What’s Up with Pasta

What's Up With Pasta Q1: We need to understand and research why the Spaniards are spending relatively less on Pasta than its European neighbors. Current market research done by AEFPA offers insufficient data, so we need to improve data quality. The main goal is the get a clear demographic segmented market overview. One of the problems is that we cannot clearly identify the potential and current pasta consumers clearly – we simply do not know enough about of core target group. In addition we need insights on consumer behavior and habits as we do not know what drives the consumer decision when choosing pasta and when declining pasta.Another advantage of a broad market study would be that it would become clear if there are segments in the market currently not being explored. As a result we will be able to clearly identify the market entry barriers for pasta. According to our calculations (Appendix 1), there is an underutilized yearly market gap of EUR 87Mln. Given this significan t amount we find it justified to spend 0. 2% (Eur 175. 000) of the market gap initializing the market research plan, collect the data and conduct the analysis.Costs to marketing strategy, marketing planning and implementation are not included in this figure. We estimate the overall cost of the market research will be Eur 132. 800 Judging from informal discussions with contacts in Unilever and Kraft Foods, our estimate seems to be on the low side. Q2 – Methodology: We are interested in conducting both quantitative and qualitative research. In our opinion we need both elements to fully understand the market. This will allow us to better segment the market. Starting point of the quantitative research is the detailed quantitative research already done by AEFPA.The Geographical sales overview, distribution channels and sales pr. pasta type, must be investigated further. We suggest conducting a demographic segmentation overlay to this data, as the segmentation will serve us by divi ding a large population/sample into specific customer groups. We are opting for the demographical segmentation as we expect to receive a large amount of data that otherwise would not be feasible to analyze. Therefore, we cluster the information to make patterns of sub-groups visible and will enable to identify consumer profile and behaviors.We refer to this as top-down market research. The consumer behavior can only be partly captured in the demographic segmentation, so to ensure we have a bulky sample of data, we introduce a bottom-up process by initiating â€Å"Shopper Insights† research. â€Å"Shopper Insights† will in addition to bring to additional data on behavior also provide invaluable insights to the customer’s perception of pasta. The aim with â€Å"Shoppers Insight† is to passively monitor the customer’s behavior in the situation of purchase at point-of-buying to learn about the â€Å"conversion rate†.Unilever defines â€Å"Shopp ers Insight† as † focus on the process that takes place between that first thought the consumer has about purchasing an item, all the way through the selection of that item†. This is further underlined by practical examples from Kraft Foods Switzerland, who has provided access to their methodology to this group. We will be adopting the methods of â€Å"5 S’s† to conduct our â€Å"Shopper insights† research and conduct this across the difference distribution channels mentioned in the case.Detailed explanation in Appendix 2 By making use of both top-down and bottom-up quantitative research, we feel we have adequate data quality. However it is critical to maintain a satisfactory sample size. We assume our sample pool will be the entire Spanish population. There are many considerations when choosing a sampling size. We consider it a tradeoff between costs and sampling quality as there is a linear relationship between the sampling size and the cost. We estimate that the sampling size must be at least 384 people. See further details in appendix 3.To finish the research we introduce â€Å"Consumer Insight† which is a qualitative overlay. Personal interviews with customers will be done immediately after the consumer has been observed in the â€Å"Shoppers Insight†. The sample size when conducting qualitative research is less important as there is no need for statistical significance, so we will be highly selective when choosing participants. Actually we will aim to only interview the â€Å"High-Consumer† and â€Å"Non-consumer† segments found in the top-down demographic segmentation research.This will provide strong qualitative data for creating the marketing strategy and planning. These topics will not be discussed in this paper. Q3 – Implementation: As we want to build in the existing data from AEPFA, significantly more data collecting must be done. We would conduct a survey on a large sample, using these four variables: Age, life-cycle stage (the life cycle stage of a consumer group defines what will be the need of that particular customer), Gender and Income. In addition questions in pasta purchasing history and frequency would be asked.The questions will be designed so the answers can be directly comparable across the entire sample. This can be achieved by having a 1-5 scale designed on which the answers must fit one of the numbers. Example: Question: â€Å"How often do you eat pasta†, Possible answers: â€Å"1: Never, 2: ones a day, 3: ones a week, 4: ones a month, 5: ones a year†. By constructing all questions to fit such answer-schedule, we will be able to achieve statistical significance. The result will be a clear segmented group, where we can establish who are the current consumers (core buying segment) and non-consumers (core anti-buyers).We believe these segments should be targeted for further penetration. Next step we passively and discretely mo nitor the consumer at point-of-buying using the â€Å"5 S’s† approach (See appendix 2). We will be present in all the distribution channels mentioned. This can be done via video or via physical presents. It is paramount the customer is unaware she/he is being monitored as this potentially would influence the buying habits. The consumer segments found above – the consumer and non-consumer – will be specifically targeted in the monitoring. I. e. hen a consumer fits one of the segments, the monitoring will be initiated. We wish to focus on these segments due to costs, but could increase the sampling to all customers across all segments if budget would allow. As the quantitative research should not stand alone, we would initiate in-depth interviews with more open-ended questions to better grasp the motivation behind the choice made by the customer. Such questions could be â€Å"Why did you buy pasta†, â€Å"What type of pasta do you normally buy†, â€Å"why did you buy pasta instead of rice or potatoes. . For the non-consumers questions could be â€Å"Why do you choose rice/potatoes instead of pasta†, †Which pasta products are you missing in the shop† etc. We believe the quantitative and qualitative output of this extensive research plan, by identifying the two interesting segments and dwell into their motivations behind their choice, would form an excellent base for developing an effective market strategy and for creating an overall marketing strategy for Pasta in Spain. ? APPENDIX 1For the calculations of the market gap – difference in current and potential market – we have assumed the following: †¢Current year is 1990. †¢Potential year is 1992. Population has increased by 0. 6% from 1990 to 1992. †¢Euro/Pesetas exchange rate is 166. 386. (Official final fixing when Spain adopted the Euro) †¢Consumer behavior in terms of demand of the different pasta types is unchange d from 1990 – 1992 †¢Pasta price was inflated with 4% from 1990 – 1992. †¢Consumption of pasta rose 1 kg pr. Capita from 1990 – 1992 Pasta Market in 1990: Pasta Market in 1992: ? APPENDIX 2:The 5 S’s method is designed so marketers can observe a customer from entering point-of-buying (POB) to final transaction. The method works on two levels: 1. Consumer level; The consumer are monitored so we follow the target discreetly around the POB. We observe how the consumer Sees, Scans, Spot, Show interest and (potentially) Select the product we represent. This gives us valuable information as we can identifies were in the process we lose the customer (also call Fall-out). The conversation rate is computed as number of consumers selecting our product out of shoppers entering the POB.The net sales for a given company is highly sensitive to changes in conversation rate – Only a small increase in conversion will generate a (relative) large increase i n sales. 2. Store layout and the category placement in POB. We can observe the customers’ ability to find the product in POB; is the product visible to the consumer, where on the shelve is it placed, is it placed with complementary goods? or supplementary goods? After the research is concluded feedback will be delivered to POB to improve visibility if required. ? APPENDIX 3: We recognize the sample size of 1067 is a (very) rough estimate.We opted for an internet resource from Creative Research Systems as we decided to focus our resources on the research planning and method. The sample size is computed using: Confidence level: 95% Confidence Interval (margin of error) 5% Population 40’000’000 We believe these input factors are comparable with real-life statistical simulations. ? APPENDIX 4: As we require a specialized set of data and therefore need a specialized report, we assume such report must be order and bought directly at a Market Research company or instit ute under normal circumstances.As it is specialized we assume the price will be high, so budget with a one-time payment of EUR 75. 000. We have only very little foundation for making this estimate. It was the conclusion of a conversation between marketing executives on Linkedin. The bottom-up research will need to conduct 384 observations in order to fulfill to the minimum sample size requirement found in appendix 3. Based on information from marketing sources at Kraft Foods, we consider it realistic one market researcher can conduct 25 observations in one day. This results in 15. 3 days of work at an assumed daily rate of EUR 1000

Exchange Rate Based On Economic Factors Finance Essay - Free Essay Example

