indian army

The Indian Army (IA, Devanāgarī: भारतीय स्थलसेना, Bhāratīya Sthalsēnā) is the land based branch and the largest component of the Indian Armed Forces. Its primary mission is to ensure the national security and defence of the Republic of India from external aggression and threats, and maintaining peace and security within its borders. It also conducts humanitarian rescue operations during natural calamities and other disturbances.

The Indian Army came into being when India gained independence in 1947, and inherited most of the infrastructure of the British Indian Army that were located in post-partition India. It is a voluntary service and although a provision for military conscription exists in the Indian constitution, it has never been imposed.

Since independence, the Army has been involved in four wars with neighboring Pakistan and one with the People's Republic of China. Other major operations undertaken by the Army include Operation Vijay, Operation Meghdoot and Operation Cactus. Apart from conflicts, the Army has been an active participant in United Nations peacekeeping missions.

The President of India serves as the Commander-in-Chief of the Army. The Chief of Army Staff (COAS), a General, is a four star commander and commands the Army. There is never more than one serving general at any given time in the Army. Two officers have been conferred the rank of Field Marshal, a 5-star rank and the officer serves as the ceremonial chief.

With about 1,414,000 soldiers in active service[1] and about 1,800,000 reserve troops, the Indian Army is the world's second largest active standing army and the largest in terms of army populace.[2] By 2020, the Indian Army plans to upgrade 4,000 T-72s, over 2,500 T-90s, and few thousand other tanks

wireless sensor networks

Wireless Sensor Networks

Introduction:-

A wireless sensor network [wsn] is a wireless network consisting of spatially distributed autonomous devices that use sensors to monitor physical or environmental conditions. These autonomous devices, or nodes. Combine with routers and a gateway to create a typical WSN system. The distributed measurement nodes communicate wirelessly to a central gate way, which provides a connection to the wired world where you can collect, process, analyse, present your measurement data. To extend distance and reliability in a wireless sensor network, you can use routers to gain an additional communication link between and nodes and the gateway.
National instruments wireless sensor networks offers reliable, low-pressure measurements nodes that operate for up to three years on 4AA batteries and can be deployed for long-team, remote operation. The NI WSN protocol based on IEEE 802.15.4 and ZIGBEE technology provides a low-power communication standard that offers mesh routing capability to extend network distance and reliability. The wireless protocol we select for a network depends on the applications requirement.
WSN Application:-
Embedded monitoring covers a large range of application areas, including those in which power or infrastructure limitations make a wired solutions costly, challenging or even impossible. You can position wireless sensor networks alongside wired systems to create a complete wired and wireless measurement and control system.
A WSN system is ideal for an application like environmental monitoring in which the requirement mandate a long term deployed solution of acquire water Soil or climate measurements. For utilities such as the electricity grid, street lights and water municipals wireless sensor offer a lower cost method for collecting system health data to reduce energy usage. And better manage resource. In structural health monitoring, you can use wireless sensors to effectively monitor high ways, bridges and tunnels. You can also deploy these systems to continually monitor office buildings, hospitals, airports, factories, power plants or productions facilities.
WSN System Architecture:-
In a common WSN architecture, the measurement nodes are deployed to acquire measurements such as temperature, voltage, or even dissolved oxygen. The nodes are part of wireless network administrated by the gateway, which governs network Aspects such as client authentication and data security. The gateway collects the measurement data from each nodes and send it over a wired connection, typically ETHERNET, to host controlled. These, software such as the NI Lab view graphical development environment can perform advanced processing and analysis and present your data in a fashion that meets your needs.
The NI wireless sensor network advantage:-
With the NI WSN platform, we can customize and enhance a typical WSN architecture to create a complete wired and wireless measurement system for our flexibility to choose a windows-based host controller for our WSN systems or a real-time controllers such as NI complete RIO, giving you the ability to integrate. Reconfigurable input-output with our wireless measurement. With either host controller, we can use lab view and NI-WSN software with lab view project integration and drag and drop programming to easily configure our WSN systems. Exact high quality measurement data, perform analysis and present our data.
Working of wireless sensor network:-
The development of network technologies has prompted sensor folks to consider alternatives that reduces cost and complexity and improve reliability early sensor networks used simple twisted shielded pair [TSP] implementations for each sensor earlier the industry adopted multi drop buses [eg:- ETHERNET] now we are starting to true web-based networks [eg:- the world wide web] implemented on factory floor.
As wireless sensor become real commodities on the markets, new options or new arguments for old options are causing professional to consider network strategies once ruled out. Lets look at how the rules have changed now that wireless systems are coming online.
In addition to build functional sensor networks, we will probably have to integrate hardware and software from multiple vendors. So along with every thing else, we have to come to terms with standards and protocols – those that exists, that are emerging and those needed to ensure inter operability on the factory floor.
Wireless sensor network topologies:-
Point to point networks:-
Theoretically, these systems are the most reliable because these is only one single point of failure in the topology, the host itself. We can improve the system by adding redundant host but writing two hosts can be a problem. The 4-20 ma standard allows multiple read-out circuits. If the standard loads are used at each read out. Problems can arise if read out device load the circuit beyond its capability but most designers are familiar with the limitations and are sufficiently care full.
Multiple networks:-
Multi drop [networks] busses began the appear in the late 70’s and early 80’s. one of these mod bus from modicon [Schneider automation, north and over, massa chussets] leads the way into the industrial sphere, followed by several proprietary and open busses.
The emergence of intelligent sensors and micro computer cable of operating in industrial environments irrevocable changed the sensor networks land scape. Multi drop networks reduced the number of wires required to connect field devices to the host, but they also introduced another single point of failure the cable.
Web networks:-
The promise of the web topology had to wait until vendour developed a way to inter connect nodes without the required wiring connections. A network of any applicable size becomes infisible if all wires must connected specially for the networks. Early star topology was successful as long as star was not too large. The WWW illustrate what is available connectivity in most parts of the country, although at less than suitable speeds in many locations.
The advantages of web connectivity for sensor networks become clear as the level of intelligence in each sensor increases. Co-operating sensors can form a temporary configuration that provides sufficient capacity to replace the host self-hosting networks then became self configuring and finally, years from now, perhaps even self-aware. But several problems remaining and are the topic of significant research, such as size and power consumption reduction, through put and performance during transmission and algorithms from allocating priorities and authority.
Characteristics of wireless sensor networks:-
 Ability to with stand harsh environment
 Conditions limited power they can store
 Ability to cope with node failure
 Mobility of nodes
 Dynamic network topology
 Communication failures
 Heterogeneity nodes
 Large scale of deployment
 Unattended operation
 Node capability in scalable
Advantages of wireless sensor networks:-
 Flexibility if there is ad-hoc situation when additional work station was required.
 Implementation cost is cheaper than wired networks
 Ideal for the non-reachable places
 Ideal for temperary network setup
Disadvantages of wireless sensor networks:-
 Lower speed compared to wired network
 Less secure because hackers laptop can act as access point
 More complex to configure than wired networks
 Effected by surroundings

Indians are good at multitasking

Sathya Saran
Saturday, February 13, 2010 23:01 IST
Sathya Saran

I am always amazed at the way we Indians multitask. I mean there is work of course, increasinglytaking up our waking hours as double income families chase their dreams, then there arethe kids and their needs, dreams, targets (notnecessarily in that order) to take into account.

And then there is allthe rest of one’s life. I met three people within the space of two days, and they brought home to me, that here in this country, the urban Indian runs not just on one treadmill, but on many, alternately.

Like this man who has just become a father. Not just that, his home was filled with the joy of twin boys, born a bit ahead of their time. So, double the care, double the concerns, and to quote a Laurel and Hardy film title, when things go wrong, Double Trouble!

He admitted to an hour or two of continuous sleep every night; the babies were hearty sleepers through the day and decided the witching hour was playtime… and also time to be walked about!

They were 50 days old, so there was no way to explain to them that papa worked hard all day and needed his shut eye. Then there was the fact that not so long ago, his father had had a brain operation, to combat the ratherdistressing symptoms of Parkinsons’ disease.

Theelectrodes that they had introduced into the brain of the elderly gentleman had indeed changed the tenorof his life and he was active and alert and man about town again… but the weeks before and after the surgerymust have meant some jugglery to a man holdinga full time job.

Then there was the case of the other friend… whose mother, for the second time in as many years, was rushed into ICU. It took a lot of running about andconnecting with doctors, and finally fighting down the need for complex procedures that seemed quite
unnecessary under the circumstances, and now the lady is home safe and sound. But again, it was a juggling act of intricate skill that was called into play.

It happens in most families, the old and the very young, demand sudden, intense attention. And luckily, we are still a nation that works to tending our own.

However, when we look at the larger picture, itis changing, and not really for the better, always. My cousin was telling me, this same week, the horror story of the time when her father, an otherwise active man of 80 plus, took ill. It was a Sunday and she called one doctor after another, as the family doctor was out
of town.

It was frustrating to hear excuses, from being occupied with personal events to being so busy that the first appointment would be only available on Wednesday the coming week.

Finally her long retired cousin’s husband had to beconsulted and the wheels were set into motion to gether father admitted into hospital, from where he was taken into ICCU.

Look around, and chances are almost everyone we know, and often we ourselves, are in the face ofsuch dilemmas. It is of course never a clear black and white picture.

And the niggling worry that there are some medical institutions that look more at profit than care, makes the picture even more grey!
Doctors are after all humans too, and family people, whose own concerns must also be immediate and demanding, but a life is a life and there is theresponsibility on them of being caretaker, once they have taken on the profession.

It is a thought that needs to be reinforced and needs to be understood by every parent who urges a child to take up medicine asa career; by every young person who dreams of wearing a white coat and walking the wards as they do in films.

Medicine is after all, much more than a lucrative career. It is a full-time vocation, and another treadmill that one cannot get off, whatever one’s personal contingencies.

'Indians are born conspiracy theorists'

'Indians are born conspiracy theorists'



Sheela Bhatt in New Delhi

Jairam Ramesh, Minister of State for Environment and Forests, says that India will go to Copenhagen Meet on Climate Change with a positive frame of mind and will be flexible.

In the first part of this interview, Ramesh had spoken about how India can be prosperous without being polluting. In this the second and concluding part of an interview with rediff.com, Jairam Ramesh discusses issues related to the Copenhagen Climate Change Conference, which will be kicked off on December 7, and on what should India's stance be with regard to curbs on carbon emissions. Excerpts:

You have been saying that the Kyoto Protocol is non-negotiable. Right?

Yes, absolutely non-negotiable! There is an Annex I list and non-Annex list.

There are developed countries that take on emission reduction target and there are developing countries who are obligated to report nationally appropriate mitigation targets.

We should have 'common but differentiated' historic responsibility. These issues are non-negotiable.

I have never at any point of time said anything else. It was mischievous reporting by one newspaper of my letter. It was just an idea. I have advocated this distinction between developed and developing countries responsibilities as suggested in Kyoto Protocol.

I have never advocated India taking on internationally legally binding targets. All I have been advocating is that let us see the issue independently of Copenhagen. We must have an aggressive, pro-active domestic strategy. And then negotiate from position of strengthen.

Today, we are negotiating from a relatively defensive position. 'We are not doing this', 'we won't do this. . .' that's not correct thing to do. I would like India to be aggressive. As the Chinese have recognized, we can emerge as the leader in the field.

There is no reason why Indian companies could not be the world leaders in solar and nuclear technology, and in clean coal technology.
Do you see any possibility of a deal in Denmark?

I think intrinsically there is a consensus that there won't be any treaty in Denmark (the interview was conducted in mid-November). There will be some sort of a political statement.

As of now, my feedback is that we will not have legally binding comprehensive climate change treaty. There are too many loose ends. I think the inability of Americans to deliver is also an issue. They are unable to deliver meaningful reduction targets by 2020.

I think that's one very important reason for not having any big deal in Copenhagen. What we will have is the statement of political ambition, a kind of political vision. I think political leaders will give a mandate for future negotiations.

But that's not enough.

It's a start. It's a start. Something is better than nothing.

We don't see people's participation in government's climate change policies.

I agree that ultimately it's all about people and livelihood-security. I have been going to villages. I have been to Himalayas and the North-East. I have gone to coastal communities. Let me tell you, the public is aware of these issues. People know why rains come like this and why floods are so horrific.

You don't have to educate people of India. People are feeling the changes in the climate. I have started coastal zone management. I had public consultation in Goa, Chennai and Mumbai. I will have it in Puri and Kochi. I had public consultations on the Himalayan ecosystem in Shimla and Dehradun.
Some experts think that your ministry is blindly approving Clean Development Mechanism project. (CDM is an arrangement under the Kyoto Protocol where rich countries can invest in projects in developing countries that are able to reduce carbon emissions). You haven't been rejecting many. Are these projects genuine?

We have approved 1,400 projects under CDM. If all of them are implemented then by 2012 we will get $6 billon worth of FDI (foreign direct investment).

About 9 per cent to 10 per cent of India's greenhouse gases will be neutralised through these CDMs.

It is wrong to say that CDMs are not benefiting. It is advantageous to the country. What you are doubting is whether it is benefiting local communities.

