An Analysis of the Supernatural in Inferno and The...

11 October 2011 The Supernatural of the Inferno and the Tempest Inroduction Shakespeares The Tempest and Dantes Inferno both exhibit supernatural situations in both pieces of literature by utilizing different practices. It is clear from reading both pieces that the supernatural used was different because each reading explored different worlds of the paranormal. Dialogue played a great role with introducing the supernatural. This dialogue along with the symbols and metaphors clearly showed the mystic side. For instance, In Inferno, Dante the character is struggling between the supernatural forces of good and evil, which are the theme of the story. In the Tempest, It was believed that The Tempest was thought to be one of the last dramatic plays by Shakespeare, nonetheless it has been lately said to be influenced by supernatural. Later it was described as a comedy with mystical characteristics. With that said the supernatural can be classified in The Tempest and Dantes Inferno in many ways. Magic Magic played a huge part in both literature pieces wh en it came down the supernatural. One thing that both had in common was that as authors, they knew how to create immortal symbols that displayed their magic in the mystical world. For example, in the Tempest, the play starts with a big tempest; Prospero, who is the fair Duke of Milan, raises a storm to make the ship of his usurping brother go down into the water, nonetheless the Prosperos ship sinks and he,

Letters on England by Voltaire - 1134 Words

Letters on England is a small collection of letters written by Voltaire (born Franà §ois-Marie Arouet) in 1733 which offers a survey of societal England from the view of a Frenchmen. The original Letters on England, titled Lettres philosophiques, was written in English by Voltaire. This first edition was quite a cumbersome read and so in 1980 Leonard Tancock retranslated the book to English from a previous French edition. Just a few years prior to the release of Letters on England, Voltaire had been imprisoned by France and then exiled to England. This incarceration and banishment was in response to satirical compositions written by Voltaire that the French political powers felt undermined their rule. Despite harsh censorship laws,†¦show more content†¦In addition to insights on religion, Voltaire also detailed his own understanding of the politics and economics in Europe during the time of the Enlightenment. During this time, an absolute monarchy ruled France while the English had what Voltaire saw as a limited monarch with an involved democracy. France was ruled using bribery, force, and corruption while England was governed though compromise and negotiations. Voltaire himself believed in political moderation and defense of civil liberties. He also observed the differences in economics between the two countries. Free trade was discouraged in France, to the point that some noblemen lost their rank if they participated in such commerce. Contrasting this, Voltaire saw that the English encouraged trade and tradesmen were even held in high regards. He believed that this difference in economics was what gave England access to their freedoms. Furthermore, Voltaire had a great respect for England’s stance on the sciences and philosophy. Since the beginning of man, religion has served as both a guide to moral behavior and as an explanation to elucidate the physical world. Up until the 17th and 18th centuries, most explanations of things pe rtaining to the natural world were religiously based or simply established on deductive reasoning alone. When the Enlightenment Era began, new ideas of reasoning came toShow MoreRelatedVoltaire s Views On England And Candide1528 Words   |  7 Pagesconnection between the two is in the final statement of Candide and the final letter in Letters on England, where Voltaire encourages readers to take action. In a span of twenty years, Voltaire did not change his opinion of thinkers and philosophers. He believes both should be appreciated and valued for their work. This is one of the largest similarities between Letters on England and Candide, as both show clearly how Voltaire views the work of thinkers. In Candide, readers are introduced to two philosophersRead MoreVoltaire s Views Toward English And French Religion, Government, And Scientific Advancements1079 Words   |  5 PagesVoltaire’s Views Toward English French Religion, Government, and Scientific Advancements After 1688, England became a constitutional monarchy under the rule of Mary and William. English society evolved from embracing the absolute monarchy to one that introduces new thought processes and beliefs. In Voltaire’s Letters on England, he contributes the development of England to its respectable regards toward religion, governmental systems, and scientific advancements. He contrasts these practicesRead MoreVoltaire and The Enlightenment1142 Words   |  5 PagesThe Enlightenment was revolutionary because of Voltaire, a writer that used his ideas to attack the established Catholic Church, and to propagate the freedom of religion, scientific thoughts, skepticism and experiential philosophy. Voltaire was born in 1694, a year that was under the regiment of Louis XIV. At that time, the aristocracy ruled France in an extreme way that most commoners were struggling in poverty. From a middle-class family, Voltaire did not like the political environment of FranceRead MoreThe Enormous Influence of the Enlightenment on the World and Mary Shelleys Frankenstein1082 Words   |  5 Pagesthe Enlightenment was in England, and throughout in the Europe. France was the core country of the Enlightenment. The influence of the Enlightenment on the world was enormous. It provided plenty of mental preparation for the French Revolution; had inspired role in American Revolution. Voltaire’s Letter on England In the course of the Enlightenment, a large number of thinkers have emerged: Montesquieu, Rousseau, Voltaire, Kant, Locke, etc. Among those people, Voltaire had the most representative;Read MoreEssay on Voltaire and the Beginning of the Enlightment1305 Words   |  6 Pageshe assumed the name de Voltaire. After choosing the new name, Voltaire said, I was very unlucky under my first name. I want to see if this one will succeed any better.2 Upon his release from the Bastille, Voltaire was exiled to England, a country he grew very fond of. At this time, freedom of speech was continuously exemplified throughout the country of England; Voltaire found this toleration very advantageous to the beginnings of his opinion. While in England, Voltaire decided to redirect hisRead MoreVoltaire s Theory Of The Age Of Enlightenment848 Words   |  4 Pagescommonly known as Voltaire was born November 21, 1699, in Paris, France. He was a French philosopher, historian and writer of the Age of Enlightenment. He valued the right to have your own thoughts as well as the ability to change religion. Even though he was a complex person, he was highly intelligent, humorous and his writing style made him one of France s greatest writers and philosophers. He supported social reform, including freedom of religion, civil rights and free trade. Voltaire had a rough relationshipRead MoreVoltaire2028 Words   |  9 PagesVoltaire’s Letters on England is a collection of written documents that Voltaire wrote between 1726 and 1729 on his experiences he had while staying in England. After its publication in French in 1734, many people of French ethnicity saw it as a bashing of the French government, and even a little bit on the Catholic religion. Voltaire does seem to be fairly favorable towards the English in his letters, which is understandable after he was exiled in his homeland of France multiple times. In manyRead MoreFrench Revolution - Montesquieu Voltaire844 Words   |  4 Pagescausing the people to question the current state of their society, and ultimately causing the French Revolution. Montesquieu and Voltaire were two very major Enlightenment figures whose beliefs had a huge impact on the French Revolution. The ever-growing middle class of France had begun to have access to and absorb some writings and ideas of philosophes like Montesquieu, Voltaire, Rousseau, and Diderot. In addition, the recent American Revolution proved to the people of France that Enlightenment idealsRead MoreThe Main Ideas of Enlightenment Philosophers Essay834 Words   |  4 Pagesand had the best interests of society in mind. Although each philosoph had his or her own ideas, they all centered around one main theme: equality and human freedom. One famous influential philosopher was John Locke. Locke was born in England in the mid 17th century and lived through both the English Civil War and the Glorious Revolution. He strongly believed in equality for all men. In his book Second Treatise on Civil Government, he says that â€Å"creatures of the same species and rank†¦shouldRead MoreThe Enlightenment: An Incredible Change1163 Words   |  5 Pageswriters such as Jean-Baptiste Poquelin known by Moliere, Jonathan Swift, and Francois-Marie Arouet know by Voltaire wrote some incredible stories, poems, plays and articles about the age of reason. In literature, all of them are well known by the tactics and methods they used in their styles of writing in order to persuade or inform the readers. In the Age of Enlightenment, Moliere, Swift, and Voltaire used the concept of â€Å"Satire†, such as verbal, situational, and dramatic irony to depict their message

Burger King Incorporation Free Essays

This is the second leading fast food chain in United States; it mainly concentrates on the use of restaurants of which the company has franchises more than 10400 restaurants that are all over in about 71 countries worldwide (Glenn, 1995, p C2). This was established the two Miami entrepreneurs back in the 1954 and later sold it to the Pillsbury in the year 1967. Today, its head offices are situated at Miami, Florida. We will write a custom essay sample on Burger King Incorporation or any similar topic only for you Order Now By the year 2008, the company had around 41,000 people as their employees. With the demographic forces, the company has extended its wings to many countries that all over the world. With this, they have managed to serve over 15. 7 million customers, of which have ended up submitting them to some of the forces (Louise, 1996, pg 14). This is because, different people tend to perceive thing differently and thus, they have been forced to come up with ways in which they can satisfy all the clients in the company. This mainly concerns with the type of materials that they use to come up with their product, and the way they label the product to attract the market at a given locality. As regard to the many franchises within the company, the franchisee began to collide with each other. This led to the deterioration of their relationship which in the long run resulted to the falling sales within the company. This was the major economic force that the company faced in the year 2001 till they were forced to sell the company to group of investors in late 2002. The company faces competition forces mainly from McDonalds Corporation who is their principal competitor in the market (Brymer, 2000, pg 22). This company has managed to outdo the Burger King because of their ability to be able to serve around 15 million customer daily, this has also been as the regard to the fact that the company has more restaurant outlet compared to that of the Burger King, while Burger have 10,400 restaurants worldwide, the McDonalds Corporation has 31,000 restaurant worldwide. This has given them the advantage to reach to more client than the Burger King. Reference Brymer, R. A. Hashimoto, K. (2000) Hospitality Tourism: An Introduction to the Industry pp 20-24 United States: Kendall/Hunt Publishing Compan How to cite Burger King Incorporation, Papers

