Why do firms exist Essay Example | Topics and Well Written Essays - 3000 words

Why do firms exist - Essay Example A simple, yet, complete definition of firms may help in starting the debate about why they actually exist. Fisher, Prentice & Waschik (2010), define firm as â€Å"a group of workers and managers, collectively called labor, and a group of physical assets, like machinery in a manufacturing operation or computers in a service sector firm, collectively called capital, which produce goods and/or services (p. 14). This definition provides three major areas where people are involved with the firms. People, firstly, work for or manage the firms as labor, secondly they invest in businesses and firms to earn profits and giving firms the strength of progress in the form of capital, and lastly people use the products or services offered by the firms. Hence, our life is, in one way or the other, dependent on firms. It is a way of earning for one group and a way of gathering necessities of life for the other like food stuff, clothing, and professional services like legal, educational or healthcar e services and so on. Owing to the importance of firms in our regular activities and modern life, this paper aims to answer the question: why do firms exist? In doing so, this paper will provide perspectives of different researchers and their theories to justify the claims made. Theory of Firm Theory of firm necessitates by trying to predict how the business would carry out their prescribed strategies to achieve their ultimate goal and that is profit maximization. The theory of firm helps predict and explain other alternatives and decision made by the company. Traditionally it was based on having sole goal of profit maximization. But most recent analysis, theories and researches suggest that sales maximization or market share that is satisfying the needs of the customers along with satisfying its legitimate stake holders, combined with satisfactory profits may be the main purpose of businesses in short term as well as in long term to survive. Traditionally companies’ were fol lowing stock holder theory that is managers had one objective of maximizing share holder value. For example a company would not mind shutting down a branch in a region or country and resulting in thousands of people being unemployed and affecting the whole economy of that region or country. Despite these factors, the managers would have let the factory moved to another region or country because labor is cheap and plentiful there. Traditional theory suggested companies to disregard safety practices or other practices to preserve social responsibilities, according to theory, as they would have to spend money over it which reduces profit. However, if such avoidance of such actions charges the companies with substantial penalty or case file or dereputation resulting in more expenses (fines) than the companies were encouraged to provide equipment and running the safety policy. The risks of fewer sales by customer boycotting the company’s products are also avoided by adopting such practices in the modern business arena and companies would fall into instrumental form of skate holder theory (Schroeder, Clark, and Cathey 2010, pp. 124-128). Stake holder theory is referred as 21st century theory where the organizations are so large that they can affect the whole society significantly. This broader impact of organizational procedures and processes suggest that they cannot just be responsible to share holders i.e. obeying stock holder t

Contract law Essay Example | Topics and Well Written Essays - 1000 words

Contract law - Essay Example Churton and Silver were able to inform Risk It of the situation, who agreed to amending the loan agreement by postponing the payment of the principal due for 1 year, and waived all interest payables. However, due to financial problems of its own, risk It now wishes to enforce the original loan agreement against Churton and Silver, and the latter refuses citing the limitations on what they may pay and the ill effects full payment would do in damaging their business enterprise. Prior to formulating the legal advice, I would present to Risk It, it is important to first outline the various legal concepts. In the case at bar, there is clearly a contractual obligation, voluntarily undertaken by both parties. Commonly this is considered a bilateral contract, which imposes upon both parties certain obligations that they agreed upon. Here, Risk It agreed to loan the money to Churton and Silver, who in turn agreed to pay the loan based on the agreed terms. Although the facts make no mention as to the manner in which Risk It agreed to amending the terms of payment of the loan as per the difficulty in financial situation of Churton and Silver, there is really no difference as to whether or not the agreement to amend the terms is in writing or not. Despite common sense, contracts can be legally binding even if not reduced into writing, and have the same effect as if it were on paper. Thus, the acts of Risk It in agreeing to change the terms of the loan is binding upon them, and they can no longer renounce that change or deny it otherwise. This is a key concept of contract law, that contracts are formed through an agreement consisting of an offer and acceptance, a valuable consideration, and the intention of the parties to create a contract. Further assuming that all the necessary requisites of a valid contract are also present in the case at bar, there is no need to delve into the complexities of the form, parties' capacity to contract, consent freely given, and legality of the subject matter or purpose of the contract. Seeing as this is a clear contract of loan, all things should be in order. With all that said, it is clear that the only advice I can make to Risk It is for them to follow the amended loan agreement that they had made with Churton and Silver. The changed terms, and waived interest became binding on them from the moment it was made, offered and accepted by the parties. They can no longer renounce or go against that agreement, or they put themselves at risk of legal suit for the remedies due to breach of contractual obligations by Churton and Silver. It is necessary to state that the remedies for breach of contractual obligations include the award of monetary damages by the courts and a petition for specific performance. The former is the assessment of monetary sum to be given by the offending party to compensate for the injury that would be suffered by the breach of contract. This could be a relief sought against Risk It if they try to enforce the original loan agreement instead of the amended one that would inevitably cause great damage and injury to the business enterprise of Churton and Silver.  

