Chapter 17 Betty to the Rescue

• “The highest form of treason: to do the right thing for the wrong reason.”

  —T.S. Eliot

Sometimes angels work behind the scenes in secret ways. Betty Mavis was an unsuspected angel for Supervisor Mark Armen of Glacier Hills Township. Glacier Hills was just north of the city of Westminister. Armen had been a political science professor at Ansell College in Westminister, but he was a resident of Glacier Hills, and when the opportunity present itself, he decided a tour of duty in public service was in order. He still had to get elected. Several students helped in his campaign and all were supportive. Particularly helpful was graduate student Paul Turwill. Tur-will took the lead in getting together volunteers to knock on every door in Glacier Hills. He also talked residents into having signs on their lawn. In the true sense of the word, he was a go-getter. After long summer nights of campaigning, Armen and Turwill and those students who were over 21 would gather at the Knolls Tavern to discuss their activities. Betty Mavis often came along, usually with a textbook in hand, and always with a smile.

Armen told Turwill that he would help him get a job with the township if he were to be elected and a job opening was available. The election was a success, and as it happened, the previous, outgoing supervisor had a secretary who indicated she wished to resign when her boss left office. That created an opening for a secretary. Armen approached the township clerk, another elected official who served as personnel director. Armen was told that he could choose anyone he wished to be his secretary. He brought up the possibilities of having Turwill serve instead as his assistant, but with the understanding that Turwill and Armen would take care of all of the secretarial tasks of the supervisor’s office. The clerk had no problem with that arrangement, and at the first meeting led by new Supervisor Mark Armen, the issue was placed in front of the full board, and it was discussed briefly. There was no opposition when it was established that Turwill could type and he had had some clerical work experience. Turwill was hired. He was able to continue with his master’s degree program as all his remaining classes were in the evening. He agreed not to take any class on Monday night, as that was when the township board meetings were.

Political leaders often praise the patronage system. If an official is given the power to make an appointment untied to arms-length merit considerations and open competition, it is considered a plus. This is what Mark Armen had been teaching right out of the textbooks in his political personnel classes. He had his classes read George Washington Plunkitt,¹ which explained that the only way you can motivate staff is if you get to select them unhindered by rules and examinations. Patronage was the key to loyalty. When Armen the professor yielded to Armen the political leader, it didn’t seem to work out that way at all. Turwill was a big mistake. He immediately took on a lazy air. He did not show respect to other members of the staff, mostly older women who, while a bit stern in demeanor, had efficiently taken care of township business over the previous 3 decades. Stern was the nature of most workers in the community of German immigrants—many of whom were recent immigrants. Turwill was a bit sloppy in his work. Armen had to have letters retyped, and after a while just took on the task of typing his letters by himself.

Armen was outgoing and liked to joke around with citizens and students alike. He was into jogging, and would tour the township streets in his running outfit two or three mornings a week. He actually used the running to look at sites for rezoning or other issues that had come up in meetings. It was a good way to keep in touch with the citizens. He would wave and smile at constituents and even stop to chat if the occasion called for it. Some of the solid citizens took offense at this style of activity. They were especially critical when they would phone the township and ask for the supervisor only to get Turwill to answer in a sarcastic way that the supervisor was out jogging.

Armen was very concerned when some of Turwill’s college friends would stop by and have closed-door meetings with him. Armen also had an impression that Turwill and his friends would go behind the township hall and participate in recreational drug activity. Armen was well aware that many of the students on campus did drugs, and he had seen Turwill smoking on occasion. The township hall was not the place, and working hours were not the time.

A patronage appointee cannot be easily fired. This is especially the case if he or she earned the job through hard political work. This is the case when someone won an appointment through the recommendation of a close friend. A patronage appointee who knows this may use this. The patronage appointee may take on a feeling that he already paid his dues for the job and he doesn’t have to work as hard as others for their pay. Such was the case with Turwill. Armen pondered solutions, and he knew that any direct action would have costs in friendships on campus, and in respect from his township colleagues who had gone along with his judgment when Turwill was hired. The solution to the problem of Turwill was not easy. Armen’s first thought was to move him to some work outside of the township hall. Armen did let Turwill know that he could not defend him if anyone else saw him smoking marijuana about the premises, and Turwill seemed to understand the warning.

Armen thought about putting Turwill with the township work crews, but that was mostly manual labor, and Armen was not going to make Turwill a supervisor of work crews—where the workers were more skilled than he was. Fortunately the township received a neighborhood development grant for a poor area near the river—Riverdale. The grant entailed hiring crews to clean up the streets, paint houses, and conduct recreational programs. Armen put Turwill in charge of organizing teams to go to the Riverdale area and to work with them. While Turwill thought the work was a bit demeaning, he thought it was less boring that being at township hall all day. He seemed to be doing a satisfactory job in Riverdale. Armen only worried about the fall—in 2 months the Riverdale project would be over—then he would have the Tur-will project on his hands again.

Ah! The day of miracles. One day in August, Turwill came into Armen’s office with a big smile and announced that there was an opening for an assistant public works director in the city of Westminister, and the pay was 40% higher than his current salary. He asked if he should apply.

Armen put on his professor’s hat for a moment and said, “Paul, you know you are welcome here. I owe you this; I know I wouldn’t be here without your work. But the job you have here has to be considered temporary—I am here on a 2-year term; you know my job here is temporary too. You do not have a career job here; there is no career ladder. Westminister is a big city, a post like assistant public works director can have a career ladder. And I can’t raise your salary. Believe me, I know I owe you, and I know you can work hard, and I’ll let the people in Westminister know you are a good student and you can work hard. My professorial advice is simply ‘go for it.’”

Armen made a few inquiries about the position in Westminister, and he found that they wanted a person with a master’s degree and experience, and that they were conducting a national search. His brief moments of thinking that the “Paul problem” was being solved ended. On the other hand, maybe his talk with Turwill could encourage him to look for other jobs, too. But hopes dashed can be hopes revived. Two days later Turwill told the supervisor that he had made the list of ten finalists for the job at Westminister. Armen was indeed a bit dumbfounded.

The next week Turwill was invited for a personal interview. He reported back to Armen with another smile on his face. He had been the first candidate interviewed, because they were talking to people in the local area first. He related that the interview had gone extremely well. In the course of discussions about work experience Turwill had told the Westminister director of public works that he had worked on sidewalk construction crews during summers of his college years. The director asked where, and Turwill replied in Geddes, where he grew up. Geddes was a town of 10,000, forty miles to the west of Glacier Hills.