Sample details Pages: 22 Words: 6555 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Exchange rate movements can have significant impact on a companys return especially for multinational companies and companies that involved heavily in export and import of goods. A small change in exchange rate would impact directly to the companys performance. Therefore these companies often use derivatives securities such as options, forwards and futures to hedge or mitigate risk arising from exchange rate movements. Don’t waste time! Our writers will create an original "Exchange Rate Based On Economic Factors Finance Essay" essay for you Create order Investors also use these tools to speculate and hope for profit from fluctuations in exchange rates. If investors predicted accurately on future exchange rate then this would provide a favourable return on their investment portfolio. In this paper, we will examine on how economic factors relate to exchange rate movements and use it to forecast. Firstly, we will look at four different types of exchange rate regime and how the exchange rate is determined. Next, we will examine Purchasing Power Parity (PPP) and we use it to calculate whether a currency is undervalued or overvalued. After that, we look at how Balance of Payment (BOP) could be one of the factors that influences exchange rate movements. Under BOP trade flow model, we use the trade flow and capital market participants to be the factors that determine the exchange rate equilibrium. We then use this model to predict future exchange rate movements when there is a shock in economic activity. Lastly, we will examine the relat ionship between official interest rate and exchange rate and use the interest rate differentials theory to predict future exchange rate. 1.1 TYPES OF EXCHANGE RATE 1.1.1 Free Floating Exchange Rate Regime Under this type of exchange rate, the value of a nations currency is fully determined by the market demand and supply in a freely competitive market. Under no government intervention in the exchange rate determination, the rate fluctuates purely based on the conditions of demand and supply. The benefit of choosing this type of exchange rate over fixed exchange rate regime is that the country will not suffer from balance of payments crisis because the currency will adjust accordingly and no reserves are being used to maintain its pegged value, but on the other hand, it causes lack of confidence to importer or exporter as the currency has the potential to fluctuate widely in a short period during period of turbulence. 1994 economic crisis in Mexico is a good example to explain balance of payment crisis due to its fixed exchange rate regime. Mexican peso had to be devalued immediately when Mexico government run out of its foreign reserves to maintain its fixed exchange rate regime, se e Whitt (1996). However, many nations will prefer managed floating exchange rate instead of free floating exchange rate as they can intervene the market and reduce the fluctuation of its currency. 1.2 Managed Floating Exchange Rate Regime This type of exchange rate is similar to free floating exchange rate, the monetary authorities or central bank will manage and control its fluctuation rather than simply leaving it to be set by the market. The central bank can alter its official interest rates or uses its reserves to influence the value of its currency in the short and long run. We will further discuss interest rates and BOP approach in chapter 2.2 and 2.3. 1.1.3 Fixed and Semi-Fixed Exchange Rate Regime Fixed exchange rate is often called as pegged exchange rate; the exchange rate is set at a declared par value and maintained by the authorities or central bank. The rate will not fluctuate in daily basis as the intervention from the authorities will fix the exchange rate by buying or selling its currency. The central bank must hold large foreign currency reserves to mitigate shocks in supply and demand. Third world countries often use fixed exchange rate to build confidence in investors and avoid bubbles in foreign market. Developing countries can use it to avoid out-of-control-inflation. In term of semi-fixed exchange rate regime, the value of a countrys currency is allowed to float between the permitted bands of fluctuation. Same as fixed exchange rate regime, central bank has to intervene in the foreign exchange market to ensure that the exchange rate stays within the specified bands and it can be done by buying or selling its countrys currency. In other words, central bank a cts as a dominant investor and has the ability to influence market exchange rate. However, the fixed exchange rate regime can backfire, if the foreign exchange market value of the currency is not reflected by the pegged rate. This will lead to investors to trade the currency in the black market; the currency will not be traded at the pegged rate, instead at market value. If the countrys currency were set its rate wrongly, take the case when central bank set its rate above equilibrium (an overvalued currency), in the long period of time, the monetary authorities will suffer from foreign reserves crisis. They must then either devalue their currency or change the regime from fixed to floating type of exchange rate. Please refer to Argentine economic crisis (1999 -2002) and Mexican peso crisis (1994) for a better understanding in the foreign reserves crisis. CHAPTER 2: FACTORS THAT INFLUENCE EXCHANGE RATE In this chapter, we first look at how Purchasing Power Parity (PPP) could be used to analyse the movements in exchange rate and hence predict future spot rate. The reason we start with PPP is that PPP perhaps covers the most fundamental approach to assess long-term value in the foreign exchange market. In order to develop more sophisticated models of exchange rate determination, we must first be able to grip a good understanding about the basic notion of PPP, theories and assumption of this approach. We look at three main types of evaluating a nations currency which are absolute purchasing power parity, real exchange rate and relative purchasing power parity. We then use them to determine whether the currency is overvalued or undervalued. Next, we consider balance of payment (BOP) approach in our study of movements in exchange rate. In this section, we begin with the BOP structure and classification and followed by BOP flow model of exchange rate determination. In this flow m odel, we first look at how trade flow determines the exchange rate equilibrium and later we combine with capital market participants to produce a more complete BOP flow model. We also examine in how exchange rate responds to a shock in economic activity based on the BOP flow model. We look at interest rates as predictor of exchange rate movements in section 2.3. We start with two fundamental interest rate hypotheses which are covered interest rate parity (CIP) and uncovered interest rate parity (UIP) and use them to determine the expected rate of depreciation or appreciation of a currency. Next, we discuss about how interest rate differentials cause movement in capital flow from one country to another and hence affect the exchange rate. 2.1 PURCHASING POWER PARITY (PPP) PPP is one the oldest method to forecast the long-term value of a foreign exchange and the foundation of PPP is based on the assumption of law of one price. Law of one price simply states that in an efficient market, all identical tradable goods must only have one price. This law implies that exchange rates should be adjusted to compensate for price differentials across nations; price of goods and services should cost the same in all nations when prices are measured in a common currency. However, law of one price does not always hold especially in the short time frame. At a point in time, the price for the same item in different market may not be unique if the price measured in a single currency. Antweiler (2009) stated that changes in exchange rate in the short run are news-driven whereas PPP describes the long run behaviour of the exchange rate. The economic forces behind PPP will eventually even out the differences in purchasing power of currencies. As mentioned earlier, we only consider the long-term value of the exchange rate in this paper hence this problem will no longer hold as the price will adjust accordingly. PPP divided into two categories, absolute purchasing power parity and relative purchasing power parity. 2.1.1 Absolute Purchasing Power Parity In order to derive the equation for absolute purchasing power parity, firstly we need to use the assumption of law of one price to equate price of one good expressed in two different currencies. Equation (2.1) holds with respect to all tradable goods and services consumed in two countries. Pi is the price of i good and service in domestic country and with asterisks is the price of goods and services in foreign countries. S is the nominal exchange rate between the domestic country and foreign country, expressed as price of a unit of foreign currency, measured in units of domestic currency. However, we assumed that there are no transaction costs such as transportation and tariffs in equation (2.1). It will be more appropriate to calculate the estimated exchange rate based on PPP if we use a basket of tradable goods and services as our measurement in both countries instead of a single tradable good. P and P* refer to the domestic and foreign countrys price of a basket of tra dable goods and services. Equation (2.2) is often called absolute purchasing power parity. Absolute purchasing power parity follows the proposition that a group of tradable products will have the same cost in every country if the costs are converted in a common currency. If the nominal exchange rate calculated based on equation (2.2) is greater (lower) than the actual exchange rate, it suggests that the domestic currency is undervalued (overvalued) against the foreign currency. 2.1.2 Real Exchange Rate PPP however does not always hold in practice, in this case, many economists wish to measure deviation from PPP and the most popular method used for this measurement is called real exchange rate: Real exchange rate, Q, is defined as the nominal exchange rate that takes inflation differential between two currencies into account. For the simplicity, we use Big Mac, the McDonalds sandwich, as our example to explain how economists use this approach to determine whether one currency is overvalued or undervalued. Let the United Kingdom and the United States be the domestic and foreign country used in our example. We also assume it costs pound;1 to buy a Big Mac in United Kingdom, UK and $1.5 in United States, US. In this case nominal exchange rate is said to be 0.667 (pound;1 = $1.50). If absolute PPP holds, then the value for Q is said to be one; the burger would cost the same in United States and United Kingdom since the burger is identical in both countries. However, if nominal exch ange rate remains constant, i.e. pound;1 = $1.50, and Big Mac costs pound;1.2 in United Kingdom, this implies that it costs 20 percent more in United Kingdom, suggesting that the pound is overvalued by 20 percent relative to US dollar, hence the absolute PPP no longer holds (Q is not equal to one). In this case, there will be an upward pressure on the demand for US dollar; one would buy the burger in US at the price equal to 1 pound (pound;1=$1.50) instead of buying it in UK which costs pound;1.20. Increase in demand for US dollar causes upward pressure on the nominal exchange rate until the price in US and UK is the same, the real exchange rate returns to 1. To further our study on Big Mac, in table 1, page 11, we show the prices of Big Mac in 17 countries expressed in term of US Dollars based on the actual exchange rate as of 4 July 1995. Since the Big Macs are identical, whether purchased in Sydney, San Francisco or Tokyo, they should theoretically cost the same or at least ro ughly the same price according to the law of one price. The Economist magazine found out that the law of one price does not hold when applied to Big Mac, as substantial deviations from PPP exist. Nevertheless, Cumby (1993) study the behaviour of Big Mac prices in 25 countries over seven-year period starting from 1987. The study found that 70-percent of the gap between actual exchange rate and their estimated Purchasing Power McParity values was removed. Purchasing Power McParity