The Sleeping Gypsy free essay sample

Henri Julien Felix Rousseau (born May 21, 1844 – died September 2, 1910) was a French artist. Rousseau was a largely self-taught painter, although he had ambitions of entering the Academy. Henri Rousseau had a passion for painting and in his forties decided to take art more as a profession and then becoming a genius Post-Impressionist artist. Rousseau’s most famous painting is called â€Å"The Sleeping Gypsy† or in French â€Å"La Bohemienne Endormie†, an oil on canvas work created in 1897, which depicts a jungle scenes like other paintings he is known for. Although he had never encountered anything wild in him life he has met soldiers who had stories he heard about the subtropical countries and the animals. â€Å"The Sleeping Gypsy† got him a lot of fame and in his time critiques as well. Many did not like his unique style of work and considered it untutored, but he stuck to his painting which eventually â€Å"struck a chord with a younger generation of painters including Pablo Picasso, Vasily Kandinsky, and Frida Kahlo†. We will write a custom essay sample on The Sleeping Gypsy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The oil on canvas painting of â€Å"The Sleeping Gypsy† measures 51 x 6 7† (approximate proportion of 1:1.  5), and is said to be an icon in the Modern Art forms. The horizontal painting is of a â€Å"wandering Negress† who seems to be a mandolin player because of the instrument beside her. She is lying on the desert beside a vase of what seems to be drinking water and seems to be in a deep sleep. She has a colorful dress which I assume to be traditional. There is a lion next to her that smells her but does not devour her. There is a moonlight effect in the dark blue sky and there is a beautiful landscape in background of mountains. Between the mountains and the main subjects there seems to be a body of water. Now the frame of this painting is pretty plain and harmonious which makes it appropriate to the subjects of the lion and gypsy woman. It does not cut the shape of the painting nor does it take attention away from the work. Now on the oil on canvas art work (no other materials have been used), the paint seems to be applied thinly except for on the womans dress that has bright colors and the brush strokes are coarse since we can see it compared to everything else, which is thinly applied. The colors are opaque and solid. The painting looks pretty simple or plain and geometrically positioned. Obviously Rousseau didn’t place the subjects  scattered but he positioned them to create a specific image. He also only has a few subjects, the woman and the lion which are large in relation to the picture read but small in relation to life. This doesn’t mean it can’t be close to being in relation to life, since the subjects are large but not large enough. In â€Å"The Sleeping Gypsy† there is more emphasis in the center of the canvas than in the marginal. Marginal is pretty empty compared to center. One thing that does stand out more is the woman’s dress. It seems to be an oriental dress, since all many traditional or oriental dresses are colorful. The dress is or seems to be bulging because the paint is applied thickly there and then everything else isn’t. The lines are clear subservient lines they are lightly painted. Now when observing the painting as a whole there are regular shapes and no pattern, the subjects are flat but they have curved lines such as on the mountains, the lion’s body, the woman’s body and the ground. There is symmetry on the landscape part of the painting in the mountains. The painting is spacious and they vary there is only one of each subject. The only thing that repeats is the mountains in the background. The general colors being used are warm. The blue is very dominant since it is used for the sky which is most of the painting and there are other shades of blue used as well. There are a few colors except for on the dress. There are extreme contrasts and large areas. As for the light source in the painting, I believe the moon is the light source. It seems as if it is shining on the subjects just a little. But there are no shadows anywhere. Rousseau shows the moonlight on the lions back lightly and precisely, that t is noticeable. Another thing that you can notice is that the space is deep. You can see this because of the mountains and the lake in between, which creates layers. The space is suggested by planes in depth. There is a little overlapping. Not only that but it is open space as well such that the subjects look isolated in the center and the background seems far. The painting is linear and it seems as if we were beside the main interest, the gypsy. There is no illusion. Its is not religious it is simply a private painting I believe. The story a black woman gypsy is depicted in an outdoor setting in this. The action seems pretty calm because she is sleeping but the lion makes it more dramatic.

PRISONERS OF WAR BY Presented To Mrs. Provato ENG 2A0-04 Wednesday D

"PRISONERS OF WAR" BY: Presented to: Mrs. Provato ENG 2A0-04 Wednesday December 8, 1993 PRISONERS OF WAR Dear: The International Red Cross I am writing a letter to you today to mention how the prisoners of war were treated throughout the second world war. If you have never been a Prisoner of War (POW), you are extremely lucky. The prisoners of war during the World War II, (1939-1945) were treated poorly with no respect or consideration and were given the living conditions worse than animals. It was an extremely bad situation that no human being could survive. They were mistreated, manhandled, beat and even shot defending their country. No one wanted to go to war, but for those men who did, and for those who survived as POWs will always regret it. The Prisoners of War were kept in concentration camps, where it was day to day constant dying and suffering and separation of the family with unconditional weather. 1 They had no real shelter, and kept busy by working, a nd the odd time even got a chance to play baseball, soccer or some athletic game to stay in shape. 2 They were surrounded by twenty-four hour guard surveillance in the middle of nowhere, so it would be quite useless to attempt to escape, especially at the risk of being gunned down at any given time. The POW were always having to turn their back and keep an eye out for one another. They were considered to be "hostages" and were treated like the enemy. The concentration camps were not very large but were numerous. They contained about 500-600 warriors and were divided into groups of under sixteen, older than sixteen, and of course by gender (Male and Female). 3 This caused many problems with the POWs as they were split from their families, and in a lot of cases, never saw one another again. The Prisoners of War were killed by the hundreds as malnutrition and hygiene eventually caught up with them. They were put to work for lengthy periods of time, and we treated harshly for volunteeri ng to go to war. Once caught, they were taken and placed in a camp, and it was the beginning of the end for the ally. It is not like a prisoner in today's society. The prisoners had to live with leftover scraps of food, dirty water, and no hope of exiting, plus the constant shooting. They were not prisoner whom had committed a crime, rather brave warriors whom stood up to defend us. 4 It is a life no one wants to encounter, and we pray no one does, and we remember how they were abused and how they suffered to protect us. This special day is called Remembrance Day and is celebrated the eleventh day of the eleventh month. BIBLIOGRAPHY WORLD WAR II, "Prisoners" Marshall Cavendish Ltd, New York, Vol VIII. 940.53 WORLD WAR II, "Prisoners of War" Marshall Cavendish Ltd, New York, Vol III. 940.53 WORLD WAR II, "Prisoners of War" Marshall Cavendish Ltd, New York, Vol X. 940.53 Gosselin, Luc. PRISONS IN CANADA, Montreal, Quebec: Black Rose Books, 1982 ENDNOTES

Americas Roadside Architecture of the 1950s

Americas Roadside Architecture of the 1950s Googie and Tiki are examples of a Roadside Architecture, a type of structure that evolved as American business and the middle class expanded. Particularly after World War II, travel by car became part of the American culture, and a reactive, playful architecture developed that captured Americas imagination. Googie describes a futuristic, often flashy, Space Age building style in the United States during the 1950s and 1960s. Often used for restaurants, motels, bowling alleys, and assorted roadside businesses, Googie architecture was designed to attract customers. Well-known Googie examples include the 1961 LAX Theme Building at the Los Angeles International Airport and the Space Needle in Seattle, Washington, which was built for the 1962 Worlds Fair. Tiki architecture is a fanciful design that incorporates Polynesian themes. The word tiki refers to large wood and stone sculptures and carvings found in the Polynesian islands. Tiki buildings are often decorated with imitation tiki and other romanticized details borrowed from the South Seas. One example of Tiki architecture is the Royal Hawaiin Estates in Palm Springs, California. Googie Features and Characteristics Reflecting high-tech space-age ideas, the Googie style grew out of the Streamline Moderne, or Art Moderne, the architecture of the 1930s. As in Streamline Moderne architecture, Googie buildings are made with glass and steel. However, Googie buildings are deliberately flashy, often with lights that would blink and point. Typical Googie details include: Flashing lights and neon signsBoomerang and palette shapesStarburst shapesAtom motifsFlying saucer shapesSharp angles and trapezoid shapesZig-zag roof lines Tiki Architecture Has Many of These Features Tikis and carved beamsLava rockImitation bamboo detailsShells and coconuts used as ornamentsReal and imitation palm treesImitation thatch roofsA-frame shapes and extremely steep peaked roofsWaterfallsFlashy signs and other Googie details Why Googie? Googie should not be confused with the Internet search engine Google. Googie has its roots in the mid-century modern architecture of southern California, an area rich with technology companies.  The Malin Residence or Chemosphere House designed by architect John Lautner in 1960 is a Los Angeles residence that bends mid-century modern stylings into Googie. This spaceship-centirc architecture was a reaction to the nuclear arms and space races after World War II. The word Googie comes from Googies, a Los Angeles coffee shop also designed by Lautner. However, Googie ideas can be found on commercial buildings in other parts of the country, most noticeably in the Doo Wop architecture of Wildwood, New Jersey. Other names for Googie include Coffee House ModernDoo WopPopuluxeSpace AgeLeisure Architecture Why Tiki? The word tiki should not be confused with tacky, although some have said that tiki is tacky! When soldiers returned to the United States after World War II, they brought home stories about life in the South Seas. The best-selling books Kon-Tiki by Thor Heyerdahl and Tales of the South Pacific by James A. Michener heightened interest in all things tropical. Hotels and restaurants incorporated Polynesian themes to suggest an aura of romance. Polynesian-themed, or tiki, buildings proliferated in California and then throughout the United States. The Polynesia fad, also known as Polynesian Pop, reached its height in about 1959 when Hawaii became part of the United States. By then, commercial tiki architecture had taken on a variety of flashy Googie details. Also, some mainstream architects were incorporating abstract tiki shapes into the streamlined modernist design. Roadside Architecture After President Eisenhower signed the Federal Highway Act in 1956, the building of the Interstate Highway System encouraged more and more Americans to spend time in their cars, traveling from state to state. The 20th century is filled with examples of roadside eye candy created to attract the mobile American to stop and buy. The Coffee Pot Restaurant from 1927 is an example of mimetic architecture. The Muffler Man seen in the opening credits is an iconic representation of roadside marketing still seen today. Googie and Tiki architecture is well-known in southern California and associated with these architects: Paul Williams, designer of thousands of mid-century modern homes in southern California, may be best known for the LAX Theme Building, shown on this page bathed in Walt Disney colored lightingJohn LautnerDonald Wexler, designer of many mid-century modern homes in Palm Springs, California, is known for designing the Royal Hawaiin Estates in the early 1960sEldon DavisMartin Stern, Jr.Wayne McAllister Sources LAX Theme Building designed by Paul Williams, Los Angeles airport photo by Tom Szczerbowski / Getty Images Sport / Getty Images (cropped)The Royal Hawaiian Estates, Palm Springs, California, photo  © Daniel Chavkin, courtesy Royal Hawaiian EstatesThe Malin Residence or Chemosphere House Designed by John Lautner, 1960, photo by ANDREW HOLBROOKE / Corbis Entertainment / Getty Images