The Invention of Electricity Changed the Way People Live Their Lives Essay

The Invention of Electricity Changed the Way People Live Their Lives - Essay Example It was not until 1792 when a thunderstorm struck Benjamin Franklins home, and he decided to make an experiment by flying the kite through the thunderstorm with an attached iron key. The kite was struck by lightning, and electric current were sent down to Benjamin’s hand. He was  quite  lucky to survive, and he stated that electricity existed in the thunderstorm but the question was how to tap and utilise the electricity for the benefit of humanity. Before the invention of electricity, people had difficulties in performing the several task in life, there was too much utilization of man energy in different sectors. However, the invention of electricity changed the lives of human beings in thousand ways. It can be stated that electricity led to industrial revolution in which several products were being produced in large numbers. It led to a change in the entertainment sectors, food sector health sector and communication sector among others. It is imperative to note that the invention of electricity resulted in a significant improvements of how human beings live in the today’s world. Before the invention of electricity, the period was being described as the era of the dark ages because people relied only on sunlight to perform their daily activities and at night, they were unable to perform duties  because of the darkness. The invention of light electricity has led to the robust influence of how people carry out their lives in the current period. Thomas Edison who was an American inventor as well as a businessperson is thought to be the first person who invented light bulb that was using direct current electricity. The light bulb that was invented had a great influence on how people were carrying business all over the world. Moreover, it led to the inventions of other devices such as televisions and phonographs that were being used as the means of communication (Freeberg,

Woman in Business Management Personal Statement

Woman in Business Management - Personal Statement Example Being a woman, I have always desired Jewellery and tilted towards diamonds. I had a strong inclination towards commencing my own Jewellery business but I had no practical know-how of market trends, supply and demand information, supply chain and distribution channels, consumer preferences and tastes, demographics, lifestyles, attitudes, and behaviors towards this industry. Unequivocally, I learned the aforementioned concepts during my academics, yet I felt I still need a near to accurate recognition of market facts, that to be honest, theory and books do not necessarily provide. A time came when I, fortunately, met an industry expert and a professional business executive, employed at Amrapali Jewels, a diamond Jewellery boutique located in Knights Bridge. After some formal introduction and discussion, I expressed my concern that I was interested in doing an internship in her industry. She appreciated my interest and provided some guidance and direction regarding the recruitment and s election process (test and interview procedure). In short, I successfully cleared all the stages and called for my internship. Â   Delighted by my progress, I joined the Jewellery Boutique. Before sharing my actual experiences at Amrapali Jewels, I first would like to describe my predefined objectives. As far as my Knowledge goals are concerned, I had an intention to gain an insight about the entire Diamond Jewellery Purchase and Sales process, comprising of Jewellery designing, supply, display, pricing, consumer preferences and face to face customer and direct marketing. I also wanted to know about security measures and precautions being adopted by the store for safety purposes.