It's too early to say. There are some CDMs in forestry that would benefit the communities as well. Before people, the country should benefit. I don't draw distinction between country and people as media and NGOS draw. Country's benefit is people's benefit.

A lot of the approved CDMs are in area of renewable energy. There is a thermal power plant in Kolkata that has got carbon credit because of the efficiency improvement they have achieved. The Bhakara-Beas management board too has got carbon credits.

My job is not to find fault. My job is to support the new ventures. We have asked some of them to redo their proposals.

All over the world the refrain is that only China and India have benefited. It is called China Development Mechanism! PointCross, a Washington-based think-tank, has ranked India as number one in implementation of CDMs.
If you are sticking to the 'common but differentiated' responsibility of rich nations as explained in Kyoto Protocol, then why are you not applying same the principle within India? Why poor suffer more on issue of carbon reduction?

I agree. We need to address issue of domestic inequality. But we should not use poor or poverty as an excuse.

We need to improve access of community to electricity. That is the single most important step that we can take. Give people equal access to electricity. You know, 35 per cent to 40 per cent of India doesn't have access to electricity.

It's a ridiculous situation where 40 per cent of India doesn't have reliable electricity. It's important to have equality within India, but it has nothing to do with Copenhagen.

Why can't rich Indians be asked to pay more than the poor?

Answer to domestic inequality is not to ask people to consume less but to ensure that those who are not consuming should end up consuming more.

We will have to increase the size of the cake by having growth.
People also suspect the figures of levels of emission in India.

We have done a fairly good job. Since last 15 years I am following this debate. I don't think India can be faulted on methodology. We have done a series of surveys on it.

We have launched the Indian Network for Comprehensive Climate Change Assessment. It will provide inventory of greenhouse gas emissions. Our numbers can't be questioned.

At the level of community what are you doing?

We have to worry about the Himalayan ecosystem. What will happen to the glaciers, the water supply and the deforestation in upper catchment areas?

We have done surveys about livelihood insecurity in the Himalayan areas.

We are looking into eco-tourism in ecologically fragile areas of India.

In forests, we will have to provide cooking gas. We will have to make people partners in forest protection.

We are sensitized. We have sensitized chief ministers of Himalayan states. We are getting the State Action Plan on Climate Change ready. The Delhi government has already done it.

Your National Action plan reads fine but what about implementation?

We are always weak in implementation. We are trying to bring results. Please wait. The national action plan was released just last year and implementation is just picking up
Why are you not talking about consumption pattern of the West, one of the main culprits?

I agree. It is often said that developed countries' emissions are lifestyle emissions.

It is true that the consumption pattern of the West has led to this crisis of global warming.

For example, eating beef is the important cause of global warming. The driving of SUVs, the manner in which we use electricity, and in the profligate ways we use natural resources are causing troubles. These are issues embedded in lifestyle. . . that's why Americans are finding it very difficult to come to the negotiating table.

Climate change requires lots of sacrifice on the part of the developed countries in terms of their lifestyle.

What kind of targets you will give to people?

We will not have emission targets, but performance targets. We will introduce fuel efficiency standard by year 2012. We will keep 30 per cent of India under forest and green cover by 2030. We will decrease energy intensity by some per cent by 2020.

Don't you think as a developing country we should ask developed countries for compensation because due to global warming floods and rains have increased? We are the victims of their lifestyle.

We should keep asking. We can spend a lot of time in finger-pointing, but frankly we are not going to anywhere.
Many small island nations and developing countries think that your statement gives the impression that the primary responsibility of climate change is not of the developed countries.

No, no, no. The primary responsibility is of the developed countries only. Also, some of the small island states tend to dramatise the situation. Why 'primary'? In fact, the 'only'. . . the bulk of the responsibility of global warming is of developed countries.

There is historical evidence in front of you, but we have to move on because countries like India, Bangladesh or Maldives are more vulnerable than Denmark or America.

We are saying that countries like America and Denmark are responsible for global warming, but in whose interest is the agreement on climate change needed? For a country like India!

We need to understand that we need the agreement quickly, but we have to keep in mind that we don't give away on basic principles.

What's your priority?

Domestically, we need a sense of urgency. We have to move faster on solar, clean coal and other energy avenues. That is the crux.

We need scientific networks to monitor our sensitive areas. Copenhagen will take care of itself. What we need is an aggressive agenda at home and scientific agenda to measure, monitor and moderate impact of climate change.

Some people doubt that in your climate change strategy some kind of quid pro quo may creep in vis-a-vis US? Your letter suggesting that India may get UNSC seat, etc raises doubts. . .

Indians are born conspiracy theorists, okay? We live on conspiracy theories and we die as conspiracy theorists. Conspiring of theories is our karma!

The fact of the matter is that climate change is an important issue with a larger development impact. It is also a strategic issue. For us, India's interest is paramount. Nothing else matters.

proud to be an indian

PROUD TO BE AN INDIAN.

Let the world know what we stand for.

There are 3.22 Million Indians in America.
38% of Doctors in America are Indians.
12% of Scientists in America are Indians.
36% of NASA employees are Indians.
34% of MICROSOFT employees are Indians.
28% of IBM employees are Indians.
17% of INTEL employees are Indians.
13% of XEROX employees are Indians.
You may know some of these facts. These
facts were recently published in a German
Magazine, which deals with
WORLD HISTORY FACTS ABOUT INDIA.

India never invaded any country in her last
100000 years of history.
India invented the Number System.
Aryabhatta invented zero.
The World's first university was established in
Takshila in 700BC.More than 10,500 students from
all over the world studied more than 60 subjects. The
University of Nalanda built in the 4th century BC
was one of the greatest achievements of ancient India
in the field of education.
Sanskrit is the mother of all the European
languages. Sanskrit is the most suitable language
for computer software reported in Forbes magazine,
July 1987.

Ayurveda is the earliest school of medicine
known to humans. Charaka, the father of medicine
consolidated Ayurveda 2500 years ago. Today
Ayurveda is fast regaining its rightful place
in our civilization.
Although modern images of India often show
poverty and lack of development, India was the
richest country on earth until the time of
British invasion in the early 17th Century.
The art of Navigation was born in the river
Sindh 6000 years ago.
The very word Navigation is derived from
the Sanskrit word NAVGATIH.
The Word navy is also derived from Sanskrit 'Nou'.

Bhaskaracharya calculated the time taken by the
earth to orbit the sun hundreds of years before the
astronomer Smart.; Time taken by earth to orbit
the sun: (5th century) 365.258756484 days.
Budhayana first calculated the value of pi, and
he explained the concept of what is known as the
Pythagorean Theorem. He discovered this in the
6th century long before the European mathematicians
Algebra, trigonometry and calculus came from
India; Quadratic equations were by Sridharacharya in the
11th century ; The largest numbers the
Greeks and the Romans
used were 10 6(10 to the power of 6) whereas
Hindus Used numbers as big as 1053 (10 to the
power of 53) with specific names as Early as 5000 BCE
during the Vedic period. Even today, the largest
used number is Tera 1012(10 to the power of 12).

According to the Gemological Institute of
America, up until 1896,India was the only source for
diamonds to the world.
USA based IEEE has proved what has been a
century-old suspicion in the world scientifi
community that the pioneer of Wireless
communication was Prof. Jagdeesh Bose and not Marconi.

The earliest reservoir and dam for irrigation was
built in Saurashtra. According to Saka King
rudradaman I of 150 CE a beautiful lake
called 'Sudarshana'
was constructed on the hills of Raivataka during
Chandragupta Maurya's time.

Chess (Shataranja or AshtaPada) was invented in India.

Sushruta is the father of surgery. 2600
years ago he and health scientists of his time
conducted complicated surgeries like cesareans,
cataract, artificial limbs, fractures, urinary
stones and even plastic surgery and brain surgery. Usage
of anesthesia was well known in ancient India.
Over 125 surgical equipment were used. Deep
knowledge of anatomy, etiology, embryology, digestion,
metabolism, genetics and immunity is also found
in many texts.

When many cultures were only nomadic forest
dwellers over 5000 years ago, Indians
established Harappan culture in Sindhu
Valley (Indus Valley Civilization)
The place value system, the decimal system
was developed in India in 100 BC.

QUOTES ABOUT INDIA:

Albert Einstein said: We owe a lot to the
Indians, who taught us how to count, without
which no worthwhile scientific discovery could
have been made.
Mark Twain said: India is the cradle of the
human race, the birthplace of human speech, the mother
of history, the grandmother of legend, and the great
grand mother of tradition. Our most valuable and most
structive materials in the history of man are treasured
up in India only.
French scholar Romain Rolland said: If there is
one place on the face of earth where all
the dreams of living men have found a home from
the very earliest days when man began the dream
of existence, it is India.
Hu Shih, former Ambassador of China to USA said:
India conquered And dominated China culturally
for 20 centuries without ever having to send a single
soldier across her border.
=================================================================
All the above is just the TIP of the iceberg, the
list could be endless. BUT, if we don't see even a
glimpse of that great India in the India That we see
today, it
clearly means that we are not working up to our
Potential and that if we do, we could once
again; be an ever shining and Inspiring country
setting a bright path for rest of the world to follow.
I Hope you enjoyed it and work towards the welfare
of INDIA. PROUD to be an INDIAN.
=================================================================

SRK v/s shivsena muthalik

In the Shah Rukh Khan-Shiv Sena standoff the heroism is not as heroic and villainy not as villainous as some in the media are projecting.

Khan “standing up” to the Sena is as much a broadcast media driven narrative as Bal Thackeray’s “threats and intimidation.” At its core it is nothing more than a fading 84-year-old rabble rouser’s personal need for attention and losing battle to burnish a very thin legacy. It must not be a happy thought for Thackeray that 44 years after he founded it the Shiv Sena’s single-point strategy has not evolved beyond street-level goon politics to mine some nuisance value.

Bashing up a few bystanders, tearing down a few posters, ransacking a few offices and pushing around defenceless citizenry to extract donations have pretty much been the extent of the Sena’s political vision for as long as it can be traced. In many ways the Shiv Sena is nothing more than Thackeray’s own unsubstantiated grand view of the self which became an anachronism not too long after it was formed.

Like all family owned and run quasi-political outfits around the world, the Shiv Sena too is swift at plucking low-hanging fruits and beat them into some quick political pulp. With his own nephew Raj having ditched him and son Uddhav not politically adding up to a whole lot, the patriarch did not have much option but to pull out an old trick or two.

There was no way the Sena could have passed up on Khan’s somewhat Boy Scout worldview, especially the way it was expressed in the context of the Thackeray’s favorite target – Pakistan. The Sena’s 486 processor could not have executed a more complex task than ‘Shah Rukh Khan who is a Muslim star who is releasing a movie ‘My Name is Khan’ and loves Pakistani cricketers; so get him.’

While some sections of the breathless broadcast media are applauding Khan’s “extraordinary courage” in taking on Thackeray, a more sober appraisal would reveal nothing of the kind. The 44-year-old Khan has merely stood his ground in defence of his very reasonable and amiable take on the controversy over the failure of T20 cricket team owners to bid for a single Pakistani player. It is a sign of the times that something as routine as expressing one’s beliefs and sticking to them is being spun as an act of courage under fire. It is true that the Thackerays and the Sena did hold out some fairly equivocal threats in case Khan did not retract his stand on the Pakistani cricketers. However, veteran Sena watchers would see nothing more than posturing in this move.

At the personal level Thackeray had long been known to get a kick out of movie stars dropping by at his residence ‘Matoshri’ in the neighborhood that is ironically called ‘Kala Nagar.’ In some ways such visits fueled his sense of grandiosity and reinforced his image for his followers. The kind of implied intimidation that has been used in the current instance has more often than been only a tactic to get the targeted celebrities to come and pay their respects. Placating “Balasahab” became a ritual that helped the Shiv Sena acquire a profile that was way out of sync with its real influence.

Had it not been for the past acts of violence, which were done either directly by the loosely structured Sena cadres or by their proxies, this brand of politics would have seemed like the kind of caricature that Bal Thackeray is so skilled at as a cartoonist of formidable talent. It would be a mistake to cast the latest Sena outbursts as part of some overarching political debate about foreign policy, national security, terror and India’s neighborhood. In the Sena’s collective mind it is far simpler than that. It is just a characteristically short-term tactic to stay relevant in a city that has all but turned its back on them. Also, it can be said with some levity that the fulminations mean nothing more than “Come and meet Balasahab.”

As for Khan, he would be the wiser were he not to fall for the wholly unconvincing media hype of courage under fire

A middle aged Ranbir Kapoor’s getting ready to play a 21 year old wayward youth, not knowing what it means to be a proper ‘Mumbaikar’…Ranbir Kapoor is in deep discussion with his director…which goes something like this…Ranbir Kapoor: “We can’t say this dialogue, has this been cleared by MNS? Can my character be called ‘Raj?’ Did we check with all the Thackerays??

