory of change: Applicability of its principles in a contemporary organisation. Journal of Strategic Management, 2(5), 1–11. ISSN NO: 2616-8472

Ellinger, D. D., & Svendsen, S. (2021). The Impact of Human Resource Planning on Organizational Performance; A Case of Manufacturing Firms in Austria. Journal of Human Resource & Leadership5, 14-21. ISSN: 2616-8421

Hina, Q. (2014). Effectiveness of orientation programmes offered for the employees of public sector universities of Punjab, Pakistan. Journal of Education and Practice5(23), 147–151.

Kan, F. (Nov. 6, 2019). Staying relevant for the long term. The Business Times. https://www.businesstimes.com.sg/singapore/smes/mark-excellence/staying-relevant-long-term

Kim, W. C., & Mauborgne, R. (2009). How strategy shapes structure. Harvard Business Review87(9), 72-80. https://hbr.org/2009/09/how-strategy-shapes-structure

Leow, A. (Nov. 22, 2023). Future-proofing the business by going green. The Business Daily. https://www.businesstimes.com.sg/events-awards/enterprise-50/future-proofing-business-going-green#:~:text=In2021MahaChembegan,55percentlastyear.

Maha. (2023). About Maha. Maha Chemicals Asia. https://www.mahachem.com/about/

Minghua, H. (2022). Role of Efficient Human Resource Management in Managing Diversified Organizations. Frontiers in Psychology13, 864043. https://doi.org/10.3389/fpsyg.2022.864043

Rodriguez, J., & Walters, K. (2017). The importance of training and development in employee performance and evaluation. World Wide Journal of Multidisciplinary Research and Development3(10), 206-212.

Wong, C. (2021). BU1104/1804 Introduction to management concepts and application: Workbook 3 Lectures 7 and 8 [PowerPoint slides]. LearnJCU.

Mitigating The Adverse Effects Of Information Asymmetry In Firms And Markets

Information asymmetry is one of the most severe issues confronting the modern economy. This discrepancy impacts consumer relations, financial markets, and other areas. When one side in a transaction has more or better information than the other, this is referred to as information asymmetry. Bloomenthal predicts that it will be 21 years from today. When one party has more information, they have a strategic advantage. The uninformed side may face the most severe consequences. This misalignment harms markets, businesses, and society as a whole. Mismatches cause these consequences. This paper will look at how organizations and markets might alleviate the adverse effects of information asymmetry. This essay investigates potential solutions. Despite the difficulty of eradicating information asymmetry, proactive efforts can mitigate its negative consequences. Firms and markets can level the playing field in information by improving openness, obtaining third-party certification, and upgrading technology.

Organizations and marketplaces can need more information asymmetry. These consequences could be caused by misinformation. One of the most severe consequences is market inefficiency. Stiglitz argues in his 2000 article that when information is not distributed correctly, market prices may fail to represent asset values, resulting in inefficient resource allocation. As a result, financial markets may experience bubbles and crashes similar to the 2008 global financial crisis. When one person has more knowledge than the other, the recipient may act recklessly, posing moral risks. This could jeopardize the connection. Risk-taking by lenders who know more about borrowers’ finances than borrowers may be incentivized by financial markets (Tirole, 2017). This could be due to lenders having more information than investors. Adverse selection can arise when customers need more knowledge. This issue is related to customer interaction. Sellers who are aware of their vehicles’ quality may be unwilling to express it, resulting in a saturated market with low-quality items. Akerlof’s (1970) example of the used automobile market exemplifies this.

Mitigating the adverse effects of Information Asymmetry in Firms

Various strategies can be implemented to address information asymmetry within firms.

Promoting Open, Honest Communication

Addressing information imbalance in businesses requires open, honest communication. One of the most influential studies, Dye (2008), emphasizes the necessity of open communication between management and personnel to eliminate knowledge bias. Transparent businesses frequently eliminate employee imbalance. This increases decision-making across the organization. Men (2018) discovered that open and honest communication firms have higher employee happiness and engagement. A positive relationship between the two variables indicates that employees are more motivated and aligned with business goals when they believe they have access to important information. Employees feel they have access to the data.

Open communication channels facilitate the rapid dissemination of critical information. This ensures that all major stakeholders are on the same page. It is frequently caused by knowledge mismatches (Mishra & Mishra, 2014). This improves decision-making efficiency while decreasing selective information sharing, a prevalent problem.

Implementing Robust Internal Controls

Implementing robust internal controls is another method for closing the knowledge gap in individuals and organizations. This chasm exists in both corporate and personal settings. Organizational controls are a system of checks and balances to govern information flow and assure correctness. Effective internal control can reduce information imbalances, making decision-making more trustworthy and transparent. According to Cocco, Federico, and Gomes (2009), organizations with good internal controls have less information asymmetry, particularly in financial reporting. These controls, including role separation and frequent audits, can aid in systematically managing and monitoring information flows. This methodical technique is provided.