International business in the USA Essay Example | Topics and Well Written Essays - 500 words

International business in the USA - Essay Example From the perspective of the Castro regime, there might be little incentive to open up trade relations with the USA. After all these years, the American trade embargo against Cuba has had the effect of strengthening Castro’s grip on power by providing a rallying point around which the Cuban people can offer him their support. Castro has been able to point to the â€Å"evil† Americans across the Florida Straits and blame them for his country’s poverty and relatively poor standard of living. Opening up trade with America would deprive him of that crutch; and it would force him to have to take responsibility for any continuing economic problems his country faces, potentially threatening his grip on power. Because the status quo has enabled Castro to preserve his power, it is unlikely he would want to normalize trade relations with the U.S. The structure and relationships of the American political system have a tremendous influence on the state of U.S. trade relations with Cuba. There is a huge constituency of Cuban-Americans, particularly in the pivotal state of Florida, who support the current policy due to their resentment of Castro. Thus, it would be highly risky from a political standpoint for anyone to press for normalization of relations with Cuba. The Cuban exiles who fled that country in the wake of Castro’s assumption of power, and subsequently became American citizens, constitute a tremendously powerful voting block, to the extent that a Presidential candidate who supported opening trade with Cuba would be virtually assured of losing Florida.

Linguistics - structure and meaning in literary discourse Essay - 1

Linguistics - structure and meaning in literary discourse - Essay Example Throughout the novel, the novelist has been careful in adroitly interlinking the different subplots. The novel mainly deals with two parallel plots: the love relation between Charles Darnay and Lucy Manette and the historical events connected with French Revolution. However, there are several other underlying subplots distributed throughout the three Books of the novel. They include the story of the great sacrifice by the good-for-nothing lawyer Sydney Carton, the comparison between the two cities of London and Paris, the atrocities of the aristocrats etc along with the stories within story such as the imprisonment of Dr. Manette, the story of Madame Defarge. The overall setting of the novel is based on these interconnected subplots which contribute to the each other as well as to the meaning of the novel in general. The novelist has been effective in presenting the major themes of the novel through the literary device of setting. It means that the setting of the novel which incorpor ates the interrelated subplots functions as a literary device to the novelist in his ultimate conveyance of the major themes. Therefore, the subplots in A Tale of Two Cities work in relation to each other to reveal the major themes of the novel. In other words, different subplots and the structure of the novel has significant role in the transference of the themes and meaning. As George Newlin establishes, â€Å"The success  of  A  Tale  of  Two  Cities †¦ can be attributed to Dickens’s artful setting  of  a  touching human story against the background  of  the world-shaking events  of  the French Revolution, and to its powerful, universal themes.† (Newlin, 1) There is pertinent relation between the setting and the meaning in A Tale of Two Cities and the novelist proficiently selects the subplots which contribute eventually to his literary goal. Therefore, subplots in the novel cannot be comprehended in isolation. Rather, they are deeply contrived so as to

1-What are the advantages and disadvantages of using technology at Essay

1-What are the advantages and disadvantages of using technology at school OR 2-In what ways can technology such as tablet devices contributes in the children education at school - Essay Example These resources will be of immense value to the current research as it will help in obtaining information regarding the negative effects associated with use of technology in classrooms. Brown, Dina, and Mark Warschauer. "From the University to the Elementary Classroom: Students Experiences in Learning to Integrate Technology in Instruction."Â  Journal of Technology and Teacher Education. 14.3 (2006): 599-621. Print. The article titled From the University to the Elementary Classroom: Students Experiences in Learning to Integrate Technology in Instruction was authored by Brown along with other researchers and this research was conducted in order to identify methods through which instructors can implement technological advancement in different aspect of teaching such as preparing curriculum and creating coursework (Brown 599). This resource is important to the present study as this resource can provide information regarding how the issues experienced by educationists while using technology in their class rooms can be solved. Buchanan, JA. "Use of Simulation Technology in Dental Education."Â  Journal of Dental Education. 65.11 (2001): 1225-31. Print. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.130.3369&rep=rep1&type=pdf The research article titled Use of Simulation Technology in Dental Education was written by Buchanan and in the purpose of conducted this study was to identify how the technological advancement of simulation is being used in the field and educational circuit of dentistry and what are the possible advantages as well as disadvantages experienced by the stakeholders of the field in implementing this technology (Buchanan 12231). This resource can be used as an example of how technology is actually being used by educational institutes and how it is impacting

