Sample Accounting Argumentative Essay on Theory Of Adaptation, Aggregation And Arbitrage

Theory of Adaptation, Aggregation and Arbitrage


Adaptation is the process of global value creation by changing the elements of offer of a company for the purpose of meeting the demands of local preferences or the requirements. Moreover, it seeks to lobby for the increase of revenues by restructuring the business model of a company for the sole purpose of meeting the local requirements (De Kluyver 2010). Adaptation refers to the restructure of a system or ways of operation of business or organizational operation in order to conform to the market demands and obtain competitive advantage in comparison to other organizations in the industry.

Arbitrage theory refers to an asset pricing theory which states that returns derived from a financial asset are modelled linearly as a function of some macro – economic factors. A factor specific coefficient of beta represents the changes in each factor that is represented by the arbitrage policy. The main purpose of arbitrage is the exploitation of the economic value and the differences that emanate between regional and national markets and is usually done by concentration on the separate supply chain parts.

Aggregation policy refers to the limit that has been set on a variable, in insurance an aggregate refers to a limit that has been set on the amount that is payable during the entire policy period. It is mostly concerned with the creation of economies of scale for the sole purpose of reducing the challenges that suffice as a result of the differences that emanate. The theories of adaptation, aggregation and arbitrage can be applied in different industries in order to ensure the success of such organizations. These policies are significant in business organizations because they mark the important strategies of beating competition and venturing in new lines of business. The greatest challenge that business organizations face is competition and expansion in foreign markets, particularly globalization. There has to be new strategies implemented in organizations while penetrating into new markets so as to conform to the demands of the competitive markets and compete favourably in these new areas. Therefore, this brings in the importance of the adaptation policy for the purposes of adjusting in new markets.

This paper addresses various aspects of arbitrage, adaptation and aggregation theories as applied in the automotive industry, airplane industry, in education, professional services and the book publishing industry. Moreover, a survey of the influence of these facets with respect to globalization proves important in this paper and with the theories stated hereby. There is a risk to globalization that has to be tackled and this calls for the implementation of these theories as ways of mitigating these problems. The strategy framework using adaptation, aggregation and arbitrage theories are referred to as Ghemawatt’s “AAA” strategies of global framework.

Airline industry

The choice of the strategy to employ in an organization whether adaptation, aggregation or arbitrage is primarily determined by the organizations financial statements. The airline industry is composed of multinational organizations with very huge finances involved in the establishment of the organization. This particular industry is heavily dependent on branding and lots of advertisements are done on the social media to assure the customers of the quality of the services therein as a way of increasing the number of customers that visit the organization for purposes of service provision. This therefore means that the airline industry needs to implement the adaptation strategy in relation to other local markets. The operations of such industries are not dependent on labour mostly, technology is applied in most of their operations.

The globalization in the airline industries is a determinant factor with regards to the best policy to employ. The airline industry is responsible for starting their globalization history through extending their value to foreign markets because of the diverse nature of the industry. Therefore, in this respect the company is generally faced with aggregation challenges. For example, American airlines was faced with aggregation challenges while expanding its markets to china, partially because this was a foreign market in which policies regarding foreign investors might be strict to encourage the thriving of local industries.

However, the company’s resilience (American Airlines) when it comes to market penetration and offsetting the aggregation challenges has seen to its first rising in the foreign markets and continuous expansion. The advertising strategies employed by the airline have seen to the increase in the number of customers being served daily in the airline (Feng et al. 2015).  Particularly important is the quality of customer service that this airline industry provides, maintaining the customers as the first priority with regards to the management of the cargo and the efficacy of the airline with regards to insurance follow up. The safety, security and unique care during travel makes the American airways very important to the immediate customer. This has facilitated the sudden popularity of the airline in China. An airline serves many countries and is therefore not fixated on its growth in the immediate country the globalization of the industry is therefore mandatory and not optional in comparison to other industries such as the automotive industry.

Another good airline that was ranked second during the ranking of the international airlines in 2015, is the Qatar Airways. The quality of service with regards to the access of personnel who can assist in travel advisory and response in emergency situations is top notch bringing about its dominance in the market. This airways has been constructive in managing its aggregation problems bringing about a state of stability for the airline. Moreover, its arbitrage strategy has been constructive in managing the finances of the industry enabling this esteemed airline to realize revenue and attract many investors to purchase shares in the organization.

The policies applied by the airline industry is mainly arbitrage and aggregation. The extent of globalization required in this case is huge because of the competition with those companies in the domestic market. Moreover, governments are always sourcing out for ways of promoting their brands through strict policies regarding market entry by investors from other countries. This leads to high tax payments by the foreign organizations and companies. This therefore, requires strategy and policy implementation to completely penetrate the market and attract potential customers. These same strategies are those applied by both the American Airlines and Qatar Airways in their market domination. The secret for market domination is reliability, consistency and the service terms which should be attractive to both customers and investors.