works exactly the same as PPP, instead of using a basket of tradable goods and services, it uses Big Mac index which published by The Economist. Table 1 Currency Big Mac Price Implied PPP of the US$ Actual Exchange rate % Over (+)/ In Local Currency In US Dollar Terms as of 4/7/95 Under(-) Valuation Hong Kong Hk$9.50 1.23 4.09 7.73 -47 Indonesia 3900 1.75 1681 2231 -25 Australia A$2.45 1.82 1.06 1.35 -22 Canada C$2.77 1.99 1.19 1.39 -14 Singapore S$2.95 2.10 1.27 1.40 -9 US $2.32 2.32 Italy Lire 4500 2.64 1940 1702 +14 Britain pound; 1.74 2.80 1.33 1.61 +21 Spain Pta 3.55 2.86 153 124 +23 S. Korea Won 2300 2.99 991 769 +29 Holland FI 5.45 3.53 2.35 1.55 +52 Sweden Skr 26.0 3.54 11.2 7.34 +53 Belgium Bfr 109 3.84 47.0 28.4 +66 France FFr 18.5 3.85 7.97 4.80 +66 Germany DM 4.80 3.48 2.07 1.38 +50 Japan  ¥391 4.65 169 84.2 +100 Denmark Dkr 26.75 4.92 11.5 5.43 +112 Source: McDonalds; The Economist, April 15, 1995 2.1.3 Relative Purchasing Power Parity There is another way of measuring real exchange rate which is known as relative purchasing power parity. As before, it measures the relationship between two countries relative inflation rates and the change in the exchange rate, we then use it to predict the future exchange rate. Relative purchasing power parity is defined as the rate of change in price level of a basket of tradable goods and services in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries currencies. Equation (2.4) is obtained by taking logs of Equation (2.2) and the reason of doing so is one could measures the exchange rate in term of rates of growth when we apply derivative on natural logarithm (equation (2.5)). In equation (2.4), s is defined as the log of nominal exchange rate, p and p* represent the log of price in domestic country and foreign country. Next, if we apply derivative on equation (2.4), we arrived at the proportiona l rate of change, which is also known as relative purchasing power parity. The equation as above says that rate of change of currency, ds is equal home countrys inflation rate, dp minus foreign inflation rate, dp*. One way to interpret this relationship is simply saying when prices rise more rapidly in home country than foreign country then it is said that the domestic money losses its value relative to the foreign money or decrease in exchange rate, and vice-versa. Equation (2.5) is also valid for relaxing the assumption of no transaction cost when the transaction cost is proportional to the value of the goods. Take logarithm in Equation (2.6) we have: Since k is a constant, we end up with the same result as equation (2.5) simply because it vanishes when we differentiating a constant, k. In other words, proportional transaction costs have no effects on the relative purchasing power parity. In this section, we discussed how price differentials could be related to nominal exchange rate. Investors could use equations (2.2), (2.3) and (2.5) to predict the future spot rate movements. It is difficult to measure the change in price of a basket of tradable goods and services in both countries, therefore investors often use Consumer Price Index (CPI), Export Price Index (EPI) or Import Price Index in evaluating the estimated exchange rate based on these equations and make appropriate investment decision. In graph 1, we show a strong positive correlation between YEN ¥/USD$ exchange rate and Japan export prices (all commodities) from 2001 to 2010. However, the drawback of using Japan Export Price Index (EPI) is that EPI unable to tell us about the magnitude of the change in exchange rate corresponded to a unit change in export price. We note that the magnitude of the change in YEN ¥/USD$ exchange rates do not correspond well to the Japan export prices in year 2008 and this might be reason of the effect on global financial crisis in year 2007 to 2010. There are number of debates in the international economics on the issue of whether PPP is a valid tool for forecasting exchange rate. PPP could be calculated based on CPI, EPI, wholesale price indexes, wages or other set of price or cost indexes. Unfortunately, each approach may provide different set of answers as to whether a currency is undervalued or overvalued and this might lead to disaster investment decision if an investor chose a wrong set of index. In the effort of calculating relative PPP, we cannot fully rely on the set of price indexes as different countries may have different national preference and tastes, and hence different weight in their price indexes. Therefore, if two nations preference and tastes are not in common, using price indexes may not be the best approach to forecast its exchange rate. Apart from choosing appropriate set of price indexes, there is another problem called the base-year problem. Selecting different base-year could end up the same puzzle as before. However, this problem could be resolved by selecting the base year when both countries current account balance last attained is near zero. 2.2 BALANCE OF PAYMENTS (BOP) The BOP model of exchange rate determination was originally developed in the 1930s and 1940s by Robinson (1937), Machlup (1939), and Haberler (1949). In this section, we explain the meaning of BOP and its accounts, current account and capital and financial accounts. Next, we look at the basic model of BOP which only considers trade flow as the determination of exchange rate then we slowly develop to more complete BOP flow model which able to tell us the future exchange rate movements for a given shock in economy activity. 2.2.1 BOP Structure and Classification BOP is defined as a statistical statement that systematically summarises, for a specific period, the economic transactions of an economy with the rest of the world by IMF (please refer to IMF Balance of Payments Manual, Fifth Edition, Chapter 2 Conceptual Framework, page 6). The transactions refer to receipts and payments of all of the money coming in a country from abroad and going out from the country to abroad for a specific period. Examples of these transactions are payments for the countrys export and imports of goods, services and financial capital. Transactions that lead to a receipt of payment from foreigners (payment to foreigners) are recorded in the BOPs accounts as a credit (debit). BOP accounts are divided into two broad part, current account and capital and financial accounts. Current account deals with payments for import and export goods and services, income from abroad such as interest and dividends, and transfer payments. In order to figure out whether the bala nce of the current account of a country has a deficit or a surplus, one can calculate it using the equation as follow (IMF Balance of Payments Manual, Fifth Edition, Appendices, page 158): In other words, current account balance (CAB) is equal to the sum of net value of exports (X) and imports (IM) goods and services, net income abroad (NY) and net current transfer(NCT). A surplus of CAB indicates that the economy of a country being a net creditor to the rest of the world. This means that the country is providing resources to other economies more than it received, in return, they owes money to the country. This situation is often called as favourable balance and it indicates that there is an upward pressure on demand of the countrys currency, which leads to an increase in the value of the currency. On the other hand, deficit of CAB mirror the economy of a country being a net debtor to the rest of the world. It is said that the country is investing more in its country than saving and it uses resources from other economies to meet its domestic consumption and investment requirements. On the other part of BOP, capital and financial accounts which record the transactions related to international movements of ownership of financial assets. One can easily break capital and financial account into four categories; direct investment, portfolio investment, other investments and reserves account, refer to IMF Balance of Payments Manual, Fifth Edition, Chapter 3 Structure and Classification, page 77. Direct investment records the transactions on long term capital investment, such as purchase of fixed assets in foreign countries or domestic country by any residents or non-residents. Portfolio investment is referred to the transactions of buying or selling shares and bonds in financial markets. Other investments are referred to capital flows into banks or banks provide loans to residents or foreign investors. After the initial investment, any incomes or interest re payments generated by these assets are recorded in the current account. Reserve account is controlled by monetary authorities and these reserves are used for financing or regulating payments imbalances or for other purpose, refer to IMF Balance of Payments Manual, Fifth Edition, Chapter 3 Structure and Classification page 80. Any payment imbalances will usually lead to change in the holding of reserves as monetary authorities will use it for official market intervention to influence the spot rate. If a domestic resident purchased (sold) foreign assets or foreign resident sold his/her (purchased) assets in the domestic economy then it is referred to be capital outflow (capital inflow) and it is recorded as debit (credit) entry in capital and financial accounts. 2.2.2 BOP Flow Model In this section, we will use BOP flow model to determine and affect the value of an exchange rate. We will first be looking at the simple trade flow model of exchange rate determination and how do monetary authorities intervene in the foreign market under fixed and semi fixed exchange rate regime to manage its exchange rate. Next we will include capital market participants into our consideration of modelling exchange rate equilibrium and predict future spot rate movements. We also examine in how exchange rate respond to a shock in economy or large capital movements. The diagram above shows us how the equilibrium MYR/US$ exchange rate is determined under three different exchange rate regimes. On the vertical axis, we plot the MYR/US$ exchange rate and on the horizontal axis we have the quantity of US dollar printed by US government in a specific time frame. In this model, we shall only consider the demand of US dollar (D$) is affected by the Malaysian demand for US goods. To expl ain this, Malaysian residents must first exchange Ringgit Malaysia in the foreign exchange market before they could make payments for the US goods they wish to purchase. In the same vein, the supply of US dollar (S$) is only affected by the demand of Malaysian goods by US residents. In the free floating exchange rate regime, if the demand and supply for dollars is only affected by the trade flows, it should be in the equilibrium point (QE,E2) at all time, which is the intersection between supply (S$) and demand (D$) for dollars. To explain this phenomenon, if we look at the exchange rates above equilibrium, there is an excess of supply of US dollar (S$) and market will push the exchange rate down to equilibrium point, and vice-versa. Let us assume that the exchange rate regime between MYR and US Dollar were semi fixed and the permitted band of fluctuation was E1 and E3. If the equilibrium exchange rate is within the bands therefore no intervention by central bank is required. If the demand shifted above (below) the allowed band of fluctuation,D1$ (D2$), then the central bank must sells (buys) its own currency on the foreign exchange market and restore the equilibrium within the band. In the fixed exchange rate regime, if the MYR/US$ exchange rate were pegged at an artificially high level such as E3, then flow supply for dollars would exceed the flow demand of dollars and the gap between A an B would be the markets excess supply for dollars (QB -QA). In order to maintain at the level E3, the central bank must then buys its own currency on the foreign exchange market in return for the currency to which it is pegged. Graph 2 shows the spot rate between Malaysia and US (MYR/US$) for the period between 1st January 2004 and 31th December 2007. Between 1998 and 2004, the exchange rate between MYR and US Dollar was pegged wrongly at the rate above market equilibrium, 3.80 ($1=MYR 3.80) by Bank Negara Malaysia, Talib (2004). On 21th July 2005, Malaysia and US government agreed to remove this pegged regime and adopted managed float exchange rate regime. Since then, the value depreciated significantly and this indicates that the spot rate was pegged above the market equilibrium. In the BOP model, capital flows are important in analysing the exchange rate movements, especially in the short and intermediate-term horizon, Siourounis (2003). The diagram below shows how capital market participants could influence the value exchange rates. For the purpose of analysing, we divide capital participants into two groups; one seeking for capital gains (currency speculators) and other one is seeking for interest rate differentials (international investor). In the following section, we look at the model on how currency speculators influence the exchange rate whereas the interest rate differentials as a model to predict exchange rate movements will be discussed in section 2.3.3. The diagram above shows the exchange rate correspond to the demand and supply of dollars provided by currency speculators. On the right (left) side of vertical axis, the SP$ represented the supply (demand) of US dollars provided by currency speculators. Let the current spot rate MYR/US$ be the point where SP$ intersects y axis, Ee. If speculators predict the expectation of future spot rate be more than Ee, say E2, then currency speculators will convert Ringgit Malaysia to US dollars at the present and it convert back when the market rose above the current equilibrium point. In other words, currency speculators will be willing to supply more of US dollars in the future if the expected spot rate lies above Ee. The opposite case will be the same if expected spot rate lies below Ee. Complete BOP flow model of exchange rate determination is obtained by combining BOP trade flow model of exchange rate determination, diagram 1, currency speculation and exchange rate determination, diagram 2 and interest rate differentials as a model of exchange rate det ermination, diagram 5. This model allows us to study the interaction of commercial traders and capital market participants set the equilibrium level of spot rate. Diagram 3 (a) is the copy of the trade flow model shown in diagram 1 where exchange rate is determined by only trade demand and supply of US dollars. In order to capture the gaps between trade demand and trade supply we plot excess commercial demand curve for dollars, ED$ in diagram 3 (b), (D$-S$) and relate it to the supply of US dollars curve, SP1$. SP1$ curve is influenced by capital market participants, which consist of international investors and currency speculators. Plot ED$ and SP1$ in a same graph, we obtain the complete BOP flow model of exchange rate determination. In this model, the new equilibrium level of exchange rate is obtained by finding the intersection point between ED$ and SP1$. In other words, it is the intersection point between the net supply of dollars provided by capital market participants and the excess of commercial demand for dollars by commercial traders. However, investors are more interested in how exchange rates respond to shift in domestic and foreign economic activity, change in market expectations of future spot rates and independent shift in trade flows. Using BOP flow model of exchange rate (2), diagram 4 allows us to predict the future exchange rate movements and its direction caused by these shocks. Let us assume the SP2$ and ED1$ be the current supply and demand for US dollars respectively and the corresponding spot rate is at E1. If there is an increase in Malaysian economic activity (case 1), more Malaysian residents are willing to spend, this would imply that a relative increase in Malaysian demand for US goods and services. In turn, it causes an overall rightward shift of excess commercial demand for US dollars from ED1$ to ED2S. The market will respond to the change in Malaysian economic activity and restore its equilibrium at a higher rate, E2. In other words, greater amount of US dollars are injected by Malaysian residents whilst the supply curve remains constant, this caused an increase in the equilibrium spot rate. For the increase in independent trade flows, it will be the same explanation as increase in Malaysian economic activity. In case 2, we assume there is a positive shift in the market expectation of future spot rate and this positive shift would immediately impact the exchange rate. An upward shift in market expectation on the long run equilibrium would shift SP2$ upwards to SP3$, positive shift in capital market participants demand for foreign exchange resulting an immediately appreciation in the spot rate. Siourounis (2003) shows the empirical evidence for a positive shock to net purchase of US equities by UK, Germany and Switzerland have a significant and immediate effect on exchange rate that lasts between 10 and 17 months. In graph 3, we show there is a significant trend between USD$/AUD$ exchange r ate and Australias current account seasonally adjusted. However the exchange rate does not always associate with the Australias current account balance especially in year 2003 to 2004. This could be the reason when Australia became the host for Ruby World Cup (RWC) 2003. URS Finance and Economics (2004) stated that the results of this event contributed to additional economic activity in the short term throughout the Australian economy in terms of industry sales, employment, GDP and Government revenue. However, URS Finance and Economics (2004) also stated that after 2005 any RWC 2003 influence would have diminished on international visitors. We also note that gap between Australias current account seasonally adjusted and its exchange rate was diminished as well. In graph 4 shows the connection between GBP/MYR exchange rate and Malaysias current account balance. Starting from 2003, the exchange rates move along in the same direction with the movements in Malaysias current account b alance; however, this trend is not as significant as in graph 3. Nevertheless, investors could still use this approach to forecast exchange rate. 2.3 INTEREST RATES In this section, we look at the two main forms of interest rate hypothesis, covered interest rate parity and uncovered interest rate parity. Next, we look at the interest rate differentials as a model to predict future exchange rate movements and how it relates to capital movements from one country to another. 2.3.1 Covered interest rate parity (CIP) To explain the meaning of covered interest rate parity, we shall only consider that investors can either invest in UK (domestic country) or US (foreign country) fixed deposit. Let the UK fixed deposit and US fixed deposit rates be r and r* respectively. For simplicity, we assume that the investor can only convert his/her wealth through a 12-months forward exchange rate if he/she decided to invest in US fixed deposit. On the other hand, if the investor has decided to deposit pound;1 for 12 months in a UK bank which guarantee r interest at the end of the period. Then the pound;1 will accumulated to: For the cases when investor decided to invest pound;1 in US fixed deposit then at the end of 12 months period the pound;1 will accumulate to: Let F denote the forward exchange rate and S be the current spot rate, both measured in the unit of sterling price, (GBP per 1 unit of USD). Under no transaction costs and no arbitrage assumptions, equation (2.10) and equation (2.11) should be equal. We can rewrite the ratio F to S in a linear form. Where f is defined as the forward premium (discount), the ratio by which a countrys (UK) forward exchange rate to another (US) exceed (falls below) its spot rate. We can then substitute equation (2.13) to our equilibrium condition in equation (2.12) and express it as follow: Note that we can subtract one from both sides and r*f is the product of interest rate and forward premium (discount). In general cases, we can easily ignore the last term without affect the equilibrium condition as it is the second order of smallness, unless we are dealing we hyperinflation country then this term can not be ignored as it will be significant in measuring the equilibrium condition. Equation (2.15) states that the domestic interest rate must be higher (lower) than the foreign interest rate by the amount equal to the forward discount (premium) on the domestic currency; this is also known as covered interest rate parity hypothesis. However, empirical evidences show that equation (2.13) does not always hold precisely for the given interest rate differentials and forward premium as it contains transaction costs. In fact, for the fixed exchange rate regime, most researchers found out it felt within a specific bound. We define c to be the cost of carrying out the transaction. The absolute value c is too small that one can not justify it as an unexploited profit opportunity and hence the no arbitrage assumption is still valid in this case. Taylor (1989) studied the unexploited profit opportunities in three different types of economics, stable period, period of turbulences and later period of turbulences of an economic. He concluded that there is no unexploited profit opportunity to be found during the stable period in foreign exchange and this indicates that market is in efficient. He also noted that there is potential to exploit profitable arbitrage opportunity during periods of turbulences. In the later period of turbulences, frequency and size of the profit opportunities in the market had decreased significantly and this suggest that efficiency of the market had increased over time. 2.3.2 Uncovered interest rate parity (UIP) In the covered interest rate parity, we restrict investors to invest in foreign country by changing his/her currency through forward contract whereas in uncovered interest rate parity we do not restrict them. Therefore, investors bear the exchange rate risk as they are not guaranteed the value of exchange rate at the end of 12 months period. As equation (2.12), we replace F by Se where Se represents the expected spot rate at the end of 12 months period. Note that the ratio Se/S is not known; unlike in the equation (2.12), all variables are known at the present. The ratio can be greater (lower) than one if the expected spot rate is higher (lower) than the current spot rate. We can rewrite the ratio as follow: We define ?Se to be the expected rate of depreciation or appreciation of the domestic currency over the 12 months period. Substituting equation (2.17) into equation (2.16), we obtain: As before, we ignore the final term, r*Se in equation (2.18) The equation ab ove states the domestic interest rate must be higher (lower) than the foreign interest rate by the amount equal to the expected rate of depreciation (appreciation) of the domestic currency, this is also known as the uncovered interest rate parity hypothesis. 