Benjamin Franklin Essay Example for Free

Benjamin Franklin Essay I. INTRODUCTION Benjamin Franklin was born in Boston as the son of a candle maker. From humble beginnings, he grew into a renowned figure of American history. â€Å"He became famous for being a scientist, an inventor, a statesman, a printer, a philosopher, a musician, and an economist†. Today, Americans recognize him for being one of our Founding Fathers and a prominent citizen of the city of Philadelphia. In his autobiography, Franklin shows that he desired self-improvement and in pursuit of this goal focused on improvements of four different types: intellectual, moral, business, and social. II. BODY Franklin’s intellectual improvements were numerous. As a child, he had a thirst for knowledge. He exhibited a readiness to learn and read at an early age, and while in school, he rose to the head of his class and then skipped a grade. After Franklin’s father pointed out that he had a poor manner of writing, Franklin resolved to improve not only his manner of writing but also his arrangement of thoughts in his written work. His ambition was to become a good English writer. In his young age, he also was intent on improving his language and when he got older he taught himself French, Italian, Spanish, and Latin. He used the library as a means of improvement by constant study of one to two hours per day here. Franklin went to great lengths to achieve moral improvement. As a young man, Franklin developed a plan regulating his future conduct in life that he adhered to even in his old age. He wrote a list of moral characters that he would like to possess such as temperance, fr ugality, and humility. He had thirteen categories in all that he wrote down in a book to carry with him. He had a separate column for each day of the week. He would pull out the book and mark which virtues he felt he had committed a fault in that day so that he may examine them and improve upon them. During the course of this practice, Franklin said that he found himself fuller of faults than he would have thought, but he had the satisfaction of seeing those faults diminish. His actions also showed that he strove for moral perfection. He thought excessive drinking was a detestable habit and abstained from doing so when his coworkers drank all day long. He spent no time in taverns, playing games, or displaying antics of any kind. He also believed in the importance of frugality and did his best to save money on housing. During the eighteen months he lived in London, he worked hard and spent little on himself except for the occasional play or book. It was his practice of frugality that lead to his wealth and distinction later in life. Benjamin Franklin had a Quaker friend that pointed out that he thought that Franklin had a problem with pride and so Franklin endeavored to be more humble. He attributed his humility, or sometimes his appearance of humility, with allowing him to hold so much weight with his fellow citizens. Franklin also strove for truth, sincerity, and integrity in all of his business dealings. Not only did Franklin improve intellectually and morally but he also made improvements in business. In little time after becoming an apprentice to his brother, he exhibited great proficiency in the printing business. He was able to take a failing newspaper and make it profitable by developing a better type and better print which led to an increase in the number of subscribers. He made a mold to be used in printing houses to combat the problem of equipment deficiencies. He also made a copper press to print paper money. He filled the spaces in Poor Richard’s Almanac with proverbial sentences for the benefit of its readers. Similarly, he made use of newspapers to communicate instruction. Franklin also contributed greatly to social improvements in his day. He formed a club of mutual improvement called JUNTO. He started the Philadelphia public library which was an institution that was imitated by other towns. He laid the ground work for a more effective city watch and started the first fire company. He established a Philosophical Society in Pennsylvania and also an academy that grew into the University of Pennsylvania. He invented a more efficient and economical stove known as the Franklin stove. He helped in the establishing of a hospital in Philadelphia and also in streets being paved. Franklin was generally successful in his attempts at self-improvement, excelling from an early age. He attempted to be the best person he could be and genuinely desired to help others. He convinced coworkers to stop drinking and spend their money of food instead and also loaned money to them. He loaned money to his friends, Collins and Ralph, even though they took advantage of him and never repaid their debts. He recognized that Keimer was only using him to train his workers and then was going to fire him, yet Franklin still cheerfully put Keimer’s printing house in order. Franklin was also always eager to help young beginners. He further demonstrated that he was not a self-promoter when he had a chance for a better business deal but declined because of the obligations he felt he had with his current partners. III. CONCLUSION Franklin has long been revered as one of the great figures of American history. As a Founding Father, he was instrumental in the early days of shaping the American government. Throughout his lifetime, he strove for improvement in intellectual, moral, business, and social areas and was successful in his attempts in each of these areas. He was a benevolent individual who desired to help others, and he authored his autobiography in the hope that posterity would follow his example and reap the same benefits References Benjamin Franklin: Glimpses of the Man. 1994. The Franklin Institute Science Museum. http://www.fi.edu/franklin/ (accessed June 4, 2012). Franklin, Benjamin. 1909. The Autobiography of Benjamin Franklin. Ed. Charles W. Eliot. New York: P F Collier Son Company.

