1. Calculate the excess returns during the period of study

2. Calculate the average excess return, standard deviation, Skewness and kurtosis using the excel functions

3. Calculate the 5% Value at Risk (VaR) assuming

a) distribution is normal

b) distribution is not normal

c) comment on your findings

In September 2002, the Financial Accounting Standards Board (FASB) of the United States published a discussion paper seeking views on whether U.S. standard setting should move from a principle based approach toward a principle based approach as sometimes associated with the International Accounting Standards Board (IASB). That paper was partly in response to the SarbanesOxley Act, which was itself a response to such accounting scandals as Enron and WorldCom. Schipper (2003) points out that the U.S. rules are often based on principles. That is, the standard setters use principles in order to produce the rules for the preparers of financial statements. Nelson (2003, 91) agrees, and suggests that a particular standard should rather be seen as more or less rules-based. He suggests that rules can increase the accuracy with which standard setters communicate their requirements and can reduce the sort of imprecision that leads to aggressive reporting choices by management. However, he notes that rules can also lead to excessive complexity and to the structuring of transactions. One of the reasons why standards on several topics need to contain rules is that the standards are inconsistent with the conceptual frameworks of the standard setters. For several topics, the use of the appropriate principle could lead to clearer communication and to more precision without the need for the current rules. That is, before asking how rules-based a particular standard should be, we should ask whether the standard is based on the most appropriate principle. I identify six topics on which the accounting standards have detailed technical rules. In each case, I suggest that part of the need for rules is caused by a lack of principle or by the use of an inappropriate principle (i.e., one that does not fit with higher-level principles). The lack of clear and appropriate principles can also lead to optional accounting methods in standards because no one policy is obviously the correct one; this leads to lack of comparability. I do not suggest that the use of appropriate principles would lead inexorably to standards with no optional methods but that, on some topics, optional methods could be eliminated. The six topics are examined one by one. In each case, I attempt to locate the principles being used, to assess the appropriateness of the principles, and then to identify any arbitrary rules or optional methods that result from the absence of appropriate principles. I start with the IASB’s standards (hereafter, IFRSs), with frequent comparison with U.S. GAAP. One reason for examining

IFRSs in particular is that they are required for the financial reporting of listed companies throughout much of the world in 2005 onward,1 and the FASB has announced plans for convergence of its standards with IFRSs.2 The final section of the paper draws conclusions about how accounting might be improved by substituting principles (or better principles) for the existing requirements. PRIOR LITERATURE AND PURPOSE OF THIS PAPER Alexander (1999) investigates the nature of principles and rules in an accounting context. Below, I use the word ìprinciplesî to include Alexanderís type A overall criteria (e.g., fair presentation, the definitions of elements of accounting and, in particular, the primacy of the asset and liability definitions) and his type B conventions (e.g., prudence). Such principles are contained in the standard settersí conceptual frameworks. I contrast this to ìrulesî which are Alexanderís type C rules (e.g., the requirement to measure inventories at the lower of cost and market). My definition of ìrulesî includes Nelsonís (2003, 91) ìspecific criteria, ëbright lineí thresholds, examples, scope restrictions, exceptions, subsequent precedents, implementation guidance, etc.î The use of the terms ìprinciplesî and ìrulesî seems broadly consistent among Alexander (1999), Nelson (2003), Schipper (2003), and me. My purpose is not to investigate why the U.S. system tends toward the writing of rules (whether based on principles or not). Identifying the roles played by the existence since the 1930s of the Securities and Exchange Commission (SEC) as an enforcement agency and the perceived need of auditors to protect themselves from litigation by encouraging the setting of clear and detailed rules is left to Benston (1976), Zeff (1995), and future research. As discussed below, the IASB also frequently writes rules. Thus, my purpose is to evaluate how the failure to use the appropriate principles can lead any standard setter to rely too much on rules. As noted earlier, the imposition of rules has some potential advantages. Those identified by Schipper (2003) and Nelson (2003) include: ï increased comparability; ï increased verifiability for auditors and regulators (and a related reduction in litigation); ï reduced opportunities for earnings management through judgments (but increased opportunities through transaction structuring); and ï improved communication of standard settersí intentions. Nelson (2003) and the American Accounting Associationís Financial Accounting Standards Committee (FASC) (2003) review the literature related to these issues. FASC concludes: Concepts-based standards, if applied properly, better support the FASBís stated mission of ìimproving the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability.î (AAA FASC 2003, 74) (emphasis added) In addition to balancing the advantages and disadvantages of more detailed rules, the standard setters sometimes face competing principles. An obvious example is the difficulty of trading off relevance and reliability: for instance, estimates of current values or future cash flows might be potentially relevant data, but some such estimates have low reliability. Departure from one principle might be justified by the need to follow another one. Standard setters are also subject to political pressure, especially from the management of large companies (e.g., Hope and Gray 1982; Solomons 1978; Watts and Zimmerman 1978; Nobes 1992; Zeff 1997). Giving way to political pressure might be an explanation for departing from principles. However, a bad standard cannot be re-classified as a good one because issuing it enabled the standard setter to survive.