2.3.3 Interest Rate Differentials as Predictors of Exchange Rate Changes Has been mentioned in the previous section, we will look at how international investors react on the interest rate differentials and hence influence the change in exchange rate. Same as before, we assume a two-country world economy consist of United States and Malaysia. We also assume that investors will invest their wealth in Malaysia if the interest rate in Malaysia is higher than in United State, and vice-versa. Diagram 5 shows the relationship between interest rate differentials and the capital movement between two countries. At the point (iUS iMY)2, investors are indifference if they invested their wealth in Malaysia or United State; the interest in both country is the same. However, when the official interest rate set in United State is higher (lower) than in Malaysia, (iUS iMY)3, then investors will inject more capital into US (Malaysia) from Malaysia (US) as they could earn a higher rate of return. In the second part of the diagram shows the relationship between the size of the change in the spot rate and capital flows.   The slop represents the sensitivity of exchange rate towards capital flow; the higher it is the greater the magnitude of the change in spot rate towards capital flows. In reality, equation (2.20) does not always hold as the expected change in exchange rate predicted by investor does not always match with the spot rate at 12-months period. Therefore, we introduce u as the predictor error in equation (2.21). In evaluating the interest rate differentials as predictors of the change in exchange rate, investors have to measure the size and the direction of the predictor error. Mussa (1979) stated that the interest differentials explain little on the changes in exchange rates; therefore one has to include predictor error when evaluating the change in exchange rate. Graph 5, Appendices shows a positive relationship between MYR/GBP spot rate movements and the difference in interest rate between United Kingdom and Malaysia, (IUK- IMYR). Based on these data, if an currency speculator wishes to predict the future spot rate and he is considering interest rate differentials be the only factor that influences spot rate; he will exchange sterling pound for Ringgit Malaysia at the present and convert back to sterling pound in the future to obtain capital gain as the spot rate has the tendency to drift downward. Conclusion This paper found out that the relative change in price in the short run for both countries with respect to the nominal exchange rate does not hold when we use law of one price. Changes in exchange rate in the short run are news-driven and law of one price is valid when we measure the change in the long run. We also showed that prices of Big Mac in 17 countries did not cost the same price when we measured in term of US dollars. In the long run, studies showed that the gap between actual and estimated exchange rate using Purchasing Power McParity was removed. The real exchange rate is said to be equal to one if the absolute purchasing power holds when we measure the prices in both countries with respect to the nominal spot rate. Under the BOP model, if the spot rate were pegged at the rate above its equilibrium then the central bank would have to buy its own currency on the foreign market in return for the currency to which it is pegged. In corporate to this, we look at the case w hen Malaysia and United State removed the fixed exchange rate regime and adopted managed float exchange rate regime, the exchange rate depreciated significantly. We also discussed how capital market participants react and influence the exchange rate when there is a shock in economy activity. In the interest rates section, we discussed the meaning of covered interest rate parity and uncovered interest rate parity; we then use them as predictor of exchange rate changes. In driving these two hypotheses, we use no arbitrage opportunity assumption. However, studies showed that during period of turbulence there is potential to exploit profitable arbitrage opportunity whereas in the stable period there is no unexploited profit opportunity which indicates that market is in efficient. We also discussed how interest rate differentials will influence capital movements and its sensitivity. If interest rate in domestic country is higher than in foreign country then it will cause capital flow into domestic country by international investors. We also concluded that the greater the sensitivity of change in spot rates towards capital flows, the greater the magnitude of the change. We also showed that there is positive trend between YEN ¥/USD$ exchange rate and Japan export prices (All Commodities), USD$/AUD$ exchange rate and Australia current account seasonally adjusted, GBP/MYR exchange rate and UK current account seasonally adjusted, MYR/GBP exchange rate and interest rate differential.

Computer Vs. Artificial Intelligence - 926 Words

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Chhi 301 Paper 2 - 1749 Words

PAPER 2 Submitted to: Dr. Nickens Liberty University Online Lynchburg, VA by Richard M. Shouse June 17, 2013 Introduction: In response to the how and why the papacy in Rome became the center of power as it did. Shortly after the Fall of the Roman Empire there was a fight for power between several barbarian tribes like the Ostrogoth’s, Goths, Visigoths, Vandals, Saxons, Huns, Franks, Lombard’s, Burundians, and others. The two major tribes were the Ostrogoth’s and the Lombard’s where power shifted several times, And the only infrastructure was the Christian church, so in one sense, the church took over after the fall of Rome. It was this shift of power that lead to the power being but into†¦show more content†¦Pope Honorius argued that Christ did not possess both divine and a human will at the same time; but had only one will that was expressed through both his human and divine natures. These caused an embarrassment to other Popes because they did not want to admit that a Pope could adopt and promote a heretical belief. We also see that new ideas of faith would rise during this time such as the Monothelite profession of Faith which said that Christ had two natures, human and divine, but a single will. Where Pope Severinus refused to sign and the Emperor sent an envoy to Constantinople to confirm the election of the Pope and demanded that he sign the Ecthesis. Pope Severinus wouldn’t sign the Ecthesis but the emperor would eventually go along with the election of Severinus. Up to Gregory III the Pope had to be confirmed by the Constantinople and the Emperors. This brings us to 655 A.D to Pope Martin who had himself consecrated without waiting for the imperial confirmation, and convene a synod at Lanteran. Many Monothelite followers were condemned and as a result Emperor Constans II ordered Pope Martin arrested and sent back to Constantinople as a prisoner. Because of is faith he was later honored and became the last Pope to be declared a Martyr. While Martins career provided dramatic evidence of the extent to which the papacy was under imperial control at mid-sixth century, it also demonstrated the decisive role of the papacy in theShow MoreRelatedThe Foundation Of Orthodoxy And The Canon1484 Words   |  6 Pages THE FOUNDATION OF ORTHODOXY AND THE CANON A Paper Presented to Dr. Nickens of Liberty University Lynchburg, VA In Partial Fulfillment of the Requirements for Church History CHHI 301 by Whitney J. Fitzwater April 6, 2015 INTRODUCTION The history of the Church has seen key event and movements that influenced the New Testament canon. The way by which the New Testament cannon was formed as it was is a subject of debate to this day. To truly know and beginRead MoreChurch History Paper I1551 Words   |  7 PagesThe Foundation of Orthodoxy and the Cannon             A Paper Presented to Dr. Keith Goad of Liberty University Lynchburg, VA                         In Partial Fulfillment Of the Requirements for Church History CHHI 301                               By Brittany N. Askew February 6, 2012       Brittany Askew 06 February 2012 CHHI301_B04 Paper 1 Introduction The process by which Scripture has been preserved and compiled is one whose history is worth noting. The early church hadRead MoreThe Rise of the Papacy Essay1637 Words   |  7 PagesCHHI-301-D10 LUO FALL2013 PAPER 2 The Rise of the Papacy INTRO In the void left by the collapse of the Roman Empire, the bishop of Rome grew even more in both power and prestige beginning in the sixth century and continuing to the reformation in the ninth century. It is the aim of this paper to explain how and why the papacy in Rome became the center of power of the medieval world, the factors contributing to this dominance over Western Europe, and the positive and negative ramificationsRead MoreWhy Were The Crusades?1389 Words   |  6 Pages WHY WERE THE CRUSADES STARTED SUBMITTED TO PROFESSOR C. PAUL KING CHHI-301-B06 LUO BY KEVIN SCOTT WILLIAMS JUNE 29, 2015 â€Æ' Why Were the Crusades Started Most have heard of the crusades of the middle-ages or at least heard of some famous people such as Pope Urban II, Richard the Lionheart or others. Whether you see the crusades as events that tried to promote Christian values in a pagan territory or of you see the crusades as chivalrous knights fight for a valiant cause one will stillRead MoreEssay about The Rise of the Papacy1770 Words   |  8 PagesThe Rise of the Papacy Barry Blankenship CHHI 301 - History of the Christian Church I Professor – Dr. Jeffrey S. Mayfield February 20, 2012 The Fall of A Great Empire and the Rise of the Papacy Before the fall of the Roman Empire you must stop and look at the power that was held within the millions of miles of land, building, people, cities, kings, and customs. The Roman Empire was not known for being just another city or empire but it was known for its strength, power and victories

Case Study of Hockey Queensland Samples †MyAssignmenthelp.com