Back to the present….which is tense…So despite the fact that there seems to be no perceptible threat to the Hindi film industry at large, its time that the Hindi film

fraternity stands up for their own…Especially when certain politically motivated individuals mix some comments to their own political agendas which could lead to a situation which could spiral into something akin to ‘dictatorship’… to a point where directors, writers and producers will have to line up to meet the ‘powers’ that be to get a ‘creative license’ which would permit them to make stories that would first meet the requirements of the ‘Sena(s)… So a scenario in the future, where film scripts will have to first go through the ‘Thackeray(s)’ of the city to meet their reel fate, is very much on the cards…

So yes SRK made a comment, yes he had an opinion, and yes we can react to it and yes…we may like or may not adhere to his views. And yes…others can say whatever they want to. But to resort to threats to damage property, to threaten that if someone holds a particular point of view then they deserve to be ‘dealt with’. Well its time for people to speak up…especially a fraternity which prides itself to call it an ‘industry’…if not now, then forever they will have to hold their
silence. A tightly gagged silence.

Of course it’s not yet calamity, its not as if they have destroyed theatres…well…they have not done it …’yet’. And perhaps it’s for this ‘yet’ that the industry needs to stand up for. Today ‘they’ will want you to be punished for ‘having favorable opinions towards a country’; tomorrow it could be anything…from growing a beard to wearing a mini skirt. So is Shah Rukh Khan being isolated for being what he is a ‘Khan’… a Muslim…or is he being isolated because the industry itself is scared enough of taking a stance against a body that prides itself on ‘goondaism’? Whatever it is…perhaps its time the Industry stopped changing Bombay to Mumbai to satisfy a few individuals…perhaps its time to know that sometimes its ok to say that ‘yes the film is about the 1993 riots’, if someone has a problem let them take the legal route…not the laathi route! Perhaps its time to tell a few individuals that Mumbai ‘kisike baap ki jagir nahi hain…it’s for every Indian and belongs to every Indian…who can have their own views and also have the basic democratic right to voice it, if they want to!

While social activists took to streets protesting against Shiv Sena's threat to the release of the Bollywood film, theaters and multiplexes are bowing to Sena threat and backing out from releasing the film.


The Shiv Sena Bhawan on Thursday, Feb 11 turned into a battleground when pro-SRK activists and Sena activists clashed prompting the police into action.

Social activists staged a massive protest and shouted slogans outside the Sena Bhawan demanding a smooth release of the film. The protesters were taken into preventive custody and were later released.

According to a Zee News report, the social activists were led by the famous journalist and activist Teesta Setalvad.

Meanwhile, the Mumbai police arrested 295 Shiv Sena activists as the Bal Thackeray-led party reiterated the threat to the Shahrukh Khan starrer movie. Over 1,600 Sainiks have already been arrested.

Even as the police stepped up security across the city to thwart any threat to the theaters screening the film, multiplexes such as Fun, Adlabs have reportedly backed out from releasing the film on Friday, Feb 12.

The raging spat started when Sena took offence to the Bollywood superstar favouring the participation of Pakistan cricketers in the Indian Premier League (IPL).

As theatre-owners in Mumbai faced huge pressure from the Shiv Sena to bring down posters of Shah Rukh Khan's film, Amitabh Bachchan blogged lavish praise for Bal Thackeray.

His wife, Jaya Bachchan, in an exclusive interview to NDTV, said Bollywood comes together for "national causes". She was replying to a question on why Bollywood and her own family has not supported Shah Rukh against the Sena. Shah Rukh's statement that Pakistani players should be a part of the Indian Premier League has angered the Shiv Sena.

"I had my battle. I fought it single-handedly with the support of my family," said Bachchan, referring to her own run-in with Raj Thackeray and his party, the Maharashtra Navnirman Sena (MNS), in 2008. At a Bollywood event, Jaya Bachchan had said that because she is from Uttar Pradesh, she wanted to speak in Hindi.

MNS workers attacked a cinema where Amitabh Bachchan's film, The Last Lear, was meant to premiere. Amitabh Bachchan issued a formal apology after an explanation on his blog was rejected by Thackeray.

Even while accepting Bachchan's apology, an aggressive Thackeray said Jaya Bachchan should stick to delivering dialogue written for her, instead of extemporising.

The Maharashtra Chief Minister, Ashok Chavan, has said that "Strict action will be taken against anyone who tries to disrupt screening of Shah Rukh Khan's film 'My Name Is Khan'."

The Congress was also in power when Bachchan was threatened by the MNS. Pointing out that no such support was offered to her, Bachchan said, on the issue of North Indians being attacked in Mumbai, "It's very unfortunate that today the government is talking about it, they are posturing differently. When something starts, if you think it's wrong, it should be squashed then. But you did not make an effort, because at that time it did not suit you."

AN OVERVIEW OF INTERNET APPLICATIONS

AN OVERVIEW OF INTERNET APPLICATIONS
To understand why the internet is being commercialized, we need to understand what internet applications people are interested in and are actively seeking. This section will provide an overview of the popular applications found on the internet. These applications serve as the inspiration and harbinger to the vision of electronic commerce on the I-way.
If the wires and cables of the telecommunications and cable industry are the e-commerce network foundation, the Internet applications may very well provide the language, culture, and etiquette for e-commerce. The internet, with origins completely outside the business world, is nonetheless important to commercial users because it represents in many the vision of the emerging global marketplace.
Two major types of information are likely to be founded on the internet; (1) public (or free) information (stock quotes, company annual reports, product and customer service information, government documents, works with expired copyrights, works in the public domain, and works that authors make available to the internet community on an experimental basis); and (2)fee-based information, access to which is billed (financial information, and electronic newspapers such as the San-Jose Mercury Times). For understandable reason, some types of information not likely to be founded on the internet, most notably, commercial works that are protected by copyright law. However this is too may change as better security and information protection methods become available (See Chapter 15).
To navigate through the wealth of information resources, internet users traditionally had to know cryptic operating system commands for UNIX, which is the dominant operating system on the internet. Today, sophisticated user interfaces are being developed that shield the end user from much of the complexity that was associated with the internet in general and with the UNIX operating system, in particular.
The internet provides a broad range of services to address a variety of user needs:
• Individual-to-group communications. Group conferencing. Tele-meeting services, with interactive multimedia and conferencing, negotiation, decision support systems; mailing list server, bulletin board/news group, directories / resources discovery services-for research collaboration and distance education (interactive tutorials) across institutional, state, and national boundaries
• Information transfer and delivery services. Text-based e-mail, multimedia e-mail. E-mail/fax interface e-mail/EDI interface; news groups/bulletin boards / directories; digital (packet) audio and video communications
• Information database. Access to citation, full-text database and “virtual” libraries containing both text and multimedia information. These data-bases are accessible using internet tools like Gopher, world wide web (WWW), file transfer, remote log-in, resource discovery services, and news-gathering agents
• Information processing services. Remote access to a variety of software programs including operations research (OR) tools, statistics, simulation and visualization tools.
• Resource-sharing services. Access to printer, fax machines, and other processing services that enable the utilization of spare capacity on underutilized machines.
Within these categories the most commonly used services and e-mail, bulletin boards, search and retrieval tools (Archie), and information publishing tools (Gopher and World Wide Web). These tools are described next.













Figure 3.12 screen shot of an e-mail program, PINE, developed at the university of Washington
Electronic-mail. The bulk of the traffic that crosses the internet and by far its most widely used service is interpersonal communication in the form of electronic mail. The ability to send messages in a few seconds to a computer anywhere in the world is a big reason for getting on and staying on the internet. E-mail is handled by a variety of programs with names like elm, pine, and eudoro that allow user to send and receive messages (see Fig. 3.12). as it becomes easy and inexpensive to access the internet, rather than setting up private systems, e-mail is being increasingly used for both internal and external corporate communication between enterprises and their customers, suppliers, and collaborators.
e-mail to fax. Other services (e-mail to fax and fax to e-mail) offer a variation of the e-mail theme, allowing users to send and receive a fax via e-mail. Some services are free. In general, it works in the following manner: the user sends an e-mail to a special address including the phone number of the recipient’s fax machine. A computer looks at the phone number and decides














Figure 3.13 Screenshot of a small subset of news groups accessible via command “rn”
Whether any of the participating fax machines cover the destination. If so, the message is routed to the appropriate location. Also, faxes can be sent to, multiple fax machines – a fax mail-out – or faxes and traditional e-mail can be combined. After the deed is done, the sender receives an e-mail containing the outcome, namely, success or failure to deliver. Certain limitations still apply. You cannot send a fax just anywhere with this service, only to those companies, institutions, and individuals that have linked a computer and fax modem to the network. This innovative use of the internet is an example of the digital convergence trend – in this case the two technologies being fac-simile and electronic mail.
Collaboration via bulletin boards. Another major source of the internet’s allure is that anyone can post and retrieve information in news groups, which are essentially global bulletin boards. One important source of information is the USENET service, a massive collection of topic-specific forums in which participants can send and receive news, debate issues, ask questions, and provide answers. Thousands of news groups are filled with experts discussing various aspects of their fields. Several discussion groups focus on software, hardware, medicine, politics, manufacturing, education, pets, movies sex, cooking, humor, and a host of other topics (See Fig. 3.13). In the figure, the comp. groups are computer groups, rec. groups are recreation – oriented groups, and alt. is usually reserved for groups that do not fit the traditional hierarchy.













Figure 3.14 A screen shot of a Gopher session
Information publishing and databases. Most on-line database information on the internet is free for the taking and the quantity is mind boggling. Highly Prized information that is freely accessible includes security and exchange commission (SEC) database containing valuable information on the health of companies, the NASDAQ stock exchange, the Federal Reserve and many other government agencies, esoteric information such as national weather service satellite photos, on-line searches of the largest library in the world – the library of congress catalog – and a host of other sources too numerous to list comprehensively. In addition to information, user can download soft – ware called freeware and shareware (for which a small amount is requested by the author). Although shareware applications are not very polished, they match the functionality of applications bought shrink-wrapped from the store at prices in the hundreds of dollars.
Several tool-Gopher / veronica, FTP/Archie, WWW-exist for accessing information. The Gopher, developed at the University of Minnesota, is an information organization method for facilitating easy search and access of files through menu like interfaces (See fig. 3.14). The Gopher program lists different host computers and the subject areas of information they contain. The user can select any one of these menu choices and will be transported to the submenus in that category. Gopher servers are available on many host machines around the world. Each version provides information about files on the machine it is on, as well as on other interconnected computers.
Another very popular tool for accessing information database is anonymous FTP (file transfer protocol), which allows the user to connect and download files from one computer to another computer. Figure 3.15 shows a typical log-in session for doing anonymous FTP. The user name is always “anonymous

IETF WORKING GROUPS

IETF WORKING GROUPS
The IETF is currently divided into eight functional areas; applications, internet, networks management, operational requirements, routing, security, transport, and user services. Each area has one or two area directors. When it considers a problem important enough to merit concern, the IETF sets up a working group (a group of people who work under a charter to achieve a certain goal) for further investigation.
The actual technical work of the IETF is done in its working groups, which are recognized by topic into several areas (routing, network management, security). Their goal may be the creation of an informational document, the creation of a protocol specification, or the resolution of problems in the internet. Most working groups have a finite lifetime and are disbanded after the initial goal is achieved. As in the IETF, there is no official membership for a working group.
Each area has several working groups and may also have birds of a feather (BOF) session. BOF generally have the same goals as working groups, except that they have no charter and usually meet only once or twice. BFOs are often held to determine whether there is enough interest to form a work group. The purpose of BFOs is to provide an informal forum for discussing the latest trends in the marketplace that may necessitate a working group for more detailed inquiry. This process is outlined in Fig .3.10.
Output of the IETF working groups is usually a request for comments (RFC) that is floated in the internet community for comments and criticism. The early RFCs were meeting minutes and message between the ARPANET architects about how to resolve certain problems. Two special subseries of the RFCs exist; FYIs and STDs. The for your information (FYI) RFC subseries was created to present








Figure 3.10 Process of working group creation that culminates in an internet standard document
overviews and introductory topics. Often, FYIs are Created by groups within the IETF user service area. The standard (STD) RFC subseries was created to identify internet standards.
There is another category called internet-Drafts. These are working documents of the IETF. Any group or individual may submit a document for distribution as an internet-draft. These documents are valid six months and may be updated, replaced, or made obsolete at any time. Guidelines required that an expiration date appear on every page of an internet-draft. It is not appropriate to use internet-drafts as reference material or to cite them, other than as “working drafts” or “works in progress”. Figure 3.11 details the process of draft creation and standardization.
Submitted




