Resume
Akdkd
Ffgfg
1233232
aahshd
dfssd@gmail.com
________________________________________
A dynamic and hardworking Marketing Executive with 2 years of experience before graduating and expertise in areas of
- Advertising planning
- Determining customer requirements
- Developing community related programs
- Conducting advertising projects
- Affiliate negotiations
Objective
Seeking a position that enables me to use my investing, financial management and strategic advising skills with an opportunity to further develop and utilize these skills along with experience.
Strengths
• Leadership
• Investment and risk management faced by firms
• Process Improvement
• Providing strategic advice for launching new products and services
• Analytical and problem solving skills
• Skills to maintain good relations with the companies keypublics
• Crisis managing skills
• Extensive experience in marketing area
• Capable in completion of projects
• Effective at multi-tasking.
• Able to make competent decisions promptly
• Highly trustworthy, modest and ethical.
• Quickly adapts to unfamiliar environment
• Get along well with people
Qualifications
Completed bachelor of Bachelor of business administration (Hons) Marketing with Multimedia with CGPA of 3.76 and majored in:
• Consumer Behavior
• Marketing Strategy
• Marketing Communication
• Marketing
• Product Planning and Management
• Global Marketing
• Marketing Research
Experience
Anti Corruption Bureau, Male’/ Maldives- Auditor, 2004-2005
State Trading Organization Male’/ Maldives- Marketing assistant, 2002-2003
Referee:
Mr. Adam Saleem, Assistant Managing Director
State Trading Organization
Male’, Republic Of Maldives
Mr. Omar Solahudin, Economic Advisor
Multimedia University
Cyberjaya, Malaysia
who can quantify, assess, price and forecast increasingly complex financial outcomes
seek out skilled financial engineering talent for jobs in investment banking, commercial banking, and all variety of investment management and risk management fields
science-based mathematical models to decisions about saving, investing, borrowing, lending, and managing risk.
solve practical financial problems by designing custom contracts and replicating them dynamically using instruments traded in markets.
broad range of investment and risk management needs faced by firms, governments, and households around the world.
Investement banker
They assist public and private corporations in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers, acquisitions and other types of financial transactions.
COVER LETTER
Mahahd
December 10, 2006
Dear Sir,
Because of my specialized training at Multimedia University in the Marketing field and valuable 2 years of successful experience in, I believe that I am the person that your company is looking for as I qualify for the descriptions that you have announced in The Star news on10th of December.
I have gained experience in every phase and areas of advertising while working with one of the successful companies in Maldives, State Trading Organization. While serving this organization, I have learned many strategies to improve and maintain cooperate image, involving and supporting community related activities, maintaining good relation with the customers as well as affiliates, organizing training work shops, writing news releases and other business related writings, developing new organization systems to improve work quality, leading and dealing with competitors and most importantly managing crisis effectively with in a short period of time by making competent decisions. It had also developed interpersonal skills during work.
I have also gained a lot of knowledge on how to conduct an advertising campaign during my practical work for my degree program which I passed with high grades. These practical works includes on how to develop an advertising plan in launching new products as well as services, leading groups, managing the group, distributing work to the group members, handling crisis, to solve problems with the group.
In addition I have mastered personal traits that would fit in to this position harmoniously. I am a hardworking, punctual person who can manage work as a team and independently and manages complete work with in given time. I can get along with people well as I am modest and ethical. I am also a very determined person to achieve high setting goals.
As you see from this description I can repeat that I am clearly qualified for the Marketing and Human Resource Executive in your college. May I have the privilege of discussing this matter with you personally? You can reach me at 0176559160 or e-mail me at alicrow@gmail.com to arrange a convenient time to arrange an interview.
Sincerely,
xxxxxxxxxxxxxxx
Tuesday, April 29, 2008
Cyber Prenuership ..
What is the value of entrepreneur in the society?
Entrepreneur is the person who takes responsibilities of organizing and managing the business. Who is the person who is responsible for all the risks and liabilities of the business? It is for sure that the entrepreneur. Most important role of entrepreneur is that she brings factors of production together. Land, labour capital will be combined and make in to a business venture.
The reason for teaching new concepts to be a entrepreneur is vital. Since government or private companies can not give jobs to everyone. That is out responsibility to move forward with own business venture and with a successful business we can even offer jobs to friends or others. This sounds really good. But in order to do this we need to put forward lot of effort. Organizing and managing and controlling a business make it really harder for new comers. The term entrepreneurship refers those intelligent business minded people, who come with great ideas of establishing the business. There are government bodies who helping those new comers. So that they can beat up the rivals and make their ideas into great success.
Lets us look at how a business man like Bill Gate had become most successful individual in the world. He did not have fancy education. All he knew when he left high school was simple programming language. He dropped high school because we went to through big idea which he is today. This man had contributed almost 50% of the modern day success using computer revolution. Today he offers job opportunities for millions of people. Being an entrepreneur means the person is adding a lot of value to the economy as a whole. It helps the persons too since the business generates lot of profit. According to Wikipedia it defines entrepreneurship as a person who undertakes and operates a new enterprise or venture and assumes some accountability for the inherent risks. In the context of the creation of for-profit enterprises, entrepreneur is often synonymous with founder.
Let us look at the entrepreneur resources available to those news comers in the business fields.
1. Physical resources
Those resources are tangible such as fixed assets and raw materials which are touchable. Some of the natural resources include minerals, energy resources ns land. The main resources can be classified as land labour capital. Those are three major components in formation of a business.
Valuable resources shared by a large number of firms cannot be a source of competitive advantage or SCA. Because of there wide-spread availability, they are not rare. An example might be a legal resource, either independent professionals on retainer or staff. Their major purpose is to minimize threats of law suites from a contentious environment. How rare does a resource need to be to generate a competitive advantage? If supply and demand are at equilibrium and the market clearing of resources is generally affordable, it would seas to be rare. Fore example good location, managers that are also considered as god leaders, or control of natural resources like oil reserves.
2. Reputation resources.
They are the perceptions that people un the firm’s environment have of the company. Reputation can exist at the product level as brand loyalty or at corporate level as global image. Although technology resources can be short lived because of innovation and inventions, reputation capital may be relatively long lived. Many organizations maintain high reputation over long period of time. The fortune survey used eight deferent criteria rankings: the quality of management, use of corporate assets, the firms financial soundness, the firms value of an investment, the quality of product and services, innovation, the ability of attract, develop, and retain to people and extent of community and environmental responsibility.
The opportunities includes
1. Industry and market structure:
It is really important for a entrepreneur to find the opportunities available in the home. For example people of Malaysia have got Multimedia Supper corridor who accept reliable and creative ideas to start up a business. It is always advisable for young entrepreneur to starts with a new business. But this is not by law so things can be change if either way. Searching for opportunities at home will help to reduce the time constraints since you have a clear view of what the market conditions and other factions necessary to be known by you. But it is not good to go for expensive investments at the start. Try to get finance from your own saving rather than going for a bank loan. The entrepreneur is not advisable to spend on a business which is need sunk cost money. This means heavy advertising or spending on buying the new business might not add value to him business. When ever there is a failure of the business the owner will lost money.
2. Changes in perception:
This could be a great idea if you are going for a real profit making business. The pros of doing this are that the business is already with good reputation and bunch of regular customers. New comers need not have to worry about his lack of knowledge about running the business since almost 75% of everything is ready made for him. He has to think about new innovative ways to continue the business with a profit. But is really important to learn the tactics used by the previous owner to capture and run such a nice business. But it is really worth doing to make a business plan. This will help the owner to have over all view of what he is doing and this could be a road map for his success.
There is real support for small business owners from government as well as from private sector. They give awards for best entrepreneur of the year. This sounds really helpful for new builders of business. More than that government allow those small business owners and starters to have light loan with low interest or may be with now interest. This is really good opportunities created by them.
Entrepreneur is the person who takes responsibilities of organizing and managing the business. Who is the person who is responsible for all the risks and liabilities of the business? It is for sure that the entrepreneur. Most important role of entrepreneur is that she brings factors of production together. Land, labour capital will be combined and make in to a business venture.
The reason for teaching new concepts to be a entrepreneur is vital. Since government or private companies can not give jobs to everyone. That is out responsibility to move forward with own business venture and with a successful business we can even offer jobs to friends or others. This sounds really good. But in order to do this we need to put forward lot of effort. Organizing and managing and controlling a business make it really harder for new comers. The term entrepreneurship refers those intelligent business minded people, who come with great ideas of establishing the business. There are government bodies who helping those new comers. So that they can beat up the rivals and make their ideas into great success.
Lets us look at how a business man like Bill Gate had become most successful individual in the world. He did not have fancy education. All he knew when he left high school was simple programming language. He dropped high school because we went to through big idea which he is today. This man had contributed almost 50% of the modern day success using computer revolution. Today he offers job opportunities for millions of people. Being an entrepreneur means the person is adding a lot of value to the economy as a whole. It helps the persons too since the business generates lot of profit. According to Wikipedia it defines entrepreneurship as a person who undertakes and operates a new enterprise or venture and assumes some accountability for the inherent risks. In the context of the creation of for-profit enterprises, entrepreneur is often synonymous with founder.
Let us look at the entrepreneur resources available to those news comers in the business fields.
1. Physical resources
Those resources are tangible such as fixed assets and raw materials which are touchable. Some of the natural resources include minerals, energy resources ns land. The main resources can be classified as land labour capital. Those are three major components in formation of a business.
Valuable resources shared by a large number of firms cannot be a source of competitive advantage or SCA. Because of there wide-spread availability, they are not rare. An example might be a legal resource, either independent professionals on retainer or staff. Their major purpose is to minimize threats of law suites from a contentious environment. How rare does a resource need to be to generate a competitive advantage? If supply and demand are at equilibrium and the market clearing of resources is generally affordable, it would seas to be rare. Fore example good location, managers that are also considered as god leaders, or control of natural resources like oil reserves.
2. Reputation resources.
They are the perceptions that people un the firm’s environment have of the company. Reputation can exist at the product level as brand loyalty or at corporate level as global image. Although technology resources can be short lived because of innovation and inventions, reputation capital may be relatively long lived. Many organizations maintain high reputation over long period of time. The fortune survey used eight deferent criteria rankings: the quality of management, use of corporate assets, the firms financial soundness, the firms value of an investment, the quality of product and services, innovation, the ability of attract, develop, and retain to people and extent of community and environmental responsibility.
The opportunities includes
1. Industry and market structure:
It is really important for a entrepreneur to find the opportunities available in the home. For example people of Malaysia have got Multimedia Supper corridor who accept reliable and creative ideas to start up a business. It is always advisable for young entrepreneur to starts with a new business. But this is not by law so things can be change if either way. Searching for opportunities at home will help to reduce the time constraints since you have a clear view of what the market conditions and other factions necessary to be known by you. But it is not good to go for expensive investments at the start. Try to get finance from your own saving rather than going for a bank loan. The entrepreneur is not advisable to spend on a business which is need sunk cost money. This means heavy advertising or spending on buying the new business might not add value to him business. When ever there is a failure of the business the owner will lost money.
2. Changes in perception:
This could be a great idea if you are going for a real profit making business. The pros of doing this are that the business is already with good reputation and bunch of regular customers. New comers need not have to worry about his lack of knowledge about running the business since almost 75% of everything is ready made for him. He has to think about new innovative ways to continue the business with a profit. But is really important to learn the tactics used by the previous owner to capture and run such a nice business. But it is really worth doing to make a business plan. This will help the owner to have over all view of what he is doing and this could be a road map for his success.
There is real support for small business owners from government as well as from private sector. They give awards for best entrepreneur of the year. This sounds really helpful for new builders of business. More than that government allow those small business owners and starters to have light loan with low interest or may be with now interest. This is really good opportunities created by them.
Financial Markets and Institutions
6. The recent performance of the institution
From the ratios that we have calculated, there are favorable trends going on with the institution. Return on equity was 10% in the year 2003 but it had a nearly 2% growth in the next year. But we see that return on equity had declined to 5.45% in year 2005. This is the year they had a major revolutionary structural change in the organization. They were given a sector which is not performing well which is small and medium enterprise loan scheme. Due to this we see that the return had drop dramatically.
Even though their profit dropped, the board of directors had decided to give a dividend of RM 3.76 as dividend in the year 2005. But they did not give any dividend in previous year i.e., 2004. But in 2003 they paid a high dividend which is RM 5 per share.
When we go through the return on assets the ratios are 1.02, 2.09, 1.85 for year 2005, 2004, 2003 respectively. We need to check the industry average, if we want to go for a real conclusion. From the trend we see an increasing trend followed by the decreasing trend. In 2005, even though number of assets increased there was a slightly lower increase in the Net profit of the firm.
There liquidity ratio stands at 1.3:1 in 2005, which is quiet low for a financial institution. They are highly exposed to the liquidity risk. They are advised to rise it to 1.5:1 which is advisable according to professionals.
7. Major events happening
17/08/2007
Source: BPMB: They have launched an advertising campaign in the occasion of the 50th Merdeka celebration.
04/11/2006
Source: New Straits Times: They wanted to finance half of the Pinang Outer Ring road bridge project which is RM 0.51 Billion It cost a total of RM 1.02 Billion. Other half is expected to be financed by issuing bond. This project consists of a monorail system and a second bridge. Which is to reduce the traffic congestion is the Pinang current bridge.
But the contractor peninsular metro works sdn bhd have not signed the concession agreement. This agreement consists of terms and condition of how long they are going to collect tolls as well as the tolling rates. It is believed that the signing is going to be held in a near future.
The 12km interior segment will connect Jalan Tunku Kudin to Persiaran Gurney and the coastal part Jalan Tanjong Tokong to Persiaran Gurney.
18/10/2006
Source: BPMB
Kumpulan Bank Pembangunan Menyampaikan Sumbangan Aidil Fitri Kepada 5 Buah Rumah Aanak Yatim Persendirian
07/10/2006
Source: BPMB
Bank Pembangunan Hosts An International Collaborative Training On 'Executive Development Programme (EDP-II)'
Bank Pembangunan Malaysia Berhad ("Bank Pembangunan") has been appointed by United Nations Development Programme (UNDP) to be the implementing agency to host a training program, 'Executive Development Programme (EDP-II) ("Programme"), under the project called 'Inter-Regional South-South Program in Capacity Building In Credit Analysis and Development Finance' ("Project").
This is a training program targeted to African countries namely Ethiopia, Ghana, Malawi, Uganda, Zimbabwe, Cameroon, Nigeria, Tanzania and Mozambique. The aim is to strengthen the financial capacity and knowledge of those countries financial sector which is crucial to those countries. This 5 days training program is conducted in Malaysia and related financial officers from Africa is invited.
This program is funded by Japan human resource development fund and consultant for this program is UNDP Malaysia.
14/08/2006
Source: BPMB
Bank Pembangunan Group Launch RM1.0 Billion SME Growth Acceleration Fund
Bank Pembangunan had launched RM 1 billion fund which is targeted to medium and small business owners. It is related to the announcement during the presentation of the 2006 budget where government promised to boost the growth of the small and medium firms buy fuelling them with capital.
A venture capital company named SME Growth Acceleration Fund Sdn Bhd to be formed for this purpose under bank Pembaguanan and they will undertake the distributing the fund to SMEs.
SME Growth Acceleration Fund Sdn. Bhd. will invest in SMEs that are involved in current and emerging businesses, have good operating track records and led by competent entrepreneurs. Amongst the focus of investment will be in the following domains:
• Components Manufacturing & Assembly
• Oil & Gas Products and Services
• Food Processing
• ICT Products and Services and
• General Services
04/08/2006
Source: New StraitsTimes
SME Bank Plans to Lend More to Professionals
The plan of developing SME has come with a new promise to professionals, where it has agreed to lend up to RM 10 million for those firms. This is 20 times more than the current lending amount. This will really help the professional business to find its capital.
This is likely to happen with the approval of Bank Negara expected to happen April 2007. This decision is followed by feedback from professional who claimed that current burrowing is too low for their expansion and growth. Those funds are targeted to healthcare, academic, business consultancy, building and construction, legal services and information and technology. The current burrowing amount is limited to RM 0.5 million. Thought there is some argument that this will not make a big difference compared with the conventional lending facilities provided by the commercial banks.