“You grew up in Geddes?” the director had exclaimed. “So did I. Turwill, your name is? Is that right?”

“Yes, Paul Turwill.”

The director asked, “Do you know Tom Turwill?”

“Of course,” Turwill replied. “That’s my father.”

“I can’t believe it. Your father, wow! You must be that little kid he brought to the class picnics,” the director said. “Your father was my best buddy all though school. The stories I won’t tell you, wow!”

And so went the interview. The director said he would call Turwill in a few days.

The next day the director called Mark Armen. Armen gave Turwill a toned-down good recommendation, but the director sensed something. He asked, “You’re not trying to get rid of him are you?”

Without giving a direct answer, Supervisor Armen repeated the essence of his conversation with Turwill. “I am also Paul’s professor at the college, and I have to reflect on what the job here means and what your job would mean for his career. You are offering a professional public administration post with career opportunities. His job here is simply more limited. He is certainly welcome to stay here, but you are presenting a real professional opportunity and he is capable of taking advantage of it and doing a good job.”

Armen worried that his line of bull might not be effective, but he let it rest, and the director thanked him for his views on Turwill. Turwill got the job.

Armen dropped into the Knolls a few weeks later and Betty Mavis strolled in, books in hand. He asked her how the term was going. She said, “This internship and one more class and I’ve got my degree.”

“Hey, great, tell me about your internship,” Armen said.

Mavis said, “You should know about my internship, you helped set it up last fall.”

Armen sort of remembered and said, “Something to do with personnel, at the county.”

“Right on personnel, but it is the personnel department with the city of Westminister, and let me tell you, I saved your friend Paul’s butt, too.”

Armen inquired as to how she had done that.

Mavis related that the applicants for the assistant public works director were on her desk, and a screening committee had selected ten for interviews. Turwill’s application was in the pile of rejected applications. Mavis said she simply took out the bottom application from the pile of ten and placed Turwill’s into the second spot. Evidently, the director just grabbed the pile of ten and sorted out the locals, and Tur-will was the first one to get an interview call. Mavis heard he had gotten the job, but she hadn’t told anyone how he got the interview. Turwill told her that she had really saved him. She said she thought so because Turwill was always complaining about his township job.

Armen had not thought about Mavis’s graduation, and Mavis had not brought up the subject. But Armen knew she was a waitress at a nice restaurant, the Great Lakes Steakhouse. Armen went into the tavern the week after graduation, and Mavis was there again. This time she was direct.

“Hey, Professor, when you going to take care of me? When do I get a job?”

Armen said, “O.K. Right now, this is your job interview.”

They went though her courses, the jobs she had held, and her skill levels.

Armen said, “Look, I never filled Paul Turwill’s job, and I told the clerk I really didn’t need an assistant, but I know we have a backlog of clerical work, and we could use some organization. You come in tomorrow, and we’ll discuss your job with the clerk.”

The next day Mavis was hired. Armen returned to teaching when his 2-year term ended. Mavis’s new job was a clerical job, but over the next 25 years she grew her position into a professional position. The word in township hall was that she made the place work. Indeed she was even recognized by the Greater Westminister Women’s Club as “Professional Woman of the Year.”

Rethinking patronage—sometimes it can work out O.K.

Questions

• 1. Patronage involves basic ethical questions. Was it proper for Armen to hire Turwill in the first place? There was certainly more qualified office staff available.
• 2. What could Armen have done to let Turwill know that his position with the township involved serious work?
• 3. Shouldn’t Armen have had some clues about how Turwill might act in the township office situations? Wouldn’t he have been familiar with his character? Did he do a disservice to Turwill by not carefully determining (and telling him) his specific job duties, and specific expectations for on-the-job work?

Please give the genus and species of each answer.

11. The colonies are typically large, gray-white and opaque on blood agar. Most strains recovered from clinical isolates are nonpigmented; colonies with a deep red pigmentation may be encountered. On MacConkey agar they appear nonpigmented after 24 hours but become lactose positive. The bacterial cells are gram-negative straight rods. The biochemical reactions are indole negative, methyl red negative, VP positive, motile, citrate positive, urease negative, and hydrogen sulfide negative ___________________________________________________________________________________

12. The colonies are typically large, gray-white and opaque on blood agar. On MacConkey agar they appear nonpigmented characteristic of non-lactose fermenters. On selective enteric media containing ferrous iron (HE, XLD), colonies may have a deep black pigmentation from production of hydrogen sulfide. The bacterial cells are gram-negative straight rods. The biochemical reactions are indole negative, methyl red positive, VP negative, motile, citrate positive, urease negative, and hydrogen sulfide positive. ___________________________________________________________________________________

13. Family members attended a reunion in Cape Cod and five persons became ill. Their symptoms included malaise, anorexia, and mild icterus. All patients had abnormal liver function tests. All patients recovered uneventfully. Other family members received gamma globulin. All patients denied a history of exposure to blood transfusions, parenteral drug use, and foreign travel. At the reunion, the patients had shared one meal together at which only steamed clams were served. Six persons ate the clams, and five became ill.

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14. Two brothers, age 7 and 11, killed a sitting rabbit with a BB gun. Three days later the 11-year-old boy became ill with severe headache, and on the following day he was admitted to a local hospital with temperature of 103 F. Both the brother and the boys' mother, who had assisted in cleaning the rabbit, experienced similar symptoms. The mother had an indurated cutaneous lesion on the middle finger of her left hand and generalized lymphadenopathy. All three persons responded clinically to tetracycline and chloramphenicol.

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15. A 66-year-old resident of New Mexico, traveling through Texas, became ill with fever and general malaise. The following day he was admitted to a hospital with a fever of 103 F, nausea, weakness and lower extremity myalgia. No lymphadenopathy or abnormal lung findings were apparent. Blood specimens were positive for gram-negative organisms, and the patient was begun on chloramphenicol and gentamycin. The patient's general condition improved rapidly following antibiotic therapy, although fever persisted for 10 days; his clinical course was punctuated by an episode of pulmonary edema. Persistent pulmonary infiltrates were thought to be related to congested heart failure rather than to pneumonia. He was discharged after a two week hospitalization and at present is asymptomatic. Epidemiological investigation by the Texas State Department of Health revealed that the patient had spent most of the previous month at his brother's ranch in New Mexico, where he had handled dead mice; he did not recall being bitten by fleas. During the two days immediately preceding his illness, the patient had been traveling in Texas. He spent one night on a ranch in Texas, but had no contact with rodents there.