Question: Discuss about the Case Study of Hockey Queensland. Answer: Introduction The report is based on the case study of Hockey Queensland. The State Hockey Centre is located in the southeast area of Queensland which is at a distance of around five kilometers from Brisbane which is the capital city of Queensland (Hockeyqld.com.au 2017). The mission of the Hockey Queensland board is promoting, fostering, preserving and encouraging the growth of the sports of Hockey mainly for the people related to the sport. The strategies that the board pursues are mainly, the ability to attract the people towards the sport and retain them, building the profile of the board in an innovative manner, to work and also communicate with the stakeholders in an effective manner, trying to stay a leader in the game, helping the minorities to get access to the sport and finally, trying to lead the way towards governance that is effective for the sport (Adriaanse and Schofield 2013). The Board consists of the different positions as follows. The Patron The Governor of Queensland Paul De Jersey AC, the President Steven Stewart, the Vice President- Tara Diamond, Board of Directors- Steven Stewart, Patricia Hansen, Darren Cavanagh, Tara Diamond, Graham Astbury, Victoria Carthew, Colin Murphy and Finance Director Paul Mantell. About the Board of the Organization Many events are organized by the board throughout the year. Some them are Australian Open Indoor Championships, Australian U21 Indoor Championships, Australian U13 Indoor Championships (Breitbarth et al. 2015). The structure of the board of Hockey Queensland has a direct influence on the way the board functions and the ability it has to attract the board members and also the players. The ability of the board governance assists the organizations so that they can overcome the challenges that are posed towards the structure of the board. The Board consists of members are directly related the game like Steve Stewart is a player of social hockey. Similarly, Darren Cavanagh also played hockey for more than 25 years. Patricia Hansen was also a hockey player. Sports organizations have different styles of governance (Ferkins and Bottenburg 2013). There are some rules regarding the governance structure of different organizations. The structure of two bodies should not be same. The rules regarding the governance structure include, enabling guidance regarding the strategy of the organization, ensuring the effectiveness of the monitoring themanagement that is done by the board, the responsibilities, the roles and the powers of the board are clarified. The board comprises of five to nine members (Blanco 2017). The members should have a sufficient amount of expertise and the skills required for the board. The board should have a clear perception about the purpose of the sports organization. The process of the election of the board members followed by the process of appointment is quite challenging for the sports organizations. In this case the Hockey Queensland Board should ensure that the members of the board have the appropriate skills and are experienced enough to be in the governing position in the organization. The process of this election and followed by the appointment process is not followed by all sports organizations. The time that is invested in this process matters a lot for the future of the organization. This will have an impact on the functioning of the organization. The reason being that the appointment is being done in the governance level of the organizations and due to this the process should be taken care of. The Board also has a process of evaluating the skills and auditing them. This process is important to fulfill the gaps that are there in the governance of the board. This will also help in the recruitment process of the board members and appointing only those who are suitable for the position (Garling et al. 2013). An election kit is used by the board during the recruitment process of the board members. This consists mainly of the Nomination Form for the board members, the description of the role of the board members and the code of conduct used by the board. The board has proper induction process which supports the organization to help the new members appointed in the board to be informed properly, get proper support so that they feel welcomed in the board (Sotiriadou and De Bosscher 2013). The induction process of the board needs to be well developed so that the new members are properly oriented about the processes in the organization and they can actively take part in the decision making process of the board. The process of induction takes care of the major issues related to the recruitment of the members. This helps in ensuring that the members have the appropriate knowledge levels to support the operations of the organization, should understand the operations related to the business of the organization, should also understand the circumstances related to the financial aspect of the organization, should understand the organizational strategy, should be well aware of his roles and responsibilities, should have adequate knowledge about the risks related to the business and should be able to access information that is relevant (Hopwood, Skinner and Kitchin 2012). The evaluation of the performance of the board is important so that a feedback can be obtained on the way the board has performed collectively and if necessary then the improvements need to be implemented on the skills of the members. The contribution of each and every board member is assessed. This is important for the proper functioning of the board and the developments related to the same. The evaluation process of the performance of the board is monitored by a body which is independent and helps to ensure that the board performs well and also provides the feedback on the strengths of the members and recommendations are provided for the future improvements (Shilbury and Ferkins 2015). The governance of the board and its members is important so that it can be ensured that the board performs effectively and helps to lead the organization in a proper way. The policy that is formed for monitoring the performance of the board and the evaluation should contribute in the process by which performance is assessed. The Hockey Queensland board also has a proper performance evaluation policy. This evaluation is done with the help of survey. The process of surveys acts as a way which is convenient and also confidential. The annual reports of the board for the year 2015 and 2016 is analyzed in this case study (Pedersen and Thibault 2014). Findings of the case The findings of this case is related to the analysis of the financial statements of Hockey Queensland Inc. for the years 2015 and 2016. The current assets of the organization which is mainly the liquid cash of the company, the receivables of the company and also the inventory falls under this category. The current assets of the company has decreased from the year 2015. The non-current assets have also decreased to a considerable level (Sherry, Schulenkorf and Phillips 2016). In the same manner, the current liabilities have also decreased from the year 2014 to 2015. As a result, the net assets of the company has decreased from 2014 to 2015. The total funds of the association have decreased from 2014 to 2015. The cash flows of the organization has decreased from the year 2014 to 2015. The cash flow of the organization mainly comes from the operating activities, investing activities and also the financing activities. The cash at the end of the year has hugely decreased from 2014 to 2015(Ferkins and Shilbury 2012). Further analysis is based on the financial statements of 2016. By detailed analysis it is evident that the revenue of the organization has decreased from 2015 to 2016. The expenditure has also decreased considerably from 2015 to 2016. The revenue in this case includes the grants given by the government, the affiliation income, the sponsorships given by different companies and many more (Scherer and Rowe 2013). The expenditure related to the organization includes the fees, the costs related to insurance, development of the athletes, costs related to marketing. The net surplus income has decreased from 2015 to 2016. The debtors of the organization has increased from 2015 to 2016. The total assets of the organization has decreased from 2015 to 2016. On the other hand the liabilities related to the organization has increased. Finally, the total funds of the association has decreased from the year 2015 to 2016 (Sderman and Dolles 2013). Therefore, the cash at the end year has decreased from the year 2015 to 2016. From the analysis done from the financial statements of the organization shows that the organization is not in a very good position as the assets and income has decreased and the liabilities of the organization has increased (Vanessa 2012). Discussion regarding the problems and given solutions The main problem of the organization related to the income statements of the company is the decrease in the income levels of the company and the increase in the liability which is mainly related to the expenditure and the debts of the organization (O'Boyle and Hassan 2014). The administration cost has increased and the revenue related to the sponsorships, facility hiring has decreased. Due to this the total funds of the association has decreased considerably. The cash flow has decreased in a considerable manner. The cash flow from the investing activities has decreased. There is huge difference between the cash at the beginning of the year and the cash at the end of the year for the year 2016 (Hoye et al. 2015). The solutions which are feasible for this problem are, trying to increase sponsorship for the sport, involving more and more young people in the sport, trying to involve people from the rural areas as well in the sport, improving the infrastructure, that is, acquiring more fields and areas for games and practice, providing more facilities to the less privileged but talented players, trying to promote the game so that the popularity increases and in turn, income can be generated. In this manner, the problem which the organization is facing can be solved and the income will also increase (OBoyle and Shilbury 2016). The debts and the liabilities of the organization will decrease with the help of which the net funds of the organization will increase. This fund can be utilized for the welfare of the players and for increasing the popularity and awareness of the game. Conclusion From the above discussion it can be concluded that the organization is not in a good position as is evident from the income statements of the years 2015 and 2016. The analysis of the income and expenses of the years 2014 and 2015 shows that the income of the organization has increased considerably. On the other hand, there is a huge increase in the expenditure as well. There is an increase in the maintenance costs, cost related to the competitions, the marketing costs which shows a huge increase, the bar and canteen costs also shows a enormous increase. On account of the net deficit of the organization also shows a huge increase. Similarly the income statement of 2016 shows that the revenue and expenditure both have decreased considerably, as a result of which there was again a deficit of funds in the year 2016. In the years 2014 and 2015 the total assets have decreased and the total liabilities have also shown a huge decrease. Although, in spite of this situation the total funds of the association did not show any improvement. The solution to this issue would be the search for ways to increase income and revenue. This can be done with the help of government grants, sponsorships from different companies for the sport, registration of new members. This is possible only if initiatives are taken by the board to promote the game among the youth and encourage them to join the clubs so that they can showcase their talent. The initiatives should be mainly taken by the board with the help and support of the government. The grants provided by the government and the sponsorships can be used to provide equal opportunities to the under privileged, but talented candidates. In this way more and more youth will get involved in the game, which in turn will make the game more popular. Recommendation