Other news includes
04/06/2006 Source: New StraitsTimes: Biotech, Agro-Based Sectors Get Priority
17/04/2006 Source: The Edge Daily: Bank Pembangunan's RM1b MTN attracts RM9.6b in bids
22/02/2006 Source: The Star : SME Bank To Lend Out RM2b
18/02/2006 Source: The Star :SME Bank Expects To Approve RM2B Loans
28/01/2006 Source: The Star :SMEs Given Loans Valued At RM335mil
25/01/2006 Source: Business Times :Malaysia's Largest Bond Issue Launched
24/01/2006 Source: BPMB : Bank Pembangunan INKS RM7.0 Billion Deal
24/01/2006 Source: Bernama :Bank Pembangunan's RM7 Bln MTN Programmes Biggest Ever
8-Has the size and contribution of current institution decline or improve? Why
The year 2005 was a golden year for the Bank Pembangunan in term of finance since the Bank Industri & teknologi Malaysia Berhad was rationalized by the government and as a result Bank Perusahaan Kecil & Sederhana Malaysia Berhad (SME Bank) was formed. SME is now fully owned by the Bank Pembangunan.
According to the financial statement of 2005, there was vast increase in the size of the whole group. Total assets increased by 33% which is a fact that its dominance in the financial sector had grown in the 2005. This is due to injection of shareholders capital by 33% in the year 2005.
SME scheme granted loan to small and medium enterprises. It helps lot of individual who are unable to expand their business due to financial tightness. Not only small business owners are benefited from this scheme. Professional such as law firms, accounting and auditing firms are given up to RM 10 million as loan.
Since it is part of the government it uses Bank Pembangunan are an instrument to adjust it monetary policy. Probably government step to push more money to the economy is to accelerate the growth of the economy. Economist believes that there will be multiplier effect of investment.
But on the other hand, government joined a non performing institution with bank pembangunan had lead them to decline in there profit and return on equity. Probably the main aim of the government might not be to maximize the profit and to serve the people. This could be accepted by people as long as they don’t make any huge loss in the long term.
9. Compute the following ratios of your institution and comment
2005 2004 2003
9)a. Return on Equity=net income /shareholder's equity 5.45% 12.27% 10.14%
b. Return on Asset=(Net Income/Total operating income)*(T.O.I/T.Asssets) 1.02% 2.09% 1.85%
where,
Net income/T.operating income 36.32% 65.30% 49.99%
T.Operating income /T.assets 2.81% 3.20% 3.70%
c. Asset Utilization= total operating income/assets 2.81% 3.20% 3.70%
d. Equity Multiplier = Total Assets / Total Equity Capital 534X 587X 548X
e. Profit Margin=Net profit / Total Turnover 36.32% 65.30% 49.99%
f. Interest Expense Ratio = Interest Expense / Total Operating Income 94.37% 108.13% 77.21%
g. Provision for Loan Losses=PFLL/Total operating Income 39.56% 17.50% 23.63%
h. Non Interest Expense Ratio = NIER / Total Operating Income 22.93% 14.07% 14.68%
i. Spread - - -
j. Overhead efficiency = Non Interest Income / Noninterest expense 85.88% 59.33% 96.25%
There was a rapid decrease in the profit of the firm even though its shareholders fund increase. Due to the major structural change, they were force to enter into completely new area of the market apart from the normal business which is maritime, infrastructure and some extend the financial activity. Due to this major change, company return on equity fallen by almost half of last year. The same effect is with the Return on Asset. This is all related to decrease in profit of the bank.
On the other hand they have achieved less interest expense ratio compare with the 2004. Therefore we come to know that the loss is due to unmanaged other overhead expense and an increase in the provision for loan and other defaults.
From the available information we are unable to calculate spread.
Over all, we can conclude that it is doing an average job. Due to the shift in its operation the management will face cultural differences when acquiring a new sector or new market of business. But the recent trend doesn’t show any favorable performance since other company also performed well in the period of 2005. Since, there was no blow to the industry in any way. The Ringgit Malaysia value fall and it was in a strong position and it was becoming stronger and stronger in the end of 2005.
Since the banking side of the economy is the most volatile industry they will hit every strong wave in the economy. Financial sector is really sensitive to the economy. After the Asian crisis in 1997, Malaysia is still in a recovery stage, but Bank Pembangunan did well during this period. Former president rules a ceiling on the Ringgit and it is to be lifted off in the year end of 2006. Since then world has considered Malaysia as a potential market for there investment. This had lead to major shift in the countries RGDP. With those radical changes, Bank Pembangunan had adopted Islamic banking concept into its operation. They are doing pretty good with Islamic banking since Malaysia had become a financial hub in Asia-Pacific.
We need more industry averages to compare the performance of Bank Pembangunan, since it is not so accurate to go for a conclusion without looking what their rivals doing in the business.
It is not only the financial statement that is considered when measuring the performance. The management skills are the biggest asset of the company which is not included in the financial statement. Over the years the management had done a pretty well job since Bank Pembangunan had run with a profit. It have not face over all loss which is a good sign. Even though they go bankrupt government will push it up by financing from the reserve. But it is not what most of the Malaysian’s wants. A loss in its opration means that it is going to cost the public money in the form of tax. Thank to Bank Pembangunan!
10. Run productivity and efficiency tests for this institution
2005 2,004 2003
10)Total Assets 22,860,218 17,250,081 14,109,844
Deposits from customers 4,165,629 4,269,510 3.753,330
Deposits placed with financial institutions 1,604,544 710,293 637,911
Interest Expenses 605,655 596,345 403,266
Overhead expenses 147,196 77,609 76,665
Personnel Expenses (this is from the notes to the account) - - -
The asset quality of the banking system improved further in 2005, as non-performing loans (NPLs) continued to decline. The improvement in loan quality was mainly attributed to higher reclassification of NPLs to performing status following overall improvement in the repayment capacity of borrowers and write-offs during the year.
NOTE : APENDIXEX (All the workings )in the Excel file ‘tables’
From the ratios that we have calculated, there are favorable trends going on with the institution. Return on equity was 10% in the year 2003 but it had a nearly 2% growth in the next year. But we see that return on equity had declined to 5.45% in year 2005. This is the year they had a major revolutionary structural change in the organization. They were given a sector which is not performing well which is small and medium enterprise loan scheme. Due to this we see that the return had drop dramatically.
Even though their profit dropped, the board of directors had decided to give a dividend of RM 3.76 as dividend in the year 2005. But they did not give any dividend in previous year i.e., 2004. But in 2003 they paid a high dividend which is RM 5 per share.
When we go through the return on assets the ratios are 1.02, 2.09, 1.85 for year 2005, 2004, 2003 respectively. We need to check the industry average, if we want to go for a real conclusion. From the trend we see an increasing trend followed by the decreasing trend. In 2005, even though number of assets increased there was a slightly lower increase in the Net profit of the firm.
There liquidity ratio stands at 1.3:1 in 2005, which is quiet low for a financial institution. They are highly exposed to the liquidity risk. They are advised to rise it to 1.5:1 which is advisable according to professionals.
7. Major events happening
17/08/2007
Source: BPMB: They have launched an advertising campaign in the occasion of the 50th Merdeka celebration.
04/11/2006
Source: New Straits Times: They wanted to finance half of the Pinang Outer Ring road bridge project which is RM 0.51 Billion It cost a total of RM 1.02 Billion. Other half is expected to be financed by issuing bond. This project consists of a monorail system and a second bridge. Which is to reduce the traffic congestion is the Pinang current bridge.
But the contractor peninsular metro works sdn bhd have not signed the concession agreement. This agreement consists of terms and condition of how long they are going to collect tolls as well as the tolling rates. It is believed that the signing is going to be held in a near future.
The 12km interior segment will connect Jalan Tunku Kudin to Persiaran Gurney and the coastal part Jalan Tanjong Tokong to Persiaran Gurney.
18/10/2006
Source: BPMB
Kumpulan Bank Pembangunan Menyampaikan Sumbangan Aidil Fitri Kepada 5 Buah Rumah Aanak Yatim Persendirian
07/10/2006
Source: BPMB
Bank Pembangunan Hosts An International Collaborative Training On 'Executive Development Programme (EDP-II)'
Bank Pembangunan Malaysia Berhad ("Bank Pembangunan") has been appointed by United Nations Development Programme (UNDP) to be the implementing agency to host a training program, 'Executive Development Programme (EDP-II) ("Programme"), under the project called 'Inter-Regional South-South Program in Capacity Building In Credit Analysis and Development Finance' ("Project").
This is a training program targeted to African countries namely Ethiopia, Ghana, Malawi, Uganda, Zimbabwe, Cameroon, Nigeria, Tanzania and Mozambique. The aim is to strengthen the financial capacity and knowledge of those countries financial sector which is crucial to those countries. This 5 days training program is conducted in Malaysia and related financial officers from Africa is invited.
This program is funded by Japan human resource development fund and consultant for this program is UNDP Malaysia.
14/08/2006
Source: BPMB
Bank Pembangunan Group Launch RM1.0 Billion SME Growth Acceleration Fund
Bank Pembangunan had launched RM 1 billion fund which is targeted to medium and small business owners. It is related to the announcement during the presentation of the 2006 budget where government promised to boost the growth of the small and medium firms buy fuelling them with capital.
A venture capital company named SME Growth Acceleration Fund Sdn Bhd to be formed for this purpose under bank Pembaguanan and they will undertake the distributing the fund to SMEs.
SME Growth Acceleration Fund Sdn. Bhd. will invest in SMEs that are involved in current and emerging businesses, have good operating track records and led by competent entrepreneurs. Amongst the focus of investment will be in the following domains:
• Components Manufacturing & Assembly
• Oil & Gas Products and Services
• Food Processing
• ICT Products and Services and
• General Services
04/08/2006
Source: New StraitsTimes
SME Bank Plans to Lend More to Professionals
The plan of developing SME has come with a new promise to professionals, where it has agreed to lend up to RM 10 million for those firms. This is 20 times more than the current lending amount. This will really help the professional business to find its capital.
This is likely to happen with the approval of Bank Negara expected to happen April 2007. This decision is followed by feedback from professional who claimed that current burrowing is too low for their expansion and growth. Those funds are targeted to healthcare, academic, business consultancy, building and construction, legal services and information and technology. The current burrowing amount is limited to RM 0.5 million. Thought there is some argument that this will not make a big difference compared with the conventional lending facilities provided by the commercial banks.
Other news includes
04/06/2006 Source: New StraitsTimes: Biotech, Agro-Based Sectors Get Priority
17/04/2006 Source: The Edge Daily: Bank Pembangunan's RM1b MTN attracts RM9.6b in bids
22/02/2006 Source: The Star : SME Bank To Lend Out RM2b
18/02/2006 Source: The Star :SME Bank Expects To Approve RM2B Loans
28/01/2006 Source: The Star :SMEs Given Loans Valued At RM335mil
25/01/2006 Source: Business Times :Malaysia's Largest Bond Issue Launched
24/01/2006 Source: BPMB : Bank Pembangunan INKS RM7.0 Billion Deal
24/01/2006 Source: Bernama :Bank Pembangunan's RM7 Bln MTN Programmes Biggest Ever
8-Has the size and contribution of current institution decline or improve? Why
The year 2005 was a golden year for the Bank Pembangunan in term of finance since the Bank Industri & teknologi Malaysia Berhad was rationalized by the government and as a result Bank Perusahaan Kecil & Sederhana Malaysia Berhad (SME Bank) was formed. SME is now fully owned by the Bank Pembangunan.
According to the financial statement of 2005, there was vast increase in the size of the whole group. Total assets increased by 33% which is a fact that its dominance in the financial sector had grown in the 2005. This is due to injection of shareholders capital by 33% in the year 2005.
SME scheme granted loan to small and medium enterprises. It helps lot of individual who are unable to expand their business due to financial tightness. Not only small business owners are benefited from this scheme. Professional such as law firms, accounting and auditing firms are given up to RM 10 million as loan.
Since it is part of the government it uses Bank Pembangunan are an instrument to adjust it monetary policy. Probably government step to push more money to the economy is to accelerate the growth of the economy. Economist believes that there will be multiplier effect of investment.
But on the other hand, government joined a non performing institution with bank pembangunan had lead them to decline in there profit and return on equity. Probably the main aim of the government might not be to maximize the profit and to serve the people. This could be accepted by people as long as they don’t make any huge loss in the long term.
9. Compute the following ratios of your institution and comment
2005 2004 2003
9)a. Return on Equity=net income /shareholder's equity 5.45% 12.27% 10.14%
b. Return on Asset=(Net Income/Total operating income)*(T.O.I/T.Asssets) 1.02% 2.09% 1.85%
where,
Net income/T.operating income 36.32% 65.30% 49.99%
T.Operating income /T.assets 2.81% 3.20% 3.70%
c. Asset Utilization= total operating income/assets 2.81% 3.20% 3.70%
d. Equity Multiplier = Total Assets / Total Equity Capital 534X 587X 548X
e. Profit Margin=Net profit / Total Turnover 36.32% 65.30% 49.99%
f. Interest Expense Ratio = Interest Expense / Total Operating Income 94.37% 108.13% 77.21%
g. Provision for Loan Losses=PFLL/Total operating Income 39.56% 17.50% 23.63%
h. Non Interest Expense Ratio = NIER / Total Operating Income 22.93% 14.07% 14.68%
i. Spread - - -
j. Overhead efficiency = Non Interest Income / Noninterest expense 85.88% 59.33% 96.25%
There was a rapid decrease in the profit of the firm even though its shareholders fund increase. Due to the major structural change, they were force to enter into completely new area of the market apart from the normal business which is maritime, infrastructure and some extend the financial activity. Due to this major change, company return on equity fallen by almost half of last year. The same effect is with the Return on Asset. This is all related to decrease in profit of the bank.
On the other hand they have achieved less interest expense ratio compare with the 2004. Therefore we come to know that the loss is due to unmanaged other overhead expense and an increase in the provision for loan and other defaults.
From the available information we are unable to calculate spread.
Over all, we can conclude that it is doing an average job. Due to the shift in its operation the management will face cultural differences when acquiring a new sector or new market of business. But the recent trend doesn’t show any favorable performance since other company also performed well in the period of 2005. Since, there was no blow to the industry in any way. The Ringgit Malaysia value fall and it was in a strong position and it was becoming stronger and stronger in the end of 2005.
Since the banking side of the economy is the most volatile industry they will hit every strong wave in the economy. Financial sector is really sensitive to the economy. After the Asian crisis in 1997, Malaysia is still in a recovery stage, but Bank Pembangunan did well during this period. Former president rules a ceiling on the Ringgit and it is to be lifted off in the year end of 2006. Since then world has considered Malaysia as a potential market for there investment. This had lead to major shift in the countries RGDP. With those radical changes, Bank Pembangunan had adopted Islamic banking concept into its operation. They are doing pretty good with Islamic banking since Malaysia had become a financial hub in Asia-Pacific.
We need more industry averages to compare the performance of Bank Pembangunan, since it is not so accurate to go for a conclusion without looking what their rivals doing in the business.
It is not only the financial statement that is considered when measuring the performance. The management skills are the biggest asset of the company which is not included in the financial statement. Over the years the management had done a pretty well job since Bank Pembangunan had run with a profit. It have not face over all loss which is a good sign. Even though they go bankrupt government will push it up by financing from the reserve. But it is not what most of the Malaysian’s wants. A loss in its opration means that it is going to cost the public money in the form of tax. Thank to Bank Pembangunan!
10. Run productivity and efficiency tests for this institution
2005 2,004 2003
10)Total Assets 22,860,218 17,250,081 14,109,844
Deposits from customers 4,165,629 4,269,510 3.753,330
Deposits placed with financial institutions 1,604,544 710,293 637,911
Interest Expenses 605,655 596,345 403,266
Overhead expenses 147,196 77,609 76,665
Personnel Expenses (this is from the notes to the account) - - -
The asset quality of the banking system improved further in 2005, as non-performing loans (NPLs) continued to decline. The improvement in loan quality was mainly attributed to higher reclassification of NPLs to performing status following overall improvement in the repayment capacity of borrowers and write-offs during the year.
NOTE : APENDIXEX (All the workings )in the Excel file ‘tables’
Income model Evaluation -Econometrics
COBB-DOUGLAS PRODUCTION FUNCTION.
Introduction
Some economists define very basic aim of econometrics as ‘to put empirical flesh and blood on a theoretical structure. ’ A more lengthy definition is that of Samuel at al, who describes econometrics as, ‘the application of mathematical statistics to economic data to lend empirical support to the model constructed by mathematical economists and to obtain numerical estimates.