The absolute truth is that companies must comply with at least one “A” strategy in its operations meaning that all the strategies of aggregation, adaptation and arbitrage will have to be applied at one area of its operations. Currently, the American Airlines is booming in business in the foreign markets with the Chinese market being one of its business destinations. However, the implementation of all the three strategies produce wanting results with respect to the stretch on the company’s bandwidth that results thereof.

Education industry

The education industry is mainly meant to benefit the immediate needs of the populace with respect to training and development of skill and the adjustment of logical thinking towards creating more of multi – skilled personnel as opposed to the unskilled and semi – skilled manpower. Universities and colleges are mostly involved in research, training and development for the purposes of increasing skills and fine tuning individual talents (Feng et al. 2015).

Although, there is also a considerable level of competition that do exist with regards to provision of quality training to students and the overall image of the educational facility. The brand is also a considerable factor that comes into play and the expansion of its branches. Aggregation thus becomes particularly important in these educational facilities for the sole purposes of advertising and offsetting the challenges that suffice with regards to the level of competition that they are subjected to. For example, Harvard University and Massachusetts Institute of Technology (MIT) are known best American universities; other educational centres are toiling to meet their standards to match such high ranking standards. The Microsoft Corporation is known to employ most MIT graduates owing to their reputation and quality of training when it comes to emerging trends in technology (Wood 2006).

The education sector is wise to concentrate on one or two strategies as opposed to the implementation of all the strategies at once. This assists in the building of a competitive advantage and to avoid the stretching of the bandwidth. However, educational facilities are not so much engrossed in globalization dream because they are always posited in their destination countries, however, the identification of prospective investors to support the research and development in the universities place such universities in constant competition. Moreover, the target of foreign students to diversify the learning involved in these facilities is instrumental in their development and growth, making adaptation important as an “A” strategy.

Harvard University has remained one of the state of the art learning institutions from time in memorial. Most of the inventions and constructive thinkers in terms of leaders have their educational background in this esteemed institution. For example, the United States presidents; Bill Clinton, George W. Bush, and Barrack Obama all have their educational backgrounds in Harvard University. The university has consistently continued in producing  desired results in the world bringing about politicians, lawyers, doctors, competent engineers, just to mention a few. Moreover, Harvard has concentrated on appealing to learners in the international community inviting international students to learn on scholarships and polishing their abilities and talents in such a way that they stay favourable to the market demands. This has had its merits in promoting Harvard University. The brand of this university has enabled it to attract investors concerned with developing systems within including the culture of the alumni students (De Kluyver 2010). The theory of adaptation has enabled Harvard to be attractive to both the foreign and domestic destinations. Moreover, the use of the theory of aggregation has also been instrumental in its growth and continuous competitiveness in the world arena.

Technologically, however, MIT remains the most competent in the world over. Most information technology gurus, the likes of Bill Gates, trace their inventions based on the experiences that they gained while learning in this institution. The advertising strategies and quality of standards that are set in this university ensure the continuous growth and market domination of MIT in terms of information technology (Wood 2006). Though, the likes of Mark Zuckerberg attributes  their origins from Harvard, system developers like Bill Gates came from MIT and his links and professional competence has assisted in solving most  problems with modern computing. Further, he has consistently continued in dominating the market. These educational facilities mostly utilize the theories of adaptation, and aggregation as ways of dominating and staying competitive in the market. Moreover, their brand is well advertised by their alumnus who have emerged as world leaders or problem solvers in sectors that are very vital to the growth and living standards improvement in the entire world. This further shows the importance of the theory of arbitration in the educational sector.


The theories of arbitrage, aggregation and adaptation have their merits in application in different sectors and in organizations in general. Some organizations including companies need constant advertisement, branding and majorly stay in competition due to the brand name of such an organization. The brand name is primarily concerned with the promotion of the services provided by the industry which is complemented with the consumer demand and abilities. The airline industry is one of a kind, in need of the implementation of the theories of arbitrage and aggregation. The American Airlines have remained competitive in terms of globalization. Though, the airline’s expansion to china was a challenge because of governmental support of domestic industries, advertising and quality of service offered by the airline saw to its rise and popularity in the Chinese market, Qatar Airways is not an exception (Laman 2002). The educational industry is another important sector in dire need of aggregation and adaptation theories. The implementation of any two theories is constructive. The University of Harvard and MIT attest to the importance of the implementation of the two theories (aggregation and adaptation).

Reference List

Top of Form

De Kluyver, C. A., 2010. Fundamentals of global strategy a business model approach. [New York, N.Y.] (222 East 46th Street, New York, NY 10017), Business Expert Press.

Bottom of Form

Wood, J., 2006. Leaving Microsoft to change the world. New York: Collins.

Top of Form

Feng, J., Stocklin, S., & Wang, W., 2015. Educational strategies for the next generation leaders in hotel management.

Bottom of Form

Lamont, D., 2002. Global strategy. Oxford: Capstone.