As noted earlier, my purpose is to identify several accounting topics for which the accounting standard could be improved by being based more closely on a principle from the conceptual frameworks. In some cases, merely removing a rogue ìprincipleî that is not contained in the conceptual frameworks is sufficient. The improvements come in the form of increased clarity, decreased complexity, and decreased motivation for the structuring of transactions. That is, in some cases, increased clarity can be associated with a reduction in rules. This is not to say that principles-based standards are always clearer than rules-based standards. For example, development costs can represent an asset that meets reasonable recognition criteria; IAS No. 38 (para. 57) is based on this argument. In this context, the U.S. requirement (in SFAS No. 2) to expense development costs could be seen as an un-principled rule. However, in this case, the U.S. ìruleî leads to a clearer instruction and to several resulting advantages (see above), although not necessarily to a better balance sheet. Because some accounting topics are not susceptible to solution by use of appropriate principles without rules, standard setters are then forced to choose, for example, between an unclear principle and a clear rule. However, I and most other authors quoted above do not welcome rules for their own sake. They should be kept to the minimum necessary to achieve the various advantages claimed for them, such as clarity. This warrants an examination of each accounting topic to see if a more appropriate principle could achieve the advantages of rules and yet reduce the amount of rules at the same time. As mentioned earlier, the use of appropriate principles can reduce optional accounting treatments, with a consequent increase in comparability. I am not talking here of judgments by preparers, but of overt optional methods in accounting standards. Optional methods are not prevalent in U.S. accounting standards, although some exist.3 However, several options continue to exist in IFRS even after the removal of many in December 2003. The options were needed to achieve a three-quarters majority on the IASC Board, but arguing for the options was easier in the absence of clear principles. Using appropriate principles does not guarantee a reduction in options, but the discussion below finds several instances where a focus on principles can reduce options.

WHAT IS THE MAIN POINT OF THIS ARTICLE? HOW TO SUMMARY THIS?

Case 8

Hemoglobin, the Oxygen Carrier   

Focus concept

            A mutation in the gene for hemoglobin results in an altered protein responsible for the disease sickle cell anemia. An understanding of the biochemistry of the disease may suggest possible treatments.

Prerequisite

Hemoglobin structure and function concepts.

Background

            Normal adult hemoglobin is called Hemoglobin A (Hb A). Ninety-eight percent of adult hemoglobin is Hb A and 2% is Hb A₂. There are other forms of hemoglobin. For example, the developing fetus has a different kind of hemoglobin than most normal adults. Fetal hemoglobin (or Hemoglobin F) consists of two α chains and two γ chains, whereas adult hemoglobin (Hemoglobin A) consists of two α chains and two β chains. Fetal hemoglobin is synthesized beginning at the third month of gestation and continues up through birth. After the neonate is born, hemoglobin F synthesis declines (because synthesis of the γ chain declines) and hemoglobin A is synthesized (because synthesis of β chains begins). By the time the baby is six months old, 98% of its hemoglobin is Hemoglobin A.

            There is also a mutant form of hemoglobin called Hemoglobin S which is found in persons with the disease sickle cell anemia. The disease sickle cell anemia is one of the major health problems facing the African-American community. The World Health Organization estimates that 250,000 babies world- wide are born with sickle cell anemia. Currently there is no cure. A person afflicted with sickle cell anemia has inherited a defective gene from each parent. (Parents who are carriers of the sickle cell gene are heterozygous AS, whereas the person afflicted with sickle cell anemia is SS; non-carriers are designated AA.) The defective gene is the one coding for the β-chain. The amino acid at position 6 on each β chain has been mutated from a glutamate to a valine. Normal α chains have a decreased affinity for the mutated β chains; thus assembly of the HbS tetramer is more difficult. Red blood cells containing HbS form a sickle shape because the Hb S molecules polymerize. Hb S molecules are more likely to polymerize when in the deoxygenated T form than in the oxygenated R form. The polymerized Hb deforms the normal discoid shape of the red blood cells, producing a sickle-shaped cell. The sickle shaped red blood cells become trapped in capillaries and organs, depriving the victim of adequate oxygen supply and causing chronic pain and organ damage.

            In this case we will consider our patient, a 10-year-old black male child named Michael B., who was admitted to the hospital because he was experiencing severe chest pain. He had been hospitalized on several previous occasions for vaso-occlusive episodes that caused him to experience severe pain that could not be managed with non-prescription drugs such as ibuprofen. He was slightly jaundiced, short of breath and easily tired, and feverish. A chest x-ray was taken and was abnormal. An arterial blood sample showed a p_O2 value of 6 kPa (normal is 10-13 kPa).

Questions

You suspect that Michael has sickle cell anemia and you have ordered an isoelectric focusing analysis of the child‟s lysed red blood cells. (Lysing the red blood cells releases the hemoglobin.) Draw a diagram of the predicted results. Why will this test allow you to diagnose this child‟s disease?

Why do you think that Hb S molecules would be likely to clump together whereas Hb A molecules do not?

In the emergency room, oxygen (100%) was administered to the patient. (Inspired air normally is about 20% oxygen.) Why was this an effective treatment?

You recall reading in the medical literature about a dramatic new drug treatment for sickle cell anemia, and you‟d like to try it on this patient. The drug is hydroxyurea, and is thought to function by stimulating the afflicted person‟s synthesis of fetal hemoglobin. Exactly how hydroxyurea stimulated fetal hemoglobin synthesis is unclear, but it is believed that hydroxyurea is metabolized to NO, which binds to a soluble guanylate cyclase enzyme which then catalyzes the synthesis of a second messenger, cyclic GMP (cGMP). The cGMP interacts with transcription factors in a manner that is not completely understood to induce the transcription (and then translation) of the fetal hemoglobin gene.

In a clinical study, patients who took hydroxyurea showed a 50% reduction in frequency of hospital admissions for severe pain, and there was also a decrease in the frequency of fever and abnormal chest x-rays. Why would increasing the synthesis of fetal hemoglobin result in alleviating the symptoms of sickle cell anemia?