The economists deduce or predict certain relationships between two or more economic data series. Obvious examples are the consumption function, demand curve and employment function. Econometrics concern with quantifying such relationship and finding values for the parameters contained in them, testing any theories implied such relationships and using relationships as a basis for quantitative prediction or forecast.
In this assignment I have choose Cobb-Douglas production function. The Author has proven that this theorem could be applied in a case of Bangladeshi economy. But here I am concern with testing this function in the content of Malaysia.
Problem Statement
There was an econometric model developed by two experts C.W Cobb and D.H Douglas in 1920’s. Since they are from the old school and had come with there idea.
They came with a function which is expressed mathematically as
P = ALαKβu,
Where it defined as P=out put, K= capital, L= labor and A as the constant. α and β , are positive parameters.
Taking log of both sides of equation, the function transforms to a log-linear form as:
lnP =lnA + α lnL+ β lnK+ lnu
since this model have been develop to check the production function of the developing country , I here tried to check whether it can be applied to Malaysian content.
Research Objectives
Even though my reference term paper is about the elasticity of labor and capital with respect to all the industry in the economy, here I tried to narrow down my research to find out the truth behind my chosen economic model. Here I m going to test this econometric model based on the out put which is supposed to be equal with the sum of labor force employed and the investment which is spend on the economy.
The C-D production function could be evaluated from different angles but here as to make it simple and work out it easily with my level I stick with the basic model it self rather then going for an evaluation from different angles.
This function is applied many researchers to find the output. It could be to find the labor output or agricultural output as well as industry output. But this research is to check the out put of the economy as a whole in the content of Malaysia.
Literature Review
1. Here is an article quoted from a journal where they are concerned with doing an income model. But we see that their approach of finding total out put produce in an economy in other word GDP is totally different. I believe that this is the direct approach where steps involved in it are more than the C-D production function.
The model simulated is relatively simple and represents an extension of the model presented by Smith. 1 In the strictest sense, simplicity is important to an aggregate analysis. Suits indicate that for purposes of exposition the smaller and less complex the model the better it will be. 2 The establishment of the model on a conceptual basis is of prime importance. An expansion of the model can always he pursued at some later time of policy which would enable them to maintain inventory at a constant level in either an expanding or contracting economy. GNP is then obtained by aggregating consumption, investment and the demand for inventory. Thus, the model which is demand oriented serves to illustrate the dynamics of the multiplier and the damping effects of the inventory feedback mechanism.
Given a desired level of inventory, some fixed investment and the GNP from the previous time period, values are calculated for the present consumption and the residual non consumed output investment (inventory).Thus, the composition of successive levels of GNP is determined through the system of equations, which compose the basic model. These equations are shown below.
i. Yt = Ct-i + It-I + Dt-i
2. C + cY +C
t t o
3. It + Ift + Int
4. Int + Yt - (Ct + I~)
5. K n = K n I n
t t-i + t
6. D = K d - K n
t t t
7. S = Y C
t t t
where
Y Gross National Product
t
C Consumption
t
I Actual Investment
t
D Actual Inventory Demanded
t
c Marginal Propensity to Consume
C Autonomous Consumption
o
if Fixed Investment
t
I n Added Investment as Inventory
t
K n Actual[ Ending Inventory
t
2- According to Marjan Senjur paper he has concentrated on the level of expenditure by the government or the government spending and its impact of the economy.
Here is had used the circular flow of income as his methodology and he explained what happens when government increase it’s spending to the GDP given that other factors remains constant. His findings conclude that
Grossman (1990) established a slightly negative effect on economic growth, with great fluctuations between countries. Diamond (1990) could not find any empirical relation between the size of public expenditures and the rate of economic growth. This is also our finding. Out of these findings, with different results; we can state that it is not possible to give a reliable statement about the relation between public expenditures and economic growth. A possible explanation for this is that the problem was not formulated correctly. As Barro (1990) has already stated, such results show that, in general, countries choose the right public expenditure rate.
On average the actual PE rate is growth neutral, and, therefore, empirical results of regression of rates of growth and share of public expenditures, or of rates of growth of public expenditures, do not show correlation.
3-Accoring to Economic Issues, Vol.7, and Part 1, March 2002 paper a re-examination of the original time-series data sets used by Professor Douglas and associated researchers to establish the existence of an aggregate production function is undertaken. Particular attention is paid to the issue of whether the data provide deductive support for the ‘Laws of Production’ as claimed by Douglas (1948). Various statistical methods are used to analyze the data to see if the claims of Douglas are justified. Only the New South Wales data and to a lesser extent the New Zealand data yield results that support the assertions of Douglas - hence the Antipodean defense
In the same paper they author had quoted that the fact that on the basis of fairly wide studies there is an appreciable degree of uniformity, and that the sum of the exponents approximates unity, fairly clearly suggests that there are laws of production which can be approximated by inductive studies and that we are at least approaching them. (pp. 20-1).
This gives us the hint that sometimes C_D production function could not be applied to some industry. Only from one geographic area they are able to come with the right fit.
4-This apparent empirical strength of aggregate production functions is often interpreted as support for neoclassical theory. But there is neither theoretical nor empirical basis, for this conclusion. We already know that such functions cannot be derived theoretically, except under conditions which neoclassical theory itself rejects (e.g. the simple labor theory of value) (Garegnani, 1970). Moreover, Fisher (1971) discovered through simulation studies that the aggregate data generated by microeconomic production functions were not generally well fitted by aggregate production functions; there the functions which did best fit this data are not neoclassical in nature (this is a common finding, e.g. Walters, 1963); and that in simulation runs where the wage share happened to be roughly constant and aggregate Cobb-Douglas production functions happened to work well, this goodness of fit was puzzling because it held even when the theoretical conditions for aggregate production functions were flagrantly violated.
These guys actually support the Cobb-Douglas theory since they have faced it difficult to analyze regression using some other production function given by famous authors.
5- Dr.Khalid did a research on Cobb-Douglas production function and his conclusion and recommendations are
i. Although Cobb-Douglas production function shows physical output as the Douglas labor and capital inputs, this article prove that monetary Model is good alternative to Real Model (Physical Model) at least in Egyptian tourism sector.
ii. Cobb-Douglas production function in Monetary Model may be good formula in services sectors.
iii. Cobb-Douglas production function with intercept has good results than Cobb-Douglas production function without intercept.
iv. The Egyptian tourism sector is more sensitive for regional and national security, but it is disappear in Cobb-Douglas production function
Over all I conclude that Cobb-Douglas production function had been tested by my individual and researches and it is proven to be attractive and widely used in the economies. On the other hand this is not the case for some researchers since there is more then two factors (labor and Capital) when finding the out put. As said above in Egyptian case tourism is heavily depends on the level of internal securities provided since Middle East in not safe from the operating militias group like Al-Qaeda.
Construct your econometric model.
Since in this paper I have decided to test on the C-D production function, fist of all I have gathered data about the three components that is required to run this econometric model. Since the availability of data is limited this paper has only focused on the data collected during 1985-2005 from Malaysia.
P L K
1985 77470.000 5653.300 23124.000
1986 71594.000 5760.100 18865.000
1987 81085.000 5983.900 17904.000
1988 92370.000 6175.800 22726.000
1989 105233.000 6390.900 30599.000
1990 119081.000 6685.000 39348.000
1991 135124.000 6891.000 49126.000
1992 150682.000 7047.800 55191.000
1993 172194.000 7383.400 66937.000
1994 195461.000 7618.000 78664.000
1995 222473.000 7645.000 96967.000
1996 253732.000 8399.500 107825.000
1997 281795.000 8569.200 121494.000
1998 283243.000 8602.750 75982.000
1999 300764.000 8830.500 65841.000
2000 343215.000 9291.250 87729.000
2001 334404.000 9357.000 83345.000
2002 362012.000 9543.000 83764.000
2003 395017.000 9870.000 87089.000
2004 450152.000 9987.000 91818.000
2005 495239.000 10064.800 98930.000
From the above date P is the Gross Domestic Product (GDP) which is taken from t he statistic provided by the Malaysian government. And the L refers to the Employment where counts number of people who are employed and working is. It does not count on the number of people who are in the working age group but not working or unable to find a job.
When I was looking for a K which is believed to be the level of investment in the economy I have come across couple of figures. But I have chosen the Gross Fixed Capital Formation as K since this is the most accurate data available.
The Gross Fixed Capital Formation is a flow value. It is usually defined as the total value of additions to fixed assets by resident producer enterprises, less disposals of fixed assets during the quarter or year, plus additions to the value of non-produced assets (such as discoveries of mineral deposits, or land improvements).
Normally these assets are tangible assets, but in some cases they are intangible intellectual property including artwork and software. The debate continues about the exact definitional boundaries. The main asset types are plant & machinery, equipment, vehicles, land improvements and buildings.
Then in order to make the calculation easier what I did was to log on each figure. For example (in excel =log (77470).). Here is the logged table for P, L and K.
P L K
1985 4.889134 3.752302 4.364063
1986 4.854877 3.76043 4.275657
1987 4.908941 3.776984 4.25295
1988 4.965531 3.790693 4.356523
1989 5.022152 3.805562 4.485707
1990 5.075842 3.825101 4.594923
1991 5.130732 3.838282 4.691311
1992 5.178061 3.848054 4.741868
1993 5.236018 3.868256 4.825666
1994 5.29106 3.881841 4.895776
1995 5.347277 3.883377 4.986624
1996 5.404375 3.924253 5.032719
1997 5.449933 3.93294 5.084555
1998 5.452159 3.934637 4.880711
1999 5.478226 3.945985 4.818496
2000 5.535566 3.968074 4.943143
2001 5.524271 3.971137 4.92088
2002 5.558723 3.979685 4.923057
2003 5.596616 3.994317 4.939963
2004 5.653359 3.999435 4.962928
2005 5.694815 4.002805 4.995328
From those data then I ran the OLS regression equation with eviews software and the findings are here.
Dependent Variable: P=GDP
Method: Least Squares
Date: 09/12/07 Time: 17:49
Sample: 1985 2005
Included observations: 21
Variable Coefficient Std. Error t-Statistic Prob.
L=labor 2.83572 0.121723 23.29645 0
K=NFCF 0.129905 0.038305 3.391331 0.0033
A=Integer -6.35108 0.324183 -19.591 0
R-squared 0.994283 Mean dependent var 5.297508
Adjusted R-squared 0.993648 S.D. dependent var 0.26821
S.E. of regression 0.021376 Akaike info criterion -4.72156
Sum squared resid 0.008225 Schwarz criterion -4.57234
Log likelihood 52.57633 F-statistic 1565.366
Durbin-Watson stat 1.532652 Prob(F-statistic) 0
Therefore our function is In P = -6.35108 + 2.83572 In L + 0.129905 In K
Interpretation of the table:
Integer:
When all independent variable is 0 the dependent variable is -6.35108. However there is no economic meaning.
Labor or Employment:
Other independent variable remains constant if 1% increases in Labor force or employment will lead to a 2.83% increase in the P or Gross Domestic Output.
Capital or Gross Fixed Capital formation:
If other independent factors remain constant 1% increase in the K or capital will lead to a 0.13% increase in the GDP.
R-squared:
The two regressors L-Labor and K-GFCF explain 0.994283 or 99.4283 percent of the variation in the P-GDP. The estimated regression line fits the data quite well. The R2 value of 0.994283 means that about 99% percent of the
Variation in the (log of) output or GDP is explained by the (logs of) L-labor and K-capital.
Durbin-Watson statistic
The Durbin-Watson statistic is a test statistic used to detect the presence of autocorrelation in the residuals from a regression analysis. The value of Durbin-Watson statistic should be reasonable from 0 to 4. A value of 2 indicates there appears to be no autocorrelation. Small values of d indicate successive error terms are, on average, close in value to one another, or positively correlated. Large values of d indicate successive error terms are, on average, much different in value to one another, or negatively correlated. It means that 1.532652 value is smaller than 4. Therefore the value of Durbin-Watson statistic is can be explained by the 2 independent variables.
Year Actual Fitted Residual Residual Plot
1985 4.88913 4.85631 0.03282 | . | . * |
1986 4.85488 4.86788 -0.013 | . * | . |
1987 4.90894 4.91187 -0.00293 | . *| . |
1988 4.96553 4.9642 0.00133 | . * . |
1989 5.02215 5.02314 -0.00099 | . * . |
1990 5.07584 5.09274 -0.0169 | . * | . |
1991 5.13073 5.14264 -0.01191 | . * | . |
1992 5.17806 5.17691 0.00115 | . * . |
1993 5.23602 5.24509 -0.00907 | . * | . |
1994 5.29106 5.29272 -0.00166 | . * . |
1995 5.34728 5.30888 0.0384 | . | . * |
1996 5.40438 5.43078 -0.0264 | *. | . |
1997 5.44993 5.46215 -0.01221 | . * | . |
1998 5.45216 5.44048 0.01168 | . | * . |
1999 5.47823 5.46458 0.01365 | . | * . |
2000 5.53557 5.54341 -0.00784 | . * | . |
2001 5.52427 5.5492 -0.02493 | * | . |
2002 5.55872 5.57372 -0.015 | . * | . |
2003 5.59662 5.61741 -0.02079 | .* | . |
2004 5.65336 5.63491 0.01845 | . | *. |
2005 5.69481 5.64867 0.04614 | . | . *|
References.
• The effects of Randomly Generated Disturbances and Fiscal Policy on an Aggregate Demand Macro economic model
University of Akron
Akron, Ohio 44325
P. d. Kuzdrall
University of Western Ontario
London, Ontario CANADA N6A 3
• Public expenditure rate and economic growth by Marjan Senjur-Faculty of Economics, University of Ljubljana, Slovenia
• The Cobb-Douglas Production Function: An Antipodean Defense? Iain Fraser1: Economic Issues, Vol.7, Part 1, March 2002- 39
• Hamburg production function by Anwar Shekh
• An Estimation of Cobb-Douglas production function in Egyptian Tourism Sector by Dr Khalid from Zagazig university
Introduction
Some economists define very basic aim of econometrics as ‘to put empirical flesh and blood on a theoretical structure. ’ A more lengthy definition is that of Samuel at al, who describes econometrics as, ‘the application of mathematical statistics to economic data to lend empirical support to the model constructed by mathematical economists and to obtain numerical estimates.
The economists deduce or predict certain relationships between two or more economic data series. Obvious examples are the consumption function, demand curve and employment function. Econometrics concern with quantifying such relationship and finding values for the parameters contained in them, testing any theories implied such relationships and using relationships as a basis for quantitative prediction or forecast.
In this assignment I have choose Cobb-Douglas production function. The Author has proven that this theorem could be applied in a case of Bangladeshi economy. But here I am concern with testing this function in the content of Malaysia.
Problem Statement
There was an econometric model developed by two experts C.W Cobb and D.H Douglas in 1920’s. Since they are from the old school and had come with there idea.
They came with a function which is expressed mathematically as
P = ALαKβu,
Where it defined as P=out put, K= capital, L= labor and A as the constant. α and β , are positive parameters.
Taking log of both sides of equation, the function transforms to a log-linear form as:
lnP =lnA + α lnL+ β lnK+ lnu
since this model have been develop to check the production function of the developing country , I here tried to check whether it can be applied to Malaysian content.
Research Objectives
Even though my reference term paper is about the elasticity of labor and capital with respect to all the industry in the economy, here I tried to narrow down my research to find out the truth behind my chosen economic model. Here I m going to test this econometric model based on the out put which is supposed to be equal with the sum of labor force employed and the investment which is spend on the economy.
The C-D production function could be evaluated from different angles but here as to make it simple and work out it easily with my level I stick with the basic model it self rather then going for an evaluation from different angles.
This function is applied many researchers to find the output. It could be to find the labor output or agricultural output as well as industry output. But this research is to check the out put of the economy as a whole in the content of Malaysia.
Literature Review
1. Here is an article quoted from a journal where they are concerned with doing an income model. But we see that their approach of finding total out put produce in an economy in other word GDP is totally different. I believe that this is the direct approach where steps involved in it are more than the C-D production function.