The important of english in hong kong Essay Example for Free

The important of english in hong kong Essay We always heard that learning the English is a lifelong Journey, it seems that English become our life, most of Hong Kong student have a better result on English rather than Chinese. It bring out a concern about is it a right decision that we to regard English as important. A focus will be placed on the importance on English, the demand of using English and the advice on the language policy. The parents, teachers and the politicians believe that English is important as the English status in the world is higher than other language. For the parents, they hope heir son or daughter can study as the English-medium secondary school rather than the Chinese-medium school, they believes mainly study can increase the opportunity of enroll to the university and let their children go oversea for further study. For the teachers, many teaching material are come from foreign country, so they believe that use the English for teaching purpose can have a better education quality. For the politicians, be the part of global, the politician needs to communicate and cooperate with other country to formulate the international policy, so they choose the English e the common language for communication. English become important language is mainly have two reasons. English has appeared as the worlds unofficial international language. According to the data of Ethnologic, English is listed as the official or co- official language of over 45 countries (including Hong Kong) and is spoken extensively in other countries where it has no official status. The second reason is English is the language of science, aviation, business, diplomacy, and tourism. Many business deals in Hong Kong are conducted in English. 60% of all scientific papers nd Journals are written in English. Over 70% of all mail is written and addressed in English. Most international tourism, aviation and diplomacy is mainly conducted in English. I remember there have an example in the lecture Chinese plot have poor English and cannot communicate with the USA plot. Since United Kingdom and America have got a well development on the academic, also the United States is regarded as the most influential country on the military and in different international and their official language is English, so it makes English become important. Undoubtedly, the status of English are always in a high level, for my experience, when I get further study in the university, English become the most frequently language I use, all the lesson I take was teaching in English, all the information I found or the journal are also written in English, it seem that my academic are cannot live without English. Learning English are also can increase our competiveness in global. Therefore, I agree that the believe of parent, teachers and the politicians. the important of english in hong kong By vangie_shek

Difficulties of Cost Control in Construction Industry

Difficulties of Cost Control in Construction Industry CHAPTER 1: INTRODUCTION 1.1 Problem Statement: In every industry, cost control is a must in order to make sure that a project or production can make maximum profit or to make sure that the budget of a project does not burst. Locally, the actual costs of development of a project will normally being higher than necessary. In order to have an effective cost control in construction industry, it is necessary for us to determine the difficulties of cost control and to identify the factors contribute to the cost control difficulties in a project in order to overcome the difficulties or to avoid those factors that may cause difficulties to cost control of a construction project during construction stage, thus to have an effective cost control for the construction project and complete the project within the budget or under budget. 1.2 Aim and Objective: The aim of this paper is to study the difficulties of cost control in construction industry during the construction stage. In order to achieve the study of aim, some objectives have been established as below: To ascertain the importance of applying cost control in local construction industry. To highlight the cost control difficulties in local construction firm during the construction stage. To investigate the factors contributing to cost control difficulties in local construction firm during construction stage. 1.3 Background: Cost control is a process that should be continued throughout the project life cycle of a project. In construction industry, cost control should be continued from the inception of the project until the completion of the project to ensure that the cost of the construction project is kept within the agreed cost limits. For cost control of construction industry, it can be divided into two major stages; the control of cost during design stages and the control of cost by construction firm right after the commencement of the construction work of the construction project. According to Ashworth (2004), cost and schedule control is one of the most important functions of management once a project is identified. Cost control is paramount during the feasibility and design phases because a projects feasibility is normally tied to the cost of a project. Besides that, cost control during the construction phase can be paramount for large projects due to their potentially high construction cost and profiles. As mentioned by Nunnally (1998), the measuring and collecting the cost record of a project and the work progress are included in the cost control of a project. Besides that, the comparison of actual progress with the planning is also involved. The main purpose of cost control of a project is to gain maximum profit within the designated period and satisfactory quality of work. According to Pilcher (1994), he defined cost control as the regulation, by executive action, of the cost of carrying out the various activities which go to make up a project or a contract. The regulation (for cost control) designed for a specific industry will need a major modification if it is used in other industry because of the different nature or the business. He also said that for all construction projects, costs must be controlled and monitored from all the parties involved including client, consultants and contractor. This study will mainly focus on the difficulties of applying cost control during construction stage. That is because of in my opinion, what is needed in a cost control methodology is to proactively seeks out potential difficulties and factors contributed to those difficulties and provides project managers with as much warning as possible before their occurrence. This study provides a milestone for construction firm in the factors that likely to causes the difficulty in cost control. 