Managing Foreign Exchange Risk in International Trade

Managing Foreign Exchange Risk in International Trade MANAGING FOREIGN EXCHANGE RISK IN INTERNATIONAL TRADE WITH A FOCUS ON EAST MIDLANDS COMPANIES Abstract The purpose of this research is to investigate how international trade companies in the East Midlands manage foreign exchange risk. This study utilises descriptive statistics in presenting and analysing data from the primary research. The findings of the research indicate that a majority of the firms used broad business strategies in managing their foreign exchange risk. The main problems the firms had with managing foreign exchange risks centred on customer retention and receiving payments on time. The results also indicate that there were a few firms which took an integrated approach to mitigating foreign exchange risk. This research is of value to firms involved in international trade and also business development agencies which seek to assist firms which are planning to enter or are already operating in foreign markets. Chapter 1 Introduction International trade involves exporting and importing of goods or services across foreign borders and, as soon as a firm engages in import and/or export it is exposed to numerous risks. As a result firms operating outside their home country, have to deal with the economic conditions of the foreign country in which it wishes to operate in. One of the key issues firms involved in import and/ or export are faced with is dealing with foreign currency as this is the only means by which the exchange of goods or services is facilitated. To this end it is import to study and understand the impact which foreign currency has on international trade. Following the demise of the Bretton Woods agreement (1971) whereby exchange rates were allowed to float freely, managing foreign exchange has become important (Heakel, 2009). Consequently the prices of currencies were determined by market forces that is, demand for and supply of money (Mastry and Salam, 2007). Due to the constant changes in demand and supply which are in turn influenced by other external factors, fluctuations arise (Czinkota et al, 2009). As a result of these fluctuations firms are exposed to foreign exchange risks also known as currency risks. Firms trading in different currencies are exposed to three types of foreign exchange risks; economic, transaction and translational risk (Czinkota et al, 2009). Firms which are involved in international trade are exposed to economic and transaction risks as they both pose potential threats to the firms cash flow over time (Czinkota et al, 2009). Studies have shown that foreign exchange fluctuations can affect the value of a fi rms cash flow over time (Aretz, Bartram and Dufey, 2007, Judge, 2004, Bradley and Moles 2002, Allayannis and Ofek 1998, Chowdhry, 1995, Damant, 2002 and Wong 2001). More so, domestic firms although not dealing with foreign currency are also affected by foreign exchange fluctuations as the price of the commodity they trade in are also affected (Abor, 2005). Most of the extant literatures have focused on corporate risk management for financial firms and as such financial hedging with derivatives has been the central theme of currency risk management. On the other hand there has been evidence to show alternative methods exist for firms involved in international trade, these methods of managing foreign exchange risks involve strategic and operational risk management. However most of these studies have been carried out in isolation; financial hedging techniques carried out in isolation of strategic and operational hedging methods and vice versa. Little has been done to provide an integrated perspective, on utilising both techniques of managing foreign exchange risks with regards to international trade firms. This is the area in which the present study intends to explore thereby contributing to the overall literature Purpose of the Research Due to the nature of international trade which expose the firm to foreign exchange movements, thus subjecting the firm to currency risks, the purpose of this research is to explore how international trade firms deal with foreign exchange risk. The research focuses how import and export firms in the East Midlands manage their foreign exchange risk. This study also aims to explore the problems involved in managing those risks. Research Questions Consequently the research hopes to answer the following questions: Do import and export firms in the East Midlands actually manage their foreign exchange rate risks? How import and export companies in the East Midlands manage their foreign exchange risks? What problems they encounter with managing these risks? Definition of Key Terms Hedge A hedge can be defined as â€Å"making an investment to reduce the risk of adverse price movements in an asset. Investors use this strategy when they are unsure of what the market will do† (Investopedia, 2010). Derivatives Derivatives are instruments whose performance is derived from an underlying asset (Arnold, 2002) Spot Rate The spot rate is defined as the rate of exchange quoted immediately if buying or selling currency (Watson and Head) International Trade This involves the flow of goods and services between nations; it involves import and/ export of goods and services (Harrison et al, 2000) The subsequent section provides a break down of how rest of the research is set out. Chapter 2: Literature Review; this chapter provides an overview of the research topic by mapping out the key areas; theories within the risk management and finance literature are identified, explored and analysed. The concept of risk and risk management is explored. A broad classification is made on the types of risks and this is then narrowed down to include foreign exchange risk. The chapter proceeds by exploring the concept of foreign exchange and foreign exchange risks; which include the types of foreign exchange exposures. The common techniques for managing foreign exchange risks are explored. This is followed by a review of relevant literature in the key areas of the research topic. Chapter 3: Research Methodology; in this chapter the research design and strategy are discussed. Chapter 4: Research Findings and Analysis; this chapter presents the findings of the research which were obtained from the questionnaire. The findings are presented using tables, graphs and charts, to enable the reader gain a clearer understanding. An analysis of the findings is carried out by cross-tabulating the responses of the respondent in order to observe for any commonalities and/or differences. Chapter 5: Conclusion and Recommendation; this chapter concludes the research and recommendations are made. Chapter 2: Literature Review 2.1 Risk Management- Risk is an intrinsic part of any business, due to unpredictability of the forces which govern business transactions such as political, economic and social conditions; risk is a factor which cannot be completely eliminated (Watson and Head, 2007). Arnold (2002) describes risk as a situation where there is more than just one possible outcome, but a range of potential returns. It can also be defined as the chance that the actual return from an investment will be different than expected (Lamb, 2008). From the above definitions, risk does not necessarily spell doom or does not necessarily have a negative connotation. Markowitz was one of the earliest academics to point this out, by establishing a link between risks and return (risk-return trade-off). Essentially the theory; Modern Portfolio Theory (MPT) involves expected return and the degree of accompanying risk for an investment (Yorke and Droussiotis, 1994). A central theme of this theory is that the greater risk an investor accepts th e higher the potential for increased returns (Yorke and Droussiotis, 1994). While MPT purports a positive correlation between risk and return, the fact that an investment can have a range of possible outcomes is an uncertainty which can be very costly. As a result risk management is also a part and parcel of business. Risk management can be defined as â€Å"the performance of activities designed to minimize the negative impact (cost) of uncertainty (risk) regarding possible losses† (Abor, p.307, 2005). The objectives of risk management are to minimize potential losses, reduce volatility of cash flow thereby protecting earnings (Abor, 2005). While the objective for risk management is to protect companies against financial loss thereby protecting the value of the firm, traditional finance theory such as that proposed by Modigliani and Miller suggests that the market value of a firm is determined by it earning power (Arnold, 2002). The basic assumption of Modigliani and Miller theorem is that in an efficient market; with the absence of taxation, bankrupt cy costs and information asymmetry, the value of the firm is unaffected by its capital structure (Arnold, 2002). However empirical research (list authors) has shown the existence of capital market imperfections, such as taxes, agency problems and financial distress exists thus justifying risk management (Chowdhry, 1995). Furthermore, MPT also suggests that the risk and volatility of an investment portfolio can be reduced, and the gains can be enhanced, all by diversifying the portfolio among several non-correlated assets (Pearce Financial, 2008). That is, investors can maximise their expected return for a given level of risk by diversifying their investments across a range of assets ((McClure, 2006). MPT involves risk management through diversification of investments. In a simplified expression, MPT is based on the idea of not ‘putting all of ones eggs into one basket. 2.2 Types of Risk There are two broad classification of risks; Unsystematic and Systematic (Rossi and Laham, 208) Systematic risks refers to risks which affect the entire market due to events such as; exchange rate movements, changes in the price of commodities, war, recession and interest rates, however Unsystematic risks are risks which are specific to individual companies (reference). These distinctions were made by Sharpe (1960) in addition to Markowitz Modern Portfolio theory (MPT), the rationale behind it was that despite risk management practise through diversification, there were still underlying factors which affected the return potential of an investment portfolio. Chesnay Jondeau (2001) clearly point out that the correlation of assets which Markowitz talks about depends on other underlying factors and that the relationships are dynamic. They further found that major events such as general adverse movements in markets can significantly change the correlations between assets (Chesnay Jondeau, 2001). Empirical studies show that in financial crisis, assets tends to act the same, that is they are more likely to more become positively correlated, moving down at the same time (Ardelean, Brandt and Malik, 2009). Essentially, severe market crises will have a spill over effect and cause investments in several different asset classes or markets to succumb to sudden liquidation (Vocke and Wilde, 2000, Pearce Financial, 2008). However findings from Xing and Howe (2003) are contradictory, their findings show that the failure of previous studies to find a positive risk-return relationship may be as a result of model misspecification. Essentially they found that there was no agreement on the risk-return relationship amongst previous studies which had used data from one market (Xing and Howe, 2003). Thus they argued that the world market should be taken into consideration in assessing risk return-relationship in a partially integrated market (Xing and Howe, 2003). But then it only stands to reason that if markets are integrated partially or wholly, a catastrophic economic cycle such as financial crises would have an adverse effect on the world market. Thus clearly it does not matter how much one diversifies unsystematic risk, the underlying systematic risk is a problematic factor which has to be dealt with. 2.3 Foreign Exchange rate as a Systematic Risk Background Foreign Exchange rate can be defined as the â€Å"price of one currency expressed in terms of another† (Arnold, p.973, 2002). For example, if the exchange rate exchange rate between the European Euro and the Pound is â‚ ¬1.3 =  £ 1.00, this means that  £1 is equivalent to â‚ ¬1.3. Foreign Exchange (Forex) is traded on the foreign exchange market, the purpose of which is to facilitate trade and the exchange of currencies between countries (Czinkota et al, 2009). The Forex market is an informal market which does not have a central trading place (Czinkota et al, 2009). Trade is carried out it is a 24 hour market as it involves financial institutions from around the globe, as trade moves from one financial centre to another (Arnold, 2002). Thus as one market closes in one region or continent another opens in a different place (Arnold, 2002). The major trading centres are in Tokyo, Singapore, London and New York (Waston and Head, 2007). The buyers and sellers of foreign c urrencies included exporters/importers; tourists; fund managers; governments; central banks; speculators and commercial banks (Arnold, 2002). However large commercial banks account for a larger percentage of Forex trading in the currency markets, as they deal currencies on behalf of customers (Arnold, 2002). They also undertake transactions of their own in an attempt to make a profit by speculating on future movements of exchange rates (Arnold, 2002). Foreign Exchange Risk After the demise of the Bretton woods conference (1973) exchange rates were allowed to float freely; exchange rates were no longer fixed and currencies were allowed to float freely in value to each other (Czinkota et al, 2009). However freely floating exchange rate poses problems for investors and firms alike who deal with different currencies as the uncertainty of exchange rate movements can have a positive or negative impact on an investment (Czinkota et al, 2009). Foreign exchange risk also known as currency risk is the â€Å"risk that an entity will be required to pay more (or less) than expected as a result of fluctuations in the exchange rate between its currency and the foreign currency in which payment must be made† (Abor, p.3, 2005). Thus considering the potential variability of Forex and the impact it can have on international investments and international business, irrespective of the business sector, it is clear that Foreign exchange risks can be classed as systematic risks. Forex risk is an un-diversifiable risk as it affects the entire market. Having established the relationship between Forex and systematic risk and understanding that it cannot be diversified the question which presents itself is, what can be done about it? Theory states that the only way out is to hedge this risk (Bartram, 2007), the decision to hedge will be examined in Section 2.7 2.4 Types of Foreign Exchange Exposure There are three types of foreign exchange risks or exposures; Economic exposure, Transaction exposure and Translational exposure (Maurer and Valiani, 2002). Transaction exposure is the risk that arises as a result of an existing contractual agreement involving a commitment in foreign currency, this sort of risk is primarily associated with import or exports (Arnold, 2002). For example a firm which exports goods from the UK to the US; will have an agreement (contract) that the US firm buying the goods will pay for the goods at a later date (could be 30, 60 or 90 days), however changes in the exchange rates to either currency (whether an appreciation or depreciation) will either positive or negative consequences for either firms. Transaction risks also come as a result of firms making foreign investments such as opening subsidiary branches (Arnold, 2002). These risks arise in the form of payment costs associated with constructing