The model simulated is relatively simple and represents an extension of the model presented by Smith. 1 In the strictest sense, simplicity is important to an aggregate analysis. Suits indicate that for purposes of exposition the smaller and less complex the model the better it will be. 2 The establishment of the model on a conceptual basis is of prime importance. An expansion of the model can always he pursued at some later time of policy which would enable them to maintain inventory at a constant level in either an expanding or contracting economy. GNP is then obtained by aggregating consumption, investment and the demand for inventory. Thus, the model which is demand oriented serves to illustrate the dynamics of the multiplier and the damping effects of the inventory feedback mechanism.
Given a desired level of inventory, some fixed investment and the GNP from the previous time period, values are calculated for the present consumption and the residual non consumed output investment (inventory).Thus, the composition of successive levels of GNP is determined through the system of equations, which compose the basic model. These equations are shown below.
i. Yt = Ct-i + It-I + Dt-i
2. C + cY +C
t t o
3. It + Ift + Int
4. Int + Yt - (Ct + I~)
5. K n = K n I n
t t-i + t
6. D = K d - K n
t t t
7. S = Y C
t t t
where
Y Gross National Product
t
C Consumption
t
I Actual Investment
t
D Actual Inventory Demanded
t
c Marginal Propensity to Consume
C Autonomous Consumption
o
if Fixed Investment
t
I n Added Investment as Inventory
t
K n Actual[ Ending Inventory
t
2- According to Marjan Senjur paper he has concentrated on the level of expenditure by the government or the government spending and its impact of the economy.
Here is had used the circular flow of income as his methodology and he explained what happens when government increase it’s spending to the GDP given that other factors remains constant. His findings conclude that
Grossman (1990) established a slightly negative effect on economic growth, with great fluctuations between countries. Diamond (1990) could not find any empirical relation between the size of public expenditures and the rate of economic growth. This is also our finding. Out of these findings, with different results; we can state that it is not possible to give a reliable statement about the relation between public expenditures and economic growth. A possible explanation for this is that the problem was not formulated correctly. As Barro (1990) has already stated, such results show that, in general, countries choose the right public expenditure rate.
On average the actual PE rate is growth neutral, and, therefore, empirical results of regression of rates of growth and share of public expenditures, or of rates of growth of public expenditures, do not show correlation.
3-Accoring to Economic Issues, Vol.7, and Part 1, March 2002 paper a re-examination of the original time-series data sets used by Professor Douglas and associated researchers to establish the existence of an aggregate production function is undertaken. Particular attention is paid to the issue of whether the data provide deductive support for the ‘Laws of Production’ as claimed by Douglas (1948). Various statistical methods are used to analyze the data to see if the claims of Douglas are justified. Only the New South Wales data and to a lesser extent the New Zealand data yield results that support the assertions of Douglas - hence the Antipodean defense
In the same paper they author had quoted that the fact that on the basis of fairly wide studies there is an appreciable degree of uniformity, and that the sum of the exponents approximates unity, fairly clearly suggests that there are laws of production which can be approximated by inductive studies and that we are at least approaching them. (pp. 20-1).
This gives us the hint that sometimes C_D production function could not be applied to some industry. Only from one geographic area they are able to come with the right fit.
4-This apparent empirical strength of aggregate production functions is often interpreted as support for neoclassical theory. But there is neither theoretical nor empirical basis, for this conclusion. We already know that such functions cannot be derived theoretically, except under conditions which neoclassical theory itself rejects (e.g. the simple labor theory of value) (Garegnani, 1970). Moreover, Fisher (1971) discovered through simulation studies that the aggregate data generated by microeconomic production functions were not generally well fitted by aggregate production functions; there the functions which did best fit this data are not neoclassical in nature (this is a common finding, e.g. Walters, 1963); and that in simulation runs where the wage share happened to be roughly constant and aggregate Cobb-Douglas production functions happened to work well, this goodness of fit was puzzling because it held even when the theoretical conditions for aggregate production functions were flagrantly violated.
These guys actually support the Cobb-Douglas theory since they have faced it difficult to analyze regression using some other production function given by famous authors.
5- Dr.Khalid did a research on Cobb-Douglas production function and his conclusion and recommendations are
i. Although Cobb-Douglas production function shows physical output as the Douglas labor and capital inputs, this article prove that monetary Model is good alternative to Real Model (Physical Model) at least in Egyptian tourism sector.
ii. Cobb-Douglas production function in Monetary Model may be good formula in services sectors.
iii. Cobb-Douglas production function with intercept has good results than Cobb-Douglas production function without intercept.
iv. The Egyptian tourism sector is more sensitive for regional and national security, but it is disappear in Cobb-Douglas production function
Over all I conclude that Cobb-Douglas production function had been tested by my individual and researches and it is proven to be attractive and widely used in the economies. On the other hand this is not the case for some researchers since there is more then two factors (labor and Capital) when finding the out put. As said above in Egyptian case tourism is heavily depends on the level of internal securities provided since Middle East in not safe from the operating militias group like Al-Qaeda.
Construct your econometric model.
Since in this paper I have decided to test on the C-D production function, fist of all I have gathered data about the three components that is required to run this econometric model. Since the availability of data is limited this paper has only focused on the data collected during 1985-2005 from Malaysia.
P L K
1985 77470.000 5653.300 23124.000
1986 71594.000 5760.100 18865.000
1987 81085.000 5983.900 17904.000
1988 92370.000 6175.800 22726.000
1989 105233.000 6390.900 30599.000
1990 119081.000 6685.000 39348.000
1991 135124.000 6891.000 49126.000
1992 150682.000 7047.800 55191.000
1993 172194.000 7383.400 66937.000
1994 195461.000 7618.000 78664.000
1995 222473.000 7645.000 96967.000
1996 253732.000 8399.500 107825.000
1997 281795.000 8569.200 121494.000
1998 283243.000 8602.750 75982.000
1999 300764.000 8830.500 65841.000
2000 343215.000 9291.250 87729.000
2001 334404.000 9357.000 83345.000
2002 362012.000 9543.000 83764.000
2003 395017.000 9870.000 87089.000
2004 450152.000 9987.000 91818.000
2005 495239.000 10064.800 98930.000
From the above date P is the Gross Domestic Product (GDP) which is taken from t he statistic provided by the Malaysian government. And the L refers to the Employment where counts number of people who are employed and working is. It does not count on the number of people who are in the working age group but not working or unable to find a job.
When I was looking for a K which is believed to be the level of investment in the economy I have come across couple of figures. But I have chosen the Gross Fixed Capital Formation as K since this is the most accurate data available.
The Gross Fixed Capital Formation is a flow value. It is usually defined as the total value of additions to fixed assets by resident producer enterprises, less disposals of fixed assets during the quarter or year, plus additions to the value of non-produced assets (such as discoveries of mineral deposits, or land improvements).
Normally these assets are tangible assets, but in some cases they are intangible intellectual property including artwork and software. The debate continues about the exact definitional boundaries. The main asset types are plant & machinery, equipment, vehicles, land improvements and buildings.
Then in order to make the calculation easier what I did was to log on each figure. For example (in excel =log (77470).). Here is the logged table for P, L and K.
P L K
1985 4.889134 3.752302 4.364063
1986 4.854877 3.76043 4.275657
1987 4.908941 3.776984 4.25295
1988 4.965531 3.790693 4.356523
1989 5.022152 3.805562 4.485707
1990 5.075842 3.825101 4.594923
1991 5.130732 3.838282 4.691311
1992 5.178061 3.848054 4.741868
1993 5.236018 3.868256 4.825666
1994 5.29106 3.881841 4.895776
1995 5.347277 3.883377 4.986624
1996 5.404375 3.924253 5.032719
1997 5.449933 3.93294 5.084555
1998 5.452159 3.934637 4.880711
1999 5.478226 3.945985 4.818496
2000 5.535566 3.968074 4.943143
2001 5.524271 3.971137 4.92088
2002 5.558723 3.979685 4.923057
2003 5.596616 3.994317 4.939963
2004 5.653359 3.999435 4.962928
2005 5.694815 4.002805 4.995328
From those data then I ran the OLS regression equation with eviews software and the findings are here.
Dependent Variable: P=GDP
Method: Least Squares
Date: 09/12/07 Time: 17:49
Sample: 1985 2005
Included observations: 21
Variable Coefficient Std. Error t-Statistic Prob.
L=labor 2.83572 0.121723 23.29645 0
K=NFCF 0.129905 0.038305 3.391331 0.0033
A=Integer -6.35108 0.324183 -19.591 0
R-squared 0.994283 Mean dependent var 5.297508
Adjusted R-squared 0.993648 S.D. dependent var 0.26821
S.E. of regression 0.021376 Akaike info criterion -4.72156
Sum squared resid 0.008225 Schwarz criterion -4.57234
Log likelihood 52.57633 F-statistic 1565.366
Durbin-Watson stat 1.532652 Prob(F-statistic) 0
Therefore our function is In P = -6.35108 + 2.83572 In L + 0.129905 In K
Interpretation of the table:
Integer:
When all independent variable is 0 the dependent variable is -6.35108. However there is no economic meaning.
Labor or Employment:
Other independent variable remains constant if 1% increases in Labor force or employment will lead to a 2.83% increase in the P or Gross Domestic Output.
Capital or Gross Fixed Capital formation:
If other independent factors remain constant 1% increase in the K or capital will lead to a 0.13% increase in the GDP.
R-squared:
The two regressors L-Labor and K-GFCF explain 0.994283 or 99.4283 percent of the variation in the P-GDP. The estimated regression line fits the data quite well. The R2 value of 0.994283 means that about 99% percent of the
Variation in the (log of) output or GDP is explained by the (logs of) L-labor and K-capital.
Durbin-Watson statistic
The Durbin-Watson statistic is a test statistic used to detect the presence of autocorrelation in the residuals from a regression analysis. The value of Durbin-Watson statistic should be reasonable from 0 to 4. A value of 2 indicates there appears to be no autocorrelation. Small values of d indicate successive error terms are, on average, close in value to one another, or positively correlated. Large values of d indicate successive error terms are, on average, much different in value to one another, or negatively correlated. It means that 1.532652 value is smaller than 4. Therefore the value of Durbin-Watson statistic is can be explained by the 2 independent variables.
Year Actual Fitted Residual Residual Plot
1985 4.88913 4.85631 0.03282 | . | . * |
1986 4.85488 4.86788 -0.013 | . * | . |
1987 4.90894 4.91187 -0.00293 | . *| . |
1988 4.96553 4.9642 0.00133 | . * . |
1989 5.02215 5.02314 -0.00099 | . * . |
1990 5.07584 5.09274 -0.0169 | . * | . |
1991 5.13073 5.14264 -0.01191 | . * | . |
1992 5.17806 5.17691 0.00115 | . * . |
1993 5.23602 5.24509 -0.00907 | . * | . |
1994 5.29106 5.29272 -0.00166 | . * . |
1995 5.34728 5.30888 0.0384 | . | . * |
1996 5.40438 5.43078 -0.0264 | *. | . |
1997 5.44993 5.46215 -0.01221 | . * | . |
1998 5.45216 5.44048 0.01168 | . | * . |
1999 5.47823 5.46458 0.01365 | . | * . |
2000 5.53557 5.54341 -0.00784 | . * | . |
2001 5.52427 5.5492 -0.02493 | * | . |
2002 5.55872 5.57372 -0.015 | . * | . |
2003 5.59662 5.61741 -0.02079 | .* | . |
2004 5.65336 5.63491 0.01845 | . | *. |
2005 5.69481 5.64867 0.04614 | . | . *|
References.
• The effects of Randomly Generated Disturbances and Fiscal Policy on an Aggregate Demand Macro economic model
University of Akron
Akron, Ohio 44325
P. d. Kuzdrall
University of Western Ontario
London, Ontario CANADA N6A 3
• Public expenditure rate and economic growth by Marjan Senjur-Faculty of Economics, University of Ljubljana, Slovenia
• The Cobb-Douglas Production Function: An Antipodean Defense? Iain Fraser1: Economic Issues, Vol.7, Part 1, March 2002- 39
• Hamburg production function by Anwar Shekh
• An Estimation of Cobb-Douglas production function in Egyptian Tourism Sector by Dr Khalid from Zagazig university
Bank managemen Hong Leong Bank
BANK MANAGEMENT
BFN 2044
ASSIGNMENT
Hong Leong Bank
LECTURER: Mr. Nazri
1.0 Hong Leong Bank Berhad Common-Size Income Statement
2005 2006
Interest income 100.0 100.0
Interest expense -49.8 -54.6
Net interest income 50.2 45.4
Income from Islamic Banking Operations 1.7 7.1
51.9 52.5
Non-interest income 41.0 56.4
92.9 108.9
Overhead expenses -32.2 -27.4
Profit before provision 60.7 81.5
Loan and financing loss and provision -21.4 -7.9
Profit before taxation and zakat 39.3 73.6
Taxation and zakat -11.1 -20.4
Profit after taxation and zakat 28.2 53.2
1.1 Hong Leong Bank Berhad Common-Size Income Statement Analysis
Net interest income for Hong Leong Bank has decreased from 50.2 to 45.4 due to the increasing interest expense. The interest expense for the bank increased in 2006 because, the amount of deposits and placement of banks and other financial institutions in Hong Leong increases. The income from Islamic Banking Operations for the bank increased tremendously from 1.7 in 2005 to 7.1 in 2006, as the Islamic banking franchise for the bank grew strongly. Finally, the profit after taxation and zakat for the bank increased extremely from 28.2 in 2005 to 53.2 in 2006, seeing that the bank did cut down on overhead expenses and, loan and financing loss.
2.0 Hong Leong Bank Berhad Common-Size Balance Sheet
2005 2006
Assets
Cash and short-term funds 27.7 19.3
Securities purchased under resale agreements 0.0 17.2
Deposits and placements with banks and other financial institutions 6.4 6.1
Dealing securities 6.4 4.6
Investment securities 11.2 5.8
Loans, advances and financing 42.3 44.3
Other assets 3.2 0.4
Statutory deposits with Bank Negara Malaysia 1.0 1.5
Tax recoverable 0.0 0.0
Investment in subsidiary companies 1.1 0.1
Fixed assets 0.5 0.4
Deferred tax assets 0.3 0.2
Total assets 100.0 100.0
Liabilities
Deposits from customers 71.0 69.3
Deposits and placement of banks and other financial institutions 4.5 3.6
Obligations on securities sold under repurchase agreements 9.8 16.5
Floating rate certificates of deposit 0.0 0.7
Bill and acceptances payable 3.4 1.0
Other liabilities 0.9 1.2
Provision for taxation 0.0 0.0
Total liabilities 89.6 92.4
Share capital 4.3 2.7
Reserves 6.1 5.4
Less: Treasury shares, at cost 0.0 0.5
Shareholders’ funds 10.4 7.6
Total liabilities and shareholders’ funds 100.0 100.0
2.1 Hong Leong Bank Berhad Common-Size Balance Sheet Analysis
In 2006, the banks had purchased back a number of securities and resell them under the obligations on securities sold under repurchase agreements thus, causes the obligations on securities sold under repurchase agreements, and the securities purchased under resale agreements for the bank increased in a tremendous rate from 9.8 to 16.5, and 0.0 to 17.2 correspondingly. Besides that, the investment securities and other assets for the bank also decreased greatly from 11.2 to 5.8 and 3.2 to 0.4 respectively. The reason that causes the bank’s other assets to decrease, is because of the amounts recoverable from Danaharta. As at 30 June 2006, the amount recoverable from Danaharta has been fully provided. The bank’s bills and acceptances payable has furthermore decreased from 3.4 to 1.0 because of the decreased in deposits and placements of banks and other financial institutions, obligations on securities held under bills and acceptances payable. The shareholders’ funds for Hong Leong as well decreased since the bank had purchased back its own shares up to 10% of existing total issued and paid-up share capital.
3.0 Hong Leong Bank Berhad Comparative Statements
2005
RM 2006
RM Change
RM Change
%
Interest income 1,309,683 2,080,936 771,253 58.9
Interest expense -652,590 -1,137,121 -484,531 74.2
Net interest income 657,093 943,815 286,722 43.6
Income from Islamic Banking Operations
21,838
147,334
125,496
574.7
678,931 1,091,149 412,218 60.7
Non-interest income 536,876 1,174,427 637,551 118.8
1,215,807 2,265,576 1,049,769 86.3
Overhead expenses -421,408 -570,085 -148,677 35.3
Profit before provision 794,399 1,695,491 901,092 113.4
Loan and financing loss and provision
-280,050
-165,434
114,616
-40.9
Profit before taxation and zakat 514,349 1,530,057 1,015,708 197.5
Taxation and zakat -145,034 -424,262 -279,228 192.5
Profit after taxation and zakat 369,315 1,105,795 736,480 199.4
3.1 Hong Leong Bank Berhad Comparative Statements Analysis
The interest expense for the bank changed by 74.2% because, the amount of deposits and placement of banks and other financial institutions in Hong Leong increases. The income from Islamic Banking Operations for the bank increased by 574.7%, as the Islamic banking franchise for the bank grew strongly. Finally, the profit after taxation and zakat for the bank increased extremely to 199.4% in 2006, seeing that the bank did cut down on overhead expenses with only slight increase of 35.3% and, loan and financing loss with (40.9%).