Content concerns or
Editorial comments

Internet governance hierarchies

9 Internet governance hierarchies
serves to adjudicate disputes in the standards process and is responsible for setting the technical direction, establishing standards, and resolving problems in the internet. The IAB meets regularly to discuss internet standards. Since the internet is not an IBM-only, Intel-only, or PowerPC – only network, it can work only if standard ways exist for computers software applications to talk to each other. This allows computer from different vendors to communicate or interoperate without problems. The IAB is responsible for these standards; it decides when a standard is necessary, considers the problem, adopts a standard, and announces it via the network.
The IAB also keeps track of various network addresses. Each host computer has a unique 32 – bit address called IP address; no two computers in the world can have the same address. The IP address is similar to a telephone number; no two customers can have the same number. The IAB worries about the problem like how to develop rules for assigning IP numbers. In other words, it doesn’t actually assign the address, but it makes the rules about how to assign them. An interesting side effect of the rapid growth of the internet is that the 32-bit IP address space is becoming insufficient. While it is true that the internet is running out of 32-bit IP addresses, this problem is being addressed with the IP next generation (IPng) extension (see Chapter 17). In short, IPng seeks to add digits to the IP address. This is somehow like the U.S. phone system, which has run out of numbers several times. Ten years ago local calls were dialed with seven digits; today, in some metropolitan areas, local calls now require dialing ten digits.
The IAB is supported by the engineering task force (IETF), the protocol engineering and development arm of the internet. The IETF is a large open international community of network designers, operators, vendors, and researchers concerned with the evolution of the internet architecture and the smooth operation of the internet. It is open to any interested individual and meets regularly to discuss operational and near-term technical problems of the internet. The internal management of the IETF is handled by the area directors. Together with the chair of the IETF, they form the internet engineering steering group (IESG). The operational management of the internet standards process is handled by the IESG under the auspices of the internet society.
IETF WORKING GROUPS

INTERNET GOVERNANCE: THE INTERNET SOCIETY

INTERNET GOVERNANCE:
THE INTERNET SOCIETY
Governance Hierarchy
Because the internet is not a single, unified network, it is not surprising that no one body controls it. Although there are standards, no internet police exist to enforce them. In effect, the system itself policies such things if any organization strays from the collective standards, it loses the benefits of global connectivity – which was the whole point of becoming part of the internet in the first place. Groups do exist that carry out central management functions for the internet, such as the InterNIC (www.internic.net), which, among other things, register companies that are connected to the internet, and the internet society (www.isoc.org). The internet society has various engineering committees of the Internet. But none has the power to force a particular direction or action on the internet community.
The ultimate authority for the technical direction of the internet rests with the internet society (ISOC). This professional society is considered with the growth and evolution of the world wide internet, with the social, political, and technical issues. It is a voluntary organization whose goal is to promote global information exchange. The four groups in the structure are the ISOC and its board of trustees, the internet architecture board (IAB), the IESG, and the IETF itself (see Fig.3.9). the ISOC trustees are responsible for approving appointment to the IAB from among the nominees submitted by the IETF nominating committee.
ISOC appoints a council – IAB – that has responsibility for the technical management and direction of the internet. The IAB is responsible for overall architectural considerations in the internet. It also

Barriers to International Internetworking

Barriers to International Internetworking
Historically, three barriers have slowed the development of international networks. The principle barrier has been the high cost of international communications. Another important factor has been the high cost of installing and maintaining the physical infrastructure, coupled with the limited capacity of such facilities. With the advent of optical transmission and the introduction of new technical innovations, however, capacity is increasing and hence costs can be amortized over an enlarged user base. The third reason has been the lack of competition. Until recently, most governments have exercised either direct or indirect control over national telecommunications as well as international links. While this is still the case in some parts of the world, deregulation has brought about a significant increase in some parts of the world; deregulation has brought about a significant increase in competition and opening of domestic markets to foreign companies [NAS93].
Neverthelesss, despite the growing availability of capacity, the cost differential between U.S. overseas services is not something that is likely to be resolved soon, although change seems inevitable. In almost every country telcos operate in a “contrived” economic system, that is, a system of cross – subsidization in which monies are collected to support a wide range of government goals. One of the goals in the United-states is “universal service,” or the provision of affordable telephone service for the greatest number of people. The swiss, and many other governments throughout western Europe, use monies collected from telecommunications services to subsidize postal and transportation services. Introducing competition into these countries does not appear in the best interests of these governments and, in fact, the telcos are discouraging anyone from building his own network employing leased lines. In short, two factors – possible loss of control and income - have made the telcos reluctant to enter into a market economy in which competition is encouraged.

EBONE: European Backbone

EBONE: European Backbone
EBONE is a European international network backbone connecting research network backbone connecting research network services providers. A not-for-profit cooperative effort, EBONE is set up as a consortium whose members share the costs of management and operation based on respective access speeds. EBONE began in september1991 when representatives of several European academic and research networks met to resolve long-standing connectivity problems. Their approach was to evaluate existing available links and look for opportunities to bring these links together quickly under a unified approach. The effort was formally started in January 1992 and has proved successfully. The need for bandwidth and high-speed connectivity to the U.S backbone had long been recognized in the European community. Until late 1991 such connectivity was available only to individual national and international research networks. Among EBONE’s advantages are simplified network interconnection, increased bandwidth, improved connections to the united-states, and greater economy of scale in terms of operations and transmission cost.
EBONE provides two types of service: backbone services and interconnects services. According to the EBONE consortium, the focus in the coming years will be on the interconnect (Global Neutral Interconnect) service as other backbones come into existence, providing networking services for research.
EBONE operates a core backbone among London, Stockholm, Amsterdam, Geneva, and Paris, as shown in Fig.3.8. Inter-continental links to the united-states are provided from London, Paris, Stockholm, and Geneva. The European links initially operated at speeds between 256 Kbps and 512 Kbps, but the demand for EBONE services has grown such that the Stockholm-Amsterdam-Geneva links are now being upgraded to 1.5 Mbps, Paris-Geneva will become 2 Mbps, and the Paris-U.S. link will be1.5 Mbps. A new core site in Bonn is being set up and one in Vienna is being investigated to support extension of the network to the central and eastern European countries. Please note that the network speeds in Fig.3.8. Are probably outdated and are used to illustrate the infrastructure at one point in time.
EBONE is managed by the EBONE management committee, which is elected by the participating organizations. Operational support is provided by core sites and other sites in cooperation with EBONE network operations center at the royal institute of technology (KTH) in Stockholm. Development is planned by the EBONE action team, which consists of technical representatives from the participating organizations. Some of the member organizations of the EBONE consortium are listed in Table 3.6
(256 Kbps) Nordic Carriers
(256Kbps) Swipnet / Tele2
(256-512Kbps) NORDUNET
512Kbps
USA

256 Kbps 512 Kbps
1024Kbps
USA

2Mbps 512Kbps (Not Known) SURFnet
JANET (64 Kbps) RedIRIS, FCCN
(IXI) HEAnet
256Kbps (IXI) ULB
(IXI) YUNAC
(not known) EUNET
512Kbps (128 Kbps) ECRC
USA (128 Kbps) ACOnet
256Kbps

REANATER (Not known) (2 Mbps) Geneve, SWITCH
Fourth – (19.2Kbps) (64 Kbps) EARN

KUL (64 Kbps) (256 Kbps) ACOnet
(64 Kbps) ILAN

1544Kbps(until jun 93) (64 Kbps) ARIADNEt
USA (64 Kbps) EASInet, GMD



Figure 3.8 EBONE (European backbone) structure
Table 3.6 EBONE consortium members
ACOnet, Austria KTH, Sweden
ARIADnet, GREECE NFSR, Belgium
EARN NORDUNET
ECRC PIREX, U.K.
EUNET / EurOpen RedIRIS, Spain
FCCN, Portugal Renater, France
FORTH, Greece (Crete) SURFnet, Netherlands
GMD, Germany SwipNet, Sweden
HEANET, Ireland SWITCH, Switzerland
ILAN, Israel TIPnet / Telecom Finland
JANET / JNT, U.K.

International Computer Networks

International Computer Networks
International computer networks have flourished since the mid 1970s when sites in the United Kingdom and Norway were connected to the ARPANET. An early national network project outside the United States was JANET (joint academic network) in the United Kingdom. Later, several national network projects were initiated in numbers of countries on every continent. Examples include JUNET in Japan, DEN (Deutsche froschungesnetz) in Germany, UNINET in Norway, and SDn in Korea. International collaborations included NORDUNET in the Nordic countries (regional networks such as Swedish SUNET are part of NORDUNET), EARN and EUNET in Europe, and PACOM in the pacific-rim.
In the early 1980’s the CSNET (computer science Network); BITNET (because it’s time network), and UUCP (UNIX to UNIX copy) all developed international links. For Example, by 1984 CSNET was operating e-mail gateways between the United-states and Canada, Korea, Israel, Japan, France, Germany, Australia, and Scandinavia. In the same time period, BITNET spread to Europe, via the European Academic research network (EARN) and the other regions such as GULFNET in the Persian Gulf region. Similarly, the UUCP network developed a gateway to the EUNET (European UNIX networks) via Amsterdam [NAS93].
By the mid-1980’s, when the NAFNET backbone was being discussed, e-mail gateways already connected the various U.S. networks to a robust and growing global networking infrastructure. Today, the NSFNET and European networks are connected by two high-speed circuits linking the NSFNET at New York to INRIA, a French research network in Sophia Antipoles, and NORDUNET, a Scandinavian research network in the Royal Institute of Technology in Stockholm.
In Europe, the development of internet was hampered by national policies mandating OSI protocols. These policies prevented development of large scale internet infrastructures everywhere expect for the Scandinavian countries (Sweden, Finland, and Norway) that embraced the TCP/IP protocols and became well connected. In fact Scandinavian countries are the heaviest users of internet after the united-states. In 1989, RIPE (Roseau IP Europeans) began coordinating the internet operation in Europe, and today about 25 percent of all hosts hooked to the internet are estimated to be in Europe.
Other international links to NSFNET were established in 1991. For example, the federal university of Rio de Janeiro (UFRJ) came on-line in December 1991. The connection between California’s regional network CERFnet and UFRJ is intended to provide internet access to a regional network located within the state of Rio de Janeiro. Mexico was also linked to the NSFNET in November 1991 with a 64-bps satellite link to the CERnet via the Mexican satellite, Morelles II. And, the system Engineering research institute (SERI), Seoul, Korea, was brought on-line in march 1991. The link between SERI and CERFnet provides internet access to the Korean national research network (KREONet).
Networking in developing countries such as china presents a cross-sectional view of the importance these countries place on computer networks. For instance the major wide area network in china was CNPAC (China national public data network). CNPAC was designed to carry data at speeds varying between 1.2 and 9.6 Kbps. The network hub was in Beijing, where the network management center is located. Since 1993, china has been installing a new network; CHINAPAC covers all provincial capitals of the main land and is intended to be the major public data network backbone. CHINAPAC and its international links run at a 64-kbps backbone rate. User links vary from 1200 kbps. User can connect to CHINAPAC through leased lines (9.6 through 64 Kbps) or through dial-up (9.6 kbps; 1200/2400 bps). It is expected that high-speed fiber will soon cover the china. China is expected to invest approximately $60billion in telecom infrastructure through the end of the decade. It is anticipated that $18.39 billion will be invested during the Eight five year plan (1990-1995) and $41.37 billion during the ninth (1996-2000).

Gigabit Research Testbeds

Gigabit Research Testbeds
Today, gigabit testbed facilities are being developed, and work on the gigabit network applications has begun. However, the classical “chicken and egg” problem applies to gigabit networks in the sense that they won’t be economically viable until a market for them exists and a market won’t develop until user have a chance to experiment with such higher-speed networks.
The NSF established several testbeds to provide a focal point for needed technical interaction that is driven by user needs. These testbeds have pioneered some of the technical discussion and publications concerned with the evolving architectures. The initial goals concentrated on end-to-end upper-layer issues (user impact, applications, transport & higher-layer protocols, operating systems, and host network interface architecture best suited for imaging, visualization, multimedia, remote backup, and other emerging applications) So that usage of networks is understood.
The current gigabit research revolves around a set of six testbeds (Aurora, blaca, CASA, MAGIC, Nectar, and VISTA net) funded by the NSF and the Defense Advanced Research Projects Agency, each with its own research objective and staff. Here are some details of the six NREN testbeds:
Aurora. The network links four sites located in the Northeast using 622-Mbps SONET (data transmission standard) channels ; the university of Pennsylvania in Philadelphia; Bell core in Morristown, New York, and the Massachusetts Institute of Technology in Cambridge, Massachusetts. This testbed will explore alternative network technologies, investigate distributed system / network service paradigms, and experiment with gigabit network applications. A key objective is to provide a platform on which other researchers can explore both business and scientific applications of such net works as well as develop the network architecture to meet the needs of these new applications.
Blanca. The network connects sites at AT&T Bell Labs in New Jersey; the University of Wisconsin and the University of Illinois in the Midwest; and the University of California – Berkeley and Lawrence Livermore Laboratories in California. AT&T is providing long – distance T-3 circuits and experimental switches and hardware, and local exchange carriers are providing higher speed regional links. The emphasis will be on widely distributed supercomputing and high – bandwidth visualization. Specifically, the applications to be studied include multiple remote visualization and control of simulations; radio astronomy imaging; multimedia digital library; and medical imaging.
CASA. The network connects four sites in California and New Mexico: the major ones being san Diego supercomputer center and the Los Almos National Laboratory. Network links are provided by MCI, pacific Bell and US west. Applications here focus on using gigabit networks to combine the processing power of multiple supercomputers for climate and chemical reaction modeling.
MAGIC. The network ties together a wide variety of government and university sites. Sprint and southwestern Bell are among the carriers providing links. The network will be used by the U.S Army and others to test interactive reaction modeling.
Nectar. The network will provide a high speed link between two local area networks at Carnegie – Mellon University and the Pittsburgh super – computer center. Fiber links will be provided by Bell Atlantic, and Bellcore and CMU are collaborating on hardware design. The network will link high – performance parallel interface LANs over ATM- and SONET – based networks.
VISTAnet. The network uses SONET / ATM links from Bellsouth and GTE to link supercomputer center MCNC, North Carolina State University, and University of north Carolina-Chapel Hill. The network focuses on a single application: networking powerful computer to help doctors plan radiation therapy for cancer treatment.
These testbeds are exploring two different technological approaches to developing gigabit switching systems: asynchronous transfer mode (ATM) and packet transfer mode (PTM). A prototype ATM switch was provided by Bell core, and IBM has provided a packet transfer mode switch. High – speed network links are provided by MCI, NYNEX, and Bell Atlantic. The first approach, ATM switching , uses small, fixed-size data elements (called cells) and is expected to form the basis for the next generation of network switching technology. The second approach, PTM, is based on variable-sized packets and is a method being purchased within a smaller segment of the data communications industry. Each approach has its advantages, and these and other options may coexist in the networks of tomorrow. In addition, technologies, as well as the development of higher-layer protocols and application service models, need further research.
3.5 GLOBALIZATION OF THE ACADEMIC INTERNET
By the late 1980’s the internet had spread globally, including Canada, Australia, Europe, South Africa, South America, Asia, and Japan. Although we have discussed the development, implementation, and network infra structure in the united-states, the Internet has always been an international network. Today the global network environment reaches over 140 countries, each with its own slant. Asian countries see the internet as way of expanding business and trade. Eastern European countries, longing for scientific, have long wanted to participate but were excluded by government regulation. Since this ban was relaxed, development is progressing rapidly. Third world countries that formerly did not have the means to participate now view the internet as a way to raise their educational expansion is hampered by the lack of a good supporting infrastructure, namely, a decent telephone system. In Eastern Europe and in several developing nations, a reliable phone system capable of handling continuous data transmission is virtually nonexistent. Even in major capital cities, fast connections are often limited to the speeds available to the average home anywhere in united-states, 9600 bps. Typically, even if one of these countries is “on the internet” only a few sites representing the top institutions have access-usually, the major technical university for that country. However, telecom infrastructure is a major priority in most developing countries and is expected to improve rapidly [NAS93].