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16. A 38-year-old man in Alabama developed bilateral paresthesia and pain in his ears, headache, sore throat, and anorexia. These symptoms persisted and later were accompanied by fever, difficulty swallowing, confusion, and tremor. He was admitted to the hospital with a temperature of 105 F, nuchal rigidity, confusion, agitation, and spasmodic tremors. Physical examination admission revealed dysarthria, dysphagia, pharyngeal paralysis, and drooling. Stimulation of the patient precipitated spasms with spontaneous flexion of all extremities. A lumbar puncture revealed no marked abnormalities. Seven days later, the patient had pharyngeal and laryngeal spasms, subsequent cyanosis, and suffered a respiratory arrest; he was resuscitated immediately. Reviewing the patient's history he had been bitten on the right ear by a bat four weeks prior to admission. The bat had escaped and the patient had sought medical care. Over the next few days, the patient lapsed into a coma. Neurologic examination revealed facial paralysis, generalized hypoflexia, and response to only deep pain. No other focal abnormalities were present. Initially the patient was treated with diphenylhydantoin, diazepam, and chlorpromazine. Once the coma ensued, the sedatives were discontinued. Proteinuria, hypothermia and hypoxia subsequently developed. Despite intensive respiratory care, antibiotics, postural drainage, use of bronchodialators, and vigorous suctioning, hypoxia persisted. The patient developed a pneumothorax, had a cardiorespiratory arrest and died.

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17. You are working in a Los Angeles emergency room. At 2 A.M., a man and two women arrived with a screaming 5-year old child. The man tried to explain what was wrong, but he spoke only spanish and you had a difficult time understanding him. The child's mother was sobbing and you couldn't hear what she was saying. The other woman spoke a bit of english and explained that this was her family who just arrived from El Salvador. She said the father kept repeating the word for break bone. The child was examined and presented with a rash, a fever of 104 F but not broken bones or fractures. What is your diagnosis?

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18. A 9-year-old boy was brought by his father for evaluation of crampy abdominal pain, nausea, and mild diarrhea that had persisted for approximately two weeks. On the day before the evaluation, the boy reported to his parents that he had passed a large worm into the toilet during a bowel movement. He flushed the worm before the parents could see it. Physical examination was completely unremarkable. The boy had no fever, cough, or rash and did not complain of anal pruritus. His travel history was unremarkable. Examination of a stool specimen revealed the diagnosis. Which nematode was likely in this case?

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19. A 45-year-old Egyptian was referred for evaluation of hematuria and urinary frequency of 2 months’ duration. This individual had lived in the Middle East for most of his life but for the past year lived in the United States. He denied previous renal or urologic problems. His physical examination was unremarkable. A midstream urine specimen was grossly bloody. What was the etiologic agent of the patient’s urologic process?

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20. A 63 –year-old international telecommunications executive visits your office with complaints of high fever. The fever is not constant, but intermittent. He says that every three days or so he suffers from these debilitating “sweats”. He usually has headaches and muscle aches during these episodes. They are so bad that he can’t go to work. After a day or so he feels better. He has been having these episodes for several months. What is the name of the condition you suspect?

CASE 2

Mark Hobson is an internal auditor employed by Com­ stock Industries. He is nearing completion of an audit of the Avil Division conducted during the first five weeks of the year. The Avil Division is one of three manufacturing divisions in Comstock and manufactures inventories to supply about 50 percent of Comstock's sales. In addition to the manufacturing divisions, Comstock has two marketing divisions (domestic and international) and a technical service division that offers worldwide technical support. Each customer is assigned to the most suitable manufacturing division, which functions as the supplier for that customer. The manufacturing division then approves the customer's credit, ships against orders obtained by the sales representatives, and collects the customer receivables when due. This allows order-to-order monitoring of customer credit limits against customer orders received.

Two Potential Observations

Two items concern Mark. First, there was a material dollar amount of inventory of part number A2 still carried on the Avil books at year-end, despite the fact that the Fast-tac machining component in which part A2 was used is now considered the first generation and is no longer manufactured. Company policy requires an immediate write-off of all obsolete inventory items. Second, some accounts receivable still carried as collectible at year-end were more than 180 days old. All receivables are due in 30 days, which is standard for the industry. Mark believes many of these old accounts are uncollectible.

The division manager's administrative assistant, Brenda Wilson, performed the aging- of accounts receivable rather than the division accountant, as is standard practice. The division accountant refused to discuss the circumstances of Brenda's actions.

The Auditee's Comments

Mark scheduled a meeting with Brenda to discuss his concerns.

"Well, Mark," Brenda responded, "I know that policy requires that obsolete inventories be written off; but part A2 is just not being used at present. We might start to make those Fast-tac components again. Who knows? Wide ties are coming back again, aren't they? Fast-tac could, too. There are plenty of customers, especially in the third world, that are finding those second- and third-generation machines pretty expensive to maintain. I mean, there is a policy that states obsolete inventories should be written off, but there is no policy defining an obsolete part."

"And as for those receivables,” Brenda continued, "that is certainly a judgment call, too. Who knows if those accounts will be collected? We're in a slight recession now. When things pick up, we'll probably collect a few. There isn't even a policy in this division on writing off receivables. I checked. Nothing says I have to write them off. So who are you to say I have to?"

“'Brenda, be straight. You know those parts will never be used. And you know those receivables are bad."

"Look, Mark," Brenda finally bargained, "it's only two weeks from the close of the year. Let's let these items ride till after the close so that everyone gets their bonuses. Then, I promise I'll take a fresh look at both inventories and receivables. I'll write them down after year-end after the financial reports are issued. No one will know. And, after all, who's to be hurt?"

The Division Manager

Mark continued his audit, drafted his report containing observations related to the inventory and receivables, and reviewed the report with the division manager, Hal Wright. Hal was visibly disturbed.  