For example, the US Sarbanes-Oxley Act (SOX) mandates publicly traded firms to establish and maintain internal financial reporting controls. According to Hribar and Jenkins (2004), SOX compliance enhances financial reporting and lowers information asymmetry.

Implementing Ethical Guidelines

It is critical to establish ethical norms to prevent information inequities in organizations. Adopting and adhering to moral values can aid in the creation of a culture of fairness and integrity, hence eliminating asymmetric information. Employees can make decisions that favor honesty and transparency when provided with moral rules. This mitigates the detrimental impacts of information asymmetry on the organization. According to Trevio, Weaver, and Reynolds (2006), ethical leadership can diminish unethical behaviour in commercial groups. Leaders should set a clear tone and adhere to ethical standards to urge their colleagues to follow their lead. This fosters a responsible and equitable environment for the transmission of information. For instance, Enron’s infamous accounting scandal underscored the importance of ethical guidelines in preventing information asymmetry. The lack of adherence to ethical principles contributed to the concealment of financial information, ultimately leading to one of the most significant corporate collapses in history (Kaplan & Kiron, 2007).

Independent Auditing

Independent auditing involves examining and verifying financial statements and other relevant information by external auditors who are not affiliated with the entity being audited. The primary objective is to provide an unbiased assessment of the accuracy and reliability of financial information, reducing information asymmetry between a company’s management and its shareholders. One essential function of independent auditing is to validate the financial information presented by companies. The audit process includes a comprehensive examination of financial statements, internal controls, and supporting documentation. By providing an external, independent opinion on the accuracy of financial reporting, auditing is a powerful tool in mitigating information asymmetry between management and shareholders (DeAngelo, 1981).

For instance, the Enron scandal 2001 highlighted the importance of independent auditing. Due to insufficient audits, Enron may modify its financial statements. This resulted in one of the world’s most significant corporate failures. According to Cohen et al., in 2007, regulatory reforms such as the Sarbanes-Oxley Act underlined the necessity of independent audits in the dependability of financial data. By objectively examining a company’s finances, independent audits increase investor trust. Investors trust corporations audited by credible firms, according to Francis and Wang (2008). Greater trust aids financial markets in allocating resources more efficiently, mitigating the adverse effects of information asymmetry. As a result, information asymmetry is unlikely.

Technology and Information-Sharing Platforms in Mitigating Information Asymmetry

Due to the advent of digital platforms and technology that make information sharing easier, information dissemination is evolving. This modification should be necessary. These technologies provide unique solutions to information asymmetry challenges in various industries. Real-time data collection and analysis are now possible, decreasing the time lag associated with traditional information sharing. This is far superior to what we have currently. Financial markets benefit from real-time stock prices, economic data, and news feeds. Investors can obtain current information, which helps them make better decisions and eliminates information asymmetry, according to Biais et al. (2018).

Furthermore, big data analytics has enabled the management of massive databases, exposing previously unseen patterns and insights. According to Chen et al. (2012), predictive analytics, machine learning, and artificial intelligence increase data interpretation. Assisting with risk management, this streamlines risk assessment and management.

Blockchain has altered the decrease of information asymmetry. Because blockchain technology is decentralized and resistant to tampering, blockchain technology can improve supply chain transparency by providing an immutable, distributed transaction database. This might be accomplished via blockchain. According to Iansiti and Lakhani (2017), this strategy removes asymmetry by giving trustworthy and synchronized information to all necessary stakeholders. Food goods may be tracked from farm to table using blockchain technology. Using distributed ledger technology this is achievable. Customers can obtain complete information on the production process to ensure it corresponds to the product’s path. Customers can access this information. Transparency closes information gaps in the supply chain, increasing system confidence.

Open-source platforms enable collaboration and information sharing among commercial firms, academic researchers, and software developers. Engineers can openly discuss and communicate with code on sites like GitHub, which helps to close the knowledge gap during technology development. This is due to the possibility of code collaboration between engineers. According to Kogut and Metiu (2001), as developers learn best practices, coding standards, and new technologies, they create a more knowledgeable and collaborative community. Collaboration within the scientific community also aids in the dissemination of research findings. Open-access journals and preprint services are among the initiatives. Ginsparg’s 2002 research discovered that this accelerates knowledge spread, reduces academic information imbalance, and raises general awareness of various issues.