or establishing new branches (Arnold, 2002). In order to make the necessary payments, the home-based firm would exchange its home currency for foreign currency, thereby giving rise to potential transaction risk (A rnold, 2002) Translational exposure relates to a firms earnings; it involves a firms accounting practises (Waston and Head, 2007). This risk â€Å"arises from the legal requirement that all firms consolidate their financial statement (balance sheet and income statement) of all worldwide operations annually† (Czinkota et al, p. 334, 2009). This implies that, as firms translate and consolidate foreign assets, liabilities and profits into domestic currency, there is the possibility of the firm experiencing a loss or gain (Waston and Head, 2007). This is mainly an accounting risk and as such give a real indication of the impact of exchange rate fluctuations on the value of a firm (Watson and Head, 2007). Economic exposure impacts a firms long-term cash flow, positively or negatively (Czinkota et al, 2009). This kind of risk not only affects firms involved in international trade but also has an impact on domestic firms as it can also affect the price of commodities sold (Czinkota et al, 2009). Furthermore, this sort of risk also undermines the competitiveness of a firm (Arnold, 2002). It can affect the firms competitive position directly if the home currency appreciates and foreign competitors are able to offer a much cheaper price, compared to the firms products which have become expensive as a result of the currency appreciation (Arnold, 2002). Economic risk can also affect a firms competitive position indirectly even if a firms home currency does not experience adverse movements (Arnold, 2002). For example Arnold (2002) illustrate that a South African firm selling in Hong Kong with a New Zealand firm as its main competitor can lose competitive edge if the New Zealand dollar weakens against the Hong dollar. Thus the products or commodity on offer by the New Zealand firm would be cheaper than that of the South African firm assuming both currencies (South African Rand and New Zealand Dollar) had a similar exchange rate against Hong Kong Dollar. Economic and transaction risk are more related to businesses involved in international trade, translational exposure more to do with accounting practises (Waston and Head, 2007). Consequently these are the foreign exchange exposure that will be focused on. 2.5 Foreign Exchange Risk and Natural Hedging The idea of applying natural hedging strategies as tools to hedge foreign exchange exposure is one that has received a lot of attention in recent times, as the concept focuses on using non-financial methods to mitigate the volatility of future cash flows and possibly add value to the firm (Kim et al, 2006). The various natural hedging strategies are explained below. Netting This technique relates to multi-nationals which have foreign subsidiaries, it involves reducing funds transferred by netting off the transaction between the parent company and the subsidiary firm (Watson and Head, 2007). For example â€Å"if a UK parent owed a subsidiary in Canada and sold C$2.2m of goods to the subsidiary on credit while the Canadian subsidiary is owed C$1.5m by the UK company, instead of transferring a total of C$3.7m the intra-group transfer is the net amount of C$700,00† (Arnold, p. 982, 2002). This implies that rather than both the parent and subsidiary firm managing their exposure separately they opt for a centralised management system to reduce the size of the currency flows. Consequently transaction costs and the cost of purchasing foreign exchange are mitigated (Arnold, 2002). Leading and Lagging This technique involves either settling foreign accounts by either postponing payments (lagging) till the end of the credit period allowed or prepayment (leading) at the beginning of the transaction (Watson and Head, 2007). It functions based on the anticipation a firm has that future exchange rates will either appreciate or depreciate (Czinkota, 2009). Thus if a firm anticipated a depreciation in its home currency, it lead its payments conversely if the firm anticipated an appreciation in exchange rate it would lag its payments. Invoicing in the Domestic Currency This method involves invoicing foreign customers in the firms domestic currency rather than in the foreign currency (Arnold, 2002). What this does is that it shifts the burden of risk to the foreign firm (buyer). Operational and Strategic Methods There is no one singular acceptable definition of operational hedging as it varies according to the context it is been used. Boyabatli and Toktay (2004) in their work, review and discuss a diverse cross section of views on operational hedging, they delve into the similarities in application methods of operational hedging across different academic fields. They discovered that although there were some differences in meaning in various academic fields; operations management, finance, strategy and international business, there were basic characteristics which were similar across all fields. On this basis operational hedging can be described according to its functionality. Bradley and Moles describe it as the decisions firms take in regards to the â€Å"location of their production facilities, sourcing of inputs, the nature and scope of products, strategic financial decisions such as the currency denomination of debt, the firms choice of markets and market segments† (Bradley and Mo les p.29, 2002). It involves the use of non-financial methods to mitigate the volatility of future cash flows and possibly add value to the firm (Kim et al, 2006). The objective is geared towards reducing long-term economic exposures. Operational hedging can be said to be based on the principle of real options. Real options are â€Å"opportunities to delay and adjust investments and operating decisions over time in response to resolution of uncertainty† (Triantis 2000 cited in Boyabatli and Toktay p.6, 2004). 2.6 Hedging with Financial Derivatives The different types of financial derivatives are: Forwards and Futures, Foreign currency Options and Currency Swaps. Forward contract: This enables the business to protect itself from adverse movements in exchange rates by locking in an agreed exchange rate until the agreed date of payment (Brealey, Myers and Allen, 2006). The example given by Horcher and Karen (p.95, 2005) illustrate the concept further; â€Å"a company requires 100 million Japanese yen in three months to pay for imported products. The current spot exchange rate is 115.00 yen per U.S. dollar, and the forward rate is 114.50. The company books a forward contract to buy yen (sell U.S. dollars) in three months time at a price of 114.50 and orders its merchandise. In three months time, the company will use the contract to buy yen at 114.50. At that time, if yen is trading at 117.00 per U.S. dollar, the company will have locked in a price that, with the benefit of hindsight, is worse than current market prices. If three months later yen is at 112.00 per U.S. dollar, the company will have successfully protected itself against a more exp ensive yen. Regardless of price changes, the company has locked in its yen purchase price at the forward rate of 114.50, enabling it to budget its costs with certainty†. Futures Contract: A futures contract refers to an â€Å"agreement to buy or sell a standard quantity of specified financial instrument or foreign currency at a future date at a price agreed between two parties† (Watson and Head, 2007). Although it bears some similarities to the forward contract in that it also locks in the exchange rate, however one major difference is that a forward contract can be used in a wide range of currencies while the futures contract is applicable to a limited number of currencies (Brealey, Myers and Allen, 2006). Foreign currency Options: This gives holders the right to purchase or sell foreign currency under an agreement that allows for the right but not the obligation to undertake the transaction at the agreed future date (Brealey, Myers and Allen, 2006). One key advantage of this method of hedging is that it gives holders the opportunity to take advantage of favourable exchange rate movements (Watson and Head, 2007). However a non-refundable fee on the option known as an option premium is required (Watson and Head, 2007). Currency Swaps: A currency swap is â€Å"an agreement between two parties to exchange principal and interest payments in different currencies over a stated time period† (Watson and Hedge, p. 382, 2007). Basically what this implies is that a firm can gain the use of foreign currency but avoid exchange rate risk which may arise from servicing payments (Watson and Head, 2007). 2.7 A review of Literature on hedging This section critically examines the rationale for hedging foreign exchange risk. The rationale which has been put forward for hedging risk in the existing literature (Judge, 2004) is that it maximises shareholder value. The idea behind hedging any kind of risk in general is that once a firm takes on the responsibility of actively managing risk, shareholder value is increased, thereby increasing the overall value of the firm (Judge, 2004). However finance theory proposes that shareholders are diversified and thus are not willing to pay a premium to firms for adopting hedging policies (Rossi and Laham, 2008). So in that vein, theory proposes that what is actually being maximized is the managers private utility (Tekavcic, Sernic and Spricic, 2008). Essentially finance theory states that shareholders are diversified while managers of firms are not, so in a bid to protect their income and personal asset, which are linked to the firm, they hedge against uncertainty (Baranoff and Brockett, 2008). Within this theory shareholders are willing to take on risk in exchange for greater returns (risk-return trade off) and so they invest in companies which they believe can provide such high returns. Thus managers hedging risks can be said to lead to underinvestment, which then flaws the theory of risk-return trade off (Baranoff and Brockett, 2008). This theory is based on the premise that financial markets are efficient and as such hedging activities of firm would not add value to the firm (Rossi and Laham). In addition to the complexities of the above theory, when the concept of hedging is put into the context of foreign exchange movements; the Law of one price (LOP)/ purchasing power parity (PPP) suggests that identical goods are not affected by exchange rate variations (Hyrina and Serletis, 2008). The law of one price is the foundation of the theory of PPP which posits that similar goods should have identical prices across countries once expressed in a common currency (Hyrina and Serletis, 2008, Czinkota et al, 2009). Numerous studies have been carried out to test whether or not the theory holds, however there is no general consensus as to whether or not the theory is valid. Hyrina and Serletis (2009), Glen (1992), Choi, Laibson and Madrian (2006) found that there are some flaws within the theory as the real exchange rate is not stationary. Engel and Rogers (1996) examines the impact distance has on goods sold and whether the presence of national borders separating locations were these goods are sold, also have any impact on the law of one price. Empirical evidence from the research shows distance and border have significant role to play on the differences in price of goods (Engel and Rogers, 1996). More so, that market segmentation also leads to price differentiation (Engel and Rogers, 1996). This theory just like the first are both based on the principle that the market is efficient and as such inconsistencies such as movements in exchange rate even out in time (Zanna, 2009). Without attempting to disparage the above theories, in regards to the first theory, whether or not hedging is done to propagate the interests of managers, the fact is that, the basis of the theory (Efficient Market) is flawed as there are numerous empirical evidence (Nobile, 2007; Bartram, 2007, Allayannis and Ofek, 2003, Tekavcic et al 2008, Mastry, 2003) to suggest that there are imperfections in the financial market such as high interests rates, inflation, tax and of course foreign exchange movements which can affect a firm. Thus shareholders cannot afford not to be concerned about hedging as these imperfections in the market can affect the cash flow, profit and ultimately the overall value of the firm. Thus in the same vain PPP should not hold. In regards to PPP it is necessary to indicate that there are other factors which affect the price of goods sold across national borders. Bradley (2005) states that the prices of goods for each firm are influenced by numerous factors such as; Government policies, high inflation rates and corporate income tax and thus such prices of goods cannot be the same across different borders. So to state clearly the financial market is not efficient due to market imperfections. Thus movements in foreign exchange can affect the cash flow and overall value of the firm. Consequently it is necessary for firms to focus on how to manage this risk. 2.8 Review of literature on financial derivatives and operational Strategies The extant literatures on hedging exchange rate risks with financial derivatives have focused on corporate risk management. The main thrust of literatures from authors such as Mastry (2003), Bartram et al (2003) and Galum and Roth (1993) have carried out studies which are aimed at finding the optimal financial derivative. However there is no general consensus as to an optimal financial hedging position. The reason for this can related to basic financial theory which suggests that derivative instruments should be chosen based on the degree of exposure of the firm and the payoff that can be gotten from the instrument (Bartram, 2006). Essentially what this implies instruments with linear characteristics such as forwards, futures and swaps should be used for linear exposures, while instruments with nonlinear profiles such as currency options are suitable to hedging nonlinear exposure (Stulz, 2003). Put simply the theory suggests that after firms assess the nature of its exposure, all tha t needs to be done is choose a derivative which matches that exposure. However, contrary to financial theory Bartram (2006), Ianieri (2009) found that as a result of the flexible nature of options, options can be used to hedge various types of exposures and not just nonlinear exposures. Despite these findings, merely identifying the nature of exposure and matching it with a derivative is not enough. There are other factors which influence the decision on what derivatives to use besides the nature of exposure. For instance while an option is flexible and can be adapted to suit various types of exposures, it is also be a highly complex technical method to use. The problem with currency options is that they require highly skilled individuals who can understand and use it effectively. Ianieri (2009) states that even brokers who should know how to use this method have had bad experiences with it. In an alternative view, Masry and Salam (2007) in an attempt to understand the rationale for using financial derivatives found that the size of the firm impacts on a firms decision to use financial derivatives. A study conducted by Judge (2004) shows that there is a positive relationship between the size of the firm and the foreign currency hedging decision. The general idea is that large firms have numerous resources available to them; in terms of personnel and information, and as such they are more likely to hedge using financial derivatives (Judge, 2004). So in essence the transaction costs which accompany the use of derivatives would discourage small firms from opting to hedge with financial derivatives. On the other hand Kim and Sung (2005), Managing Foreign Exchange Risk in International Trade Managing Foreign Exchange Risk in International Trade MANAGING FOREIGN EXCHANGE RISK IN INTERNATIONAL TRADE WITH A FOCUS ON EAST MIDLANDS COMPANIES Abstract The purpose of this research is to investigate how international trade companies in the East Midlands manage foreign exchange risk. This study utilises descriptive statistics in presenting and analysing data from the primary research. The findings of the research indicate that a majority of the firms used broad business strategies in managing their foreign exchange risk. The main problems the firms had with managing foreign exchange risks centred on customer retention and receiving payments on time. The results also indicate that there were a few firms which took an integrated approach to mitigating foreign exchange risk. This research is of value to firms involved in international trade and also business development agencies which seek to assist firms which are planning to enter or are already operating in foreign markets. Chapter 1 Introduction International trade involves exporting and importing of goods or services across foreign borders and, as soon as a firm engages in import and/or export it is exposed to numerous risks. As a result firms operating outside their home country, have to deal with the economic conditions of the foreign country in which it wishes to operate in. One of the key issues firms involved in import and/ or export are faced with is dealing with foreign currency as this is the only means by which the exchange of goods or services is facilitated. To this end it is import to study and understand the impact which foreign currency has on international trade. Following the demise of the Bretton Woods agreement (1971) whereby exchange rates were allowed to float freely, managing foreign exchange has become important (Heakel, 2009). Consequently the prices of currencies were determined by market forces that is, demand for and supply of money (Mastry and Salam, 2007). Due to the constant changes in demand and supply which are in turn influenced by other external factors, fluctuations arise (Czinkota et al, 2009). As a result of these fluctuations firms are exposed to foreign exchange risks also known as currency risks. Firms trading in different currencies are exposed to three types of foreign exchange risks; economic, transaction and translational risk (Czinkota et al, 2009). Firms which are involved in international trade are exposed to economic and transaction risks as they both pose potential threats to the firms cash flow over time (Czinkota et al, 2009). Studies have shown that foreign exchange fluctuations can affect the value of a fi rms cash flow over time (Aretz, Bartram and Dufey, 2007, Judge, 2004, Bradley and Moles 2002, Allayannis and Ofek 1998, Chowdhry, 1995, Damant, 2002 and Wong 2001). More so, domestic firms although not dealing with foreign currency are also affected by foreign exchange fluctuations as the price of the commodity they trade in are also affected (Abor, 2005). Most of the extant literatures have focused on corporate risk management for financial firms and as such financial hedging with derivatives has been the central theme of currency risk management. On the other hand there has been evidence to show alternative methods exist for firms involved in international trade, these methods of managing foreign exchange risks involve strategic and operational risk management. However most of these studies have been carried out in isolation; financial hedging techniques carried out in isolation of strategic and operational hedging methods and vice versa. Little has been done to provide an integrated perspective, on utilising both techniques of managing foreign exchange risks with regards to international trade firms. This is the area in which the present study intends to explore thereby contributing to the overall literature Purpose of the Research Due to the nature of international trade which expose the firm to foreign exchange movements, thus subjecting the firm to currency risks, the purpose of this research is to explore how international trade firms deal with foreign exchange risk. The research focuses how import and export firms in the East Midlands manage their foreign exchange risk. This study also aims to explore the problems involved in managing those risks. Research Questions Consequently the research hopes to answer the following questions: Do import and export firms in the East Midlands actually manage their foreign exchange rate risks? How import and export companies in the East Midlands manage their foreign exchange risks? What problems they encounter with managing these risks? Definition of Key Terms Hedge A hedge can be defined as â€Å"making an investment to reduce the risk of adverse price movements in an asset. Investors use this strategy when they are unsure of what the market will do† (Investopedia, 2010). Derivatives Derivatives are instruments whose performance is derived from an underlying asset (Arnold, 2002) Spot Rate The spot rate is defined as the rate of exchange quoted immediately if buying or selling currency (Watson and Head) International Trade This involves the flow of goods and services between nations; it involves import and/ export of goods and services (Harrison et al, 2000) The subsequent section provides a break down of how rest of the research is set out. Chapter 2: Literature Review; this chapter provides an overview of the research topic by mapping out the key areas; theories within the risk management and finance literature are identified, explored and analysed. The concept of risk and risk management is explored. A broad classification is made on the types of risks and this is then narrowed down to include foreign exchange risk. The chapter proceeds by exploring the concept of foreign exchange and foreign exchange risks; which include the types of foreign exchange exposures. The common techniques for managing foreign exchange risks are explored. This is followed by a review of relevant literature in the key areas of the research topic. Chapter 3: Research Methodology; in this chapter the research design and strategy are discussed. Chapter 4: Research Findings and Analysis; this chapter presents the findings of the research which were obtained from the questionnaire. The findings are presented using tables, graphs and charts, to enable the reader gain a clearer understanding. An analysis of the findings is carried out by cross-tabulating the responses of the respondent in order to observe for any commonalities and/or differences. Chapter 5: Conclusion and Recommendation; this chapter concludes the research and recommendations are made. Chapter 2: Literature Review 2.1 Risk Management- Risk is an intrinsic part of any business, due to unpredictability of the forces which govern business transactions such as political, economic and social conditions; risk is a factor which cannot be completely eliminated (Watson and Head, 2007). Arnold (2002) describes risk as a situation where there is more than just one possible outcome, but a range of potential returns. It can also be defined as the chance that the actual return from an investment will be different than expected (Lamb, 2008). From the above definitions, risk does not necessarily spell doom or does not necessarily have a negative connotation. Markowitz was one of the earliest academics to point this out, by establishing a link between risks and return (risk-return trade-off). Essentially the theory; Modern Portfolio Theory (MPT) involves expected return and the degree of accompanying risk for an investment (Yorke and Droussiotis, 1994). A central theme of this theory is that the greater risk an investor accepts th e higher the potential for increased returns (Yorke and Droussiotis, 1994). While MPT purports a positive correlation between risk and return, the fact that an investment can have a range of possible outcomes is an uncertainty which can be very costly. As a result risk management is also a part and parcel of business. Risk management can be defined as â€Å"the performance of activities designed to minimize the negative impact (cost) of uncertainty (risk) regarding possible losses† (Abor, p.307, 2005). The objectives of risk management are to minimize potential losses, reduce volatility of cash flow thereby protecting earnings (Abor, 2005). While the objective for risk management is to protect companies against financial loss thereby protecting the value of the firm, traditional finance theory such as that proposed by Modigliani and Miller suggests that the market value of a firm is determined by it earning power (Arnold, 2002). The basic assumption of Modigliani and Miller theorem is that in an efficient market; with the absence of taxation, bankrupt cy costs and information asymmetry, the value of the firm is unaffected by its capital structure (Arnold, 2002). However empirical research (list authors) has shown the existence of capital market imperfections, such as taxes, agency problems and financial distress exists thus justifying risk management (Chowdhry, 1995). Furthermore, MPT also suggests that the risk and volatility of an investment portfolio can be reduced, and the gains can be enhanced, all by diversifying the portfolio among several non-correlated assets (Pearce Financial, 2008). That is, investors can maximise their expected return for a given level of risk by diversifying their investments across a range of assets ((McClure, 2006). MPT involves risk management through diversification of investments. In a simplified expression, MPT is based on the idea of not ‘putting all of ones eggs into one basket. 2.2 Types of Risk There are two broad classification of risks; Unsystematic and Systematic (Rossi and Laham, 208) Systematic risks refers to risks which affect the entire market due to events such as; exchange rate movements, changes in the price of commodities, war, recession and interest rates, however Unsystematic risks are risks which are specific to individual companies (reference). These distinctions were made by Sharpe (1960) in addition to Markowitz Modern Portfolio theory (MPT), the rationale behind it was that despite risk management practise through diversification, there were still underlying factors which affected the return potential of an investment portfolio. Chesnay Jondeau (2001) clearly point out that the correlation of assets which Markowitz talks about depends on other underlying factors and that the relationships are dynamic. They further found that major events such as general adverse movements in markets can significantly change the correlations between assets (Chesnay Jondeau, 2001). Empirical studies show that in financial crisis, assets tends to act the same, that is they are more likely to more become positively correlated, moving down at the same time (Ardelean, Brandt and Malik, 2009). Essentially, severe market crises will have a spill over effect and cause investments in several different asset classes or markets to succumb to sudden liquidation (Vocke and Wilde, 2000, Pearce Financial, 2008). However findings from Xing and Howe (2003) are contradictory, their findings show that the failure of previous studies to find a positive risk-return relationship may be as a result of model misspecification. Essentially they found that there was no agreement on the risk-return relationship amongst previous studies which had used data from one market (Xing and Howe, 2003). Thus they argued that the world market should be taken into consideration in assessing risk return-relationship in a partially integrated market (Xing and Howe, 2003). But then it only stands to reason that if markets are integrated partially or wholly, a catastrophic economic cycle such as financial crises would have an adverse effect on the world market. Thus clearly it does not matter how much one diversifies unsystematic risk, the underlying systematic risk is a problematic factor which has to be dealt with. 2.3 Foreign Exchange rate as a Systematic Risk Background Foreign Exchange rate can be defined as the â€Å"price of one currency expressed in terms of another† (Arnold, p.973, 2002). For example, if the exchange rate exchange rate between the European Euro and the Pound is â‚ ¬1.3 =  £ 1.00, this means that  £1 is equivalent to â‚ ¬1.3. Foreign Exchange (Forex) is traded on the foreign exchange market, the purpose of which is to facilitate trade and the exchange of currencies between countries (Czinkota et al, 2009). The Forex market is an informal market which does not have a central trading place (Czinkota et al, 2009). Trade is carried out it is a 24 hour market as it involves financial institutions from around the globe, as trade moves from one financial centre to another (Arnold, 2002). Thus as one market closes in one region or continent another opens in a different place (Arnold, 2002). The major trading centres are in Tokyo, Singapore, London and New York (Waston and Head, 2007). The buyers and sellers of foreign c urrencies included exporters/importers; tourists; fund managers; governments; central banks; speculators and commercial banks (Arnold, 2002). However large commercial banks account for a larger percentage of Forex trading in the currency markets, as they deal currencies on behalf of customers (Arnold, 2002). They also undertake transactions of their own in an attempt to make a profit by speculating on future movements of exchange rates (Arnold, 2002). Foreign Exchange Risk After the demise of the Bretton woods conference (1973) exchange rates were allowed to float freely; exchange rates were no longer fixed and currencies were allowed to float freely in value to each other (Czinkota et al, 2009). However freely floating exchange rate poses problems for investors and firms alike who deal with different currencies as the uncertainty of exchange rate movements can have a positive or negative impact on an investment (Czinkota et al, 2009). Foreign exchange risk also known as currency risk is the â€Å"risk that an entity will be required to pay more (or less) than expected as a result of fluctuations in the exchange rate between its currency and the foreign currency in which payment must be made† (Abor, p.3, 2005). Thus considering the potential variability of Forex and the impact it can have on international investments and international business, irrespective of the business sector, it is clear that Foreign exchange risks can be classed as systematic risks. Forex risk is an un-diversifiable risk as it affects the entire market. Having established the relationship between Forex and systematic risk and understanding that it cannot be diversified the question which presents itself is, what can be done about it? Theory states that the only way out is to hedge this risk (Bartram, 2007), the decision to hedge will be examined in Section 2.7 2.4 Types of Foreign Exchange Exposure There are three types of foreign exchange risks or exposures; Economic exposure, Transaction exposure and Translational exposure (Maurer and Valiani, 2002). Transaction exposure is the risk that arises as a result of an existing contractual agreement involving a commitment in foreign currency, this sort of risk is primarily associated with import or exports (Arnold, 2002). For example a firm which exports goods from the UK to the US; will have an agreement (contract) that the US firm buying the goods will pay for the goods at a later date (could be 30, 60 or 90 days), however changes in the exchange rates to either currency (whether an appreciation or depreciation) will either positive or negative consequences for either firms. Transaction risks also come as a result of firms making foreign investments such as opening subsidiary branches (Arnold, 2002). These risks arise in the form of payment costs associated with constructing