1.4 Scope of Study: Cost Control is commonly used in every industry and almost in every project, the study will only focused on cost control difficulties of construction industry or a construction project during the construction stage. This study will ascertain the importance and the use of applying cost control in local construction industry. Besides that, the difficulties in applying cost control during construction stage also falls within the scope of this study. After highlighting the difficulties theoretically, an interview will be conducted with experienced Contract Executive or Contact Manager or Project Manager to determine the difficulties of cost control during construction stage practically. Finally, after understanding the difficulties of cost control during construction stage, the factors contributing to cost control difficulties during construction stage will also be highlighted. 1.5 Research Methodology The study is conducting in three stages. First stage is literature review. The literature review will started with the introduction to cost control. In the introduction to cost control, the definition of cost control will be reviewed and the literature will also review the importance of cost control in construction industry. Moreover, the literature also will review the difficulties of applying cost control during construction stage. Furthermore, articles and notes about the cost control difficulties will be searched. All literature will be review deeply by referring the previous research paper, article, journal and etc. These sources can all be found in Google, Emerald, Yahoo and from the library of College Tunku Abdul Rahman. At second stage, an interview will be conducted with experienced Contract Executive or Contracts Manager or Project Manager face-to-face to obtain the information about their current practices in cost control system of their company, the practical difficulties and factors contributing to the difficulties in cost control will be identified by the Contract Executive or Contract Manager or Project Manager. The chosen Contract Executive or Contract Manager or Project Manager must be experienced enough in cost management of construction industry and willing to provide valuable information regarding the research topic. Last stage is writing up the content of the dissertation and the information obtained during the interview will be analyse and compare with the theoretical information. Conclusion of this study should be the result of the comparison between the practical and theoretical difficulties during cost control of construction stage faced by the contractor. 1.6 Benefits of Study By conducting this study, it allows me to have a rough idea on the Cost Control system. Completing this study also gives me a better understanding regarding the purposes and importance of Cost Control. Besides that, it also provides me with better perception regarding the difficulties during the application of Cost Control during construction stage. Furthermore, the interview conducted with the experienced Personnel will definitely allow me to review the current practices of Cost Control in the construction industry. 1.7 Dissertation Organisation Chapter 1: Introduction Chapter 2: Cost Control Chapter 3: Research Design and Methodology Chapter 4: Analysis of the Result and Discussion Chapter 5: Conclusion CHAPTER 2: COST CONTROL 2.1 Introduction to Cost Control 2.1.1 Definition The term Cost is defined by Dictionary.com (an application of iPod Touch) as the price paid to acquire, produce, accomplish, or maintain anything. Whereas the term Control in Dictionary.com, it defines Control as the act or power of controlling; regulation; domination or command. For construction industry, the term Cost should be referred to the amount paid by a party; either a person or a corporation, to another party; normally a contractor, either to construct a complete building or a particular section of a building. And for the term Control in construction industry, it should be referred to an official mean of regulation or restraint in the management of the project. According to Marchesan and Formoso (n. d.), the combination of the term Cost and Control should be defined as the application of procedures that result in early illumination of potential changes in resource requirements and in the timely surveillance of the usage of funds to permit action that will keep cost within a predetermined range. While for the other definition of Cost Control, we can refer to Ashworth (2004), he defined Cost Control as a process of planning, checking and verifying project expenditure based on established standards and taking the necessary corrective action to ensure that the total project expenditure is approximately to the estimated budget. While according to Ritz (1994), he stated that Cost Control gives a different meaning to a different people. Some people engage it with engineering costs; some states that it is a cost report, value engineering, cost management etc. Cost Control involves all the activities above in different time by different parties and all the parties involved in a project will have their own responsibilities and roles in cost minimization and Cost Control. Other than that, Royal Institute of Chartered Surveyor Committee defined Cost Control as the total proves which ensures that the contract sum is within the clients approved budget or cost limit. Further definition can refer to Mueller (1986), he stated that the cost control is the ability to influence the final cost of project positively with modifying negative performance trends. In addition, Kwayke (1997) defined Cost Control as a process where construction cost of a project is manage with the best method and systematic approach in order that the contractor would not suffer losses during the execution of the activities of the project and the cost of construction of a project would not be over-estimated by the developer. By concluding all the definition mentioned above, Cost Control in construction industry should be the application of procedures or regulation during the construction project life cycle to plan, check and verify the construction project expenditure based on the established procedures or regulations to ensure that the construction project expenditure is within the project budget, within given timeframe with quality specified and also to ensure that resources are used to best advantages or maximization of the profit for the construction project. 