"Gee, Mark, this couldn't have come at a more awkward time. Our figures just passed muster by the independent outside auditors. There was a guy out here for our inventory count in November, and Brenda already sent her spreadsheet on year-end receivables to corporate head­ quarters. No one up there, in our group or on the CPA audit team, was the least bit critical. If you go raising a big stink, particularly now, the independent outside auditors will catch us writing off inventory and receivables, they'll adjust profit, and there will be hell to pay for all of us. And, Mark, this is no clear-cut issue either. I mean, I can see how you can write a report calling for clearer policy, but not one calling for specific write-downs. That's way out of your jurisdiction. But still, I promise, we'll look at all this after our statements go to bed. Right now, I feel the managers of this division have worked their hearts out and I intend to fight to protect what little bonuses they have coming. If we write down as you suggest, those bonuses will go and the stockholders will lose too. Earnings per share (EPS) will drop like a rock. They might even close this division. Now you don't want that, do you, boy?"  

"Well, Hal, I could word my observations as they are in the draft but include your response." Hal was suddenly angry. "What? And let the audit committee decide the issue? They have nothing to do with this. They accepted the CPA’s report. If you want to make the audit committee happy, you'll accept it, too, and leave this adjustment stuff alone."

The Internal Audit Director
Concerned, Mark delayed finalizing his report and discussed the draft with Gail Wu, director of internal audit. Gail is not trained as an auditor and was promoted to director of internal audit from corporate finance so that she might develop a better understanding of operating relationships. Still, Gail is very smart and Mark has always respected her opinion. The discussion was by telephone, with Mark still at the Avil Division headquarters and Gail at the corporate office.

"Mark, Hal is right. If you, in essence, blow the whistle on management bonuses this year, we can kiss goodbye all the goodwill I've been struggling to build for this department. It will all go out the window."

"I know you've been trying to put us on a better footing, Gail, but Hal is intractable. As far as he is concerned, the only observation he will accept in the report is that of deficient policy, with nothing mentioned about the inventory or receivables needing adjustment."

"Well, do what you have to," Gail ended the discussion. "But I insist that you submit a report that Hal agrees to and has signed. I don't want to stir up hornets and then have to try to explain my loose cannon to the board when everyone is howling about the bonus problem."

1. Refer to The IIA’s Code of Ethics. Identify three specific Rules of Conduct relevant to this case.
2. Using the Rules of Conduct you identify as the context, discuss the ethical issues raised in the case.
3. Discuss how the ethical dilemma Mark faces might have been avoided. In other words, discuss specific things Comstock's management and/or the internal audit function might have done to reduce the risk of such a situation arising.
4. Clearly indicate what you would do if you found yourself in Mark's position. Briefly explain why.

T/F .   plz provide correct answer with solutions key of textbook: Gregory and Stuart Comparing Economic System in the Twenty-First Century,7th edition.

46. Japan’s Ministry of international trade and industry was the pioneer of Asian industrial policy, which tends to be much more comprehensive than in the U.S.

47. The administrative-command economy was the mechanism for resource allocation in the former USSR between 1929 and the word war 2, but was abandoned in 1946.

48. Today, the U.S., with 5 percent of world population, produces 22 percent of world GDP, while Eastern Europe and the former Soviet Union, with 7 percent of world population, produce 6 percent of world GDP.

49. The economic planning agency in the USSR Was Gosbank.

50. In practice, the planning process in the Soviet Union was so effective that the optimal plan was always chosen from among the set of consistent plans.

51. In the Soviet model of centralized socialism, a principal-agent problem was created by the information asymmetry that existed between enterprise managers and their superiors.

52. In the USSR, prices were changed frequently to equate supply and demand.

53. Economist Steve Hancke has found that for every 10 percent increase in economic freedom, GDP per capita rises between 7 and 14 percent.

54. Whereas prices played little, if any role in the allocation of most inputs in the Soviet Union, wage differentials were the primary mechanism of allocating labor.

55. The two major institutions of Soviet agriculture after 1928 were the Kolkhoz and the Sovkhoz.

56. China is the world's most populous country, with about 1.3 billion citizens.

57. Although the Chinese economy resembled the administrative-command economy of the USSR prior to 1970, it now resembles market socialism.

58. The Great Leap Forward and the Cultural Revolution both caused interruption of economic growth in China.

59. The contract responsibility system introduced in China in the late 1970s effectively brought collectivization to an end.

60. During the past twenty years, privatization has been extended to small and Medium-scale industry in China, but large-scale enterprises remain under state ownership.

61. China was able to finance about 40% of its capital formation in The 1990s with foreign direct investment.

62 Since 1980, China's rate of economic growth has been among the highest in the world.

63. The high rate of economic growth in the world in the 1990s can be attributed, in part, to the expansion of economic freedom and property rights.

64. The major difference in the distribution of income in planned socialist and capitalist economies is due to the absence of private ownership of income-producing property under socialism.

65. Frederic Pryor found that economic fluctuations in planned socialist economies were significantly less pronounced than In capitalist economies.

66. Among the factors leading to the decline of the planned socialist economies are lack of technological progress, diminishing returns to capital, inefficiency, problems with incentives and the complexity of planning.

67. Liberalization is the reduction of state controls and the introduction of markets.

68. Privatization has received major emphasis both in Eastern transition economies and in Western market economies.

69 The "J" Curve" has been the dominant pattern of economic performance in transition economies

70. Economists believe that differences in initial conditions, policy measures, and environmental factors are important determinants of differences in economic performance among transition economies.

71. Other things being equal, transition economies with initial conditions more similar to market economies have had higher rates of economic growth during the transition.

72. Other things being equal, economic growth of transition economies is directly related to the degree of liberalization.

73. Poland used the ‘’gradualist approach’’ to economic transition.

74. The Washington consensus was the basis for the big push approach to economic transition.

75. In the study of economic transition, complementarities refers to the notion that some elements of transition must be implemented simultaneously.

76. The Most fundamental element in the identification of differing economic systems is property rights.

75. In the study of economic transition, complementarities refers to the notion that some elements of transition must be implemented simultaneously.

76 The most fundamental clement in the identification of differing economic systems is property rights

77 The replacement of state-owned firms by private firms did not begin until the transition era.

78. The role of government in the economy varied widely in capitalist countries, bat not in socialist countries.

79. Mass privatization began during the 1980s.

80. The first stage of privatization is to identify properties to privatize.

81. The last stage of privatization is to restructure enterprises.

82. In practice, privatization has proven easier to achieve in small scale establishments than in the largest enterprises.

83. The two major approaches to privatization have been direct sale and the use of vouchers.

84. By 2000, Ukraine had a larger percentage of output produced in the private sector than did by Hungary.

85. Restructuring means the changing of decision-making arrangements in privatized enterprises and organizations.

86. The absence of macroeconomic institutions and frameworks caused little, if any, difficulty for the transition economies

87 During the transition process, direct state control of the economy through an economic plan has to be replaced by a macroeconomic system of indirect influence.