or establishing new branches (Arnold, 2002). In order to make the necessary payments, the home-based firm would exchange its home currency for foreign currency, thereby giving rise to potential transaction risk (A rnold, 2002) Translational exposure relates to a firms earnings; it involves a firms accounting practises (Waston and Head, 2007). This risk â€Å"arises from the legal requirement that all firms consolidate their financial statement (balance sheet and income statement) of all worldwide operations annually† (Czinkota et al, p. 334, 2009). This implies that, as firms translate and consolidate foreign assets, liabilities and profits into domestic currency, there is the possibility of the firm experiencing a loss or gain (Waston and Head, 2007). This is mainly an accounting risk and as such give a real indication of the impact of exchange rate fluctuations on the value of a firm (Watson and Head, 2007). Economic exposure impacts a firms long-term cash flow, positively or negatively (Czinkota et al, 2009). This kind of risk not only affects firms involved in international trade but also has an impact on domestic firms as it can also affect the price of commodities sold (Czinkota et al, 2009). Furthermore, this sort of risk also undermines the competitiveness of a firm (Arnold, 2002). It can affect the firms competitive position directly if the home currency appreciates and foreign competitors are able to offer a much cheaper price, compared to the firms products which have become expensive as a result of the currency appreciation (Arnold, 2002). Economic risk can also affect a firms competitive position indirectly even if a firms home currency does not experience adverse movements (Arnold, 2002). For example Arnold (2002) illustrate that a South African firm selling in Hong Kong with a New Zealand firm as its main competitor can lose competitive edge if the New Zealand dollar weakens against the Hong dollar. Thus the products or commodity on offer by the New Zealand firm would be cheaper than that of the South African firm assuming both currencies (South African Rand and New Zealand Dollar) had a similar exchange rate against Hong Kong Dollar. Economic and transaction risk are more related to businesses involved in international trade, translational exposure more to do with accounting practises (Waston and Head, 2007). Consequently these are the foreign exchange exposure that will be focused on. 2.5 Foreign Exchange Risk and Natural Hedging The idea of applying natural hedging strategies as tools to hedge foreign exchange exposure is one that has received a lot of attention in recent times, as the concept focuses on using non-financial methods to mitigate the volatility of future cash flows and possibly add value to the firm (Kim et al, 2006). The various natural hedging strategies are explained below. Netting This technique relates to multi-nationals which have foreign subsidiaries, it involves reducing funds transferred by netting off the transaction between the parent company and the subsidiary firm (Watson and Head, 2007). For example â€Å"if a UK parent owed a subsidiary in Canada and sold C$2.2m of goods to the subsidiary on credit while the Canadian subsidiary is owed C$1.5m by the UK company, instead of transferring a total of C$3.7m the intra-group transfer is the net amount of C$700,00† (Arnold, p. 982, 2002). This implies that rather than both the parent and subsidiary firm managing their exposure separately they opt for a centralised management system to reduce the size of the currency flows. Consequently transaction costs and the cost of purchasing foreign exchange are mitigated (Arnold, 2002). Leading and Lagging This technique involves either settling foreign accounts by either postponing payments (lagging) till the end of the credit period allowed or prepayment (leading) at the beginning of the transaction (Watson and Head, 2007). It functions based on the anticipation a firm has that future exchange rates will either appreciate or depreciate (Czinkota, 2009). Thus if a firm anticipated a depreciation in its home currency, it lead its payments conversely if the firm anticipated an appreciation in exchange rate it would lag its payments. Invoicing in the Domestic Currency This method involves invoicing foreign customers in the firms domestic currency rather than in the foreign currency (Arnold, 2002). What this does is that it shifts the burden of risk to the foreign firm (buyer). Operational and Strategic Methods There is no one singular acceptable definition of operational hedging as it varies according to the context it is been used. Boyabatli and Toktay (2004) in their work, review and discuss a diverse cross section of views on operational hedging, they delve into the similarities in application methods of operational hedging across different academic fields. They discovered that although there were some differences in meaning in various academic fields; operations management, finance, strategy and international business, there were basic characteristics which were similar across all fields. On this basis operational hedging can be described according to its functionality. Bradley and Moles describe it as the decisions firms take in regards to the â€Å"location of their production facilities, sourcing of inputs, the nature and scope of products, strategic financial decisions such as the currency denomination of debt, the firms choice of markets and market segments† (Bradley and Mo les p.29, 2002). It involves the use of non-financial methods to mitigate the volatility of future cash flows and possibly add value to the firm (Kim et al, 2006). The objective is geared towards reducing long-term economic exposures. Operational hedging can be said to be based on the principle of real options. Real options are â€Å"opportunities to delay and adjust investments and operating decisions over time in response to resolution of uncertainty† (Triantis 2000 cited in Boyabatli and Toktay p.6, 2004). 2.6 Hedging with Financial Derivatives The different types of financial derivatives are: Forwards and Futures, Foreign currency Options and Currency Swaps. Forward contract: This enables the business to protect itself from adverse movements in exchange rates by locking in an agreed exchange rate until the agreed date of payment (Brealey, Myers and Allen, 2006). The example given by Horcher and Karen (p.95, 2005) illustrate the concept further; â€Å"a company requires 100 million Japanese yen in three months to pay for imported products. The current spot exchange rate is 115.00 yen per U.S. dollar, and the forward rate is 114.50. The company books a forward contract to buy yen (sell U.S. dollars) in three months time at a price of 114.50 and orders its merchandise. In three months time, the company will use the contract to buy yen at 114.50. At that time, if yen is trading at 117.00 per U.S. dollar, the company will have locked in a price that, with the benefit of hindsight, is worse than current market prices. If three months later yen is at 112.00 per U.S. dollar, the company will have successfully protected itself against a more exp ensive yen. Regardless of price changes, the company has locked in its yen purchase price at the forward rate of 114.50, enabling it to budget its costs with certainty†. Futures Contract: A futures contract refers to an â€Å"agreement to buy or sell a standard quantity of specified financial instrument or foreign currency at a future date at a price agreed between two parties† (Watson and Head, 2007). Although it bears some similarities to the forward contract in that it also locks in the exchange rate, however one major difference is that a forward contract can be used in a wide range of currencies while the futures contract is applicable to a limited number of currencies (Brealey, Myers and Allen, 2006). Foreign currency Options: This gives holders the right to purchase or sell foreign currency under an agreement that allows for the right but not the obligation to undertake the transaction at the agreed future date (Brealey, Myers and Allen, 2006). One key advantage of this method of hedging is that it gives holders the opportunity to take advantage of favourable exchange rate movements (Watson and Head, 2007). However a non-refundable fee on the option known as an option premium is required (Watson and Head, 2007). Currency Swaps: A currency swap is â€Å"an agreement between two parties to exchange principal and interest payments in different currencies over a stated time period† (Watson and Hedge, p. 382, 2007). Basically what this implies is that a firm can gain the use of foreign currency but avoid exchange rate risk which may arise from servicing payments (Watson and Head, 2007). 2.7 A review of Literature on hedging This section critically examines the rationale for hedging foreign exchange risk. The rationale which has been put forward for hedging risk in the existing literature (Judge, 2004) is that it maximises shareholder value. The idea behind hedging any kind of risk in general is that once a firm takes on the responsibility of actively managing risk, shareholder value is increased, thereby increasing the overall value of the firm (Judge, 2004). However finance theory proposes that shareholders are diversified and thus are not willing to pay a premium to firms for adopting hedging policies (Rossi and Laham, 2008). So in that vein, theory proposes that what is actually being maximized is the managers private utility (Tekavcic, Sernic and Spricic, 2008). Essentially finance theory states that shareholders are diversified while managers of firms are not, so in a bid to protect their income and personal asset, which are linked to the firm, they hedge against uncertainty (Baranoff and Brockett, 2008). Within this theory shareholders are willing to take on risk in exchange for greater returns (risk-return trade off) and so they invest in companies which they believe can provide such high returns. Thus managers hedging risks can be said to lead to underinvestment, which then flaws the theory of risk-return trade off (Baranoff and Brockett, 2008). This theory is based on the premise that financial markets are efficient and as such hedging activities of firm would not add value to the firm (Rossi and Laham). In addition to the complexities of the above theory, when the concept of hedging is put into the context of foreign exchange movements; the Law of one price (LOP)/ purchasing power parity (PPP) suggests that identical goods are not affected by exchange rate variations (Hyrina and Serletis, 2008). The law of one price is the foundation of the theory of PPP which posits that similar goods should have identical prices across countries once expressed in a common currency (Hyrina and Serletis, 2008, Czinkota et al, 2009). Numerous studies have been carried out to test whether or not the theory holds, however there is no general consensus as to whether or not the theory is valid. Hyrina and Serletis (2009), Glen (1992), Choi, Laibson and Madrian (2006) found that there are some flaws within the theory as the real exchange rate is not stationary. Engel and Rogers (1996) examines the impact distance has on goods sold and whether the presence of national borders separating locations were these goods are sold, also have any impact on the law of one price. Empirical evidence from the research shows distance and border have significant role to play on the differences in price of goods (Engel and Rogers, 1996). More so, that market segmentation also leads to price differentiation (Engel and Rogers, 1996). This theory just like the first are both based on the principle that the market is efficient and as such inconsistencies such as movements in exchange rate even out in time (Zanna, 2009). Without attempting to disparage the above theories, in regards to the first theory, whether or not hedging is done to propagate the interests of managers, the fact is that, the basis of the theory (Efficient Market) is flawed as there are numerous empirical evidence (Nobile, 2007; Bartram, 2007, Allayannis and Ofek, 2003, Tekavcic et al 2008, Mastry, 2003) to suggest that there are imperfections in the financial market such as high interests rates, inflation, tax and of course foreign exchange movements which can affect a firm. Thus shareholders cannot afford not to be concerned about hedging as these imperfections in the market can affect the cash flow, profit and ultimately the overall value of the firm. Thus in the same vain PPP should not hold. In regards to PPP it is necessary to indicate that there are other factors which affect the price of goods sold across national borders. Bradley (2005) states that the prices of goods for each firm are influenced by numerous factors such as; Government policies, high inflation rates and corporate income tax and thus such prices of goods cannot be the same across different borders. So to state clearly the financial market is not efficient due to market imperfections. Thus movements in foreign exchange can affect the cash flow and overall value of the firm. Consequently it is necessary for firms to focus on how to manage this risk. 2.8 Review of literature on financial derivatives and operational Strategies The extant literatures on hedging exchange rate risks with financial derivatives have focused on corporate risk management. The main thrust of literatures from authors such as Mastry (2003), Bartram et al (2003) and Galum and Roth (1993) have carried out studies which are aimed at finding the optimal financial derivative. However there is no general consensus as to an optimal financial hedging position. The reason for this can related to basic financial theory which suggests that derivative instruments should be chosen based on the degree of exposure of the firm and the payoff that can be gotten from the instrument (Bartram, 2006). Essentially what this implies instruments with linear characteristics such as forwards, futures and swaps should be used for linear exposures, while instruments with nonlinear profiles such as currency options are suitable to hedging nonlinear exposure (Stulz, 2003). Put simply the theory suggests that after firms assess the nature of its exposure, all tha t needs to be done is choose a derivative which matches that exposure. However, contrary to financial theory Bartram (2006), Ianieri (2009) found that as a result of the flexible nature of options, options can be used to hedge various types of exposures and not just nonlinear exposures. Despite these findings, merely identifying the nature of exposure and matching it with a derivative is not enough. There are other factors which influence the decision on what derivatives to use besides the nature of exposure. For instance while an option is flexible and can be adapted to suit various types of exposures, it is also be a highly complex technical method to use. The problem with currency options is that they require highly skilled individuals who can understand and use it effectively. Ianieri (2009) states that even brokers who should know how to use this method have had bad experiences with it. In an alternative view, Masry and Salam (2007) in an attempt to understand the rationale for using financial derivatives found that the size of the firm impacts on a firms decision to use financial derivatives. A study conducted by Judge (2004) shows that there is a positive relationship between the size of the firm and the foreign currency hedging decision. The general idea is that large firms have numerous resources available to them; in terms of personnel and information, and as such they are more likely to hedge using financial derivatives (Judge, 2004). So in essence the transaction costs which accompany the use of derivatives would discourage small firms from opting to hedge with financial derivatives. On the other hand Kim and Sung (2005),