2.1.2 Statement of Facts in Cost Control As stated by Roger (2000), he said that Cost Control is a broad set of cost accounting methods and management techniques with the common goal of improving business cost-efficiency by reducing costs, or at least restricting their rate of growth. Cost Control is used in business to monitor, evaluate and the most important to increase the efficiency of specific areas within their operations. As for Nunnally (1998), he stated that cost control of a project involves measuring and collecting cost record and work progress of a project. Besides that, comparison of actual progress with the planning is also involved. He also mentioned that the main objective of Cost Control of a project is to maximize profit within the given timeframe and to achieve satisfactory quality of work. If the application of cost control is by a systematic procedure, it will result in ease of collection of important cost data in estimating and controlling of the cost of the coming projects in future. Kwakye (1997) states the main purpose in cost controlling for a construction project should be active controlling of final costs for owner, and not just to record and registering the payment. Cost Control Reports must be prepared for efficient Cost Control. The Cost Control Report is based on the cost data collected, it is important to project the costs in to future and to estimate or re-estimate the cost of the work yet to be completed. Amount of detail and the time interval between Cost Control Reports must be considered and the time interval is varied depends on the level of management for which they prepared the Reports for. For example, Cost Report should be received by site manager on weekly basis. Since the commencement of the contract, any new information must be taken into account and makes a suitable reporting system is important for a cost control system. According to Koh (2005), if an adequate reporting system is used, the estimator would become more reluctant in the future to use cost data that have been fed back from the site and granting the estimator some time to determine sufficient detail about the data and conditions they acquired. In addition, Koh (2005) also suggested two areas to check whether the Cost Control reporting system is efficient or not. First is to check on the profitability of the work and second would be check on efficiency carried out against the standard of the output rates that were used by the estimator in compiling the estimate. 2.1.3 The Purposes and Importance of Cost Control One of the principal objectives of Cost Control for most project or organisation is the achievement of minimum cost for a particular project. Achievement of minimum cost is to maximize the profit and profit in simple terms is what is left after all the income accruing to the enterprise has been received and all of the costs or outgoings have been paid. For all construction projects, cost must be monitored and controlled, whether from the point of view of owner, designer or a contractor. It helps to distinguish the problems arise and understanding of the problems which occur in each phase of industry enables better co-ordination of the activities of the many participants in a single project (Pilcher, 1994). Besides that, according to Pilcher (1994), the importance of Cost Control is due largely to the following: To provide the relevant feedback, carefully qualified in detail by all the conditions under which the work has been carried out, to the estimator who is responsible for establishing the standards both historical and future; To provide the client with a value-for-money project. Example: To give the building client a building which is soundly constructed, of satisfactory appearance and well suited to perform the functions for which it is required, combined with economical construction layout. To provide data to assist in the valuation of those variations that will arise during the course of the work; To provide immediate warning of uneconomic operations, both in the long and the short term; To limit the clients expenditure to within the amount agreed. In simple terms this means that the tender sum and final account should approximately equate with the budget estimate. To achieve balanced design expenditure between the various elements of the buildings. Thus, the sums allocated to cladding, insulation, finishing, services and other elements of the building will be properly related to the class of building and to each other. To summarize progress. To promote cost consciousness; The contractor may ascertain the maximum income that they may receive according to the contract sum, then ascertain the initial cost expenditure, or provide detailed brief to his own construction team who will then determine the actual cost that may involved. But most schemes are a combination of these two extremes. There has in recent years been a great need for an understanding of construction economics and Cost Control, particularly during the construction stage of projects. As stated by Ashworth (2004), Cost Control also should serve the following purposes: The clients requirements today are more complex, a more effective system of control is therefore desirable during the construction stage up to the completion of final account and thereafter during costs-in-use. There has been a trend towards modern designs and new techniques, materials and methods of construction. The designer is able to choose from a far wider range of products and this has produced variety in construction. The traditional methods of estimating are unable to cope in these circumstances to achieve value for money and more balanced designs resulting that in the end the contractor may need to bear for extra cost due to the faulty design. Contractors profit margins have in real terms been reduced considerably during the past decade. This has resulted in their greater cost-consciousness in an attempt to redress possible losses. There is a general trend towards greater cost-effectiveness, and thus a need to examine construction costs not solely in the context of initial costs but in terms of whole-life costs, or total-cost appraisal. World recession has generally produced a shortage of funds for capital purposes and construction in general. This has been coupled with high inflation and interest charges, resulting in the costs of construction soaring to high levels. Although the relative costs compared with other commodities may be similar, the apparent high costs have resulted in greater caution, particularly on the part of contractor. 2.2 Difficulties of Applying Cost Control Procedures At present, serious problems exist in the cost control and management of construction project. For example, for some construction project, the design is earlier than the study of feasibility, which makes the later turn into useless. In bidding, some construction companies perform illegally, which makes the bidding fail to control project cost well. The popularization of assigned subcontracts and various subcontracts serve as potential threats for project quality. The delay for project payment, especially for workers wages, is serious. Some projects can not manage the changes of designs, construction companies fail to follow the designs completely, which may lead to larger costs for construction. Some construction companies emphasize on the control of quality and period but fail to control the cost. All these activities make the cost of construction project out of control in our country, which is harmful for the sustainable and healthy development of construction industry. Gao (2009) has stated that the following is the difficulties in Cost Control of construction stage. 