88. The policy environment of transition economies is much more simple than that of established capitalist market economies.

89. Poorly developed or poorly functioning banking and financial systems contributed to the collapse of investment in the early stages of economic transition in Russia and Eastern Europe.

90. Typically, savings increased sharply in the early stages of transitions.

91. Macroeconomic balance requires that the sum of investment and private savings equals the sum of the government balance and the foreign balance.

92. In all of the transition economies, the government balance increased between 1990 and 2002.

93. The typical pattern of inflation in transition economies has been an increase in the early stages of transition, followed by a reduction in more recent years.

94. In nearly all transition economies, there have been large reductions in the Gini coefficient for income inequality.

95. Between 1991 and 1996. Ten transition countries became candidate members of the European Union, and all ten became members of the WT0 and GATT.

96. While a convertible currency is a goal for all transition economies, it isn't necessary in order for a country to engage in free trade with the rest of the world.

97. Aid to Transition economies from IMF has been primarily for domestic stabilization, whereas aid from te world bank have been long term economic development.

98. As a group, transition has fired poorly in attracting foreign direct investment.

99. Although private-sector employment as a percentage of total employment varied widely among transition economies in the early stages of transition, in later stages there has been among transition has been very little variation in relative private-sector employment.

CASE DISCUSSION QUESTIONS What are the underlying cultural assumptions for Mr. Bernard and how are these different from the basic assumptions of N’Diaye and Diop? What would you do if you were Bernard’s boss, the managing director? In what ways is a reward system a cultural phenomenon? How might you design an effective reward system for Senegal? It was a most unusual meeting at a local café in Dakar. Diop, a young Senegalese engineer who was educated at one of Frances’s elite engineering grandes ‘ecoles in Lyon, was meeting with N’Diaye, a model factory worker to whom other workers from his tribe often turned when there were personal or professional difficulties. N’Diaye was a chief’s son, but he didn’t belong to the union and he was not an official representative of any group within the factory. Socometal is a metal container and can company. While multinational, this particular plant is a joint venture wherein 52 percent is owned by the French parent company and 48 percent is Senegalese. Over the last twenty years Socometal has grown in size from 150 to 800 employees and it has returns of about 400 million FCFA (African francs) or $144 million. The firm is often held up as a model in terms of its Africanization of management policies, whereby most managers are now West African with only 8-10 top managers coming from France. During the meeting N’Diaye asked Diop if he would accept an agreement to pay each worker for two extra hours in exchange for a 30 percent increase in daily production levels. If so, N’Diaye would the guarantor for this target production level that would enable the company to meet the order in the shortest time period. “If you accept my offer,” he said with a smile, “we could even produce more. We are at 12,000 (units) a day, but we’ve never been confronted with this situation. I would never have made this proposal to Mr. Bernard but, if you agree today, I will see that the 20,000 (unit) level is reached as of tomorrow evening. I’ll ask each worker to find ways of going faster, to communicate this to the others and to help each other if they have problems…” Mr. Olivier Bernard, a graduate of Ecole Centrale in Paris (one of Frances’s more prestigious engineering schools), was the French production manager, and Diop was the assistant production manager. Mr. Bernard was about 40 and had not succeeded at climbing the hierarchal ladder in the parent company. Some report that this was due to his tendency to be arrogant, uncommunicative and negative. His family lived in a very nice neighborhood in Marseille, and it was his practice to come to Dakar, precisely organize the work using various flowcharts, tell Diop exactly what was expected by a certain date and then return to France for periods of two to six weeks. This time he maintained that he had contracted a virus and needed to return for medical treatment. Shortly before Mr. Bernard fell ill, Socometal agreed to a contract requiring them to reach in short time a volume of production never before achieved. Mr. Bernard, after having done a quick calculation, declared, “We’ll never get that from our workers--- c’est impossible!” After organizing as best he could, he left for Marseille. Diop pondered what N’Diaye had proposed, and then he sought the opinions of influential people in different departments. Some of the French and Italian expatriates told him they were sure that the workers would not do overtime, but felt confident enough to take the risk. The next morning N’Diaye and Diop met in front of the factory and Diop gave his agreement on the condition that the 30 percent rise in daily production levels be reached that evening. He and the management would take a final decision on a wage increase only after assessing the results and on evaluating the ability of the workers to maintain this level of production in the long run. The reasons given by the French and Italian expatriates for why the Senegalese would not perform overtime or speed up their productivity are interesting. One older French logistics manager said, “Africans aren’t lazy but they work to live, and once they have enough they refuse to do more. It won’t make any sense to them to work harder or longer for more pay.” And the Italian human resource manager exclaimed, “We already tried two years ago to get them to do more faster. We threatened to fire anyone caught going too slow or missing more than one day’s work per month, and we told them they would all get bonuses if they reached the production target. We had the sense that they were laughing behind our backs and doing just enough to keep their jobs while maintaining the same production levels.” Four days after their first negotiation, the contract between Diop and N’Diaye went into action. Throughout the day N’Diaye gave his job on the line to two of his colleagues in order to have enough time and energy to mobilize all the workers. The workers found the agreement an excellent initiative. “This will be a chance to earn a bit more money, but especially to show them (the French management) that we’re more capable than they think,” declared one of the Senegalese foremen. From its first day of application the formula worked wonders. Working only one extra hour per day, every work unit produced 8 percent more than was forecast by Diop and N’Diaye. Over the next two months, the daily production level oscillated between 18,000 and 22,000 units per day --- between 38 and 43 percent more than the previous daily production. It was at this production level, never experienced during the history of the company, that Mr. Bernard found things when he returned from his illness. “I,” said Diop, “was very happy to see the workers so proud of their results, so satisfied with their pay raise and finally really involved in their work…. In view of some expatriates’ attitudes it was a veritable miracle…. But, instead of rejoicing, Mr. Bernard reproached me for giving two hours’ pay to the workers, who were only really doing one hour more than usual. ‘By making this absurd decision,’ he said, ‘you have put the management in danger of losing its authority over the workers. You have acted against house rules… You have created a precedent too costly for our business. Now, we must stop this ridiculous operation as quickly as possible. We must apply work regulations…’ And he slammed the door in my face before I had the time to say anything. After all, he has more power than me in this company, which is financed 52 percent by French people. Nevertheless, I thought I would go to see the managing director and explain myself and present my arguments. I owed this action to N’Diaye and his workers, who had trusted me, and I didn’t care if it made Bernard any angrier.” In the meantime, the decided to maintain the new production level in order to honor their word to N’Diaye and Diop. A foreman and friend of N’Diaye stated, “At least he knows how to listen and speak to us like men.” The foreman indicated, however, that they might return to the former production level if Bernard dealt with them as he did before.