4.0 Hong Leong Bank Berhad Ratios
2005 2006
Profitability Ratios
Return on Assets (%) 1.79 1.64
Return on Equity (%) 17.11 21.45
Earnings & Efficiency Ratios
Earnings Spread 0.01 0.01
Efficiency Ratio 0.35 0.27
Asset Utilization 0.03 0.04
Burden Ratio 0.00 -0.01
Liquidity Ratios
Current Ratio 1.06 1.07
Loans to Deposits 0.56 0.61
Deposits Times Capital 7.24 9.56
Financing Ratios
Total Debt Ratio 0.90 0.92
Total Debt to Equity Ratio 8.58 12.11
Equity to Assets 0.10 0.08
Loss Allowance to Loans 0.02 0.01
Operating Ratios
Net Interest Margin 0.02 0.02
Net Non Interest Margin - -
Cost to Income Ratio 0.35 0.27
Operating Profit Margin 0.18 0.18
4.1 Hong Leong Bank Berhad Ratios Analysis
The bank return on assets decreased from 1.79% to 1.64%, which signifies that the management is poor in conducting profitable operations. As for the return on equity, it has shown a positive enhancement as it rises from 17.11% to 21.45% in 2006. The management's performance in producing a rate of return on the equity capital employed is proficient.
While for the earnings spread, it has been stable along the years and it indicates that, Hong Leong is constant in managing their earnings assets and liabilities. The efficiency ratio for the bank decreased from 0.35 to 0.27 in 2006. The ratios show that, the bank is laying the underpinning for continual growth and competitiveness through its productivity. Hong Leong bank’s asset utilization slightly changed from 0.03 to 0.04. These ratios point out that, the bank doesn’t make any expansion in organizing the earning assets to produce income, but, the bank is competent in managing its manufacturing overhead costs incidental to operations. The burden ratio in 2005 is 0.00 decreased to -0.01 in 2006.
In favor for the bank’s current ratio is computed as, 1.06 in 2005 and 1.07 in 2006. The bank should achieve a higher current ratio in order to accomplish a high liquidity by either increasing the assets or decreasing the liabilities. As for the bank’s loans to deposits ratio, has a small increment from 0.56 to 0.61. From the ratios, the bank is quite capable in managing its loans through its deposits; the bank should achieve higher loans to deposits ratio to capitalize on its liquidity. The deposits times capital ratio for Hong Leong is 7.24 in 2005 and 9.56 in 2006. This indicates that, the mixture of profit potential and risk measures for the bank varies in years but the bank is laying the foundation for constant increase and competitiveness.
On behalf of the total debt ratio, the bank has maintained quite high ratios all through the years; 0.90 in 2005 increase to 0.92 in 2006. The bank’s ratios point to the increasing of the bank’s liabilities, in order to reduce its total debt ratio, the bank should increase its total assets or reduce its total liabilities. The bank’s total debt to equity ratio has increased in tremendously from 8.58 to 12.11 in 2006. With a high total debt to equity ratio, the bank is restricted in the amount of money they can borrow and less favorable to existing or potential creditors, while may be favorable to the stockholders. Hong Leong is administrating the stockholder investment in fixed assets very well by decreasing the equity to assets ratio from 0.10 in 2005 to 0.08 in 2006. The loss allowance to loans ratio for the bank decreased from 0.02 to 0.01 the following year. These ratios signify that, the bank estimation allowance for loan losses has decreased and the bank should maintain a certain level of loss allowance to loans for the inherent risks in the loan portfolio.
Hong Leong’s net interest margin is 0.02 in 2005 and 2006. The ratios illustrate that, the bank has a very low net interest income earned from its average earning assets. The value of cost to income ratio for the bank is 0.35 in 2005 decreased to 0.27 in 2006; this shows that, Hong Leong is excellent in managing its operating profit including non-interest income. The bank’s operating profit margin is constant calculated as 0.18 in 2005 and 2006. The operating profit margin ratios imply that the bank is managing its operating expenses very well by maintaining a constant ratio.
5.0 Strength
The rating on Hong Leong Bank Bhd. reflects its adequate balance sheet strength and satisfactory asset quality. That said, profitability continues to be challenged by industry wide decline in interest margins, as well as the bank’s efforts to boost no interest income by developing its no conventional banking business. Hong Leong Bank was established in 1968 and listed on the Kuala Lumpur Stock Exchange since 1994. The enlarged entity is the fifth-largest Malaysian bank today with 180 branches in Malaysia and one each in Singapore and Hong Kong. Being one of the oldest and one of the largest banks in the country, the bank has become the choice and the trusted for its experience and establishment stability and this is proven by the many awards won by the bank over the years.
5.1 Opportunities:
Hong Leong has increased their profit 17% to 21% this shows they have internal strength to grow it further. It has internal capabilities to grow further.
One of he resent trend towards the banking industry is adopting mobile banking or mobile commerce where transactions could be done using the mobile phone. This could be the convenient cousin on internet banking. It needs to adopt its surver such as way that mobile phone users are able to do transaction. This will further develop banking service to rural areas.
It is not to be forgotten that most about 60% to 80 % of the economic active population is in the developing country. Since Malaysia is in this bank of countries, Hong Leong has lot to explore from this market. It has great opportunity and market for its services in the future in Malaysia. When thinking of the survival factor and economic negative waves this could be a really helpful factor.
When we looking at the Arabian or Middle East courtiers it is know that they have access oil dollar money. They have not developed the idea of investing and reinvesting due the barrier of religious believes. Most of them don’t believe in today’s conventional banking system and they tend to keep their money away from the bank. But the concept of Islamic banking had given them high hope and way to invest. Malaysia is believed to be the hub for Islamic banking and financial system since we have a stable economic system that had been running for years. Middle Eastern do bring lots of dollar money to Malaysia. Since Hong Leong does have the Islamic baking adopted and it is believed that non-Muslims are also joining this system of finance. Therefore we could conclude that Hong Leong has great opportunity forward with Islamic banking.
Microfinance is another area they could exploit, where concern with issuing loans to lower income class or the villagers is. Most of the commercial banks have totally forgotten this sector of the market.
5.2 Threats and Weakness:
Over all Hong Leong bank could be said that it is going strong. But it is the aim of every business to grow, expand, acquire or merge with firms with the same level. It needs to grow constantly so that it can capture more market share and be a better part of the industry. It is doing same level with other competitors. They adopt every strategic advantage its competitor takes either as the second mover or as the first mover which is the plan of the bank.
There is a trend which practices the big eating the small, where the large companies are talking over the small firms. In case of Hong Leong, it has direct threat from local competitors as well as the International competitors. The biggest challenge would be not to get in the hand of predator.
Conclusion:
There are unique opportunities for sustainable, profitable growth and to innovate, differentiate and deliver its Vision. Hong Leong management Agenda outlines the journey towards that Vision. It sets out the following aspirations and pace for the Group over the longer term as we seek:
• To strengthen and embed our core position in Malaysia towards a strong domestic presence
• To establish regional and international presence, and Centers of Excellence in Islamic Banking, Private Banking and Investment Banking, and
• To establish a strong regional business to participate in markets outside our domestic core.
What it wants to be in the future is clearly stated in its vision and mission statement. Over all, the bank had generated fare enough relationship with its customers and the name “Hong Leong ” is deep in its customer’s heart. It is the biggest strength it has.
But we try not to forget the value of the management, who takes the all stress and make perfect decisions which leads to profit for the bank. Since manpower is not valued in most of the cases.
BFN 2044
ASSIGNMENT
Hong Leong Bank
LECTURER: Mr. Nazri
1.0 Hong Leong Bank Berhad Common-Size Income Statement
2005 2006
Interest income 100.0 100.0
Interest expense -49.8 -54.6
Net interest income 50.2 45.4
Income from Islamic Banking Operations 1.7 7.1
51.9 52.5
Non-interest income 41.0 56.4
92.9 108.9
Overhead expenses -32.2 -27.4
Profit before provision 60.7 81.5
Loan and financing loss and provision -21.4 -7.9
Profit before taxation and zakat 39.3 73.6
Taxation and zakat -11.1 -20.4
Profit after taxation and zakat 28.2 53.2
1.1 Hong Leong Bank Berhad Common-Size Income Statement Analysis
Net interest income for Hong Leong Bank has decreased from 50.2 to 45.4 due to the increasing interest expense. The interest expense for the bank increased in 2006 because, the amount of deposits and placement of banks and other financial institutions in Hong Leong increases. The income from Islamic Banking Operations for the bank increased tremendously from 1.7 in 2005 to 7.1 in 2006, as the Islamic banking franchise for the bank grew strongly. Finally, the profit after taxation and zakat for the bank increased extremely from 28.2 in 2005 to 53.2 in 2006, seeing that the bank did cut down on overhead expenses and, loan and financing loss.
2.0 Hong Leong Bank Berhad Common-Size Balance Sheet
2005 2006
Assets
Cash and short-term funds 27.7 19.3
Securities purchased under resale agreements 0.0 17.2
Deposits and placements with banks and other financial institutions 6.4 6.1
Dealing securities 6.4 4.6
Investment securities 11.2 5.8
Loans, advances and financing 42.3 44.3
Other assets 3.2 0.4
Statutory deposits with Bank Negara Malaysia 1.0 1.5
Tax recoverable 0.0 0.0
Investment in subsidiary companies 1.1 0.1
Fixed assets 0.5 0.4
Deferred tax assets 0.3 0.2
Total assets 100.0 100.0
Liabilities
Deposits from customers 71.0 69.3
Deposits and placement of banks and other financial institutions 4.5 3.6
Obligations on securities sold under repurchase agreements 9.8 16.5
Floating rate certificates of deposit 0.0 0.7
Bill and acceptances payable 3.4 1.0
Other liabilities 0.9 1.2
Provision for taxation 0.0 0.0
Total liabilities 89.6 92.4
Share capital 4.3 2.7
Reserves 6.1 5.4
Less: Treasury shares, at cost 0.0 0.5
Shareholders’ funds 10.4 7.6
Total liabilities and shareholders’ funds 100.0 100.0
2.1 Hong Leong Bank Berhad Common-Size Balance Sheet Analysis
In 2006, the banks had purchased back a number of securities and resell them under the obligations on securities sold under repurchase agreements thus, causes the obligations on securities sold under repurchase agreements, and the securities purchased under resale agreements for the bank increased in a tremendous rate from 9.8 to 16.5, and 0.0 to 17.2 correspondingly. Besides that, the investment securities and other assets for the bank also decreased greatly from 11.2 to 5.8 and 3.2 to 0.4 respectively. The reason that causes the bank’s other assets to decrease, is because of the amounts recoverable from Danaharta. As at 30 June 2006, the amount recoverable from Danaharta has been fully provided. The bank’s bills and acceptances payable has furthermore decreased from 3.4 to 1.0 because of the decreased in deposits and placements of banks and other financial institutions, obligations on securities held under bills and acceptances payable. The shareholders’ funds for Hong Leong as well decreased since the bank had purchased back its own shares up to 10% of existing total issued and paid-up share capital.
3.0 Hong Leong Bank Berhad Comparative Statements
2005
RM 2006
RM Change
RM Change
%
Interest income 1,309,683 2,080,936 771,253 58.9
Interest expense -652,590 -1,137,121 -484,531 74.2
Net interest income 657,093 943,815 286,722 43.6
Income from Islamic Banking Operations
21,838
147,334
125,496
574.7
678,931 1,091,149 412,218 60.7
Non-interest income 536,876 1,174,427 637,551 118.8
1,215,807 2,265,576 1,049,769 86.3
Overhead expenses -421,408 -570,085 -148,677 35.3
Profit before provision 794,399 1,695,491 901,092 113.4
Loan and financing loss and provision
-280,050
-165,434
114,616
-40.9
Profit before taxation and zakat 514,349 1,530,057 1,015,708 197.5
Taxation and zakat -145,034 -424,262 -279,228 192.5
Profit after taxation and zakat 369,315 1,105,795 736,480 199.4
3.1 Hong Leong Bank Berhad Comparative Statements Analysis
The interest expense for the bank changed by 74.2% because, the amount of deposits and placement of banks and other financial institutions in Hong Leong increases. The income from Islamic Banking Operations for the bank increased by 574.7%, as the Islamic banking franchise for the bank grew strongly. Finally, the profit after taxation and zakat for the bank increased extremely to 199.4% in 2006, seeing that the bank did cut down on overhead expenses with only slight increase of 35.3% and, loan and financing loss with (40.9%).
4.0 Hong Leong Bank Berhad Ratios
2005 2006
Profitability Ratios
Return on Assets (%) 1.79 1.64
Return on Equity (%) 17.11 21.45
Earnings & Efficiency Ratios
Earnings Spread 0.01 0.01
Efficiency Ratio 0.35 0.27
Asset Utilization 0.03 0.04
Burden Ratio 0.00 -0.01
Liquidity Ratios
Current Ratio 1.06 1.07
Loans to Deposits 0.56 0.61
Deposits Times Capital 7.24 9.56
Financing Ratios
Total Debt Ratio 0.90 0.92
Total Debt to Equity Ratio 8.58 12.11
Equity to Assets 0.10 0.08
Loss Allowance to Loans 0.02 0.01
Operating Ratios
Net Interest Margin 0.02 0.02
Net Non Interest Margin - -
Cost to Income Ratio 0.35 0.27
Operating Profit Margin 0.18 0.18
4.1 Hong Leong Bank Berhad Ratios Analysis
The bank return on assets decreased from 1.79% to 1.64%, which signifies that the management is poor in conducting profitable operations. As for the return on equity, it has shown a positive enhancement as it rises from 17.11% to 21.45% in 2006. The management's performance in producing a rate of return on the equity capital employed is proficient.
While for the earnings spread, it has been stable along the years and it indicates that, Hong Leong is constant in managing their earnings assets and liabilities. The efficiency ratio for the bank decreased from 0.35 to 0.27 in 2006. The ratios show that, the bank is laying the underpinning for continual growth and competitiveness through its productivity. Hong Leong bank’s asset utilization slightly changed from 0.03 to 0.04. These ratios point out that, the bank doesn’t make any expansion in organizing the earning assets to produce income, but, the bank is competent in managing its manufacturing overhead costs incidental to operations. The burden ratio in 2005 is 0.00 decreased to -0.01 in 2006.
In favor for the bank’s current ratio is computed as, 1.06 in 2005 and 1.07 in 2006. The bank should achieve a higher current ratio in order to accomplish a high liquidity by either increasing the assets or decreasing the liabilities. As for the bank’s loans to deposits ratio, has a small increment from 0.56 to 0.61. From the ratios, the bank is quite capable in managing its loans through its deposits; the bank should achieve higher loans to deposits ratio to capitalize on its liquidity. The deposits times capital ratio for Hong Leong is 7.24 in 2005 and 9.56 in 2006. This indicates that, the mixture of profit potential and risk measures for the bank varies in years but the bank is laying the foundation for constant increase and competitiveness.
On behalf of the total debt ratio, the bank has maintained quite high ratios all through the years; 0.90 in 2005 increase to 0.92 in 2006. The bank’s ratios point to the increasing of the bank’s liabilities, in order to reduce its total debt ratio, the bank should increase its total assets or reduce its total liabilities. The bank’s total debt to equity ratio has increased in tremendously from 8.58 to 12.11 in 2006. With a high total debt to equity ratio, the bank is restricted in the amount of money they can borrow and less favorable to existing or potential creditors, while may be favorable to the stockholders. Hong Leong is administrating the stockholder investment in fixed assets very well by decreasing the equity to assets ratio from 0.10 in 2005 to 0.08 in 2006. The loss allowance to loans ratio for the bank decreased from 0.02 to 0.01 the following year. These ratios signify that, the bank estimation allowance for loan losses has decreased and the bank should maintain a certain level of loss allowance to loans for the inherent risks in the loan portfolio.