2.2.1 Fail to Estimate the Project Exactly The project estimation is performed at the very beginning, namely in the study of feasibility. Present compilation of study of feasibility is lack of details. No effective items to control the number of project. The estimation has a lower preciseness. Besides, the study of feasibility has no necessary investigation. Some potential geological disasters can not be identified effectively, which leads to the rise of costs. Although some companies make details for implement, the effect is poor. In order to establish the project, some companies may reduce the number of project and decrease costs. 2.2.2 The Compilation of Project Budget Has Poor Reliability At the stage of design, the investigation is far from sufficient. Some fundamental materials for design are inexact. As a result, the design may be irrational and will be changed significantly in construction, which causes the poor reliability of budget. 2.2.3 Working Drawing Budget is Unpractical At the working drawing design stage, compile the project budget according to the design. The working drawing budget is to calculate the cost of design. The rationality of working drawing budget is about how to organize the construction and how to reach the design requirements by what kinds of methods, plus how to arrange the construction period, and how to manage workers and machines under different seasons, according to scientific designs. All these tasks are supposed to be arranged by construction companies. For design companies, to compile the budget is unpractical. 2.2.4 Do not Follow Basic Construction Procedures and Can not Control Costs For some projects, time is urgent. Therefore, the design is maybe imperfect. And the construction does not follow the basic procedures strictly. Sometimes, the study of feasibility turns into useless papers. As a result, the estimation and the budget can not control the project cost effectively. 2.2.5 Contract is not Managed Well Some developers neglect to manage contracts. They do not follow the terms written in contracts strictly. Besides, some developers can not calculate the cost of project quantities correctly. They are incapable of managing external workers effectively. 2.2.6 Irregular Management and Many Changes for Project Developers can not design properly and have to change the management methods. Or, the execution is weak. They can change the design as will. Then, the scale of project is increasing and the cost is rising. 2.2.7 Rise of Cost Due to Unreasonable Financing Structure At present, the funds for construction project in Malaysia are mainly from domestic loans, foreign funds, self-collected by construction companies, and other sources. Although financing ways are few and some are immature, limits are more. Sometimes, funds can not arrive in time. In order to insure the process of project, the construction companies have to apply loans from banks. Therefore, a large proportion of construction funds are from banks as loans. And the credit period is long and can not match with investment return. The characteristics of construction industry determine the lagged-behind investment return. One financing channel increases risks and costs, which leads to the accumulation of loan balance in banks, increasing construction costs and pressures for later in operation. 2.2.8 System is imperfect One of the factors that cause overspending is the management. Main items that cause overspending include management fees, compensation fees for removing, and supervision. Main reasons include: Lack of a perfect cost control system and can not manage and control the cost systematically, which makes it hard to identify the out-of-control of cost in time. Lack the idea of cost control and the constraint mechanism. Project managers are always focusing on quality and construction period, but not cost control. The absence of system makes the expenditure more irregular. No integrated standards for management fee are effective. Workers are more than necessary in construction companies. 2.3 Factors Contributing to the Difficulties of Cost Control 2.3.1 Control of labour cost The control of labour cost frequently causing much troubles to Cost Control because of the productivity of labour is variable and causing the difficulty to the estimating stage. Although experienced estimators have their own database of historic cost data, but these data can only ever be regarded as an average for a given trade and does not make allowance for particular circumstances. A prediction of how labour will perform in the future on a particular project must be incorporated into an estimate of cost. Site management is greatly affecting the labour efficiency and their productivity. It is important that all labour resources, either self-employed or employed as labour and materials sub-contractors, are fully supervised and co-ordinated, to ensure that the labour resources are efficiently organized and making best used of them. If the labour resources are not well organized, it may reduce the productivity of the labour and making cost of labour to be higher hence causing difficulties to Cost Control because the labour cost is different with the estimated cost. 2.3.2 Site Condition After the design of engineer, quantity surveyor will normally estimate the amount of the designed work, but due to the site condition is unpredictable, it cause the cost estimation is rather difficult. In many of the construction project, there are majority of unforeseen and differing site condition are found in subsurface work such as tunneling and foundation work, such situation can also arise in rehabilitation and restoration work, retrofitting to meet revised seismic codes and projects that improve energy efficiency. Where ground water level is close to the surface of the site, closely pumping operation may be needed throughout the substructure work. This unforeseen situation will increase the construction cost. A wet site may also involve raising temporary sheds and offices on brick bases and more costly temporary work. The cost of excavation in rock is much more expensive than working in normal ground. This type of strata will need to be examined and to determine what type of support is needed to the sides of excavation. All this will contribute to the difficulty in cost control when the construction method is carried out wrongly. 