Molex Inc. and their reporting of a financial error found during their audit. This is the only company on the S&P 500 Index to have reported an error during the year.

1. Do you think it is because companies are doing a better job reporting on their financial statements or do you think it is just because they are getting away with the fraud?
2. What techniques have you learned so far in class that you could have implemented to help catch this financial error?

Honesty for Banks Is Still Such a Lonely Word: Jonathan Weil

March 02, 2011, 7:04 PM EST

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By Jonathan Weil

March 3 (Bloomberg) -- So many big companies. So few big mistakes.

Last August an electronics manufacturer named Molex Inc. did something remarkable, at least by today’s standards for disclosing bad news. It filed a special report with the Securities and Exchange Commission known as an 8-K, saying it had overstated its shareholder equity by $101 million and that investors shouldn’t rely on its financial statements for the previous three years.

What made this event so unusual is it was the only negative restatement disclosed in this manner last year by a company in the Standard & Poor’s 500 Index. That’s according to Audit Analytics, a Sutton, Massachusetts, research firm that tracks such data. Molex, based in Lisle, Illinois, included its corrected results in its fiscal 2010 annual report the same day.

You could look at this in different ways. Perhaps the quality of today’s financial reports is so pure that only one S&P 500 company had to disavow its books last year because its results weren’t as good as originally reported. Or it may be that too few of America’s largest companies are willing to admit their errors and disclose them prominently.

“It’s one or the other,” says Don Whalen, research director at Audit Analytics. “Either companies’ internal controls have improved dramatically, so they’re not making mistakes. Or it’s too good to be true, and the information is not getting out.”

Course Correction

Whichever it is, the number of companies correcting errors in their books has declined dramatically. Last year 699 SEC- registered companies filed financial restatements, according to Audit Analytics. That was up from 640 in 2009, but less than half the record 1,566 companies in 2006.

The figures for banks, in particular, look unnaturally low. Forty-four banks restated last year, one fewer than in 2009. Even more curious, there were 133 banks that issued corrections from 2008 through 2010. That was down from 169 banks during the previous three-year period, before the financial crisis took off in earnest, which makes no sense.

Here we had the greatest banking industry meltdown since the Great Depression. Hundreds of lenders failed. And yet the number of banks correcting accounting errors declined while the collapse was unfolding. There were no restatements by the likes of IndyMac, Washington Mutual or Lehman Brothers, for example. The obvious conclusion is the government has been giving lots of banks a free pass, as have their auditors.

Bad Books

It’s not just banks, either. Fannie Mae and Freddie Mac, for instance, took massive bailouts in 2008 without ever conceding errors in their balance sheets. No wonder nobody high up in the financial world is going to jail, when regulators won’t force even those outfits to be honest and acknowledge their books were disastrously wrong.

Molex wasn’t the only S&P 500 company that revised its results last year. There were 10 in all, including Zions Bancorporation. In January 2010, the Salt Lake City-based lender warned investors not to rely on its financial reports for the two previous quarters. Zions’ corrections made earnings and equity look better, though, unlike the fixes at Molex.

The other eight S&P 500 companies that restated last year, including Tyco International Ltd., disclosed revisions without disavowing their previous financial reports in 8-Ks.

Soft Disclosure

About 53 percent of all restatements by U.S. companies in 2010 were handled this way, on the grounds that the errors supposedly weren’t big enough to warrant more prominent disclosures. Sometimes called “stealth restatements,” the corrections instead got tucked elsewhere, such as footnotes in press releases or companies’ quarterly and annual reports.

One explanation for why restatements peaked in 2006 is that the Sarbanes-Oxley Act, starting in late 2004, required many companies to begin subjecting their internal financial-reporting systems to audits by outside accounting firms. As companies improved their internal controls, they found more errors and issued more corrections. Then after they completed their initial overhauls, the theory goes, the number of errors fell sharply.

There’s another school of thought, too. In August 2008, an SEC advisory committee released a report concluding there were too many restatements and that lots of them had resulted from accounting errors that the markets didn’t care about. The panel recommended relaxing the benchmarks for determining when restatements would be needed, drawing howls from some investors and praise from the business lobby.

Who’s Restating

Sure enough, corrections are far fewer today than when the panel began its work, especially at large corporations. The latest increase in the overall figures was driven by tiny companies, which tend to be less mature and easier for auditors and regulators to push around. The number of restaters with less than $75 million of shares available for trading rose to 551 last year from 484 in 2009. Meanwhile, the number of larger companies that restated their books fell to 148 from 156.

Whalen says he still believes improvements in companies’ internal controls are the main reason for the broad decline since 2006. About 40 percent of last year’s restatements had no effect on earnings, according to Audit Analytics. So it’s not as if humdrum errors are never getting fixed.

He’s at a loss, though, to explain how there could be fewer banks that restated their books after the financial crisis started than before. “As a layman, you know there’s something wrong with that,” he says.