Hong Leong’s net interest margin is 0.02 in 2005 and 2006. The ratios illustrate that, the bank has a very low net interest income earned from its average earning assets. The value of cost to income ratio for the bank is 0.35 in 2005 decreased to 0.27 in 2006; this shows that, Hong Leong is excellent in managing its operating profit including non-interest income. The bank’s operating profit margin is constant calculated as 0.18 in 2005 and 2006. The operating profit margin ratios imply that the bank is managing its operating expenses very well by maintaining a constant ratio.
5.0 Strength
The rating on Hong Leong Bank Bhd. reflects its adequate balance sheet strength and satisfactory asset quality. That said, profitability continues to be challenged by industry wide decline in interest margins, as well as the bank’s efforts to boost no interest income by developing its no conventional banking business. Hong Leong Bank was established in 1968 and listed on the Kuala Lumpur Stock Exchange since 1994. The enlarged entity is the fifth-largest Malaysian bank today with 180 branches in Malaysia and one each in Singapore and Hong Kong. Being one of the oldest and one of the largest banks in the country, the bank has become the choice and the trusted for its experience and establishment stability and this is proven by the many awards won by the bank over the years.
5.1 Opportunities:
Hong Leong has increased their profit 17% to 21% this shows they have internal strength to grow it further. It has internal capabilities to grow further.
One of he resent trend towards the banking industry is adopting mobile banking or mobile commerce where transactions could be done using the mobile phone. This could be the convenient cousin on internet banking. It needs to adopt its surver such as way that mobile phone users are able to do transaction. This will further develop banking service to rural areas.
It is not to be forgotten that most about 60% to 80 % of the economic active population is in the developing country. Since Malaysia is in this bank of countries, Hong Leong has lot to explore from this market. It has great opportunity and market for its services in the future in Malaysia. When thinking of the survival factor and economic negative waves this could be a really helpful factor.
When we looking at the Arabian or Middle East courtiers it is know that they have access oil dollar money. They have not developed the idea of investing and reinvesting due the barrier of religious believes. Most of them don’t believe in today’s conventional banking system and they tend to keep their money away from the bank. But the concept of Islamic banking had given them high hope and way to invest. Malaysia is believed to be the hub for Islamic banking and financial system since we have a stable economic system that had been running for years. Middle Eastern do bring lots of dollar money to Malaysia. Since Hong Leong does have the Islamic baking adopted and it is believed that non-Muslims are also joining this system of finance. Therefore we could conclude that Hong Leong has great opportunity forward with Islamic banking.
Microfinance is another area they could exploit, where concern with issuing loans to lower income class or the villagers is. Most of the commercial banks have totally forgotten this sector of the market.
5.2 Threats and Weakness:
Over all Hong Leong bank could be said that it is going strong. But it is the aim of every business to grow, expand, acquire or merge with firms with the same level. It needs to grow constantly so that it can capture more market share and be a better part of the industry. It is doing same level with other competitors. They adopt every strategic advantage its competitor takes either as the second mover or as the first mover which is the plan of the bank.
There is a trend which practices the big eating the small, where the large companies are talking over the small firms. In case of Hong Leong, it has direct threat from local competitors as well as the International competitors. The biggest challenge would be not to get in the hand of predator.
Conclusion:
There are unique opportunities for sustainable, profitable growth and to innovate, differentiate and deliver its Vision. Hong Leong management Agenda outlines the journey towards that Vision. It sets out the following aspirations and pace for the Group over the longer term as we seek:
• To strengthen and embed our core position in Malaysia towards a strong domestic presence
• To establish regional and international presence, and Centers of Excellence in Islamic Banking, Private Banking and Investment Banking, and
• To establish a strong regional business to participate in markets outside our domestic core.
What it wants to be in the future is clearly stated in its vision and mission statement. Over all, the bank had generated fare enough relationship with its customers and the name “Hong Leong ” is deep in its customer’s heart. It is the biggest strength it has.
But we try not to forget the value of the management, who takes the all stress and make perfect decisions which leads to profit for the bank. Since manpower is not valued in most of the cases.
Danon company Anylisis
BSM3104- STRATEGIC MANAGEMENT
“Groupe Danone”
Dr David Yong
DR 3039
ALI ZAHIR
1051108445
alicrow@gmail.com
017-6559160
Question 1:
What are the core competencies for the organization?
Donone is a well establish player in the market for more than 100 years. So they should have generated there good name or reputation through out its existence in the several years of its operation. Donone is established in the global market and it had spread its wing in all most all the parts of the world. This is the biggest competitive advantage which Donone has. They had good reputation since it is owned by French businessmen. France is famous for its business in bread, biscuits and cookies. They are number one in the world. According to Donone website they had won the 2006
-Nº 1 worldwide in Fresh Dairy Products
- Nº 1 worldwide equally placed in Bottled Water (by volume)
- Nº 2 worldwide in Biscuits and Cereal Products
This position of Donone gives us what Donone is capable of doing. There have well establish brands such as “Donone”, ”Evian”, ”lu”, ”Wahaha” are the leading cash cows in the Donone product portfolio. This is one of the main key factor contribute the success of Donone since they gave got a wider range of product line with diversified areas. Of course their main concern is the market of food product but still they have diversified in those areas by producing
Donone has grown world wide and make it easy them to remain in the business by building well establish enterprises in different geographical regions. This will help them during economic fluctuation. The hit on Donone revenue can be minimize, because these economic down tern in one region of the world can be adjusted or set off by the successful revenue earned by well performing regions.
Donone had establish research institutions so it can stay ahead of their rivals such as Nescafe’ and Dutch lady. It is really worthwhile to spend heavy amount of money on research and development because a large global player like Danone need to have a core competitive advantage over its rivals. It is known that in food and beverage industry there always is 5 big companies who dominate the market. It is one of the main aims of Danone to be in that category. Recent tread in the food industry is that most of the consumers are getting concern with health issues and they are moving more towards organic products which have to be one of the areas they have to concentrate on. So doing research on organic food and coming with a great product will help Danone to dominate its products in the market and it will lead to more market share for Danone.
One the other hand achieving economies of scale will help to reduce the price of their product. Danone has build up good networking system to connect it operations in different corners of the world. It has built a supply chain management system so that they have lock in the suppliers in the system. It can guarantee the flow of raw materials needed for it production. Supply chain management system helps them to minimize unnecessary cost such as warehousing and cost of holding unwanted finished stock. They have employed a full enterprise system from which they save millions of dollars a year. This had leaded them to reduce administration and operating costs and this lead to economies of scale. An economy of scale means lower cost per unit. Low cost of goods means that Danone can sell their good cheaper than its rivals so it can stay ahead of rivals.
Over the past 40 years Danone had establish a well know brand name and it cost billions today. This brand loyalty is one of their core competitive factors which had made then to add extra price for its product sold in the market. Brand loyalty will help Danone to increase it profit by raising its prices to a same amount with the brand loyalty.
2- What are the key success factors for the organization?
Generally, the main key factor behind the success of this giant organization is the fact that they value and care about their customers’ in par to the organizations aim to sustain the development. This is clearly known by their mission, “Bringing health through food to a majority of people”. For an organization that had started as early as in 1966, this is a unique mission that these people have come up with. The mission statement has proven that they care about their customers since the beginning, which played a main part to build consumer trust. This statement makes the people realize that they are not set up for the success of their organization, like some of the organizations today, but they are honest people who care about their health. And in today’s people being health concerned people, they have touched the heart of many as they have mentioned as “majority of people” through this concept.
In addition to this, they had penetrated to the market by making sure that they are environment friendly people since the world have been showing a lot of concern for the environment. They have been steadily investing in their products’ safety and made sure that it won’t harm our vulnerable environment, which is something, food companies can do a great extent if they don’t care about it. To accomplish this Donone had come up with product packaging that can be recycled and made sure that it has a minimum of weight so that they can reduce plastic consumption. Furthermore they had shown respect to the environmental standards for they say the food companies are facing a dilemma where there is an increase of consumers and the importance of limiting the pollution of the environment by mankind, which in turn affects the food companies. It had initiated programs in favor of maintaining pollution free programs such as the Green Plants in 1995 which was aimed to limit waste and to get the best out of waste recovery by cutting down the consumption of water and energy.
Apart from this, the strategies used with in the company as well play an important role of its success. Most beneficial strategy that they have came up is that they had made sure of organic growth since the beginning. They extended their business in places where they have good opportunities to expand and tried to capture the market as soon as they can by extending their product line which will prevent from them loosing their monopoly in beverage industry. The key success strategy here is that Danone thinks and act fast, and makes competent decision. For instant, as soon as they found out that they are going to loose their monopoly in beverage industry if they kept on making containers, they shifted from a container manufacturing company to beverage industry in 1970. Furthermore the decision to withdraw glass plate manufacture when there was a threat to their sales due to booming of oil prizes is a good evidence of this strategy.
For the expansion of their company, Danone had partnered with a number of companies that had led to success. The first remarkable movement to this is that they combined with BSN in 1973, making them the leading food group of France. As soon as they captured the French market, they set a target to make a base in the Europe in 1980. With this hope, the company established all over southern Europe, England and Germany. They thought of the best opportunities where they can expand and make them lead in this market. For instance they entered in to biscuit industry as they discovered the change in peoples’ eating habit. To be precise, they meet their consumer needs according to their change in lifestyle as the world modernizes.
Being in food industry Danone had invested and done a great job in producing food that meets their customers desiring taste in every country they are at present. In fact they have been succeeding in every country they enter. They are able to win over customers in countries where people have not tasted diary products. The reality behind this is their well known strategy known as innovation. They research these countries before launching their brands and finds out about their tastes and dietary habits. At the end, as Danone company says they develop “local brands” which makes them successful in every other country they market.
Danone says that they are unique from other companies’ because they have developed a vision that defends its core values. This is major fact behind their success. This vision is applied for internal and external key publics and due to this excellent strategy they had gain their success. Their core values are Openness, Enthusiasm, Humanism and proximity.
Further more the loyal employees who stand and work for this mission is also behind their success. Their dedication to their work and dual commitment to business success and social progress as Danone group says is important. Without them, Danone wouldn’t have succeeded.
3. Where is the organization vulnerable? What should it watch out for?
Danone Company is expending its wing by doing acquisition and mergers. They had practice this in the France as well as in other parts of the world. They buy out small and middle scale rivals and in the countries which they are expending. When talking over another business Danone need to be really prepare for the reluctance of the third party. Managing employees who belong to that organization could be difficult since making changes around that business is not that easy task. Most of the employees morale is lost when Danone buy out those businesses. For example in India when Danone buy out the brand “Britannica” the employees felt left out where most of them have been working for Britannica for years.
Another thing that Danone need to watch out is that when purchasing that business lost of money is needed. So it needs to consider cost of capital and return on that investment. It is really risky when growing globally. There are language barriers, political unrest, currency difference and ethical issues too. In order for Danone to be successful it has to make those factors into consideration. They need to build a master plan to tackle with that kind of situation if they want to be successful in the expending. Danone might face it difficult to finance those investments since it buys out firms in almost all the countries which it expands. Sometimes they might have some types of restriction from the government especially when the government changes and the policies of the new government changes too. It is difficult to take off an investment once it spends. Due to some sunk cost Danone still might have to carry out with those investments which pay them just break even. On those situations Danone has to face some type of loss. In a conclusion, we can say that going global is risky on the other hand taking right risk means higher return.
Danone need to keep well balance product portfolio. It should always research on producing new line of products before existing products gets “Problem child or Dogs”.
It also needs to be careful with out break of bird flue since it used egg as a raw material in their product range such as cereal and biscuits.
In Danone website some of the information needed is not mentioned. Such as the difficulties it faces when doing the business world wide. In order to go more detail we have to get true information.
4. Identify the challenges faced and opportunities available to the
Organization in the industry
Opportunities
Since people are becoming more and more concerned about their diet to maintain a great body shape especially among youngsters, this is good opportunity to make something for these valuable customers. Danone can create new product line targeted to these health conscious people making sure their needs are met. These youngsters are in need of a drink or a diary product that will keep them fit without ruining their physique. For instance young women mostly have an eye on low fat, diet, or low sugar products these days. There fore Danone can create low sugar and low fat products for each existing product. Example of a product can be low sugar biscuits without neglecting the delightful taste of each. This can be a good approach when it is build up these product line are introduce with a new theme indicating that Danone has introduced a new brand for people who doesn’t want fat in their diet since people who would consume these products are increasing. Further more this can be a good product for those who cannot consume Danone products due to certain type of illness such as Diabetes. They can mention this as well, so that Danone can build up a new image in their consumers mind, that they not only care for the health of healthy people but also those who are sick and cannot enjoy the delicious product line that Danone has produced over the years. This will increase another marketing opportunity around the world as there are a lot of diabetes people.
On the other hand the increase of popularity in sports among youngsters can provide a great opportunity to build up energizers to boost up energy for those who play sports. They can easily penetrate this market as they have already gained trust among their consumers for creating healthy products.
Further more with the huge success of past operating years Danone still has the opportunity to penetrate in many other countries market since they have been loyal in the past and they have gained enough trust from the consumers to introduce their products. This can contribute a great deal for their expansion theory.
Challenges
The main challenge that Danone faces will be the fact that they are trying to invade the countries that have already established their own diary products and had made the locals believe in their own country products than that of the products that is made in any other country. These people refuse to accept new products since they have been used to the old ones. Further more increase in competition, as more food industries are growing in countries where Danone had planted a market will be a threat to their sales. These food industries are as well investing a lot to produce innovative products varying the taste to gain customers attention and doing research to meet the changes in their consumers eating habits.
On the other hand, for every product that is made in Danone or any other food industry there will be the same product made from another company with a different name competing it. Even if Danone introduced a new product, the competing companies will introduce a much improved version of that product to the market the next day it self. In another words they have a lot of competition in their product line.
Being established in different countries around the world which is politically unstable will cause a threat to their products. Countries like Africa where Danone had introduced their brands, is very politically unstable. Therefore their no guarantee that these products will survive in a near future in there country and moreover whether it will make the launching of these product a failure where they lost a large amount of sales.
5. Analyze the degree of attractiveness of the industry for the organization
With the Porter’s “Five Forces Model".
Every industry has many members or company in it. They face challenges from all the corner of the industry. According to Potter’s five Forces competition model there is certain five factors which are determining the competitiveness in the industry where the firms exist. On the other hand competitiveness in different geographical area might be different due to competitive five forces and its impact on the first.
Danone is a global player in the business so they need to be well prepared for those issues. There are five forces which determine the competitiveness in the industry which are namely threats of new entrance, Bargaining power if supplies, bargaining power of customers, treat of substitute product and rivalry among the firms.
Threat of New Entrance:
Evidence suggested that companies often find it difficult to identify new competitors. Identifying new entrance is important because they can threaten the market share of existing competitors. One reason new entrance pose such a thereat is that they additional product capacity. Unless demand for a good or service is increasing, additional capacity will move down consumers price because demand remain same and supply increase. This will lead existing firms to lower its revenue because the prices fall.
Danone always have the strategy of buying out the existing firms when it moves into new market or new geographical area. They target to only the best performing businesses so that they can minimize have well known name and easy to penetrate market. They can also eliminate the threats which give by existing players buy ways of cutting prices or using there advantage of economies of scale. On the other hand they don’t add more capacity in the industry since they carry out the operation run by existing firms. Once they capture enough market share then they introduce new products in to the market and dominate the market. This strategy seems really work-out with Danone.
Donone is operating in food and beverages industry; there are a lot of small scale competitors around. Danone had already achieved economies of scale so it will be really difficult for new entrance to compete a giant business like Danone. There brand names are well recognize in the market so they don’t have so much thread from new entrance small firms.
Bargaining power of suppliers.
It is vital to maintain good relationship with ht suppliers of raw materials. Danone needs to make sure that raw materials are reached on time to manufacturing outlets so that it can carry out the business successfully. Failure to deliver raw material might end up in lack of Danone products in the market. This could lead to loose some customers, in other word Danone’s market share.
Danone could establish SCM (Supply Chain Management) system so that the suppliers are locked-in in the process of the organization. Once we build a good relationship with the suppliers then they will start to be loyal to the business. This way the company can minimizes the bargaining power of the suppliers. Most agricultural producer is quite a lot in numbers so Danone might not face so difficult to find the suppliers of raw materials.