Medical practioners who used hydroxyurea as a treatment for sickle cell anemia noted that their patients seemed to benefit from the administration of the drug long before the synthesis of fetal hemoglobin had time to take effect. It has recently been determined that hydroxyurea can react directly with the iron ion of oxy- and deoxyHb to form iron nitrosyl hemoglobin (HbNO). Why would this be of benefit to the sickle-cell anemic patient?

And finally, hydroxyurea has been shown to produce NO directly, in less than an hour after hydroxyurea administration. It‟s also possible that HbNO could produce NO, either directly or indirectly. NO is an important second messenger which, even in nanomolar amounts, stimulates vasodilation. How could NO production help the sickle-cell anemic patient?

A year ago, at a conference, one of your colleagues told you that she had “cured” a patient of sickle cell anemia by performing a bone marrow transplant. Why would this procedure “cure” sickle cell anemia?

The patient‟s parents tell you that they are planning on having another child and that they are confident that subsequent children will not have sickle cell anemia, since they already have a child with the disease. What will you tell them?

References

Glew, R. H., and Ninomiya, Y. (1997) Clinical Studies in Medical Biochemistry, Oxford University Press, pp. 78-90.

Glover, R. E., Ivy, E. D., Orringer, E. P., Maeda, H., and Mason, R. (1999) Molecular Pharmacology 55, pp. 1006-1010.

Huang, J., Hadimani, S. B., Rupon, J. W., Ballas, S. K., Kim-Shapiro, D. B., and S. Bruce King (2002) Biochemistry 41, pp. 2466-2474.

S. Bruce King (2003) J.Clin. Invest., 111, pp. 171-172.

Answer the following Questions using the Measles at Disneyland Article listed below:

1. Apply the epidemiological triangle. Describe the agent, person, and environment.

2. How would you classify the Disease?

3. Identify a prevention strategy for each of the 3 levels of prevention. (Prinmary Prevention, Secondary Prevention, Tertiary Prevention)

Article: Measles at Disneyland, a Problem for All Ages

Measles is once again capturing headlines in the United States. Even though only a small portion of the U.S. population is susceptible, international travel, vaccine refusal or delay, and rare vaccine failures combined with high social contacts allow the highly infectious measles virus to infect susceptible individuals of all ages (1). The story of an unvaccinated child or adolescent contracting measles while traveling abroad and transmitting the virus to others upon return to the United States has been repeated many times in recent years. The 2014–2015 Disneyland-associated outbreak has captured public attention because infants too young to receive the vaccine and children with true medical contraindications to vaccination became infected (2). In addition, Disneyland employees contracted measles and possibly contributed to disease transmission. In 2014, there were 23 measles outbreaks and more than 644 cases of measles (2). More outbreaks owing to vaccine refusal will undoubtedly occur because of sufficient numbers of susceptible individuals in many areas.

Several factors have contributed to parents' refusal to vaccinate their children, and rates of refusal have increased in some states in recent years (3). In addition, although great progress has been made in controlling measles globally, it has recently rebounded in many countries (1). In Europe, where most countries do not require measles or other immunizations for children to attend schools, more than 10 000 cases of measles have been reported each year for several years. The flawed and fraudulent study published in 1998 claiming that the measles-mumps-rubella (MMR) vaccine caused autism has contributed to the hesitancy to vaccinate and the resurgence of measles (1, 3, 4) over the 12 years before the study was retracted. However, even after the study was proven to be based on fabricated data, and numerous reviews and reports in the responsible press discredited the study, fears linger. It is hoped that the recent encouragement by Autism Speaks for parents to vaccinate their children should help increase rates (5).

The relative absence of measles in most areas of the United States for many years has led to an under-appreciation of measles-related complications and mortality that occurs at all ages and in all countries, including the United States. A review of more than 67 000 reported cases of measles in the United States from 1987 to 2000 found that complications include otitis media, pneumonia, diarrhea, and encephalitis in children younger than 5 years and that hospitalization for measles complications was required for approximately 25% of infected children (6). The complication rates are lowest among children and adolescents aged 5 to 19 years, but the rate of complications increases after adolescence, and hospitalization and mortality rates are highest in persons 30 years of age or older (6). In fact, case-fatality rates in adults 30 years of age or older are higher than those in children younger than 5 years.

Much can be done to prevent these outbreaks. Children younger than 12 months of age (the recommended age for the first dose of MMR) and those with medical contraindications depend on high levels of immunity in the rest of the population to provide “community protection,” sometimes referred to as “herd immunity.” These individuals are not immune to measles and will remain susceptible during outbreaks. Parents should be able to take all children to Disneyland and other public places without the fear of measles exposure. Some have proposed removing religious, philosophical, and/or personal belief exemptions to school laws, but enacting these changes could inflame public opinion against immunizations (3, 7). How can adult primary care clinicians assist their pediatric colleagues in boosting community protection? They should routinely review immunization records as they see new patients who are transitioning from pediatric care. The current Advisory Committee on Immunization Practices recommendations advise immunization for potentially susceptible individuals to help prevent future outbreaks (8). Primary care practitioners can also be sure to confirm immunization status of their patients who are health care providers or who plan to travel to other countries (including Europe) where measles is a problem (8). Primary care clinicians should also consider confirmation of immunization status of adult patients working in settings with a high likelihood of exposure to large numbers of children or international travelers, such as schoolteachers or theme park staff. Most adults do not know their detailed vaccination history or have access to their pediatric medical records. Verbal reassurance that “I had all my shots” is insufficient. The simplest thing to do if vaccine status is uncertain is to provide a dose of MMR to those without documentation of 2 doses of measles vaccine after 12 months of age (8). Although serologic testing is an option, it requires multiple visits and possible delays. Primary care physicians also need to be familiar with the clinical signs of measles and promptly report suspect cases to local health authorities to try to limit outbreaks when they do occur.