Jurassic Park: Comparision Between Book And Movie Essay -- essays rese

Jurassic Park: Comparision Between Book and Movie Michael Crichton, a master of suspense, has created a novel for your imagination. This book involves prehistoric animals and plants from the Jurassic era. Steven Spielberg took on this book, as a movie project to add to his collection of visually mastered Science-Fiction motion pictures. Both the movie and the book have captured the imagination of people around the world. In this paper, it will show the similarities and differences for the first third of these two superb creations. One of the similarities of both the movie and the book is the construction accident. The movie and the book's opening scenes show some Jurassic Park workers loading a dinosaur into a maximum security cage. The dinosaur grabbed a hold of one of the workers causing chaos throughout the worksite. The construction worker was drawn in by the dinosaur and never returned. After this "construction accident," the worker's family was suing Jurassic Park for a sizable sum of money. The family sent out a lawyer to the island to see if the park is safe, and if its the cause for their relative's death. The book tells stories that the movie doesn't show. One of those is about a little girl. The little girl is vacationing with her parents when she goes off by herself exploring. She was looking for animals for her class, when she stumbles upon a lizard. She starts to get closer, when the lizard attacks her. The little girl ...

Did Korea Succeeded in the Three Invasions from 108 B.C. to 1231 A.D.?

Korea is strategically located among its allies and enemies, and it is a sad fate that this nation not only invaded and slaughtered was even divided in two. Two brothers believeth in truth but view these principles differently. One belongs to the other, as if in the movie Predator when it was said that: â€Å"The enemy of your enemy is also your friend†. The ROK was formed in the North and The South became a Republic (Readings). In short, despite of the peace being enjoyed by its citizenry; â€Å"factions remained because of groups being formed such as, Communist vs. Industrialist, pro-China vs.pro-Soviet, Conservatives vs. Liberals due to cold war politics and internal divisions among themselves (Readings). †The decline of the Han dynasty (the rule of the Chinese) started the beginnings of three rival kingdoms, the Koguryo on the northeast of China, the Paekche on the southwest, and Shilla on the Southeast (Readings). Despite unification moves was attempted in its enti re history, the northern part or the Nangnang (Lolang) remained a socialist and the southern part democratic was an end result of the unification of Paekche and Shilla to which better known to the world today as Seoul.After the Hans the Mongols came, during those invasions the Koreans suffered so greatly that they even accounted this period with the Mongols to the Japanese period the Dark Age in their history. Koreans in the long history of factions among themselves retained its culture, language, and faith. However, these are the same people who have an open mind that was able to embrace other belief like the Catholic Religion and adjusted amicably with the modern culture.They are people who have survived so many wars, which turned its cities into devastation and poverty but were able to retain its own uniqueness despite of so many foreign invasions. The Koreans, in their own rights succeeded in their quest for their own beliefs and freedom not only because they were hard survivors but because they have been gifted with valiant men and women, from which is the offspring of a good stock their origins are made of.The success in nation building cannot be seen overnight, it has to passed through the test of time just like forging gold from a nuggets of other metals. This could have probably happened in the history of Korea which was clearly seen during the time of Yi Dynasty until the time of King Sae Jong thru the time of General Yi to Admiral Yi, and Yu Kwan-soon (Association). However, Koreans failure may not be seen in terms of its economic position today since it is regarded as one of the four dragons of the Southeast Asian economy but for the reason that they are divided in two.The division may be called providence probably for the reason that it is to create a balance of which some has already foreseen, that the north will be the pivotal point to which will determine the stability of East Asia and north Pacific Rim. The South however, have shown to the wor ld that it has recovered so fast, that it became a leader on economic recovery after a decade of crises that was undergone by the rest of other Asian region. Succeeding is not just to be seen in economic statistics and armaments, but more so on how its people as a country have survived.Though these two siblings may have separated, history or destiny may have reasons why it is so. Separately in each field both have succeeded, but only until they have ensured that another invasion would not follow and as for the moment, hoping they will no longer keep repeating their history. Since 1953, all hostilities ended (Readings). Hopefully that the ceasefire will truly be the end of all factions, and may these neighboring nations eventually learned that strength is not found in violence but on strong hearts that is willing to undergo reforms and forgiveness.