Gigabit Applications: Challenges Ahead

Gigabit Applications: Challenges Ahead
The key issue to be considered is this: will the world of the researcher, the educator, and the industry employee be fundamentally altered by the existence of gigabit networks and if so, how? More specially, what networks based applications can be envisioned that need the gigabit speeds to be effective? Two of the criteria for determining potential applications in this context are (1) real – time processing and synchronization of information and (2) distributed applications.
Applications in the realm of real-time processing and synchronization of information require that the time needed to complete a task using the network must be influenced by gigabit speeds. In other words, waiting for results to arrive in the mail or over slow-speed networks may be too slow to be useful. Examples of these applications include group collaboration and video conferencing> generally, it is conjectured that the use of gigabit networks will enable a major paradigm shift to image-based communication from the older text based modes of communications.
Although not exclusively a gigabit networking problem, real-time processing of multiple high-speed data streams that are interrelated first requires the synchronization of multiple streams to align and integrate them. The resulting streams are intended to be viewed by a user at a workstation. Synchronization is a key problem, since the communication paths can introduce widely differing delays both among different remote points and among different user media being communicated.
Applications in the realm of distributed computing use multiple computational resources (supercomputers and workstations) in parallel, all interacting at gigabit speeds to significantly improve our ability to solve particular problems related to electronic commerce. Examples include virtual reality and large-scale simulations.
Distributed computing applications often require programs running simultaneously on multiple machines on the network. These programs pass data back and forth to each other at speeds determined by the nature of the computation, the speed of the network, and the delay between the computers. A major research challenge in this area is dealing with the relatively long latency, or propagation delay, present over long distances between processors. This latency factor can be a major problem relative to the data exchange required for computational efficiency.

Gigabit Network Research

Gigabit Network Research
Currently, the NREN community has access to a variety of networks operating at a speeds ranging
From those obtained with dial-up modem (14.4 Kbps) to high – speed LANs (100 Mbps). In the
Realm of wide area networks, regional networks typically offer 1.5 Mbps access lines and national
Level back bone networks such as the NSFNET, and other networks operated by the government
Offers 45 Mbps. It is recognized that gigabit networking infra-structure during the next decade.
In light of this, gigabit network research has two goals: (1) to advance the technology and
understanding of requirements for high – speed networking by developing architectural alternatives in determining for possible structure of a next generation wide area gigabit network, and (2) to explore the potential applications for such a network that are of importance to business and society in general. Applications for gigabit networks will probably evolve from various experimental applications being developed in universities and in government and industrial research test beds.
High – Speed Gigabit Wide Area Network Architecture
Creating a wide area gigabit network is expected to require major departures from existing network technology along several dimensions:
• The network speed will over whelm the processing capabilities of most existing supercomputers and workstations. Existing operating systems and protocols will be unable to respond quickly without radical design changes
• Since the total delay across a gigabit network is expected to be small, applications requiring large bandwidth and whose quality deteriorates with delays are enabled easily. Applications such as video conferencing requiring the exchange of large amounts of data at regular intervals can be deployed.
• The volume of data in the networks can be huge. The task of managing the reliable flow of such large amounts of data in a network environment with thousands of users requires research in algorithm for storage, routing, and retransmission required to recover from anomalies such as errors, fail – user, and congestion.
• Switching protocols must be designed and developed that can operate at gigabit speeds while dealing with the propagation delays and processing constraints specific to gigabit networks. New switches will be required that have the ability to handle traffic loads of several gigabits per second (or more) and to switch millions of application data representing the combined traffic load.
In short, although gigabit networks can provide many benefits and enabled new applications that are required in a information – dominated society, they also pose many technical challenges. The physical layer of the gigabit network (cabling and wiring) may well be the simplest of these hurdles to overcome. In addition to physical data transport, network running at this speed requires changes in almost every network element at all levels to eliminate bottlenecks that reduce the speed of information flow. This will require major architectural changes in workstation hosts, packet switches, gateways, and routers, both in hardware design and software.

Very High Speed Backbone Network Services (vBNS)

Very High Speed Backbone Network Services (vBNS)
MCI was selected to provide the NSFNET very high speed backbone network service (vBNS). This service will be operated from MCI’s production telecommunications infrastructure based on SONET transport technology. The technical details of SONET and presented in chapter 19.
The vBNS provider is responsible for establishing and maintaining a vBNS to accept traffic from the five supercomputing centers SCCs) and the NSF – designated access points (NAPs). The vBNS provider is also required to provide for high – speed connectivity between regions, facilitate multimedia applications, and promote development and utilization of advanced routing technologies.
Access to the MCI vBNS will commence at data rates of 155 Mbps and will increase to gigabit – per – second rates over the five-year award period. Access of 655Mbps is estimated to be available by 1996. By 1998 a 960-Gbps SONET backbone with 2.4-Gbps access to SCCs is anticipated. MCI will make a Testnet available in support of experimentation with new telecommunication technologies. Although vBNS traffic must comply with the AUP, the vBNS can have connections and customers beyond those specified by NSF as long as the quality and of required services for NSF – specified customer are not affected.

routing arbiter

Routing Arbiter (RA)
Routing arbiter (RA) is an entirely new element introduced into the NAP architecture. RA organization implements the concept of policy – based net – work routing of traffic between different networks efficiently. In the past, ators. This is now recognized as a key for network efficiency. In the past, although several tools were available to apply routing algorithms, they were not used in a well – coordinated way. In a large network such as the Internet, applying individual routing policies without proper coordination and simulation of the consequences leads to an unmanageable situation. The solution for controlling the chaos is the routing arbiter (RA).
RA will maintain database of routing services that have networks attached to the NAPs backbone access points. They can be used to obtain information on network topology, policy, and interconnection information in order to construct routing tables. This job will fall to an organization chosen to handle a number of routing tasks that formerly were part and parcel of the role of backbone provider. In fact, the solicitation warns that the routing arbiter and the - Mbps backbone provider cannot be same organization. According to the NSF salutation, “this component of the architecture will provide for an unbiased routing scheme which will be available [but not mandatory]. For all attached networks” [NSF92].
Under the new NSF architecture, Merit and Information Science Institute (ISI) have been selected to jointly implement the role of routing arbiter ( http://www.ra.net ). Merit will have the central role in technical coordination for Internet Service providers who need to interchange traffic. This function is needed to assure smooth operations and stability for the Internet during the data transition to new technologies resulting from this award program and beyond. Merit will also work with ISI to implement new technologies for routing traffic among Internet networks, using high powered workstations as “route servers.” Merit will be responsible for deploying new routing technologies that are expected to be a key to accommodating continued Internet growth and complexity resulting from the many new user of the Internet in the next few years. For instance, a key task for the routing arbiter will be to enhance the use of new switched services offered by the telco carriers, such as ATM, in the place of the dedicated point-to-point technology that is widely deployed in wide – area internetworks.
The major goals for the routing arbiter including advanced of Internet routing algorithms with respect to scaling and stability issues, routing information registration and dissemination for the network service providers serving the Internet, deployment of route servers to aid in the dissemination and real – time maintenance of the global routing system, and coordination and sharing of technical information in support of the Internet operations community. A key element for enabling information sharing is the routing arbiter database (RADB). Data from the RA database may be used by any one worldwide to help with debugging, configuring, and engineering Internet routing and addressing.

network access points

San Francisco NAP





Very high
Band width network
[>155 mbps]


Chicago NAP New York NAP

Network access
Points (NAP) containing
ATM switches for
Fast packet transfer






Figure 3.7 Network access points (NAPs) and high bandwidth architecture (vBNS)
NETWORK ACCESS POINTS (NAPs)
A network access point is a high-speed network or to which a number of routers can be connected for the purpose of traffic exchange and interoperation. NAPs are locations where other networks can connect to the vBNS. It is anticipated that many types of networks will eventually connect to the NAPs. Examples of such networks include other federally sponsored networks, other services providers for research and education, service providers for traffic not limited to the support of research and education, and international networks. NAPs must be able operate at speeds of at least 1.544Mbps (T-1).
According to NSF, NAPs will not be subject to the acceptable usage policy (AUP) and will permit, for example, tow attached networks to exchange traffic without violating the AUP of any other attached networks to exchange traffic without violating the AUP of any other attached network. The Internet’s Acceptable use policy states that only data whose connect type falls under the category of research and education is allowed on the Internet backbone; Commercial business data content is not. This policy, created for commercial network providers to bypass the NSFNET backbone as much as possible.
The NAP is a conceptual evolution of other successful models, namely, Federal Information Exchange (FIX) and the commercial Information Exchange CIX). An interconnection point where multiple commercial meet and exchange traffic, CIX was created to let network providers exchange traffic directly without concern about violating the AUP (See Chapter 4).
Today, the primary NAPs are located in san Francisco, operated by pacific bell; in Chicago, operated by Ameritech; and in pennsauken, New Jersey, operated by sprint. A fourth access point, in Washington, is operated by Metropolitan Fiber Systems. The NAPs are fiber distributed data interface (FDDI)-based rings to which other carriers connect At T-1 or T-3 speeds. Traffic meeting AUP guidelines would be allowed on the vBNS 155-Mbps backbone, but commercial traffic would have to use alternative delivery services that may also be connected to multiple backbones, each serving different customers.
The internal details of each NAP are beyond the scope of this book. They can be obtained from the following addresses:
• San Francisco – Pacific Bell ( http://www.pacbell.com/ )
• Chicago – Ameritech ( http://www.ameritech.com/ )
• New York – sprint ( http://www.sprint.com/)
• Washington, D.C. – Metropolitan Area Fiber ( http://www.mfsdatanet.com/ )