On the other hand the supplier of agricultural goods in unpredictable since it will depend on the weather and certain other factors. But the demand for Danone products remains same. So short fall of supply might lead Danone to face difficulties financially and might lead to low profit. So it needs to make a reliable method of delivering the supplies on time.
I believe that the bargaining power of the suppliers in really low because Danone had got alternatives in choosing its suppliers.
Bargaining power of Customers:
It is the most important function for a business to exist in the market. It is almost impossible to run a business without considering their view about our products. So Danone needs to consider it when talking any decisions on that matter. Danone might have large scale buyers who might be distributing Danone products to a local area. These large scale buyers are one of the key factors for high sales turnover. Danone needs to keep good relationship with those large scale buyers in order to maintain them buying from Danone.
But household buyers are important too since they are final party who consume Danone’s products. So think about ways in which Danone can add value to its product, which is best fitted to needs of the consumers.
Bargaining power of customers is quite high since there is many sellers who sell almost same type with Danone’s product for example biscuits, yogurts, Mineral water and cereal product. So Danone has little control over its customers. Single mistake by Danone might lead to loose its customers. They could switch to other brands easily if they are not happy with the Danone brands.
Availability of substitute products:
There is always the threat that a new similar product might hit the market. It is really easy to copy or attack Danone’s product. Danone doesn’t have any control over it.
Danone uses strategy of buying existing well performing businesses. This help them to buy existing market and those customers could be introduces with the new line of Danone products. This strategy worked in the case of Britannica in India. Since India is well populated country and almost 1/6 of the worlds population lives in India. They performed well in that region with high tern over. They successfully completed in attracting the Britannica customers to Danone products.
Danone needs to have clear view of what is going on in the market so that when ever there is a threat of a substitute, and then Danone can come with a new brad which can tackle the substitute products.
Intensity of Rivalry among Competitors.
Firms in an industry are homogenous and the action taken by one firm will be absorbed by others and response in a competitive manner. For example if the rival of Danone increase it’s spending on marketing then in order to catch up with then Danone needs to involve in a same type of promotion activity.
But in case of a monopoly like Telecom’s, the internet service price is set higher than the lost and they earned abnormal profit. Due the fact, that they don’t have any threat from any rivals. They can set what ever price they like and can easily go one and don’t have to care quality of the service.
For every industry there will be five big players in the market. In order to remain competitive a successful Danone need to keep up to date information about the rivals and their action and act accordingly.
6. Recommend appropriate short term and long term strategies for the organization in the industry
Groupe Danone needs to concentrate on its current product range and find ways to sell it to existing market as well as new markets. It needs to do more promotions so that it can create brand royalty and attract more customers.
There are several short term options available to this company since it is large and it is considered as one of the fortune 500 business in the world in 2006. This is a good indication that Danone how Danone is working on its operation through out the world. They have built good reputation and loyal customers.
SHORT TERN STRATEGIES:
• According to the financial statement analysis the most growing market for Danone is in Asia pacific. Therefore Danone needs to plan and establish marketing strategy in Asia Pacific region. It could use internet marketing for that large number of Asia people are mostly internet surfers and online gamers. More marketing and sales force need to be employed in this region so that it can meet the growing demand in this region. Proper methods of production and distribution channels need to be managed in a way so that it can increase the sales more than they did last year.
• Quick reaction to rivals moves. Companies like Nestle’ are the main competitors and Danone need to be ahead of those competitors other wise they have to follow Nestle’ foot step. It can spend more on advertising so that it can take more piece of the market share.
• It can increase the sales by 15 % next year from it’s over all operation. And minimize the cost by 5 % so that the profit will increase to 15% next year.
LONG TERM STRATEGIES:
For any business the long term plan will be the growth in to the market. There achieve economies of scale so that it can sell goods and services at the lowest price and stay ahead of the competitors.
Danone is a global business and it has taken full advantages of globalization by expanding into all the continent of the world. Steady growth is achieved through well established product line and achieving the maximum sales. The main aim of the managing force is to maximize the wealth of its shareholders. Penetrating through different market will help them to grow in future. They were born in European market and had expands its arm. Now it has reached to a maximum and the growth rate is low compare with other areas of the world. So it could no longer concentrate on the European market since it had established and had been there almost 40 years now. Moving other parts of the world will lead Danone to make more profit. Cost of living in Europe has changed last couple of decades. Living s style also had change with it. Individuals are more concern with their health these days and going for more organic products.
It is recommended to Danone to shift its production plants to Asia and South America where they can access to cheap labor as well as cheap raw materials. This will be a competitive factor for then since cost is decreased. In Europe everything is expensive. They have potential market left in South America.
“Groupe Danone”
Dr David Yong
DR 3039
ALI ZAHIR
1051108445
alicrow@gmail.com
017-6559160
Question 1:
What are the core competencies for the organization?
Donone is a well establish player in the market for more than 100 years. So they should have generated there good name or reputation through out its existence in the several years of its operation. Donone is established in the global market and it had spread its wing in all most all the parts of the world. This is the biggest competitive advantage which Donone has. They had good reputation since it is owned by French businessmen. France is famous for its business in bread, biscuits and cookies. They are number one in the world. According to Donone website they had won the 2006
-Nº 1 worldwide in Fresh Dairy Products
- Nº 1 worldwide equally placed in Bottled Water (by volume)
- Nº 2 worldwide in Biscuits and Cereal Products
This position of Donone gives us what Donone is capable of doing. There have well establish brands such as “Donone”, ”Evian”, ”lu”, ”Wahaha” are the leading cash cows in the Donone product portfolio. This is one of the main key factor contribute the success of Donone since they gave got a wider range of product line with diversified areas. Of course their main concern is the market of food product but still they have diversified in those areas by producing
Donone has grown world wide and make it easy them to remain in the business by building well establish enterprises in different geographical regions. This will help them during economic fluctuation. The hit on Donone revenue can be minimize, because these economic down tern in one region of the world can be adjusted or set off by the successful revenue earned by well performing regions.
Donone had establish research institutions so it can stay ahead of their rivals such as Nescafe’ and Dutch lady. It is really worthwhile to spend heavy amount of money on research and development because a large global player like Danone need to have a core competitive advantage over its rivals. It is known that in food and beverage industry there always is 5 big companies who dominate the market. It is one of the main aims of Danone to be in that category. Recent tread in the food industry is that most of the consumers are getting concern with health issues and they are moving more towards organic products which have to be one of the areas they have to concentrate on. So doing research on organic food and coming with a great product will help Danone to dominate its products in the market and it will lead to more market share for Danone.
One the other hand achieving economies of scale will help to reduce the price of their product. Danone has build up good networking system to connect it operations in different corners of the world. It has built a supply chain management system so that they have lock in the suppliers in the system. It can guarantee the flow of raw materials needed for it production. Supply chain management system helps them to minimize unnecessary cost such as warehousing and cost of holding unwanted finished stock. They have employed a full enterprise system from which they save millions of dollars a year. This had leaded them to reduce administration and operating costs and this lead to economies of scale. An economy of scale means lower cost per unit. Low cost of goods means that Danone can sell their good cheaper than its rivals so it can stay ahead of rivals.
Over the past 40 years Danone had establish a well know brand name and it cost billions today. This brand loyalty is one of their core competitive factors which had made then to add extra price for its product sold in the market. Brand loyalty will help Danone to increase it profit by raising its prices to a same amount with the brand loyalty.
2- What are the key success factors for the organization?
Generally, the main key factor behind the success of this giant organization is the fact that they value and care about their customers’ in par to the organizations aim to sustain the development. This is clearly known by their mission, “Bringing health through food to a majority of people”. For an organization that had started as early as in 1966, this is a unique mission that these people have come up with. The mission statement has proven that they care about their customers since the beginning, which played a main part to build consumer trust. This statement makes the people realize that they are not set up for the success of their organization, like some of the organizations today, but they are honest people who care about their health. And in today’s people being health concerned people, they have touched the heart of many as they have mentioned as “majority of people” through this concept.
In addition to this, they had penetrated to the market by making sure that they are environment friendly people since the world have been showing a lot of concern for the environment. They have been steadily investing in their products’ safety and made sure that it won’t harm our vulnerable environment, which is something, food companies can do a great extent if they don’t care about it. To accomplish this Donone had come up with product packaging that can be recycled and made sure that it has a minimum of weight so that they can reduce plastic consumption. Furthermore they had shown respect to the environmental standards for they say the food companies are facing a dilemma where there is an increase of consumers and the importance of limiting the pollution of the environment by mankind, which in turn affects the food companies. It had initiated programs in favor of maintaining pollution free programs such as the Green Plants in 1995 which was aimed to limit waste and to get the best out of waste recovery by cutting down the consumption of water and energy.
Apart from this, the strategies used with in the company as well play an important role of its success. Most beneficial strategy that they have came up is that they had made sure of organic growth since the beginning. They extended their business in places where they have good opportunities to expand and tried to capture the market as soon as they can by extending their product line which will prevent from them loosing their monopoly in beverage industry. The key success strategy here is that Danone thinks and act fast, and makes competent decision. For instant, as soon as they found out that they are going to loose their monopoly in beverage industry if they kept on making containers, they shifted from a container manufacturing company to beverage industry in 1970. Furthermore the decision to withdraw glass plate manufacture when there was a threat to their sales due to booming of oil prizes is a good evidence of this strategy.
For the expansion of their company, Danone had partnered with a number of companies that had led to success. The first remarkable movement to this is that they combined with BSN in 1973, making them the leading food group of France. As soon as they captured the French market, they set a target to make a base in the Europe in 1980. With this hope, the company established all over southern Europe, England and Germany. They thought of the best opportunities where they can expand and make them lead in this market. For instance they entered in to biscuit industry as they discovered the change in peoples’ eating habit. To be precise, they meet their consumer needs according to their change in lifestyle as the world modernizes.
Being in food industry Danone had invested and done a great job in producing food that meets their customers desiring taste in every country they are at present. In fact they have been succeeding in every country they enter. They are able to win over customers in countries where people have not tasted diary products. The reality behind this is their well known strategy known as innovation. They research these countries before launching their brands and finds out about their tastes and dietary habits. At the end, as Danone company says they develop “local brands” which makes them successful in every other country they market.
Danone says that they are unique from other companies’ because they have developed a vision that defends its core values. This is major fact behind their success. This vision is applied for internal and external key publics and due to this excellent strategy they had gain their success. Their core values are Openness, Enthusiasm, Humanism and proximity.
Further more the loyal employees who stand and work for this mission is also behind their success. Their dedication to their work and dual commitment to business success and social progress as Danone group says is important. Without them, Danone wouldn’t have succeeded.
3. Where is the organization vulnerable? What should it watch out for?
Danone Company is expending its wing by doing acquisition and mergers. They had practice this in the France as well as in other parts of the world. They buy out small and middle scale rivals and in the countries which they are expending. When talking over another business Danone need to be really prepare for the reluctance of the third party. Managing employees who belong to that organization could be difficult since making changes around that business is not that easy task. Most of the employees morale is lost when Danone buy out those businesses. For example in India when Danone buy out the brand “Britannica” the employees felt left out where most of them have been working for Britannica for years.
Another thing that Danone need to watch out is that when purchasing that business lost of money is needed. So it needs to consider cost of capital and return on that investment. It is really risky when growing globally. There are language barriers, political unrest, currency difference and ethical issues too. In order for Danone to be successful it has to make those factors into consideration. They need to build a master plan to tackle with that kind of situation if they want to be successful in the expending. Danone might face it difficult to finance those investments since it buys out firms in almost all the countries which it expands. Sometimes they might have some types of restriction from the government especially when the government changes and the policies of the new government changes too. It is difficult to take off an investment once it spends. Due to some sunk cost Danone still might have to carry out with those investments which pay them just break even. On those situations Danone has to face some type of loss. In a conclusion, we can say that going global is risky on the other hand taking right risk means higher return.
Danone need to keep well balance product portfolio. It should always research on producing new line of products before existing products gets “Problem child or Dogs”.
It also needs to be careful with out break of bird flue since it used egg as a raw material in their product range such as cereal and biscuits.
In Danone website some of the information needed is not mentioned. Such as the difficulties it faces when doing the business world wide. In order to go more detail we have to get true information.
4. Identify the challenges faced and opportunities available to the
Organization in the industry
Opportunities
Since people are becoming more and more concerned about their diet to maintain a great body shape especially among youngsters, this is good opportunity to make something for these valuable customers. Danone can create new product line targeted to these health conscious people making sure their needs are met. These youngsters are in need of a drink or a diary product that will keep them fit without ruining their physique. For instance young women mostly have an eye on low fat, diet, or low sugar products these days. There fore Danone can create low sugar and low fat products for each existing product. Example of a product can be low sugar biscuits without neglecting the delightful taste of each. This can be a good approach when it is build up these product line are introduce with a new theme indicating that Danone has introduced a new brand for people who doesn’t want fat in their diet since people who would consume these products are increasing. Further more this can be a good product for those who cannot consume Danone products due to certain type of illness such as Diabetes. They can mention this as well, so that Danone can build up a new image in their consumers mind, that they not only care for the health of healthy people but also those who are sick and cannot enjoy the delicious product line that Danone has produced over the years. This will increase another marketing opportunity around the world as there are a lot of diabetes people.
On the other hand the increase of popularity in sports among youngsters can provide a great opportunity to build up energizers to boost up energy for those who play sports. They can easily penetrate this market as they have already gained trust among their consumers for creating healthy products.
Further more with the huge success of past operating years Danone still has the opportunity to penetrate in many other countries market since they have been loyal in the past and they have gained enough trust from the consumers to introduce their products. This can contribute a great deal for their expansion theory.
Challenges
The main challenge that Danone faces will be the fact that they are trying to invade the countries that have already established their own diary products and had made the locals believe in their own country products than that of the products that is made in any other country. These people refuse to accept new products since they have been used to the old ones. Further more increase in competition, as more food industries are growing in countries where Danone had planted a market will be a threat to their sales. These food industries are as well investing a lot to produce innovative products varying the taste to gain customers attention and doing research to meet the changes in their consumers eating habits.
On the other hand, for every product that is made in Danone or any other food industry there will be the same product made from another company with a different name competing it. Even if Danone introduced a new product, the competing companies will introduce a much improved version of that product to the market the next day it self. In another words they have a lot of competition in their product line.
Being established in different countries around the world which is politically unstable will cause a threat to their products. Countries like Africa where Danone had introduced their brands, is very politically unstable. Therefore their no guarantee that these products will survive in a near future in there country and moreover whether it will make the launching of these product a failure where they lost a large amount of sales.
5. Analyze the degree of attractiveness of the industry for the organization
With the Porter’s “Five Forces Model".
Every industry has many members or company in it. They face challenges from all the corner of the industry. According to Potter’s five Forces competition model there is certain five factors which are determining the competitiveness in the industry where the firms exist. On the other hand competitiveness in different geographical area might be different due to competitive five forces and its impact on the first.
Danone is a global player in the business so they need to be well prepared for those issues. There are five forces which determine the competitiveness in the industry which are namely threats of new entrance, Bargaining power if supplies, bargaining power of customers, treat of substitute product and rivalry among the firms.
Threat of New Entrance:
Evidence suggested that companies often find it difficult to identify new competitors. Identifying new entrance is important because they can threaten the market share of existing competitors. One reason new entrance pose such a thereat is that they additional product capacity. Unless demand for a good or service is increasing, additional capacity will move down consumers price because demand remain same and supply increase. This will lead existing firms to lower its revenue because the prices fall.
Danone always have the strategy of buying out the existing firms when it moves into new market or new geographical area. They target to only the best performing businesses so that they can minimize have well known name and easy to penetrate market. They can also eliminate the threats which give by existing players buy ways of cutting prices or using there advantage of economies of scale. On the other hand they don’t add more capacity in the industry since they carry out the operation run by existing firms. Once they capture enough market share then they introduce new products in to the market and dominate the market. This strategy seems really work-out with Danone.
Donone is operating in food and beverages industry; there are a lot of small scale competitors around. Danone had already achieved economies of scale so it will be really difficult for new entrance to compete a giant business like Danone. There brand names are well recognize in the market so they don’t have so much thread from new entrance small firms.
Bargaining power of suppliers.