Measles can be eradicated. However, this will take time; ramped-up efforts to ensure that eligible U.S. children are vaccinated; and greater international collaboration to improve prevention of measles in all countries, including highly industrialized countries with ongoing measles problems (1). Maintaining public trust in immunization and our immunization safety system is essential in helping parents to understand the potential adverse consequences of failure to vaccinate and that processes are in place to ensure that their children receive the safest vaccines possible. Coordinated input from all stakeholders with oversight as recommended in 2011 by the National Vaccine Advisory Committee (9) would enhance public confidence in our immunization programs. Following the framework recommended by the Institute of Medicine (10), constant surveillance and additional studies of vaccine safety to address public concerns should be a priority. Adequate funding is necessary to take advantage of the expanded use of electronic health records to conduct epidemiologic studies that identify or rule out even small postvaccination risks. Also, funding of studies to take advantage of advances in immunology and genomics can allow us to better understand the biological mechanisms for adverse events caused by vaccines and for diseases of concern. Such studies would help counter the common misperception that every illness that occurs after vaccination was caused by the vaccine.

Chapter 1 of our text casts the Spotlight on Nigeria, with a population of 186 million and counting. Africa’s most populous country faces the curious challenge the comparative literature calls the “resource curse--” one that other resource-rich countries such as Iran, Venezuela, the Democratic Republic of the Congo, and South Sudan also grapple. The “curse” points to a situation in which an abundance of oil resources, instead of delivering higher living standards, a better quality of life, and economic prosperity for the population, instead perpetuates underdevelopment.

The paradox is particular pronounced for Nigeria, one of the world’s biggest oil-producers. Despite earning hundreds of billions from its petroleum exports, accounting for a whopping 90 percent of gross domestic product (GDP), Nigeria scores only 0.532 on the UNDP’s 2017 HDI index, up a mere 0.061 from 2012, or 157 out of 189 countries. (UNDP. International Human Development Indicators. Its poor showing on critical QLI indicators--health, life expectancy, education, poverty, gender equality, sustainability, and so on--is illustrative of the classic challenge to many resource-rich countries in the Global South: abundant natural resources that, instead of bringing economic prosperity has done the opposite. It begs the question, would Nigeria be better off without oil?

It may strike us as odd that a country so richly-endowed with natural resources has not been able to show more for it. Instead, what we have had are several military coups, rampant corruption, political fragmentation, poor living standards, and fitful democratic progress. On the corruption side of the ledger, Nigeria ranks 148/180 on Transparency International’s 2017 Corruption Index, scoring a mere 27 out of 100, slightly above Afghanistan, Burundi, Haiti, North Korea, Somalia, and Tajikistan. Corruption has enabled the political elite to “buy off” mass publics and, until recently, underwrite repressive rule. “Black gold” has served to distort normal economic development in Nigeria by robbing other sectors of needed resources. (Similar situations obtain in other oil-producing economies such as Algeria (now experiencing great political upheaval) and Iran in the Middle East/North Africa and Mexico and Venezuela in our own Hemisphere.)

Nigeria’s (post-independence) economic plan sought to encourage domestic growth through tariffs and subsidies, a strategy that should have produced good results, given its high oil revenues. It failed, being driven more by political expediency than by economic logic. So, for example, a US$ 8 billion investment in steel production failed to get off the ground. (Nmehelle, Vincent O. “Sharia Law in the Northern States of Nigeria: To implement, or not to implement, the Constitutionality is the Question,” Human Rights Quarterly 26, no. 3 (2004), pp. 730-59.).

Oil price declines beginning in the 1980s, amidst economic uncertainty and changing energy habits in the industrialized North and a chronic foreign-debt burden, forced Nigeria’s leaders to reverse course on its economic development strategy. This resulted in huge job losses, run-away inflation, and much public discontent. To win support, the military government of Ibrahim Babangida (1985-93) diverted the country’s oil wealth to coopt opponents and the civil society, even while it kept up the pressure on its critics. Political support was purchased through an elaborate system of patrimony using petro dollars.

Another military coup in 1993 brought Sani Abacha to power. Corruption (the misuse of political office for personal or political gain) became endemic (Johnston, Michael. Syndromes of Corruption: Wealth, Power, and Democracy. Cambridge & New York: Cambridge University Press (2005)--as was narco- and human trafficking, money laundering, and so-called 419 scams--an internet swindle involving unknown Nigerian civil servants.

The fourth republic under the popularly-elected government of Olusegun Obasanjo (1999-2007) faced the daunting task of reining in the economy while breaking with the past. The approach produced only limited results. Yar’Adua (2007-2010) and his Democratic Party (PDP) successors (2010-15) launched what became known as the National Economic Empowerment and Development Strategy (NEEDS). NEEDS was an ambitious plan to stimulate domestic enterprise through foreign direct investment (FDI). It was also meant to bring more transparency in government spending, foster the rule of law, reduce corruption, improve transportation and telecom, and deliver the people’s health. The International Monetary Fund (IMF) report on Nigeria sounds a cautious note of optimism, i.e. if the economic reforms and diversification plans, and the efforts to control inflation (the money supply), stabilise the country’s finances, and “move beyond oil,” remain on track.