financial analysing

Analyzing Financial
Performance Reports
This chapter focuses on analyzing financial performance measures. The first part describes how variances between actual and budgeted data are calculated for business units. Because expense and revenue budgets are part of the budgets for business units, the discussion can be extended to cover expense and revenue centers as well. The second part describes how reports of these variances are used by senior management to evaluate business unit performance. In the next chapter, we describe how nonfinancial performance measures can be incorporated into the management control process.
Calculating Variances:
Although the focus of this section is on comparing is on actual performance with the budget, competent operating managers nevertheless adopt a continuous improvement, or Kaizen, mentality;
They do not assume that optimal performance is being “on budget.” Most companies make a monthly analysis of the differences between actual and budget revenues and expenses for each business unit and for the whole organization (some do this quarterly.). some companies merely report the amount of these variances, as in exhibit 10.1. this statement shows that the actual profit was $52,000 higher than budget, and that the principal reason for this was that revenues were higher than budget. It doesn’t illustrate why the revenues were higher or whether there were significant offsetting differences in the variances of the expenses items that were netted out in the overall numbers.
A more through analysis identifies the causes of the variances and the organization unit responsible. Effective systems identify variances down to the lower level of management. Variances are hierarchical. As shown in exhibit 10.2, they begin with the total business unit performance, which is divided into revenue variances and expenses variances. Revenue veriances are further divided into volume and price variances for the total business unit and for each marketing responsibility centre within the unity. They can be further divided by sales area and sales
EXHIBIT 10.1 performance report, January (000s)
XXXX
EXHIBIT 10.2 variance analysis disaggregation
XXXX
District. Expense variance can be divided between manufacturing expenses and other expenses. Manufacturing expenses can be further subdivided factories and departments within factories. Therefore, it is possible to identify each variance with the individual manager who is responsible for it. This type of analysis is a powerful tool, without which the efficacy of profit budgets would be limited.
The profit budget has embedded in it certain expectations about the state of the total industry and about the company ‘s market share, its selling prices, and its cost structure. Results from variance computations are more “actionable” if change in actual results are analyzed against each of these expectations. The analytical framework we use to conduct variance analysis incorporates the following ideas:
• Identify the key casual factors that affect profits.
• Break down the overall profit variance by these key casual factors.
• Focus on the profit impact of variation in each casual factor.
• Try to calculate the specific, separable impact of each casual factor by varying only that factor while holding all other factors constant (“spinning only one DL at a time”).
• Add complexity sequentially, one layer at a time, beginning at a very essential basic “commonsense” level (“peel the onion”).
• Stop the process when the added complexity at a newly created level is not justified by added useful insights into the casual factors underlying the overall profit variance.
Exhibit 10.3 provides details of the budget of the business unit whose performance is required in exhibit 10.1.
Revenue Variances:
In this section, we describe how to calculate selling price, volume, and mix variances. The calculation is made for each product line, and the product line results are then aggregated to calculate the total variances. A positive variances is favorable, because it indicates that actual profit exceeded budgeted profit, and a negative variance is unfavorable.
Selling Price Variance
The selling price variance is calculated by multiplying the difference between the actual price and the standard price by the actual volume. The calculation is shown in exhibit 10.4. It shows that the price variance is $75,000, unfavorable.
Exhibit 10.3 Budget for January ($000s)
XXXX
Exhibit 10.4 selling price variances, January (000s)
XXXX
Exhibit 10.5 sales mix and volume variance, January ($000s)
XXXX
Mix and volume variance
Often the mix and volume variance are not separated. The equation for the combined for the mix and volume variance is:
Mix and volume variance = (Actual volume – Budgeted volume)
*Budgeted unit contribution
The calculation of mix and volume variance is shown in Exhibit 10.5; it is $150,000 favorable.
The volume variance results from selling more units than budgeted. The mix variance results from selling a different proportion of products from that assumed in the budget. Because products earn different proportion of products contributions per unit, the sale of different proportions of products from those budgeted will result in a variance. If the business unit has a “richer” mix (i.e., a higher proportion of products with a high contribution margin), the actual profit will be higher than budgeted; and if it has a “leaner” mix, the profit will be lower. The actual volume and mix variances are joint, so techniques for separating them are somewhat arbitrary. One such technique is described next.
Mix Variance
The mix variance for each product is found from the following equation:
Mix variance = [(Actual volume of sales)
- (Total actual volume of sales * Budgeted proportion)
*Budgeted unit contribution]
Exhibit 10.6 Mix Variance, January ($000s)
XXXX
Exhibit 10.7 Sales volume variance, January ($000s)
XXXX
The calculating of the mix variances is shown in exhibit 10.6. It shows that the higher proportion of the product B and a lower proportion of the product A were sold. Since product B has a higher unit contribution than product A, the mix variance is favorable, by $35,000.
Volume Variance
The volume variance can be calculated by subtracting the mix variance from the combined mix and volume variance. This is $150,000 minus $35,000, or $115,000. It can also be calculated for each product as follows:
Volume Variance = [(Total actual volume of sales) * (Budgeted percentage)
- (Budgeted sales)] * (Budgeted unit contribution)
The calculation of the volume variance is shown in Exhibit 10.7.
Other revenue analyses
Revenue variances may be further subdivided. In our example, exhibits 10.4, 10.5, 10.6, and 10.7 provide the information needed to classify them by product. Such a classification is shown in exhibit 10.8.
Market penetration and industry volume
One extension of revenue analysis is to separate the mix and volume variance into the amount caused by differences in market share and the amount caused by differences in industry volume. The principle is that the business unit managers are responsible for market share, but
Exhibit 10.8 Revenue variances by product, January ($000s)
XXXX
They are not responsible for the industry volume because that is largely influenced by the state of the economy. To make this calculation, industry sales data must be available. This calculation is given in exhibit 10.9.
Section A of exhibit 10.9 provides the assumptions that were made in the original budget shown in exhibit 10.3, and section B provides details on actual industry volume and market share for the month of January.
The following equation is used to separate the effort of market penetration from industry volume on the mix and volume variance:
Market share variance = [(Actual sales) – (Industry volume)]
*Budget market penetration
*Budget unit contribution
The market share variance is found for each product separately, and the total variance is the algebraic sum. The calculation is shown in section C. it shows that $104,000 of the favorable mix and volume variance of $46,000 resulted from the fact that actual industry dollar volume was higher than the amount assumed in the budget.
The $46,000 industry volume variance can also be calculated for each product as follows:
Industry volume variance = (Actual industry volume – budget industry
Volume) * Budget market penetration
*Budgeted unit contribution
This calculation of variances due to industry volume is shown in section D.
Expense variances
Fixed costs
Variance costs are costs that vary directly and proportionally with volume. The budgeted variance manufacturing costs must be adjusted to the actual volume of production. Assume that the January production was as follows: product A, 150,000 units; product B, 120,000 units;
EXHIBIT 10.9 industry volume and market share variances, January ($000s)
XXXX
EXHIBIT 10.10 fixed – cost variances, January ($000s)
XXXX
Exhibit 10.11 variance manufacturing expense variances, January ($000s)
XXXX
Product C, 200,000 units. Assumed also that the variable manufacturing costs incurred in January were as follows: material, $470,000; $65,000; variable manufacturing overhead, $90.000. exhibit 10.3 shows the standard unit variable costs.
The budgeted manufacturing expenses is adjusted to the amount that should have been spent at the actual level of production by multiplying each element of standard cost for each product by the volume of proportion for that product. This calculation is shown in exhibit 10.11.
This exhibit shows that there was an unfavorable variance of $13,000 in January. This is called a spending variance because it results from spending $13,000 in excess of the adjusted budget. It consist of unfavorable overhead spending variance of $11,000 and $12,000, respectively. These are partially offset by a favorable overhead spending variance of $10,000.
The volume that is used to adjust the budgeted variable manufacturing expenses is the manufacturing volume, not the sales volume, which was used in finding the revenue variances.
In the simple given here, we assumed that the two volumes were the same-namely, that the quantity of each product manufactured in January was the same as the quantity sold in January. If production volume different from sales volume, the cost difference would show up in changes in inventory. Depending on the company’s inventory costing method, this might or might not result in a production volume variance. Calculating of such a variance is explained in the next section.
In this example, we assumed that all the nonmanufacturing expenses were fixed. If some of them had variable components, the variances should be calculated in the same way as was used for the calculation of manufacturing cost variances.
Summary of variances:
There are several ways in which the variances can be summarized in a report for management. One possibility is shown in exhibit 10.12. it was used primarily because the amounts can be traced easily to the earlier exhibits. Another from of presentation is to show the actual amounts, as well as the variances. This gives an indication of the relative importance of each variance as a variance as a fraction of the total revenue or expense item to which it relates.
Variations in practice:
The example just given, although complicated, is a relatively straight forward way of identifying the variances that caused actual profit in a business unit to be different from the budgeted profitability. Some variations from this approach are described in this section.
Exhibit 10.12 summary performance report, January ($000s)
Actual profit (Exhibit 10.1) $132
Budget profit (Exhibit 10.1) 80
Variance $ 50