Mitigating the Adverse Effects of Information Asymmetry in Markets

Market Signaling

Market signaling, coined by Michael Spence in his seminal work on labor market signaling, is frequently employed to address asymmetric information. Market signaling is relatively widespread. Signaling occurs when one party provides trustworthy information to another to indicate traits not observable in economic transactions, particularly in information-asymmetric marketplaces. The goal is to reveal concealed information. This signaling lowers ambiguity and encourages informed decision-making, thus mitigating the adverse effects of information disparity. According to Spence’s signaling theory, people or organizations with superior-quality knowledge are incentivized to share it since they can transmit it. This communication is accomplished by signals, actions, features, or observable characteristics that reveal hidden information. This communication is made possible by signals. It is difficult or impossible to replicate these signals, providing faith in them. As a result, they are reliable predictors of sender or sender group quality.

For example, education is assumed to signal productivity in the job market. Spence stated that education signals because it is costly and difficult to replicate. People must invest both time and money to obtain an education. Potential employers can rely on this commitment to demonstrate the individual’s abilities. Weiss’ (1995) labor market analysis backs up the signaling theory. According to this research, education may be an excellent predictor of worker productivity. Employers may need help to measure employee productivity directly, resulting in an information imbalance. In these situations, education is critical for signaling.

Disclosure Requirements

Disclosure regulations are critical for closing information gaps in the market. To offer vital information to market participants simultaneously during trading sessions, stock exchanges worldwide must follow tight laws. These rules seek to level the playing field and provide investors with additional information that may impact their investment decisions. The guidelines provide vital information to investors. For example, the US Securities and Exchange Commission (SEC) compels firms to adhere to disclosure guidelines. According to Li (2010), disclosure minimizes information asymmetry and promotes investor market liquidity. When financial reports, key events, and other pertinent information are presented appropriately, investors can better understand a company’s finances.

Furthermore, disclosure duties are not limited to financial information. ESG disclosures have gained popularity in recent years. According to Grewal, Serafeim, and Zhu (2020), ESG disclosure minimizes knowledge asymmetry and boosts business value. Non-financial variables influence investment decisions, and disclosure laws have been strengthened to reflect this growing knowledge.

Third-Party Certifications

With third-party certificates, market information asymmetry can be controlled more efficiently. These certificates, often issued by non-certified businesses, attest to the items’ and services’ quality, safety, and ethics. Companies can demonstrate that they meet the criteria by obtaining certification from an impartial body. This increases customer and market trust. One example is Fair Trade accreditation, provided for products created with ethical labor and environmental sustainability. Becchetti et al. (2017) discovered that Fair Trade certification boosts customer trust and purchasing decisions. This accreditation decreases information asymmetry by ensuring that consumers make purchases ethically. Determining whether a product is ethically created requires third-party participation. Food certifications like the USDA Organic label demonstrate that a product fulfills agricultural and processing criteria. According to Janssen and Hamm (2012), customers who use these credentials have less information asymmetry about food production and quality because consumers who utilize these certificates have access to additional information.

Reputation Systems

Online platforms and service sectors use reputation systems to eliminate information asymmetry. Because of their substantial contribution, these systems are critical. These networks let users directly share their experiences and opinions, which can impact the reputation of a business or service provider. Positive evaluations enhance a company’s reputation, while negative reviews may motivate firms to rectify problems, fostering openness and responsibility. Users on Yelp and TripAdvisor can rate and review companies. Users can rate and check hotels, restaurants, and local businesses on these websites. Luca (2016) discovered a substantial link between customer trust and online reviews. Positive internet reviews assist in educating consumers and closing the knowledge gap by revealing service quality. This can close knowledge gaps.

Firms in the sharing economy require reputation management solutions as well. Airbnb and Uber rely heavily on customer feedback. These services can build user, driver, and host trust. According to Zervas et al. (2017), reputation systems minimize information asymmetry via transparency. Participants can then form opinions based on the experiences of their peers.

Conclusion

As a result, knowledge asymmetry continues to be a key hindrance in organizations and markets, resulting in market inefficiencies and moral hazards. These issues can be mitigated by open and honest communication inside firms, tight internal controls, and market mechanisms such as mandatory disclosure, third-party certifications, and reputation systems. Technological advancements, particularly in blockchain and AI, present challenges and solutions. This is true regardless of the concerns raised by these advances. Continuous research and innovation are required to comprehend and solve these difficulties. This will ensure that information asymmetry reduction remains successful and relevant in the ever-changing context of modern economies. Regulatory authorities, businesses, and academic institutions must work together to create and implement economic transaction transparency, justice, and efficiency solutions. This is something we must accomplish going ahead.

References

Bloomenthal, A. (2021, January 19). Asymmetric information in economics is explained. Investopedia. https://www.investopedia.com/terms/a/asymmetricinformation.asp#:~:text=Asymmetricinformationalsoknownas,knowledgethantheotherparty.

Ross, S. (2021, August 31). How to fix the problem of asymmetric information. Investopedia. https://www.investopedia.com/ask/answers/050415/how-can-problem-asymmetric-information-be-overcome.asp