In theory, then all is not lost for Nigeria to overcome its resource curse. For all that, it continues to depend heavily on one source of income--petroleum; and not much has changed in terms of improvements in living standards for the majority of Nigerians. Indeed, inequality has reached alarming levels. To be fair, Nigeria’s civilian leaders have boldly gone where none of its military rulers have gone, starting the “rainy-day” fund and tackling corruption, especially in the all-important oil sector.

Still, huge challenges remain, reflecting the ambiguous role of petroleum in the country’s life. So, although there are hopeful signs, Nigeria’s prospects, like that of Brazil and others, remain uncertain. The rise of the Boko Haram terrorist group and the failure of the current President Muhammadu Buhari to bring it to book has not helped. (For background on the group, founded in 2002, see the BBC here.) Buhari has come in for “widespread criticism over his government’s inability to defeat the renewed …insurgency in the northeast.” The New York Times, 9 April 2018 (here). This explains in part why Nigeria scores only modestly on civil liberties (freedom of expression, association, the rule of law, personal and individual rights) on the Freedom House Index; and also on the EIU Index.

Here are some pathways into this first discussion: What do you make of Nigeria’s resource-curse challenge? Can the country get out from under this curse and how? Why does Nigeria seem to hold so much promise, yet continually fails to deliver? Comparatively speaking, how do we account for the fact that Canada, also an energy-rich country, has not fallen prey to this curse?

Read the Italy Defied Starbucks—Until It Didn’t case below and answer the 4 questions:

“We arrive with humility and respect in the country of coffee,” Howard Schultz, the former longtime CEO of Starbucks, told Corriere della Sera, Italy’s leading daily, last week. He was about to inaugurate, in Milan, the first Italian outpost of the global chain that supersized coffee and now vies with McDonald’s and Coca Cola as a symbol of American gastronomic imperialism. Even, of course, if Italy has one of the world’s most developed coffee cultures, which in fact is what inspired Schultz to convince the founders of the small Starbucks coffee company to open its first coffeehouse in 1984.

Italy is a country where the pumpkin is generally found in the ravioli, not the latte, and so the Milan Starbucks isn’t just any Starbucks branch. It’s a huge “Roastery” in the former Milan outpost

of the Poste, the Italian postal service, and is meant as a full “experience,” Starbucks said in a press release that has already been mocked by Eater. (“Eight Ridiculous Things Starbucks Is Saying About Its New Store in Milan.”) The Roastery, the first in Europe after others in Seattle and Shanghai, will offer coffee and food and also illustrate Starbucks’s roasting process.

Okay. But a question leaps to mind: Does Italy need Starbucks? “Che tristezza,” one Italian friend told me when I asked her about it opening in Milan. “How sad.” I called the Tazza d’Oro, one of Rome’s most historic coffee shops—they’re called bars in Italian—and Laura Birrozzi, a manager, offered some thoughts. “We and Starbucks sell something completely different. We have quality Italian espresso,” she said. I asked her if she’d ever been to a Starbucks, and she said she had on one occasion, on a visit to London. “It wasn’t the coffee I’m used to,” was all she’d say.

At the Milan Roastery, an espresso will cost 1.80 euros “sitting or standing,” Corriere della Sera noted, since in Italian coffee shops, the price changes depending on whether you have table service or gulp your drink down at the bar. A cappuccino will cost as much as 4.50 euros. This has already prompted Italy’s consumer association to file a complaint with Italy’s antitrust authority, saying the prices were far above average for Milan. Online, Italians are already complaining that Starbucks could drive up prices elsewhere in Italy. (Still, from the coverage, it seems the Roastery piqued people’s curiosity; the lines were around the block for the musical-gala opening party.)

The announcement last year about the opening did not go over well. The columnist Aldo Cazzullo wrote in Corriere della Sera then that “as an Italian,” he considered the opening of Starbucks in Italy nothing short of “a humiliation.” Though he conceded that the arrival of the chain might make some Italian coffee shops step up their game: Starbucks “represents a philosophy, as well as a sort of office for people who don’t have an office,” he wrote. “Maybe our bars will also become more hospitable.”

But, he ended on a discordant note: “I wonder how many of the 350 jobs announced in Milan will go to young Italians and how many to young immigrants,” Cazzullo wrote. It’s unclear what kind of immigrants he had in mind, or why hiring immigrants would be an issue. What is clear is that in Italy, coffee seems to connect in unexpected ways to national identity. There were polemics last year after Starbucks sponsored a garden of palm trees in Piazza Duomo, to drum up enthusiasm ahead of its opening this year. This prompted Matteo Salvini, then only the leader of the far-right League party and now Italy’s interior minister and deputy prime minister, to decry what he called the “Africanization” of Italy, and to call for the defense of the “Italianness” of coffee. “All that’s missing are the sand and camels, and the illegal immigrants will feel at home,” he said then.

Schultz has been trying to open Starbucks in Italy for decades, and the fact that Italy has such excellent coffee everywhere—even the coffee at the average highway rest stops in Italy is better than much of what’s served in good restaurants elsewhere in the world— was no doubt a major issue. In 1998, Michael Specter wrote in The New Yorker about Schultz’s efforts to open Starbucks and said a branch of the chain would open in Italy “next year.”

So why the delay? For one thing, Italians don’t drink coffee the way Starbucks serves coffee. In Italy, coffee—espresso—is drunk generally standing up, at a coffee bar. Cappuccino or caffè latte is drunk in the morning or sometimes in the late afternoon if you haven’t had a proper lunch, and never after meals, because who can digest milk after a meal? Italians are very attuned to proper digestion.