Analysis of variance-Favorable/(unfavorable)
Revenue variances: $ (75)
Price (exhibit 10.4) 35
Mix (Exhibit 10.6) 115
Volume (Exhibit 10.7) $ 75
Net revenue variances
Variable-cost variances (Exhibit 10.11):
Material $(11)
Labor (12)
Variable overhead 10
Net variable-cost variances $(13)
Fixed-cost variances (Exhibit 10.10):
Selling expense $(5)
Administrative expense (5)
Net fixed-cost variances $(10)
Variance $(52)
Time Period of the comparison
The example compared January’s budget with January’s actual. Some companies use performance for the year to date as the basis for comparison; for the period ended June 30, they would use budgeted and actual amounts for the six months ending on June 30 rather than the amounts for June. Other companies compare the budget for the whole year with the current estimate of actual performance for the year. The actual amounts for the report prepared as of June 30 would consist of actual numbers for six months plus the best current estimate of revenues and expenses for the second six months.
A comparison for the year to date is not as much influenced by temporary aberrations that may be peculiar to the current month and, therefore, that need not be of as much concern to management. On the other hand, it may mask the emergence of an important factor that is not temporary.
A comparison of the annual budget with current expectation of actual performance for the whole year shows how closely the business unit manager expects to meet the annual profit target. If performance for the year to date is worse than the budget for the year to date, it is possible that the deficit will be overcome in the remaining months. On the other hand, forces that caused for the remainder of the year, which will make the final numbers significantly different from the budgeted amounts. Senior management needs a realistic estimation of the profit for the whole year, both because it may suggest the need to change the dividend policy, to obtain additional cash, or to change levels of discretionary spending, and also because a current estimate of the year’s performance is often provided to financial analysts and other outside parties.
Obtain a realistic estimate is difficult. Business unit managers tend to be optimistic about their ability to perform in the remaining months because, if they are pessimistic, this casts doubt on their ability to manage. To some extent, this tendency can be overcome by placing the burden of proof on business unit managers to show that the current trends in volume, margins, and costs are not going to continue. Nevertheless, an estimation of the whole year is soft, whereas actual performance is a matter of record. An alternative that lessens this problem is to report performance both for the year to date and for the year as a whole.
Focus on gross margin
In the example, we assumed that selling prices were budgeted to remaining constant throughout the year. In many companies, changes in cost or other factor are expected to lead to changes in selling prices, and the task of the marketing manager is to be obtain a budgeted gross margin-that is, a constant spread between costs and selling prices. Such a policy is especially important in periods of inflation. A variance analysis in such a system would not have a selling price variance. Instead, there would be a gross margin variance. Unit gross margin is the difference between selling prices and manufacturing costs.
The variance analysis is done by substituting “gross margin” for “selling price” in the revenue equations. Gross margin is the different between actual selling prices and the standard manufacturing cost. The current standard manufacturing costs that are caused by changes in wage rates and in material prices(and, in some companies, significant changes in other input factors, such as electricity in aluminum manufacturing). The standard, rather than the actual, cost is used so that manufacturing inefficiencies do not affect the performance of the marketing organization.
Evaluation standards
In management control system, the formal standards used in the evolution of perfect reports on actual activities are of three types: (1) predetermined standards or budgets, (2) historical standards, or (3) external standards.
Predetermined standards or budgets
If carefully prepared and coordinated, these are excellent standards. They are the basis against which actual performance is compared in many companies. If the budget numbers are collected in a haphazard manner, they obviously will not provide a reliable basis for comparison.
Historical standards
These are records of past actual performance. Result for the current month may be compared with the result for the last month or with result for the same month a year ago. This type of standards has two serious weakness: (1) conditions may have changed between the two periods in a way that invalidates the comparison, and (2) the prior period’s performance may not have been acceptable. A supervisor whose spoilage cost is $500 a month, month after month, is consistent; but we do not know, without other evidence, whether the performance was consistently good or consistently poor. Despite these inherent weakness, historical standards are used in some companies, often because valid predetermined standards are not available.
External standards
These are standards derived from the performance of other responsibility centers or other companies in the same industry. The performance of one branch sales office may be compared with similar, such a comparison may provide an acceptable basis for evaluating performance.
Some companies identify the company that they belive to be the best managed in the industry and use numbers from that company-either with cooperation of that company or from published material-as a basis of comparison. This process is called benchmarketing.
Data for individual companies are available in annual and quarterly reports and in form 10k. (form 10k data are available from the securities and exchange commission and are published on the internet for about 13,000 companies.) data for industries are published in dun & bradstreet Inc., key business ratios; standard & poor’s compustat services Inc., Robert morris association annual statement studies; and annual surveys published in fortune, business week, and forbes. Trade associations publish data for the companies in their industries.
Many companies publish their financial satatements on the internet. A problem with using this information as a basis for comparison with competitors performance is that the names for account titles are not same. The American institute of CPAs has a project that seeks to establish a standard set of account titles used in internet reports. This is named the XBRL project. When these become accepted, it should be easy to obtain averages and other data for competitors by a simple computer program. Current information about this project can be obtained from the AICPA website: www.oasis.open.org/cover/ siteindex.html. the financial executives institute provides information about performance of member companies, but most is available only to subscribers of its project. Tidbits are published in its journal, financial executive.
Limitations on standards
A variance between actual and standard performance is meaningful only if it is derived from a valid standard. Although it is convient to refer to favorable and unfavorable variances, these words imply that the standard is a reliable measure of what coasts should have been under the circumstances. This situation can arise for either or both of two reasons: (1) the standard was not set properly, or (2) although it was set properly in light of conditions existing at the time, changed conditions have made the standard obsolete. An essential first step in the analysis of a variance is an examination of the validity of the standard.
Full-cost systems
If the company has a full-cost system, both variable and fixed overhead costs are included in the inventory at the time standard cost per unit. If the ending inventory is higher than the beginning inventory, some of the fixed overhead costs incurred in the period remain in inventory rather than flowing through to cost of sales. Conversely, if the inventory balance decreased during the period, more fixed overhead costs were released to cost of sales than the amount actually incurred in the period. Our example assumed that the inventory level did not change. Thus, the problem of treating the variance associated with fixed overhead costs did not arise.
If inventory levels change, and if actual production volume is different from budgeted sales amount of the production volume variance should be calculated and reported. This variance is the difference between budgeted fixed production costs at the actual volume (as stated in the flexible budget) and standard fixed production costs as that volume.
If the company has a variable – cost system, fixed production costs are not included in inventory, so there is no production volume variance. The fixed production expense variance is simply the difference between the budgeted amount and the actual amount.
The important point is that production variances should be associated with production volume, not sales volume.
Amount of detail
In the example, we analyzed revenue variances at several levels: first, in total; then by volume, mix, and price; then by analyzing the volume and mix variance by industry volume and market share. At each of these levels to another is often reffered to as “peeling the onion”- that is, successive layers are peeled off, and the process continues as long as the additional details is judged to be worthwhile. Some companies do not develop as much layers as shown in our example; other develop more. It is possible, and in some cases worthwhile to develop additional sales and marketing variances, such as the following: by sales territories, and even by individual salesperson; by sales to individual countries or regions; by sales to key customers, principal types of customers, or customers in certain industries; by sales originated from direct mail, from customer calls, or from other sources. Additional detail for manufacturing costs can be developed by calculating variances for lower-level responsibility centers and by identifying variances with specific input factors, such as wage rates and material prices.
These layers correspond to the hierarchy of responsibility centers. Taking action based on the reported variances is not possible unless they can be associated with the managers responsible for them.
With modern information technology, about any level of detail can be supplied quickly and at reasonable cost. The problem is to decide how much is worthwhile. In part, the answer depends on the information requested by individual managers – some are oriented, others are not. In the ideal solution, the basic data exist to make any conceivable type of analysis, but only a small fraction of these data are reported routinely.
Engineered and Discretionary Costs
As we pointed out in chapter 4, variances in engineered costs are viewed in a fundamentally different way from variances in discretionary costs.
A “favorable” variance in engineered costs is usually an indication of good performance; that is, the cost the better the performance. This is subject to the qualification that quality and on-time delivery are judged to be satisfactory.
By contrast, the performance of a discretionary expense center is usually judged to be satisfactory if actual expenses are about equal to the budgeted amount, neither higher nor lower. This is because a favorable variances may indicate that the responsibility center did not perform adequately the functions that it had agreed to perform. Because some elements in a discretionary expense center are in fact engineered (e.g., the bookkeeping functions in the controller organization), a favorable variance is usually truly favorable for these elements.
Limitations of variance analysis
Although variance analysis is a powerful tool, it does have limitations. The most important limitations is that although it identifies where a variance occurs, it does not tell why the variance occurred or what is being done about it. For example, the report may show there was a significant unfavorable variance in marketing expenses, and it may identify this variance with high sales promotion expenses. It does not, however, explain why sales promotion expenses were high and what if any actions were being taken. A narrative explanation, accompanying the performance report, should provide such an explanation.
A second problem in variance analysis is to decide whether there is a significant difference between actual and standard performance for certain processes; these techniques are usually referred to as statistical quality control. However, they are applicable only when the process is repeated at frequent intervals, such as the operation of a machine tool on a production line. The literature contains a few articles suggesting that statistical quality control be used to determine whether a budget variance is significant, but this suggestion has little practical relevance at the business unit level because the necessary number of repetitive action is not present. Conceptually, a variance should be investigated only when the benefit expected from
correcting the problem exceeds the cost of the investigation, but a model based on this premise has so many uncertainties that it is only of academic interest. Managers therefore rely on judgment in deciding what variances are significant. Moreover, if a variance is significant but is uncontrollable (such as unexpected inflation), there may be no point in investigating it.
A third limitation of variance analysis is that as the performance reports become more highly aggregated, offsetting variances might mislead the reader. For example, a manager looking at business unit manufacturing cost performance might notice that it was on budget. However, this might have resulted from good performance at one plant offset by poor performance at another. Similarly, when different product lines at different stages of development are combined, the combination may obscure the actual results of each product line.
Also, as variances become more highly aggregated, managers become more dependent on the accompanying explanations and forecasts. Plant manager know what is happening in their plant and can easily explain causes of variances. Business unit managers and everyone above them, however, usually must depend on the explanation that company the variance report of the plant.
Finally, the reports show only what has happened. They do not show the future effects of actions that the manager has taken. For example, reducing the amount spent for employee training increases current profitability, but it may have adverse consequences in the future. Also, the report shows only those events that are recorded in the accounts, and many important events are not reflected in current accounting transactions. The accounts don’t show state of morale, for instance.
Management Action
There is one cardinal principle formal financial reports: the monthly profit report should contain no major surprises. Significant information should be communicated quickly by telephone, fax, electronic mail, or personal meetings as soon as it becomes known. The formal reports conforms the general impression that the senior manager has learned from these sources. Based on this information, he or she may have acted prior to the receipt of the formal report.
The formal report is nevertheless important. One of the most important benefits of formal reporting is that it provides the desirable pressure on subordinate managers to take corrective actions on their own initiative. Further, the information from informal sources may be incomplete or misunderstood; the numbers in the formal report provide mare accurate information, and the report may confirm or cast doubts on the information received from informal sources. Also, the formal report provides a basis for analysis information from the informal source soften is general and imprecise.
Usually, there is a discussion between the business unit manager and his or her superior, in which the business unit manager explains the reasons for significant variances, the action being taken to correct unfavorable situations, and the expected timing of each corrective action. These explanations are necessarily subjective, and they may be biased. Operating managers, like most people, don’t like to admit that unfavorable variances caused by their errors. A senior manager has an opinion, based on experience, as to the likelihood that a business unit manager will be frank and forthcoming, and he or she judges the report accordingly.
Profit reports are worthless unless they lead to action. The action may consist of praises for a job well done, suggestions for doing things differently. “chewing out,” or more drastic personnel actions. However, these actions are by no means taken for every business unit every month. As long as business is going well, praise is the most that may be necessary, and most people don’t even expect praise routinely.
Suggested Additional Readings
Drunk, Alan S. “Reliance on budgetary control for manufacturing process automation and production subunit performance.” Accounting, organization and society XVII, no. 4 (April-may 1992), pp. 195-204.
Govindrajan, vijay. “appropriateness of accounting data in performance evaluation: an empirical examination of environment uncertainity as an intervening variable.” Accounting, organizations and society IX, no. 2 (1984), pp. 125-35.
Govindarajan, vijay, and john K. shank. “profit variance analysis: a strategic.” Issues in accounting education 4, no. 2 (Fall 1989), pp. 396-410.
Instituete of management accounts. “fundamentals of reporting information to managers.” Statement on management accounting. Supplement 5-6. Montvale, NJ, 1992.
Case10.1
Variance analysis problems
I. In this case you are asked to analyze the February and march financial performance of the temple division of the ABC company as compared with its budget, which is shown in exhibit 9.3 of the text.
Part A-February 1988
Below are the data describing the actual financial results of the temple division for the month of February 1988.

Sales $781
Variable cost of sales 552
Contribution 229
Fixed manufacturing costs 80
Gross profit 149
Selling expense 57
Administrative expense 33
Net profit $ 59