2.3.3 Location of site The cost of building on a site in a city could be much expensive than construct a similar building on a provincial site. This is due to higher wages, materials and other costs. For instance, a project on a remote location site may involve long lengths of temporary access road and of temporary power cable for electricity suppliers and increased costs of transporting operatives and materials to the site. A site in a congested central area of a city will give rise to major problem in delivery and storage of materials and equipment, protection of adjoining building, construction method to carry out substructure work, restriction on the use of mechanical plant and to the protection of the public. Overcoming these problem involve considerable additional cost and all these will considerably contribute to the difficulty in cost control. 2.3.4 Materials In some of the guides the cost of materials can be easily identified, and adjustment to the measured rate is therefore a simple process. Material prices often depend on contractor, location, quantity and discount and hence making the estimation process to be rather difficult. The materials wastage of site will also contribute to this because there will be difference between the actual amount used and the estimated amount used. 2.3.5 Overheads and profit In most case, during the estimation process, the amount of overheads and profit will normally just referred back to previous projects. But the amounts included in the published rates vary considerably. In some guides nothing has been allowed, and these expect the user to add an appropriate amount. In other information, up to 25% has been included on margins of 3%. In addition, overhead costs have generally been reduced in order to keep costs to an absolute minimum, while seeking to maintain the required workload. Builders will therefore need to access their own percentage and adjust this according to that quoted. Surveyors, in attempting to predict tender values, will also need to take this into account in their approximate estimate. 2.4 Chapter Summary Cost Control in construction industry should be the application of procedures or regulation during the construction project life cycle to plan, check and verify the construction project expenditure based on the established procedures or regulations to ensure that the construction project expenditure is within the project budget, within given timeframe with quality specified and also to ensure that resources are used to best advantages or maximization of the profit for the construction project. Cost Control need to serves the purposes like to provide the relevant feedback, to provide the client with a value-for-money project, to provide data to assist in the valuation, to provide immediate warning of uneconomic operations, to limit the clients expenditure, to achieve balanced design expenditure, to summarize progress and to promote cost consciousness. Difficulties of Cost Control during construction stage are failed to estimate the project exactly, the compilation of project budget has poor reliability, working drawing budget is unpractical, do not follow basic construction procedures and can not control costs, contract is not managed well, irregular management and many changes for project, rise of cost due to unreasonable financing structure and system is imperfect. Factors that contribute to those difficulties are control of labour cost, site Condition, location of site, materials and overheads and profit. It is necessary for management to study the difficulties involved and the factors contributing to these difficulties so that they will design a cost control system that more efficient for a particular project. Chapter 3: Research design and methodology 3.1 Introduction In this chapter, the research methodology used in this research will be discussed. The method of conducting research to achieve the aim and objectives will be reviewed to ensure that all the information obtained is reliable. Among two research strategies that suggested by Naoum (2007), which is Quantitative Research and Qualitative Research, Qualitative Research will be used as the research strategy for this dissertation. The reason to use Qualitative Research is because of it allows the topic being studied to give much valuable answers to questions put to them. Structured interview will be conducted with at least five (5) contractors so that sufficient information can be obtained to proceed with the field work. The interview will be carried out face to face with the interviewee, however, it also may be carried out over the telephone or any other methods like email or webcam. The targeted personnel to be interviewed are contract executive, contract manager or the project manager of the company. Since it is a structured interview, the questions to be asked are presented in the same order and with the same wording to all interviewees. The main objectives of this interview section are to clearly understand the ability of the contractor in cost control and the difficulties that they are dealing with during cost control of project they undertake. While the other objectives are to ascertain the importance of cost control during construction stage with the contractor and last but not least to investigate the factors that contribute to difficulties that they are dealing with during cost control. The interviewing session has the advantage of providing experience or opinion based information for the dissertation. Questions prepared are open- ended questions for the interview so that in-depth information can be collected. The questions are set by referring to the aim and objectives, data obtained will be of the opinions and perception as individual interviewee knowledge and experience of research area. 3.2 Questionnaire Construction The principles that are followed in constructing the questionnaire for the research are as shown in Figures 3.1 below: Research objectives + Literature review Questions Lead to Lead to Issues, topics and ideas Principles on how research objectives are translated into specific questions. (Naoum, 2007) Before constructing the questionnaire, the potential ideas which can be developed into a questionnaire at a later stage are listed out. In order to have the ideas to develop into questionnaire, the research proposal and the literature review is reviewed and all possible questions which are related to the research is written down to obtained the first thought questions. Those listed out question are all based on the aim and objectives of the research. After the first thought questions have been identified, the final questionnaire is constructed by introducing a number of section or categories for the questionnaire and the first thought questions are fitted into these sections. The research questionnaire was divided into two sections in which the first section is to obtain the back ground and information of the interviewees as well as their organization. This is to ensur