From all the available solutions the most feasible one would be the promotion of the game in the rural areas of the state. This will help the under privileged children in these areas who have talent in the game to be able to showcase their talent, first in the state level and then in the national level as well. This can be made possible with the support of the government. As is evident that the board already has a deficit of funds, the financial support from the government will play an important role in this case. The promotional activity of the game can be done in these rural areas so that they can know about the game also choose it as their future career. Volunteers are also required who can provide training in the basic level to the potential players. This training will help them to improve their potential. Implementation of the solution The implementation process of the solution starts from the level of the board of directors. The problem needs to be analyzed, which is mainly the shortage of funds. Following this the given solution and the cost related to this will be detected. Then, the ways of approaching the government and the sponsors comes into play. The players who are already registered with the organization will act as the volunteers. They need to take the responsibility to give the basic training to these players. After the players are selected from the rural areas, coaches need to be appointed to give them proper professional training so that they showcase their talent in the state and the national level as well. References Adriaanse, J.A. and Schofield, T., 2013. Analysing gender dynamics in sport governance: A new regimes-based approach.Sport Management Review,16(4), pp.498-513. Blanco, D.V., 2017. Sports Governance: Issues, Challenges and Perspectives.Asia-Pacific Social Science Review,17(1), pp.1-1. Breitbarth, T., Walzel, S., Anagnostopoulos, C. and van Eekeren, F., 2015. Corporate social responsibility and governance in sport:Oh, the things you can find, if you dont stay behind!.Corporate Governance,15(2), pp.254-273. Ferkins, D.L. and Bottenburg, M.V., 2013. The governance of high performance sport. Ferkins, L. and Shilbury, D., 2012. Good boards are strategic: What does that mean for sport governance?.Journal ofsport management,26(1), pp.67-80. Garling, S., Hunt, J., Smith, D. and Sanders, W., 2013.Contested governance: culture, power and institutions in Indigenous Australia(p. 351). ANU Press. Hockeyqld.com.au (2017).Hockey Queensland Home. [online] Hockeyqld.com.au. Available at: https://www.hockeyqld.com.au/ [Accessed 13 Oct. 2017]. Hopwood, M., Skinner, J. and Kitchin, P., 2012.Sport public relations and communication. Routledge. Hoye, R., Smith, A.C., Nicholson, M. and Stewart, B., 2015. Sport management: principles and applications. Routledge. OBoyle, I. and Shilbury, D., 2016. Exploring issues of trust in collaborative sport governance.Journal of Sport Management,30(1), pp.52-69. O'Boyle, I. and Hassan, D., 2014. Performance management and measurement in national-level non-profit sport organisations.European Sport Management Quarterly,14(3), pp.299-314. Pedersen, P.M. and Thibault, L. eds., 2014.Contemporary sport management, 5E. Human Kinetics. Scherer, J. and Rowe, D. eds., 2013.Sport, public broadcasting, and cultural citizenship: signal lost?(Vol. 25). Routledge. Sherry, E., Schulenkorf, N. and Phillips, P. eds., 2016.Managing sport development: an international approach. Routledge. Shilbury, D. and Ferkins, L., 2015. Exploring the utility of collaborative governance in a national sport organization.Journal of sport management,29(4), pp.380-397. Sderman, S. and Dolles, H. eds., 2013.Handbook of research on sport and business. Edward Elgar Publishing. Sotiriadou, P. and De Bosscher, V. eds., 2013.Managing high performance sport. Routledge. Vanessa, R., 2012. Sport entrepreneurship: challenges and directions for future research.International journal of entrepreneurial venturing,4(1), pp.65-76.

Global Strategies Globalization

Question: Why Global Strategies Are Rare In Practice? Answer: Introduction This essay focuses on the reasons as to why global strategy or globalization is rarely practiced, how it is done and when a company is ready to go global. However, to do this, there is the need to clearly define what global strategy is and what it entails in details. It is also important to discuss various factors that limit the number of organizations implementing the different strategies. To achieve all these, there is a need to look at how those strategies are important to the companies, and also the setbacks and disadvantages of the strategies on different international cooperation. Moreover, why the organizations need to reject some of the strategies is also of great importance. Furthermore, the essay also looks at the global trends in business and determines how this will affect future trends. Although globalization is the best thing that can happen to any organization in terms of increasing the companys customer base, increasing the quality and quantity of products and profit maximization, there is need to look at some aspects that may affect that organization or the people around that organization negatively. This would create a negative impression on the company, firm or organization. Discussion and Analysis A global strategy is defined as organizations strategic stepwise guidelines to globalization and can answer various questions like, what must be against what already is. It is also the measure of the level of buyers around the worlds major markets and finally how a global presence can be achieved (Linda and Gao 2016, p. 18). The global strategy also dictates the level at which the organization is supposed to conform to different environments either ethically, legally, culturally, and socially. Linda and Gao (2016) noted down important requirements for a global strategy which includes making operations standardized, exploring synergies by using the strategies globally and centralizing the current management. It is also important to note that the company or organization only standardizes the important elements to be able to achieve a global strategy. From global strategy comes the term glucol, a term that has been used by different researchers like (Talay et.al 2015, p. 62). The word glucol means thinking globally but acting and operating locally, going by the definition by Talay et.al (2015). This term came into existence to prevent any kind of confusion that would arise between global strategy and glucol strategy. As a matter of fact, the glucol strategy is usually implemented at the managerial level. All the same, global strategies are similar to the objectives that local companies, firms or organizations which have. They are just like the fleeting or short term objectives of the business which can be identified by enhancing the everyday operations of the organization. However, the long haul goals are by and large focused towards augmentation of the benefits, deals, and profit of the organization over the long haul; this guarantees development and dependability of the business and predominance over the national or provincial market (Hotho et.al 2015, p. 94). Furthermore, Worldwide Business techniques are a field which involves interdisciplinary issues of advertising, association hypothesis, business procedure, and universal administration and focus on amplifying the firm execution as outlined by (Argote 2015, p.200). He further discusses how picking a worldwide system that is adept for the arrangement of conditions can confront every business. Picking a universal system, be it institutionalization or adjustment, is dependent upon the capacity of the firm to suit its advertising procedure and the outer environment. Similarly, an applied possibility system is frequently speculated between the basic factors of the business, for example, high deals income, limit use and particular connections between these factors and their successful usage can prompt elevated amounts of execution. Therefore, one of the key components influencing worldwide business methodologies is the impact of the WTO (World Trade Organization) governing on the exchange of merchandise and ventures, Foreign Direct Investment and Intellectual Property Rights. These influence significant business interests and transactions and assents between created nations affect the present blazing issues. Such issues are mainly AIDS, ecological assurance and environmental change, worldwide security, and global relocation (Fine 2016, p. 148). Merits of Global Strategy Similarly, there is a need to clearly discuss the various benefits of a worldwide company. These benefits are vast with the main ones being; Increased profits and standardization of production. Increased profits can be realized since when the company grows to become worldwide, there will be an increase in the number of consumers or customers that buy their products or services. Standardization of production, on the other hand, is majorly done by firms who take part in worldwide business and it involves delivering an indistinguishable item for the national as well as the universal markets with just minor changes in qualities. This is for the most part clarified by the way that fundamental human needs are the same in all nations over the world going by the sentiments of (Murray et.al 2009, p. 101). Also, assets or resources of various nations being utilized for creating merchandise and ventures can be done so effectively this is given that when different nations with different resources come together and pool their resources, an increased production becomes evident. The increase can be in terms of quality and quantity, and this helps to increase the overall value of the goods and utility of the goods. In addition, Shoppers get a much more extensive assortment of items to select from hence the consumers can have a variety of choices and conclude their preferred taste and preference. Consumers would have a wide market with a wide field of variety to choose from. Shoppers also get the item they need at more aggressive costs when there is a wide variety of commodities in the market which also enhances a stiff competition. As a result of the stiff competition, most producers will tend to reduce the prices of their commodities, and this would benefit the consumers most. However, the price is the determinant of affordability, therefore, when the prices are down, the products become more affordable that can translate to more sales. According to Fine (2016), It is possible for different Organizations to secure information about products and ventures required at most focused costs, going global, and encouraging research of different products. Such intensified research leads to the acquisition of information about different products especially on the web, magazines or various blogs. Going Global also encourages Organizations to get access to much more extensive markets, increase their customer base by venturing into other foreign markets. This would impact on a company positively and would lead to an increase in the companys revenues and profits. In essence, globalization advances comprehension and goodwill among various nations and also creates a good relation between countries doing business together. This would lead to the removal of different trade restrictions and