Sales
Product unit sales price dollar sales
A 120 $0.95 $114
B 130 1.90 247
C 150 2.80 420
Total 400 781
Production
Manufacturing cost
Units variable
Product produced materials labor overhead total
A 150 $80 $20 $40 $140
B 130 91 21 35 147
C 120 190 15 30 235
Total 400 361 56 105 522
Questions
1. Prepare an analysis of variance from profit budget assuming that the temple division employed a variable standard cost accounting system.
2. Prepare an analysis of variance from profit budget assuming that the temple division used a full standard cost accounting system. Under this assumption, the actual cost of sales amount would be$632,000. (Can you derive this figure?)
3. Industry volume are presented below. Separate the mix and volume variance into the variance resulting from differences in market penetration and variance resulting from differences in industry volume. Make the calculation for the variable cost system only. Industry volume, February 1988:
Units(000)
Product A 600
Product B 650
Product C 1,500
Part B-March 1988
Below are the data describing the actual financial results for temple division for the month of march 1988.
Income statement
Sales $498
Variable cost of sales 278
Contribution 220
Fixed manufacturing costs 70
Gross profit 150
Selling expense 45
Administrative expense 20
Net profit $ 85
Sales
Product unit sales price dollar sales
A 90 $1.10 $99
B 70 2.10 147
C 80 3.15 252
Total 240 498
Production
Manufacturing cost
Units variable
Product produced materials labor overhead total
A 90 $40 $8 $17 $65
B 80 55 10 18 85
C 100 150 8 19 177
Total 270 245 26 54 325
Question
Answer the same questions posed at the end of part A. the actual cost of sales using full standard costing would be $340,500 in march. Industry volume for march was:
II. The profit budget for the crocker company for January 1988 was as follows:
Units(000)
Product A 500
Product B 600
Product C 1,000
($000)
Sales $2,500
Standard cost of sales 1,620
Gross profit 880
Selling expense $250
Research and development expense 300
Administrative expense 120
Total expense 670
Net profit before taxes $210
The product information used in developing the budget was as follows:
E F G H
Sales-units(000) 1,000 2,000 3,000 4,000
Price per unit $0.15 $0.20 $0.25 $0.30
Standard cost per unit:
Material 0.04 0.05 0.06 0.08
Direct labor 0.02 0.02 0.03 0.04
Variable overhead 0.02 0.03 0.03 0.05
Total variable cost 0.08 0.10 0.12 0.17
Fixed overhead ($000) 20 60 60 160
Total standard cost per unit 0.10 0.13 0.14 0.21
The actual revenues and costs for January 1988 were as follows:
($000)
Sales $2,160
Standard cost of sales 1,420
Net standard cost of variances 160
Actual cost of sales 1580
Gross profit 580
Selling expense $290
Research and development expense 250
Administrative expenses 110
Total expense 650
Net loss $ (70)
Operating statistics for January 1988 were as follows:
E F G H
Sales-units 1,000 1,000 4,000 3,000
Sales Price $0.13 $0.22 $0.22 $0.31
Production 1000 1000 2000 2000
Actual manufacturing costs (000):
Material $360
Labor 200
Overhead 530
Question
Prepare an analysis of variance between actual profits and budgeted profits for January 1988.
Case 10-2
Solartronics, Inc.
Jhon holden, president and general manager of solartronics, Inc., was confused. Lisa blocker, the firm’s recently hired controller and financial manager, had instituted the preparation of a new, summarized income statement. This statement was to be issued on a monthly basis. Mr.Holden had just received a copy of the statement for January 1984 (see exhibit 1).
Solartronics, Inc., a small, texas-based manufacturer of solar energy panels, had been in business since mid-1977. By the end of 1983, it had survived some bad years and positioned itself as a reasonably good-sized firm within the industry. As part of a conscious effort to “professionalize” the firm, Mr.holden had added Ms.Blocker to the staff in the autumn of 1983. Previous to that time, sorartronics had employed the services of a full-time, full-charge bookkeeper.
Mr.holden’s confusion arose from the fact that he had not expected the firm to report a loss for the month of January. While he knew that sales had been down, primarily due to the normal seasonal downturn, and that production had been scaled back to help reduce the level of inventory, he was still surprised. He wondered if this first month’s result were a bad omen in terms of the likelihood of meeting the budgeted results for the year (see exhibit 2.) even though the 1984 budget represented only a 10 percent increase in scale volume over 1983, he was concerned that such a poor start to the year might make it difficult to get “back on stream.”
Exhibit 1
XXXX
Exhibit 2
XXXX
The standard cost of goods sold consisted of: $420,000 direct labor; $780000 direct materials;$360000 variable factory overhead; and $420000 fixed factory overhead. Ms.bloker treated direct labor and direct materials as a variable costs. Of this amount, $120000 was considered to be fixed. The remaining $3000000 represented the 10 percent commission paid on sales.
The expected sales volume for the year was 5000 equivalent units.
An equivalent unit represented the most popular model sold by solartronics.
Questions
1. Why are the reported results for January so poor, particularly in light of the expected, average monthly of $30,000?
2. What additional data would be useful in analyzing the firm’s January performance? Why?
Case-10.3
Galvor Company
When M.Barsac replaced M.Chambertin as galvor’s controller in april of 1974, at the age of 31, he became the 1st of a new group of senior managers resulting from the acquisition by universal electric. It was an accepted fact that, in the large and sprawling universal organization, the controller’s department represented a key function. M.Barsac, who was a skilled accountant, had had 10years experience in a large French subsidiary of universal.
He recalled his early days with galvor vividly and admitted they were, to say the least, hectic.
I arrived at galvor in early april 1974, a few days after m.chmbertin had left. I was the first universal man here in Bordeaux and I became quickly immersed in all the problems surrounding the change of ownership. For example, there were no really workable financial statements for the previous two years. This made preparation of the business plan, which Mr.Hennessy and I began in june, extreamly difficulty. This plan covers every aspects of the business, but the great secrecy which had always been maintained at galvor about the company’s financial affairs made it almost impossible for anyone to help us.
M.Barsac’s duties could be roughly divided into two major: first, the preparation of numerous reports required by universal, and second, supervision of galvor’s internal accounting and control function as it developed after universals acquisition of galvor.
To control its operating units, universal relied primarily on an extensive system of financial reporting. Universal’s European controller, M.Boundary, as much more than a device to “check up” on the operating units. According to M.Boundry:
In addition to measuring our progress in the conventional sense of sales, earings, and return on investment, we belive the reporting system causes our operatiung people to focus their attension on critical areas which might the not otherwise receive their major attension. An example would be the level of investment in inventory. The system also forces people to think about the future and to commit themselves to specific future goals. Most operating people are under standable involved in today’s problems. We belive some device is required to force them to look beyond the problems at hand and to consider longer-range objectives and strategy. You could say we view the reporting system as an effective training and educational device.
Background
The galvor company had been founded in 1946 by M.georges later, who continued as its owner and president until 1974. Throughout its history, the company had acted as a fabricator, buying parts and assembling them into high quality, moderate cost electric and electronic measuring and test equipments. In its own sector of the electronics industry-measuring instrumenets-galvor was one of the major French firms; however, there were many electronics firms in the more sophisticated sectors of the industry that were vastly larger than galvor.
Golvor’s period of greatest growth began around 1960 and 1971, sales grew from 2.2 million 1971 new francs to 12 million, and aftertax profits from 120,000 1971 new franc to 1,062,000. Assets as of December 31, 1971, totaled 8.8 million new francs. (one 1971 new franc=$0.20.) the firm’s prosperity resulted in a number of offers to purchase equity in the firm, but M.Latour had remained steadfast in his belief that only if he had complete ownership of Galvor could he direct its affairs with a free hand. As owner/president, Latour had continued over the years to be personally involved in every detail of the firm’s operations, including signing of all of the companies important cheeks.
As of early 1972, M.latour was concerned about the development of adequate successor management for galvor. In January 1972 latour hired “technical director” as his special assistant, but this person resigned in November 1972. Following the 1973 unionization of galvor’s workforce, which latour had opposed, latour (then 54 years old) began to entertain seriously the idea of selling the firm and devoting himself “to family, philanthropic, and general social interests.” On april 1, 1974, galvor was sold to universal electric company for $4.5 million worth of UE’s stock. M.latour became chairman of the board of galvor, and david hennessy was appointed as galvor’s managing director. Hennessy at that time was 38 years old and had been with universal electric for nine years.
The Business Plan:
The heart of universal’s reporting and control system was an extreamly comprehensive document-the business plan-which was prepared annually by each of the operating units. The business plan was the primary standard for evaluating the performance of unit managers, and everything possible was done by universal’s top management to give authority to the plan.
Each January, the geneva headquarters of universal set tentative objectives for the following two years for each of its European operating units was a “first look”-an attempt to provide a broad band statement of objectives that would permit the operating units to develop their detailed business plans. For operating units that produced more than a single product line, obtained were established for both the unit as a whole and for each product line. Primary responsibilities for establishing these tentative objects rested with eight product-line-managers located in geneva, each of whom was responsible for group of products lines. On the basis of his knowledge of the product lines and his best judgement of their market potential, each product-line manager set the tentative objectives for his lines.
For reporting purposes, universal consideration that Galvor represented a single product line, even though galvor’s own executives viewed the company’s products as falling into three distinct lines-multimeters, panel meters, and electronic instruments.
For each of over 3000 universal product lines in Europe, objectives were established for five key measures.
1. Sales
2. Net income
3. Total assets.
4. Total employees
5. Capital expenditures
From January to april, these tentative objectives were “negotiated” between geneva headquarters and the operating managements. Formal managements were held in geneva to resolve differences between the operating unit managers and product – line managers or other headquarter personnel.
Negotiations also took place at the same time on products to be discontinued. Mr.Hennessy described this process as a “sophisticated exercise which includes a careful analysis of the effect on overhead costs of discontinuing a product and also recognizes the cost of holding an item in stock. It is a good analysis and one method universal uses to keep the squeeze on us.”
During may, the negotiated objectives were reviewed and approved by universal’s European headquarters in Geneva and by corporate headquarters in the united states. These final reviews focused primarily on the five key measures noted above. In 1976, the objectives for total capital expenditures and for the total number of employees received particularly close surveillance. The approved objectives provided the foundation for preparation of business plans.
In june and july, galvor prepared its business plan. The plan, containing up to 100 pages, described in detail how galvor intended to achieve its objectives for the following two years. The plan also contained a forecast, in less details, for the fifth year hence (e.g., for 1981 in the case of the plan prepared in 1976).
Summary Reports:
The board scope of the business plan can best be understood by a description of the type of information it contained. It began with a brief one-page financial and operating summary containing comparative data for:
Preceding year (actual data).
Current year (budget).
Next year (forecast).
Two years hence (forecast).
Five years hence (forecast).
This one-page summary continued condensed data dealing with the following measures for each of the five years:
Net income.
Sales.
Total assets
Total capital employed (sum of long-term debt and net worth)
Recievables
Inventories
Plant,property and equipmentcapital expenditures
Provision for depreciation
Percent return on sales
Percent return on total assets
Percent return on total capital employed
Percent total assets to sales
Percent receivable to scales
Orders received
Orders on hand
Average number of full-time employees
Total cost of employee compebsation
Sales per employee
Net income per employee
Sales per $1,000 of employee compensation
Net income per thousand square feet of flour space
Anticipated changes in net income for the current year and for each of the next two years were summarized according to their cause, as follows:
Volume of sales
Product mix
Sales prices
Raw materials purchase prices.
Cost reduction programs
Accounting changes and all other causes
This analysis of the causes in net income forced operating managements to appraise carefully the profit implications of all management actions affecting prices, costs, volume, or product mix.
Financial Statements
These condensed summary reports were followed by a complete set of projected financial statement-income statement, balance sheet, and a statement of cash flow-for the current year and for each of the next two years. Each major item on these financial statements was then analyzed in details in separate reports, which covered such matters as transactions with headquarters, proposed outside financing, investment in receivables and inventory, number of employees and employee compensation, capital expenditures, and nonrecurring write-off’s of assets.
Management Actions
The business plan contained description of the major management actions for the next two years, with an estimate of the favorable or unfavorable effect each action would have on total sales, net income, and total assets. Among some of the major management actions described in galvor’s 1976 business plan (prepared in mid-1975) were the following:implement standard cost system
Revise prices
Cut oldest low-margin items from line
Standardize and simplify product design
Create forward research and development plan
Implementing product planning
Separate plans were presented for each of the functional areas-marketing, manufacturing, research and development, financial control, and personnel and employee relations. These functional plans began with a statement of the same functions mission, an analysis of its present problems and opportunities, and a statement of the specific actions it intended to take in the next two two years. Among the objectives set set for the control area in the 1976 business plan, M.Barsac stated that he hoped to:
Better distribution task
Make mare intensive use of IBM equipment
Replace nonqualified employees with better-trained and more dynamic people
The business plan closed with a series of comparative financial statements which depicted the estimated item-by-item effect if sales fell to 60 percent or to 80 percent of forecast or increased to 120 percent of forecast. For each of these levels of variable costs, and management discretionary into three categories: fixed costs, unavoidable variable costs, and management discretionary cost. Management described the specific actions it would take to control employment, total assets, and capital expenditures in case of a reduction in sales, and when these actions would be put into effect. In its 1976 business plan, galvor indicated that its program for contraction would be put into effect if incoming orders drapped below 60 percent of budget for two weeks, 75 percent for four weeks, or 85 percent for eight weeks. It noted that assets would be cut only 80 percent in a 60 percent year and to 90 percent in an 80 percent year, “because remondernization of our business is too essential for survival to slow down much more.”
Approval of plan:
By mid summer, the completed business plan was submitted to universal headquarters; and beginning in the early fall, meetings were held in geneva to review each company’s business plan.
Each plan had to be justified and defended at these meetings, which were attended by senior executives from both universal’s European and American headquarters and by the general managers and functional managers of many of the operating units. Universal viewed these meetings as an important element in its constant effort to encourage operating managements to share their experience in resolving problems.
Before final approval of a company’s business plan at the geneva review meeting’s, changes were often proposed by universal’s top management. For example, in September 1976, the 1977 forecasts of sales and net income in galvor’s business plan were accepted; but the years-end forecasts of total employees and total assets were reduced about 9 percent and 1 percent, respectively, galvor’s proposed capital expenditures for the year were cut 34 percentage, a reduction primarily attributable to limitation imposed by universal on all operating units throughout the corporation.
The approved business plan become the foundation of the budget for the year, which was due in geneva by mid-november. The general design of the budget resembled that of the business plan, except that the various dollar amounts, which were presented in the business plan on an annual basis, were broken down by months. Minor changes between the overall key results forecast in the business plan and those reflected in greater detail in the budget were not permitted. Requests for major changes had to be geneva no later than mid-october.
Reporting to universal:
Every universal unit in Europe had to submit periodic reports to geneva according to a fixed schedule of dates. All units in universal, whether based in the united states or elsewhere, adhered to essentially the same reporting system. Identical forms and account numbers were used throughout the universal organization. Science the reporting system made no distinction between units of different size, galvor submitted the same reports as a unit with many times its sales. Computer processing of these reports facilitated combining the results of universal’s European operations for prompt review in geneva and transmission to corporate headquarters in the united states.
the main focus in most of the reports submitted to universal was on the variance between actual and budgeted results. Sales and expense data were presented for both the latest month and for the year to date. Differences between the current year and the prior year also were reported, because these were the figures submitted quarterly to universal’s shareholders and to newspapers and other financial reporting services.
Description of reports:
Thirteen different reports were submitted by the controller on a monthly basis, ranging from a statement of preliminary net income, which was due during the first week following the close of each month, to a report on the status of capital projects due on the last day of each month. The monthly reports included:
Statement of preliminary net income
Statement of income
Balance sheet
Statement of changes in retained earnings
Statement of cash flow
Employment statistics
Status of orders received, canceled, and outstanding
Statement of intercompany with headquarters
Analysis of inventories
Analysis of receivables
Status of capital projects
Controller’s monthly operating and financial review
The final item, the controller’s monthly operating and financial review, often ran to 20 pages or more. If contained an explanation variances from budget, as well as a general commentary on the financial affairs of the unit.
Cost of the system
The control and reporting system, including preparation of the annual business plan, imposed a heavy burden in time and money on the management of an operating unit. M.Barsac commented on this aspect of the system in the section of galvor’s 1976 business plan dealing with the control functional area.
Galvor’s previous administrative manager [controller], who was a tax specialist above all, had to prepare a balance sheet and statement of income once a year. Cost accounting, perpetual inventory valuation, inventory control, production control, customer accounts receivable control, budgeting, at cetera did not exist. No information was given to other department heads concerning sales results, costs, and expenses. The change to a formal monthly reporting system has been very difficult to realize. Due to the low level of employee training, many tasks, such as consolidation, monthly and quarterly reports, budgets, the business plan, implementation of the new cost system, various analysis, restatement of prior years accounts, at cetera must be fully performed by the controller and chief accountant, thus appending 80 percent of their full time in spite of working 55-60 hours per week. The number of employees in the controller’s department in subsequent years will not depend on galvor’s volume of activity, but rather on universal’s requirements.
Implementation of the complete universal cost and production control system in a company where nothing existed before is an enormous task, which involves establishing 8,000 machining and 3,000 assembly standard times and codifying 15,000 piece parts.
When interviewed early in 1977, M.Barsac stated:
Getting the data to universal on time continues to be a problem. We simply don’t have the necessary people who understand the reporting system and its purpose. The reports are all in English and few of my people are conversant in English. Also, American according methods are different from procedures used in france. Another less serious problem concerns the need to convert all of our internal records, which are kept in frances, to dollars when reporting to universal.
I am especially concerned that few of the reports we prepare for universal are useful to our operating people here in Bordeaux. Mr.Hennessy, of course, uses the reports, as do one or two others. I am doing all that I can do to encourage greater use of these reports. My job is not only to provide facts but to help the managers understand and utilize the figures available. We have recently started issuing monthly cost and expenses reports for each department showing the variances from budget. These have been well received.
Mr.Hennessy also commented on meeting the demands imposed by universal’s reporting system.
Without the need to report to universal, we would do something in less formal way or at different times. Universal decides that the entire organization must move to certain basis by a specified date. There are extra costs involved in meeting these deadlines. It should be noted, also, that demands made on the controller’s department are passed on to other areas, such as marketing, engineering, and production.