Also, Italy has a market economy with some protectionist elements. In her interview with Schultz for Corriere, the journalist Daniela Polizzi noted that the context had changed in the past 20 years, from one of adjusting to globalization to one in which trade barriers have become an issue. Starbucks now has 30,000 stores in 77 countries, including 3,400 stores in China, with 45,000 employees, Schultz answered. Italy hasn’t given up quite so much ground, but the chain has now established a beachhead there.

Some saw the arrival of Starbucks as a window into the challenges to the Italian economy. “The lack of Starbucks indicates a double anomaly: On the one hand, the biggest coffee chain in the world wasn’t present in Italy, and on the other, the biggest coffee chain in the world isn’t Italian,” the journalist Luciano Capone wrote in Il Foglio, an intellectual daily, this week, citing the economist Luigi Zingales. It seemed a sign of how Italy’s economy is based on smaller businesses with more modest ambitions. More than 90 percent of Italian companies have fewer than 15 employees.

Then there’s the flip side. “Operating in Italy, in competition with Italian coffee bars, it’s probable that Starbucks will soon learn to make excellent espressos and cappuccinos,” Capone continued. “But will the Italian system manage to learn from Starbucks how to create a global chain? It would be a small step for us, but a great step for mankind: Finally the rest of the world would discover that coffee and pizza aren’t the kind on offer at Starbucks and Pizza Hut.”

So if the wheel is coming full circle, does Olive Garden have any plans to open in Italy? I asked its spokeswoman, Meagan Mills. “We do not have any plans,” she wrote back. “Thanks for thinking of us, though!”

Questions to answer

1- What are the main marketing environment factors affecting Starbucks business in the Italian market? Why are these factors affecting the Italian market?

Case Study 9—Social Media Is Gateway to eBook Sales Success: Amazon Kindle eBooks Thomas S. Mueller, Appalachian State University The Amazon Kindle eBook brand is one of the most popular forms of digital publishing in today’s social community. As of early 2016, the direct-to-consumer online retailer was selling 1.06 million eBooks (paid downloads) per day. Consumers spent $5.75 million per day during a recent month, with $1.76 million of those sales directed to author royalties. Though it is somewhat undocumented regarding distribution, authors received an additional $140 million in funds from Kindle Unlimited, Amazon’s subscription reading service.32 The industry as a whole is generating over $2.1 billion in sales annually. It is interesting to note that as established publisher sales decreased, eBooks written by independent authors increased.33 During an assessment in 2016, 56 of Amazon’s 100 top-selling eBooks were self-published titles. Topically, the bestselling independent authors write about paranormal activities, romance, thrillers, urban fiction, suspense, and science fiction. With the ascent of digital titles on Amazon and other sources, industry experts posit that printed versions of books will become a niche market, similar to the effect noted in magazine and newsprint.34 Digital publishing strategist Ben Thompson applies aggregation theory to the process, suggesting that sales portals like Amazon eliminate intermediaries, which allows independent publishers to avoid publishers and go direct to consumers.35 With a substantial faction of the social publishing market operating independently, advertising and promotion become the responsibility of the author. One portion of an author’s time is allocated to writing the novel, while the other half of the time is invested in social commerce, which includes marketing to expand the author’s fan base. The challenge is to differentiate an eBook from millions of competitive titles, then convince readers to download the digital offering onto a Kindle reader or other digital device. Pre-selling is essential to assure return on investment for the self-published author. One viable and affordable option is to build a social media marketing plan. Social media platforms provide opportunities to develop leads, generate a follower list, leverage other prominent users, access large topical groups, and promote content “teasers” that showcase your upcoming eBook.36 Most eBook authors develop a social media plan through content generation. These are most often short, concise articles of 250 to 500 words. Most successful social media plans offer shorter posts, with frequent placement. Social media content is usually housed in a blog, such as Google’s Blogger platform, or the highly customizable WordPress.37 It’s important to claim a URL that is unique and specific to the author and her or his work. A strong URL, along with key search words included in blog post titles, can help the author’s social media content climb in ranking on search engines. Social media portals such as LinkedIn and Google+ offer each user a personal landing page, but much more is available through groups and communities, where individuals share common interests. For example, a fashion community in Google+ hosts 557,000 followers.38 A marketing communication group in LinkedIn has collected 621,000 members.39 And, the LinkedIn Book Marketing group has 28,000 members.40 It is essential to identify a topical group to understand the relevance of posts, how interaction and replies work, and who posts the top viewed submissions. Authors can integrate into these platforms by reading posts, replying to posts, and finally crafting content that resonates with potential readers. Some authors incorporate introductory promotional comments on their upcoming eBook. It is important for authors to remember that blatant selling is not admissible; posted content must provide value and prove interesting to other group members.41 Facebook has been the most influential platform for many eBook authors. It has grown to over 1.4 billion users worldwide, with 70% checking their feed multiple times each day. eBook authors create a “landing page” for their profile as an author, or sometimes for a specific title. The challenge is to direct friends from the page to a personal website, and to target specific Facebook users who are profiled as sharing an interest in the eBook topic. Some authors host events or make promotional offers to engage users and increase traffic, which can be measured through social media data management. Mark Dawson initially started writing for a traditional publishing firm. His sales were weak and he transitioned to self-publishing. After learning how to leverage Facebook, Mark invested time and energy and now earns over $450,000 per year.42 Video platforms such as Vimeo and YouTube have been integrated into the social media promotion of eBooks. YouTube, the predominant player, was purchased in 2006 for $1.65 billion by Google. YouTube currently reports that it generates over 1 billion views per month.43 Successful eBook authors have integrated YouTube segments into their social media plans, including interviews or “teasers” that offer special introductory offers at eBook launch time. It’s beneficial to cross-promote YouTube posts across Facebook pages and embedded content in visual sharing sites such as Pinterest and Instagram. Studies indicate that the human brain assimilates images 60,000 times more quickly than text. eBook authors are intentional about visual sharing; Instagram is predominantly 18 to 24 female (56%) and allows space to share images. Pinterest represents a female and male audience, with two thirds between the ages of 18 and 24. One half are located outside the United States. It allows users to aggregate content that appeals to their interests and sensibilities. The author’s challenge is to entice user engagement, create awareness for the latest published eBook, and generate reader feedback, which can channel into digital book reviews. Many authors use the visual advantage to promote their eBook through storytelling in multiple posts.44 A social media platform that serves as the “messenger” for all social media activity is Twitter. Each message is limited to 140 characters, which can in turn be reposted and shared. Twitter now has 320 million monthly users, with over 1 billion monthly visits.45 Savvy eBook authors use Twitter to include “@” user handles to attract other key authors, or hashtags to create topical searches. Twitter can also steer followers to other platforms, where blog or web content has been placed. Some have also leveraged Twitter’s new live video broadcast program Periscope to promote special programs and activities. Some of the most highly successful eBook authors are also prominent podcast hosts. Technology entrepreneur James Altucher has published 11 books, including the Wall Street Journal bestseller Choose Yourself! Altucher’s unique position in the marketplace is that he lost his fortune, earned it back, and then lost it again. He now publishes eBooks such as Reinvent Yourself and promotes his projects on the popular “James Altucher Show” podcast, which is accessible on podbay.fm and iTunes.46 One social media opportunity that is sometimes overlooked is within the Amazon portal itself. An Amazon author page can showcase the author, include a biography, feature a compilation of the author’s Amazon Kindle publications, and link to other social media content such as Twitter or personal blogs. Most anyone can become a digital author, but not everyone can sell books. The holistic author understands how to write, publish, network, create, associate, and entertain. Social media presents the gateway where authors and customers connect in the open and unregulated marketplace.