tariffs; hence encourages the movement of people from those countries. As a result, organizations and speculators get much more extensive open doors for a venture. Similarly, companies get a wider field to compete in through globalization since this involves the entire world. Therefore, the companys product will meet other products in the market and compete favorably through global strategy (Murray et.al 2009, p. 101). Demerits of Global Strategy All the same, not all that glitters is gold. There are also some negative impacts of globalization on an organization or economy at large. For instance, an antagonistic effect of changes in farming preparations in one region can impact negatively on another region. This can result in a decrease in production because resources from other zones will have to be pulled as to cover for the decline in one zone. Different fluctuations in production usually face agriculture and this can be attributed to low rainfall, diseases or other factors that affect crops. When such like problem occurs, the resources from other countries with good production can be used to curb the decline in production which can adversely affect the economy. Furthermore, globalization can have negative effect on nature as highlighted by Siegel and Ghemawat (2011). This can happen especially when moving products from one region to the other. The need to move goods and services quite often so as to reach the final consumer on time in different countries means excessive movements of locomotives which have negative effects on the environment. Apart from that, the excessive production itself has negative impacts on the environment especially the production of goods that deals with extraction such as minerals. Furthermore, the companies nature of operation can also change in order to match the global standards which might require imported labour. This would affect the locals who should benefit from the industry or company in terms of employment opportunities. Besides, globalization can also destroy neighborhood economies. This can be evident when a more developed country goes global then the neighboring competing countries that would try to match them. In return, the country might spend much in keeping up with the competition at the expense of doing other developments. On the same note, if the country fails to match the move, the economy can be affected since their production may attract low demand. To add to that, globalization can also prompt hyper-specialization, which can negative. Additionally, globalization can be driven by individuals with "know how" and power and they can methodically lead to poverty in the world. This is because only a small percentage or a section of the population will be able to control the economy. Therefore, a larger percentage of the population will be left poor and living on less than a dollar per day (Kotler 2010, p. 412). Other Disadvantages of Global Strategy Developed nations can smother improvement of undeveloped and immature nations. This is because of the fear that if those nations develop, then they would compete them and reduce their profits and the dependency of the undeveloped countries as outlined by Johansson .Monetary melancholy in one nation can also trigger unfavorable response over the globe. When one country goes bankrupt then all other countries will be affected being a supply of a flow of goods are services from one country to another will seize due to the financial problems in that country. Also, globalization can lead to the spread of contagious diseases as stated by Ghemawat (2007) . When goods or services move from one country to another, there is also a possibility of the spread of airborne diseases that can be carried by the goods or services from one country to another. This can lead to a major outbreak which can result to loss of lives. However, this problem is a preventable one and only requires a proper screening. On the same note, a countrys demand would be affected by such history of airborne diseases that once originated from the specific country. Such information interferes with customers preference that also impacts on the sales and production in general. Organizations confront much more noteworthy rivalry. And this can put littler organizations, off guard as they don't have assets to contend at a worldwide scale, when organizations go global then we have other companies on a bigger scale that are ready to compete with them. Therefore, the companies need to be ready and prepared to compete favorably with the organizations. Finally, global strategy leads to an increased gap between the poor and the rich in the society or in a country in terms of income inequalities. This is usually referred to as the poverty entrapment, cultural convergence whereby more individuals are moving towards a more westernized way of life and fashion, and this may cause cultural clashes and the introduction of unwanted ways of life in reserved communities. pollution of the environment via water, air, soil or any other means when companies go global , in addition, globalization requires more of skilled workers, therefore, the less skilled workers lose their jobs due to upgrade of the companies (Garten 1999). Globalization also increases the level of unemployment because most of the companys operations will be mechanized and therefore people doing those activities manually will have to be laid off. It can, therefore, prompt social homogenization. Every country/society has its own particular culture, however, under globalization, the way of life of some countries, especially the developing nations can be affected a great deal. Furthermore, it is threatening to Humanism through execution. It goes for quickening monetary development, and financial development, as indicated by its heroes. It can, therefore, be achieved immediately through privatization. The quest for development scarcely regards human qualities. Its also Sex Insensitive since ladies have endured a great deal under globalization. In the privatized economy, the interests and worries of ladies, especially of poor ladies, have been genuinely overlooked. More importantly, Globalization can also lead to civil war between rival coun tries in terms of resources, where they can start a conflict just because of a resource that one country isnt willing to share with the other. Conclusion and Recommendations Global marketing strategy is not only important given the way it impacts positively on the companies revenue and recognition, but also because it can be the best step in saving the company lots of money especially where packaging or advertisement are standardized. The world is already leaning towards a globalization of spirit, ideas, and culture. Therefore, acquisition of globalized products and services has become a natural step that has almost become a usual thing. Even though many companies and organization have portrayed unwillingness in incorporating the idea of global strategy, it can be of great benefit to an organization that does it the right way. Furthermore, the invention of the internet has even made it very simple for businesses to go global with lots of ease. The advancement in technology and e-business has made it possible to go global irrespective of the nature or size of ones business or firm. However, this step requires a lot of time, energy, and a strong financial base to make it a success. Furthermore, even though going global is associated with some benefits, it is true to state that the global approach is not just suitable for any business. Therefore, before deciding whether to go global or not, it is important to establish the upcoming business trends. Getting the information concerning the most innovative business strategy only requires information from a reliable service provider. On the same, there are various technological tools that can help you in getting a real-time innovative business strategy. Conclusion Going by both the advantages and disadvantages of the global strategy that have been highlighted, it is evident that most of its advantages are only money oriented while its disadvantages are things that affect the real life especially of people in the developing countries. Therefore, this can be the main reason as to why most companies or firms are reluctant to adopt the strategy. However, if correct laid down procedures are put in place, the global strategy can be the best step any company or organization would yearn for. Proper execution of the strategy can lead to maximized profits which is the main objective of all businesses. List of References Argote, L 2015, 'An Opportunity for Mutual Learning between Organizational Learning and Global Strategy Researchers: Transactive Memory Systems', Global Strategy Journal, 5, 2, pp. 198-203, Business Source Premier, EBSCOhost, viewed 22 October 2016. Fine, P 2016, 'An important perspective on the recent history of leprosy - and its implications for the current Global Strategy', Leprosy Review, 87, 2, pp. 146-150, Academic Search Premier, EBSCOhost, viewed 22 October 2016. Ghemawat, P 2007, 'Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter', Harvard Business School Press Books, p. 1, Business Source Premier, EBSCOhost, viewed 22 October 2016. Garten, JE 1999, 'World View: Global Strategies for the New Economy (Hardcover)', Harvard Business School Press Books p. 1 n.p.: Business Source Premier, EBSCOhost, viewed 22 October 2016. Hotho, J, Lyles, M, Easterby-Smith, M 2015, 'The Mutual Impact of Global Strategy and Organizational Learning: Current Themes and Future Directions', Global Strategy Journal, 5, 2, pp. 85-112, Business Source Premier, EBSCOhost, viewed 22 October 2016. Holtzblatt, M, Geekie, J, Tschakert, N 2016, 'Should U.S. and Global Regulators Take a Bigger Tax Bite Out of Technology Companies? A Case on Apple's International Tax Minimization and Reporting Strategies', Issues In Accounting Education, 31, 1, pp. 133-148, Business Source Premier, EBSCOhost, viewed 22 October 2016. Kotler, P 2010, 'Chapter 15: Desinging Strategies for theGlobal Marketplace', Marketing Management (0-13-552480-6) pp. 399-427 n.p.: Business Source Premier, EBSCOhost, viewed 22 October 2016. Kidger, P 2001, 'Chapter 9: Human resource management responses to global strategy in multinational enterprises', Globalization, Employment the Workplace pp. 170-190 n.p.: Business Source Premier, EBSCOhost, viewed 22 October 2016. Linda Hui, S, Gao, T 2016, 'Performance Effects of Global Account Coordination Mechanisms: An Integrative Study of Boundary Conditions', Journal Of International Marketing, 24, 2, pp. 1-21, Business Source Premier, EBSCOhost, viewed 22 October 2016. .Murray, J, Kotabe, M, Westjohn, S 2009, 'Global Sourcing Strategy and Performance of Knowledge-Intensive Business Services: A Two-Stage Strategic Fit Model', Journal Of International Marketing, 17, 4, pp. 90-105, Business Source Premier, EBSCOhost, viewed 22 October 2016. Siegel, J, Ghemawat, P 2011, 'Cases about Redefining Global Strategy', Harvard Business School Press Books, p. 1, Business Source Premier, EBSCOhost, viewed 22 October 2016. Talay, M, Townsend, J, Yeniyurt, S 2015, 'Global Brand Architecture Position and Market-Based Performance: The Moderating Role of Culture', Journal Of International Marketing, 23, 2, pp. 55-72, Business Source Premier, EBSCOhost, viewed 22 October 2016