No kidding.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

--Editors: Steven Gittelson, Charles W. Stevens

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Master Budget Case: Wooden Pull Toys Inc. Wooden Pull Toys Ltd. is a company that manufactures and sells a single product, which they call a Baby Turtle. For planning and control purposes they utilize a quarterly master budget, which is usually developed at least six months in advance of the budget period. Their fiscal year end is December 31. During the summer of 2019, Jimmy C., the Wooden Pull Toys controller, spent considerable time with Fanny L., the Manager of Marketing, putting together a sales forecast for the first quarter of next year (January to March, 2020). Unfortunately, their collaboration worked so well they eloped to Niagara, ON, were married and settled down. Prior to their departure they e-mailed letters of resignation and a cryptic sales forecast to the President of Wooden Pull Toys. Their sales forecast consisted of these few lines: • For the year ended December 31, 2019: 475,000 units at $11.00 each* • For the year ended December 31, 2020: 500,000 units at $11.00 each • For the year ended December 31, 2021: 500,000 units at $11.00 each *Expected sales for the year ended December 31, 2019 are based on actual sales to date and budgeted sales for the duration of the year. Wooden Pull Toys’ President felt certain that the marriage wouldn’t last, and expected Chris would be back any day. But the end of the year is quickly approaching, and there is still no word from the desert. The President, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the first quarter. Your conversations with the President and your investigations of the company’s records have revealed the following information: 1. Sales of Baby Turtles are seasonal. History shows that January, March, May and June are the slowest months with only 5% of sales for each month. Sales pick up over the summer with July, August and September each contributing 6% to the total. Valentines Day in February boosts sales to 10%, and spring break in April accounts for 7%. As Christmas shopping picks up momentum, winter sales start at 10% in October, move to 15% in November and then peak at 20% in December. This pattern of sales is not expected to change in the next two years. 2. From previous experience, management has determined that an ending inventory equal to 25% of the next month’s sales is required to fit the buyer’s demands. 3. There is only one type of raw material used in the production of Baby Turtles. R700 is a very compact material that is purchased in powder form. Each Baby Turtle requires 5 kilograms of R700, at a cost of $0.45 per kilogram. The supplier of R700 tends to be somewhat erratic so Wooden Pull Toys finds it necessary to maintain an inventory balance equal to 40% of the following month’s production needs as a precaution against stock-outs. Wooden Pull Toys pays for 20% of a month’s purchases in the month of purchase, 45% in the following month and the remaining 35% two months after the month of purchase. There is no early payment discount. 4. Beginning accounts payable will consist of $167,084 arising from the following estimated direct material purchases for November and December of 2019: R700 purchases in November 2019: $173,953 R700 purchases in December 2019 $132,750 5. Wooden Pull Toys’ manufacturing process is highly automated, so their direct labour cost is low. Employees are paid on a per unit basis. Their total pay each month is, therefore, dependent on production volumes and averages $9.00 per hour. This rate already includes the employer’s portion of employee benefits. All payroll costs are paid in the period in which they are incurred. Each unit spends a total of 18 minutes in production. 6. Due to the similarity of the equipment in each of the production stages and the company’s concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The unit variable overhead manufacturing rate is $1.30, consisting of: Utilities--$0.60; Indirect Materials--$0.20; Plant maintenance--$0.30; environmental fee--$0.14; and Other--$0.06. 7. The fixed manufacturing overhead costs for the entire year are as follows: Training and development $ 43,200 Repairs and maintenance 39,000 Supervisors’ salaries 149,400 Depreciation on equipment 178,800 Plant Insurance 96,000 Other 117,600 $ 624,000 • The annual insurance premium of $96,000 will be paid at the beginning of January. There is no change in the premium from last year. • All other “cash-related” fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred. • Wooden Pull Toys uses the straight line method of depreciation. 8. Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is fixed. Previous years’ experience has provided the following information: Lowest level of sales: 375,000 units Total Operating Expenses: $778,710 Highest level of sales: 750,000 units Total Operating Expenses: $1,022,460 These costs are paid in the month in which they occur. Not included in the above expenses is bad debt expense. 9. Sales are on a cash and credit basis, with 55% collected during the month of the sale, 35% the following month, and 9.5% the month thereafter. ½ of 1% of sales are considered uncollectible (bad debt expense). 10. Sales in November and December 2019 are expected to be $783,750 and $1,045,000 respectively. Based on the above collection pattern this will result in Accounts Receivable of $539,481 at December 31, 2019 which will be collected in January and February, 2020. 11. During the fiscal year ended December 31, 2020, Wooden Pull Toys will be required to make monthly income tax installment payments of $1,500. Outstanding income taxes from the year ended December 31, 2019 must be paid in March 2020. Income tax expense is estimated to be 25% of net income. Income taxes for the year ended December 31, 2020, in excess of installment payments, will be paid in March, 2021. 12. Wooden Pull Toys is planning to acquire additional manufacturing equipment for $304,200 cash. 40% of this amount is to be paid in January 2020, the rest, in February 2020. The manufacturing overhead costs shown above already include the depreciation on this equipment. 13. An arrangement has been made with the local bank that if Wooden Pull Toys maintains a minimum balance of $20,000 in their bank account, they will be given a line of credit at a preferred rate of 6% per annum. All borrowing is considered to happen on the first day of the month, repayments are on the last day of the month. All borrowings and repayments from the bank should be in multiples of $1,000 and interest must be paid at the end of each month. Interest is calculated on the balance at the beginning of the month, which includes any amounts borrowed that month. 14. Wooden Pull Toys Ltd. has a policy of paying dividends at the end of each quarter. The President tells you that the board of directors is planning on continuing their policy of declaring dividends of $50,000 per quarter. 15. A listing of the estimated balances in the company’s ledger accounts as of December 31, 2019 is given below: Cash $ 64,165 Accounts receivable 539,481 Inventory-raw materials 28,125 Inventory-finished goods 45,625 Capital assets (net) 724,000 $ 1,401,396 Accounts payable $ 167,084 Income tax payable 21,500 Capital stock 1,000,000 Retained earnings 212,813 $ 1,401396 ________________________________________

Required: Prepare a master budget for Wooden Pull Toys for the first quarter (January, February and March) of the year ending December 31, 2020, including the following schedules: Schedule of Cash Receipts

Open the files for the Course Project and the data set.

For each of the five variables, process, organize, present, and summarize the data. Analyze each variable by itself using graphical and numerical techniques of summarization. Use Excel as much as possible, explaining what the results reveal. Some of the following graphs may be helpful: stem-leaf diagram, frequency/relative frequency table, histogram, boxplot, dotplot, pie chart, and bar graph. Caution: not all of these are appropriate for each of these variables, nor are they all necessary. More is not necessarily better. In addition, be sure to find the appropriate measures of central tendency, the measures of dispersion, and the shapes of the distributions (for the quantitative variables) for the above data. Where appropriate, use the five number summary (the Min, Q1, Median, Q3, Max). Once again, use Excel as appropriate, and explain what the results mean. Analyze the connections or relationships between the variables. There are 10 possible pairings of two variables. Use graphical as well as numerical summary measures. Explain the results of the analysis. Be sure to consider all 10 pairings. Some variables show clear relationships, whereas others do not. Report Requirements From the variable analysis above, provide the analysis and interpretation for three individual variables. This would include no more than one graph for each, one or two measures of central tendency and variability (as appropriate), the shapes of the distributions for quantitative variables, and two or three sentences of interpretation. For the 10 pairings, identify and report only on three of the pairings, again using graphical and numerical summary (as appropriate), with interpretations. Please note that at least one pairing must include a qualitative variable, and at least one pairing must not include a qualitative variable. Prepare the report in Microsoft Word, integrating graphs and tables with text explanations and interpretations. Be sure to include graphical and numerical back up for the explanations and interpretations. Be selective in what is included in the report to meet the requirements of the report without extraneous information. All DeVry University policies are in effect, including the plagiarism policy. Project Part A report is due by the end of Week 2. Project Part A is worth 100 total points. See the grading rubric below. Submission: The report, including all relevant graphs and numerical analysis along with interpretations Format for report: Brief Introduction Discuss the first individual variable, using graphical, numerical summary and interpretation. Discuss the second individual variable, using graphical, numerical summary and interpretation. Discuss the third individual variable, using graphical, numerical summary and interpretation. Discuss the first pairing of variables, using graphical, numerical summary and interpretation. Discuss the second pairing of variables, using graphical, numerical summary and interpretation. Discuss the third pairing of variables, using graphical, numerical summary and interpretation. Conclusion