Historical documentarian Ken Burns created a 1990 television series on the Civil War for the Public Broadcasting Network (PBS). Find Mr. Burns’ Twitter user handle, then write a tweet that would include both user handle and hashtag to link his work with a new eBook on the Civil War.

Risk Assessment Homework

In this assignment, you will perform a qualitative risk assessment, using a template that has been provided below.   

A listing of threats has been prepopulated for you. These threats have been categorized by type as shown below:

Purposeful threats are launched by threat actors for a variety of reasons and the reasons may never be fully known. Threat actors could be motivated by curiosity, monetary gain, political gain, social activism, revenge or many other driving forces. It is possible that some threats could have more than one threat origination category. Some threat types are more likely to occur than others. The following table takes threat types into consideration to help determine the likelihood that vulnerability could be exploited. The threat table shown in Table 2-2 is designed to offer typical threats to information systems and these threats have been considered for the organization. Not all of these will be relevant to the findings in your risk assessment, however you will need to identify those that are.

Analyze Risk

The risk analysis for each vulnerability consists of assessing threats to determine the likelihood that a vulnerability could be exploited and the potential impact should the vulnerability be exploited. Essentially, risk is proportional to both likelihood of exploitation and possible impact. The following sections provide a brief description of each component used to determine the risk.

Likelihood

This risk analysis process is based on qualitative risk analysis. In qualitative risk analysis the impact of exploiting a threat is measured in relative terms. When a system is easy to exploit, it has a High likelihood that a threat could exploit the vulnerability. Likelihood definitions for the exploitation of vulnerabilities are found in the following table.

Impact

Impact refers to the magnitude of potential harm that could be caused to the system (or its data) by successful exploitation. Definitions for the impact resulting from the exploitation of a vulnerability are described in the following table. Since exploitation has not yet occurred, these values are perceived values. If the exploitation of vulnerability can cause significant loss to a system (or its data) then the impact of the exploit is considered to be High.

Risk Level

The risk level for the finding is the intersection of the likelihood value and impact value as depicted the table depicted below. The combination of High likelihood and High impact creates the highest risk exposure. The risk exposure matrix shown in the table below presents the same likelihood and impact severity ratings as those found in NIST SP 800-30 Risk Management Guide for Information Technology Systems.

Risk Assessment Results

This section documents the technical and non-technical security risks to the system.   Complete the following risk assessment table, ensuring that you have addressed at least 20 risks. You will be graded on your ability to demonstrate knowledge that the security controls are appropriate to the controlling the risks you have identified, as well as being able to identify appropriate risk levels based on the Impact and Likelihood levels.    

The following provides a brief description of the information documented in each column:

Identifier: Provides a unique number used for referencing each vulnerability in the form of R#-Security Control ID.

Threat: Indicates the applicable threat type from the table of threats..

Risk Description: Provides a brief description of the risk.

Business Impact: Provides a brief description of the impact to the organization if the risk is realized.

Recommended Corrective Action: Provides a brief description of the corrective action(s) recommended for mitigating the risks associated with the finding.

Likelihood: Provides the likelihood of a threat exploiting the vulnerability. This is determined by applying the methodology outlined in Section 3 of this document.

Impact: Provides the impact of a threat exploiting the vulnerability. This is determined by applying the methodology outlined in Section 3 of this document.

Risk Level: Provides the risk level (high, Medium, low) for the vulnerability. This is determined by applying the methodology outlined in Section 3 of this document.

CASE STUDY 2

The Wedding

Tony and Peggy Sue graduated from a university in Texas last May. She received a degree in elementary education, and he graduated from the culinary school. They both now work in the Dallas area. Peggy Sue is a teacher, and Tony is a chef at a resort hotel restaurant.

It is Christmas Day and Tony asks Peggy Sue to marry him. She excitedly accepts. They set a wedding date of June 30.

Tony is from New York City. He is the only son of “Big Tony" and Carmella. He is known as “Little Tony" to his family. He has three younger sisters, none of whom are yet married. The family owns a restaurant called Big Tony's, and all four children have worked in the restaurant since they were young. They have a large extended family with many relatives, most of whom live in New York City. They also have many friends in the neighborhood.

Peggy Sue is from Cornfield, Nebraska. She is the youngest of four sisters. She and her sisters worked on the family farm when they were young. Her father passed away several years ago. Her mother, Mildred, now lives alone in the family farmhouse and leases the farmland to a neighboring farmer. Peggy Sue's sisters all married local men and all live in Cornfield. All of their weddings were small (about 50 people), simple, and pretty much the same. Mildred has the wed- ding plans down to almost a standard operating procedure–9:00 A.M. ceremony at the small church, followed by a buffet brunch in the church hall, and that is about it. They really could not afford much more elaborate weddings because the income from the farm had been pretty meager. Peggy Sue's sisters did not go to college, and she had to take out loans to pay for her college expenses.

Tony and Peggy Sue decide to call home and announce the good news about their engagement and the forthcoming wedding.

Tony calls home and tells his mom, Carmella, the news. She replies, "That's great, honey! I've been waiting for this day. I can't believe my little baby is getting married. I'm so excited. We're going to have the biggest, best wedding ever. All our friends and family will come to celebrate. We'll probably have 300 people. And, of course, we'll have the reception at our restaurant; the banquet room should be big enough. I'll tell your cousin Vinnie that you want him to be best man. You grew up together, although you haven't seen much of each other since you went off to college in Texas. I'll call Aunt Lucy as soon as we're done talking and tell her that we want her little Maria and Teresa to be flower girls and little Nicky to be ring bearer. And, oh, I almost forgot the most important thing, your sisters, they'll all be bridesmaids. I already know what color their gowns will be-a decp rose; they'll be gorgeous. And sweetie, I didn't ask your papa yet, but I know he'll agree with me-on Monday, I'm going to call my friend Francine, the travel agent, and get two tickets for you for a two-week honeymoon in Italy. You've never been there, and you must go. It will be a gift from your papa and me. And tell Peggy Lee or Peggy Susie or whatever congratulations. We are so happy for both of you. It's your wedding, and I don't want to interfere. I'll just be here to help. You know what I'm saying. So, my little Tony, whatever you want me to do, you just tell me. And one more thing, I'll see Father Frank after Mass on Sun- day and tell him to mark his calendar already for a two o'clock ceremony on June 30. Goodbye, my big boy. I'll tell Papa you called. And I can't wait to start telling everybody to get ready to party on June 30."

Peggy Sue also calls her mom to tell her the news about the upcoming wed- ding. Mildred responds, “That's wonderful, dear. I'm glad you're finally getting married. You waited so long with going off to college and everything. I'il start getting everything ready. I know how to do this in my sleep by now. Tīl mention it to Reverend Johnson after Sunday service. I'll tell your sisters to expect to be bridesmaids again in keeping with the family tradition. I guess Holley will be the matron of honor; it's her turn. By the way, she's expecting her third child probably right around the same time as your wedding, but I don't think that will matter. Well, I guess pretty soon you'll be having babies of your own, like all your sisters. I'm glad you are finally settling down. You should really be thinking about moving back home, now that you are done with college. I saw Emma Miller, your second-grade teacher, at grocery store the other day. She told me she is retiring. I told her you would be excited to hear that and probably want to apply for her job."

"She said she didn't think they would have too many people applying so you would have a good chance. You could move in with me. The house is so big and lonely. There is plenty of room, and I can help you watch your babies. And your boyfriend, Tony—isn't he a cook or something? I'm sure he could probably get a job at the diner in town. Oh dear, I'm so happy. I've been praying that you would come back ever since you left. I'll tell all your sisters the news when they all come over for family dinner tonight. It won't be long before we're all together again. Goodbye, my dear, and you be careful in that big city."

Tony and Peggy Sue start discussing their wedding. They decide they want a big wedding—with their families and friends, including a lot of their college friends. They want an outdoor ceremony and outdoor reception, including plenty of food, music, and dancing into the night. They are not sure how much it will cost, though, and realize Peggy Sue's mother cannot afford to pay for the wedding, so they will have to pay for it themselves. Both Tony and Peggy Sue have college loans to pay back, but they hope that the money gifts they get from the wedding guests will be enough to pay for the wedding expenses and maybe have some left over for a honeymoon.

It is now New Year's Day, and Tony and Peggy Sue decide to sit down and start laying out the detailed plan of all the things they need to do to get ready for their wedding

CASE QUESTIONS

1. Develop an estimated duration for each activity.

2. Using a project start time of 0 (or January 1) and a required project completion time of 180 days (or June 30), calculate the ES, EF, LS, and LF times and TS for each activity. If your calculations result in a project schedule with negative TS, revise the project scope, activity estimated durations, and/or sequence or dependent relationships among activities to arrive at an acceptable baseline schedule for completing the project within 180 days (or by June 30). Describe the revisions you made.

3. Determine the critical path, and identify the activities that make up the critical path.

4. Produce a bar chart (Gantt chart) based on the ES and EF times from the schedule in item 2.