Then please read the article Uber's International 'Launch Playbook:

In 2011, when Uber first took its car service app abroad, the company made its Paris debut an all-consuming event. From headquarters in San Francisco, Chief Executive Officer Travis Kalanick personally hired and oversaw the three people running local operations ahead of the service's tense first day online in France. Every one ofUber's then-20 employees studied Parisian cab rates, or neighborhood traffic density, or French transportation laws. These days, things are less frantic. A few hours before Uber's Nov. 12 launch in Budapest, Austin Geidt , the company's head of global expansion, made time to talk through the process at a San Francisco cafe. A $17 billion valuation will do a lot to soothe jangled nerves. Geidt, a 29-year-old with one employer on her resume, helped Uber roll out in a dozen cities two years ago. Now it's adding one every other day. Budapest marked the 100th foreign city on six continents where Uber rides are available and made Hungary the 46th country where it operates. (Uber is in about 140 cities in the U.S.) While Geidt's team used to agonize over data on competition and demand in different cities to decide where to expand next, "At this point we go so quickly, I wouldn't say that it particularly matters," she says. "If we're not there now, we'll be there in a week." Geidt oversees what Uber calls its "launch playbook," a list of business strategies and operating guidelines that have been compiled by an internal team of about 40 employees. It doesn't cover everything: During a Nov. 14 dinner with New York journalists on the guest list, Uber's senior vice president for business, Emil Michael, suggested the company spend $1 million to hire a team of researchers that would target critical reporters. And Uber said on Nov. 18 that it was investigating Josh Mohrer, the head of its New York office, for tracking rides taken by a BuzzFeed reporter. The playbook includes a blueprint for expansion that begins with three people, mostly locals, in each new city: a marketer, someone to recruit drivers, and a general manager who deals with area authorities and competitors and reports to Geidt. Despite the consistent regimen, she says she tries to view each city operation as its own startup.

That has to change when one ofUber's foreign teams screws up. A brief international public-relations crisis ensued in October, when the Lyon (France) office ran a promotion offering customers a ride with an "incredibly hot chick." The trouble blew over after executives from San Francisco stepped in to stop the ad campaign. In India, Uber's biggest market outside the U.S., the central bank threatened to shut it down for skirting cybersecurity regulations by routing payments through a foreign subsidiary. The company announced in a Nov. 12 blog post that it would comply with Indian laws by hiring Paytm, a local mobile payments business, to set up virtual wallets for Indian users. It's been tougher for Uber to deal with local regulators and labor groups complaining that the company operates as an unlicensed taxi service and drains money from their transportation markets. Taxi drivers organized antiUber protests this summer that blocked streets in London and Western European cities. In the past six months, governments in Australia, Belgium, Germany, and the Philippines have instituted short-lived bans on the service or levied stiff fines on its drivers. Cabbies barricaded the door at the party celebrating Uber's Milan debut. Geidt says governments "are very hesitant to see us come, often. We're a big enough brand now that they catch on to us being there quicker than they used to." Geidt noticed Uber's smartphone app shortly after its launch in 2010, when it was a black-car service confined to San Francisco. "I loved the idea," she says, even though "I was probably too poor to be an actual customer." Having just earned a B.A. in English from the University of California at Berkeley, she e-mailed then-CEO Ryan Graves and scored an internship in the marketing department. Later she helped set up and eventually run Uber's first satellite operation, in New York. "She bounced around quickly enough that, all of a sudden, she was doing all parts of the operations in the city," says Graves, now head of global operations. Soon, Geidt was opening Uber offices across the U.S. She invited Boston cabbies to the Harvard Business School library, where she held recruitment meetings while posing as a student to get a free desk and Wi-Fi. She spent the night at a tow yard in Austin, Texas, paying fines for drivers to retrieve cars impounded in a police sting that targeted unlicensed taxis.

Since taking on international expansion in 2012, Geidt has focused much of her attention on Asia. Last year, CEO Kalanick summoned her and his other lieutenants to Beijing, where they worked for two weeks to hone their plan for China, from business structure and licenses to map data and the most popular forms of payment. "Everyone we talked to said, 'You should take four years to really research China, ' " recalls Geidt. "And we said, 'No, let's just go.'" Uber drivers have begun to roam seven cities on the mainland this year and will add several more soon, says regional manager Candice Lo. Uber couldn't afford to wait. China already has two dominant taxi-booking apps, each backed by one of the country's two biggest Internet companies, Tencent (700:HK) and Alibaba (BABA). It also faces fresh competition in the U.S., where Lyft has been slashing its prices to undercut the company. "We plan to expand internationally, but the U.S. is the biggest opportunity right now," says Lyft CEO Logan Green. To fuel expansion abroad, Uber is in talks to raise $1 billion on top of the $1.2 billion it announced in June, according to two people familiar with the fundraising who weren't authorized to discuss it publicly. "Pretty soon we're going to have more cities outside of the U.S. than inside, and we want to make big bets going forward to make sure that we're able to continue to roll out and invest in these global cities," says Kalanick, who won't confirm the new round of fundraising. Local opposition notwithstanding, the ultimate aim is even grander, says Geidt: "We really do intend to be everywhere."

Write a 500 Word document responding to the following questions:

Why is Uber choosing to expand so rapidly?

Are there first-mover advantages for this business?

Are there any downsides to being a first mover in this business?

How sustainable are any advantages in this business?