It is vital to maintain good relationship with ht suppliers of raw materials. Danone needs to make sure that raw materials are reached on time to manufacturing outlets so that it can carry out the business successfully. Failure to deliver raw material might end up in lack of Danone products in the market. This could lead to loose some customers, in other word Danone’s market share.
Danone could establish SCM (Supply Chain Management) system so that the suppliers are locked-in in the process of the organization. Once we build a good relationship with the suppliers then they will start to be loyal to the business. This way the company can minimizes the bargaining power of the suppliers. Most agricultural producer is quite a lot in numbers so Danone might not face so difficult to find the suppliers of raw materials.
On the other hand the supplier of agricultural goods in unpredictable since it will depend on the weather and certain other factors. But the demand for Danone products remains same. So short fall of supply might lead Danone to face difficulties financially and might lead to low profit. So it needs to make a reliable method of delivering the supplies on time.
I believe that the bargaining power of the suppliers in really low because Danone had got alternatives in choosing its suppliers.
Bargaining power of Customers:
It is the most important function for a business to exist in the market. It is almost impossible to run a business without considering their view about our products. So Danone needs to consider it when talking any decisions on that matter. Danone might have large scale buyers who might be distributing Danone products to a local area. These large scale buyers are one of the key factors for high sales turnover. Danone needs to keep good relationship with those large scale buyers in order to maintain them buying from Danone.
But household buyers are important too since they are final party who consume Danone’s products. So think about ways in which Danone can add value to its product, which is best fitted to needs of the consumers.
Bargaining power of customers is quite high since there is many sellers who sell almost same type with Danone’s product for example biscuits, yogurts, Mineral water and cereal product. So Danone has little control over its customers. Single mistake by Danone might lead to loose its customers. They could switch to other brands easily if they are not happy with the Danone brands.
Availability of substitute products:
There is always the threat that a new similar product might hit the market. It is really easy to copy or attack Danone’s product. Danone doesn’t have any control over it.
Danone uses strategy of buying existing well performing businesses. This help them to buy existing market and those customers could be introduces with the new line of Danone products. This strategy worked in the case of Britannica in India. Since India is well populated country and almost 1/6 of the worlds population lives in India. They performed well in that region with high tern over. They successfully completed in attracting the Britannica customers to Danone products.
Danone needs to have clear view of what is going on in the market so that when ever there is a threat of a substitute, and then Danone can come with a new brad which can tackle the substitute products.
Intensity of Rivalry among Competitors.
Firms in an industry are homogenous and the action taken by one firm will be absorbed by others and response in a competitive manner. For example if the rival of Danone increase it’s spending on marketing then in order to catch up with then Danone needs to involve in a same type of promotion activity.
But in case of a monopoly like Telecom’s, the internet service price is set higher than the lost and they earned abnormal profit. Due the fact, that they don’t have any threat from any rivals. They can set what ever price they like and can easily go one and don’t have to care quality of the service.
For every industry there will be five big players in the market. In order to remain competitive a successful Danone need to keep up to date information about the rivals and their action and act accordingly.
6. Recommend appropriate short term and long term strategies for the organization in the industry
Groupe Danone needs to concentrate on its current product range and find ways to sell it to existing market as well as new markets. It needs to do more promotions so that it can create brand royalty and attract more customers.
There are several short term options available to this company since it is large and it is considered as one of the fortune 500 business in the world in 2006. This is a good indication that Danone how Danone is working on its operation through out the world. They have built good reputation and loyal customers.
SHORT TERN STRATEGIES:
• According to the financial statement analysis the most growing market for Danone is in Asia pacific. Therefore Danone needs to plan and establish marketing strategy in Asia Pacific region. It could use internet marketing for that large number of Asia people are mostly internet surfers and online gamers. More marketing and sales force need to be employed in this region so that it can meet the growing demand in this region. Proper methods of production and distribution channels need to be managed in a way so that it can increase the sales more than they did last year.
• Quick reaction to rivals moves. Companies like Nestle’ are the main competitors and Danone need to be ahead of those competitors other wise they have to follow Nestle’ foot step. It can spend more on advertising so that it can take more piece of the market share.
• It can increase the sales by 15 % next year from it’s over all operation. And minimize the cost by 5 % so that the profit will increase to 15% next year.
LONG TERM STRATEGIES:
For any business the long term plan will be the growth in to the market. There achieve economies of scale so that it can sell goods and services at the lowest price and stay ahead of the competitors.
Danone is a global business and it has taken full advantages of globalization by expanding into all the continent of the world. Steady growth is achieved through well established product line and achieving the maximum sales. The main aim of the managing force is to maximize the wealth of its shareholders. Penetrating through different market will help them to grow in future. They were born in European market and had expands its arm. Now it has reached to a maximum and the growth rate is low compare with other areas of the world. So it could no longer concentrate on the European market since it had established and had been there almost 40 years now. Moving other parts of the world will lead Danone to make more profit. Cost of living in Europe has changed last couple of decades. Living s style also had change with it. Individuals are more concern with their health these days and going for more organic products.
It is recommended to Danone to shift its production plants to Asia and South America where they can access to cheap labor as well as cheap raw materials. This will be a competitive factor for then since cost is decreased. In Europe everything is expensive. They have potential market left in South America.
Globalisation
Globalization: global and local culture expression
The impact of globalization to culture
We are living in the world of changes. Since the end of the world war countries attitude had changed. They are more concerned with the challenges faced to there country’s economically. War destroys the economy and the world. Leaders of these countries tried to pursued people to develop there Nation. Industrial revolution came since the citizens who were in the battle fields were eventually brought home. There lot of hands to make more money and increase the GDP.
On the other side during the colonization period the super powers in the world had made business ties with these colonized countries. This had lead to form strong multinationals. Europeans had to learn about how to control the global market and how to manage them. They had to concern with producing the products to the standard expected by the host countries. But they faced the problem of managing the employees, since there were the colonize power the there reputation of them had gone. Europeans had to find ways to manage people.
A) Western culture meet eastern culture
Cultural differences can fairly simple and observable in our communication patterns,
Language and gestures, and they can be very different, even with the same language or among neighbors. An affirmative answer, ``yes'', could have different meanings in
different countries. In most Latin American countries, for example, a ``yes'' does not necessarily mean a person will do something. Ask an English person if they know anything about a particular subject: if the answer is ``not a lot'', you can assume they know next to nothing. If, however, the answer is ``a little bit'' it may mean they are one of the world’s leading experts! [1]. According to my experience I knew that showing two fingers means ‘peace’ according to Middle East people but in Australia it means an insult to other person and it is considered as a street sign language.
Western believes that number 13 and Friday 13 are bad numbers and it has bad luck. When they number the apartments or streets they don’t use the number thirteen. But is Asia Pacific the view is totally different. Sometimes a gesture could be unapproprite that the person you meet could reluctant to talk to you. It is so important to learn the culture of the host when you do the business in overseas. ‘Marlboro’ faced it difficult to penetrate into the Chinese market due the poster they used to attract people. They use there normal cowboy advertisement with the black horse. But later they realize their sales was dropping due to this, since Chinese believes the black horse it a sign of bad luck. They took this issue into consideration and came back the advertisement with a white house and managed to hold it in the market. This is how cultural differences could affect the global players.
Rapidly developing countries like Malaysia and Singapore has learned how to respect the other culture that lives their next door. They have multi-culture and multi-religions. Sometimes it could be so embarrassing and there could be hostility among races. They are really sensitive to racial issues. But in recent days it is normal to see Indian and Chinese making friends. The attitude of the young generation is really positive since they have learned to live in a multi racial society. It is a good sign of globalization. The days of war between races or religion are over and people today are more open-minded.
B) homogenous culture
It is common to see that nowadays the cultural mix is so common that there is homogeneousness among the different parties. Good example is the franchise food chain found all over world offering almost the same verities of meals. The perfect examples are McDonald’s and Kentucky Fried Chicken (KFC) and Pizza Hut. You could find them almost every corner of the world. So this reflects the fact that people are becoming homogenous in there taste of food. This is one of the famous areas where globalization is really in practice.
Today, this “cultural homogeneity version” of global theory has often been dubbed “McDonaldisation”: a term that implies that the popular consumer culture of the economically dominant West is relentlessly and inevitably transforming other, regions, cultures, nations, and societies (be they part of the developed or developing worlds). Such perspectives imply that technological change, the mass media, and consumer-oriented marketing campaigns work in tandem to remake whatever they touch in their own image. Besides consumption patterns, some ob- servers suggest that even attitudes and ideas about society, religion, and technology are transformed by cultural diffusion brought by globalization [2].
Western culture impacting the rest of the earth in ways that leads to greater worldwide cultural homogeneity. In reality, of course, the East has the rich history, which influences the West, just as the West transforms the East; thus, it is common place to buy cheap Chinese food, served up in a Styrofoam container, instead of eating a Big Mac. It is a fact believe it or not that American food giants are moving into rest of the world (West moving to East) and also famous small Chinese restaurants are established all over Western countries and there major customers are the white. Same applied to the Indian restaurants all over world.
• CHALENGES FACED BY MULTI-NATIONAL COMPANIES
Controlling globally with managerial accounting often is inefficient due to lack of understanding. Language, external variables, and headquarters decisions create distortions, which prevent comparison with domestic data and require subsidiary accounting adjustments. Furthermore, background and national cultural value systems let individuals perceive and react non-uniformly to similar issues.
There are many difficulties in global controlling. Nothing is that easy. In olden days communication is really pure so the trade is done by ships which sail on the ocean. Passing of massages are even difficult back them. But know the time we are in it is really easy for everyone to communicate by using email, instant messaging, via video conferencing etc.
At first raw materials are supplied from overseas countries mostly developing countries like chine, India, Indonesia. The system is completed with supply chain management system where supplier and customers are connected using internet or intranet.
But there are difficulties too. Language barrier could be a problem since different part of the world speaks different accent and languages. Companies like Coca Cola, McDonald need to consider local taste when establishing their business overseas. So it will be completely new dishes for different parts of the world. Another difficulty is that it really difficult to transfer raw material and finished goods between courtiers since shipping may be slow as well as there are high unreliability. Geographically separated organization need to have managers who are ready to accept cross culture deference.
Most of the managers who are opening minded and ready to invest and develop their business overseas will face the political and economical environment of the host country. They need to be really sensitive to inflation, exchange rate and movement policies since their company future depends really heavily on those factors.
If the business expand globally, centralized management system might not be really helpful to them because lack of communication between those departments. Sometimes there could be situation where company has to stop the production due to failure to deliver raw materials on time.
Globalization, technological innovation, and the spread of free-market governance has created new and interesting opportunities for managers who decide to use direct marketing to sell their products overseas. For managers, considering international direct marketing, a careful assessment of market prospects and a thoughtful evaluation of the PEST environment should maximize potential opportunities while minimizing the risks associated with foreign market [3].
[1]- Culture and globalization: a Latin American challenge Elena Granell Industrial and Commercial Training Volume 32.Number 3. 2000 89±93
[2] The Cultural Impact of Globalization: Economic Activity and Social Change
Nader Asgary and Alf H. Walle
[3]http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/3250010102.html
The impact of globalization to culture
We are living in the world of changes. Since the end of the world war countries attitude had changed. They are more concerned with the challenges faced to there country’s economically. War destroys the economy and the world. Leaders of these countries tried to pursued people to develop there Nation. Industrial revolution came since the citizens who were in the battle fields were eventually brought home. There lot of hands to make more money and increase the GDP.
On the other side during the colonization period the super powers in the world had made business ties with these colonized countries. This had lead to form strong multinationals. Europeans had to learn about how to control the global market and how to manage them. They had to concern with producing the products to the standard expected by the host countries. But they faced the problem of managing the employees, since there were the colonize power the there reputation of them had gone. Europeans had to find ways to manage people.
A) Western culture meet eastern culture
Cultural differences can fairly simple and observable in our communication patterns,
Language and gestures, and they can be very different, even with the same language or among neighbors. An affirmative answer, ``yes'', could have different meanings in
different countries. In most Latin American countries, for example, a ``yes'' does not necessarily mean a person will do something. Ask an English person if they know anything about a particular subject: if the answer is ``not a lot'', you can assume they know next to nothing. If, however, the answer is ``a little bit'' it may mean they are one of the world’s leading experts! [1]. According to my experience I knew that showing two fingers means ‘peace’ according to Middle East people but in Australia it means an insult to other person and it is considered as a street sign language.
Western believes that number 13 and Friday 13 are bad numbers and it has bad luck. When they number the apartments or streets they don’t use the number thirteen. But is Asia Pacific the view is totally different. Sometimes a gesture could be unapproprite that the person you meet could reluctant to talk to you. It is so important to learn the culture of the host when you do the business in overseas. ‘Marlboro’ faced it difficult to penetrate into the Chinese market due the poster they used to attract people. They use there normal cowboy advertisement with the black horse. But later they realize their sales was dropping due to this, since Chinese believes the black horse it a sign of bad luck. They took this issue into consideration and came back the advertisement with a white house and managed to hold it in the market. This is how cultural differences could affect the global players.
Rapidly developing countries like Malaysia and Singapore has learned how to respect the other culture that lives their next door. They have multi-culture and multi-religions. Sometimes it could be so embarrassing and there could be hostility among races. They are really sensitive to racial issues. But in recent days it is normal to see Indian and Chinese making friends. The attitude of the young generation is really positive since they have learned to live in a multi racial society. It is a good sign of globalization. The days of war between races or religion are over and people today are more open-minded.
B) homogenous culture
It is common to see that nowadays the cultural mix is so common that there is homogeneousness among the different parties. Good example is the franchise food chain found all over world offering almost the same verities of meals. The perfect examples are McDonald’s and Kentucky Fried Chicken (KFC) and Pizza Hut. You could find them almost every corner of the world. So this reflects the fact that people are becoming homogenous in there taste of food. This is one of the famous areas where globalization is really in practice.
Today, this “cultural homogeneity version” of global theory has often been dubbed “McDonaldisation”: a term that implies that the popular consumer culture of the economically dominant West is relentlessly and inevitably transforming other, regions, cultures, nations, and societies (be they part of the developed or developing worlds). Such perspectives imply that technological change, the mass media, and consumer-oriented marketing campaigns work in tandem to remake whatever they touch in their own image. Besides consumption patterns, some ob- servers suggest that even attitudes and ideas about society, religion, and technology are transformed by cultural diffusion brought by globalization [2].
Western culture impacting the rest of the earth in ways that leads to greater worldwide cultural homogeneity. In reality, of course, the East has the rich history, which influences the West, just as the West transforms the East; thus, it is common place to buy cheap Chinese food, served up in a Styrofoam container, instead of eating a Big Mac. It is a fact believe it or not that American food giants are moving into rest of the world (West moving to East) and also famous small Chinese restaurants are established all over Western countries and there major customers are the white. Same applied to the Indian restaurants all over world.
• CHALENGES FACED BY MULTI-NATIONAL COMPANIES
Controlling globally with managerial accounting often is inefficient due to lack of understanding. Language, external variables, and headquarters decisions create distortions, which prevent comparison with domestic data and require subsidiary accounting adjustments. Furthermore, background and national cultural value systems let individuals perceive and react non-uniformly to similar issues.
There are many difficulties in global controlling. Nothing is that easy. In olden days communication is really pure so the trade is done by ships which sail on the ocean. Passing of massages are even difficult back them. But know the time we are in it is really easy for everyone to communicate by using email, instant messaging, via video conferencing etc.
At first raw materials are supplied from overseas countries mostly developing countries like chine, India, Indonesia. The system is completed with supply chain management system where supplier and customers are connected using internet or intranet.
But there are difficulties too. Language barrier could be a problem since different part of the world speaks different accent and languages. Companies like Coca Cola, McDonald need to consider local taste when establishing their business overseas. So it will be completely new dishes for different parts of the world. Another difficulty is that it really difficult to transfer raw material and finished goods between courtiers since shipping may be slow as well as there are high unreliability. Geographically separated organization need to have managers who are ready to accept cross culture deference.
Most of the managers who are opening minded and ready to invest and develop their business overseas will face the political and economical environment of the host country. They need to be really sensitive to inflation, exchange rate and movement policies since their company future depends really heavily on those factors.
If the business expand globally, centralized management system might not be really helpful to them because lack of communication between those departments. Sometimes there could be situation where company has to stop the production due to failure to deliver raw materials on time.
Globalization, technological innovation, and the spread of free-market governance has created new and interesting opportunities for managers who decide to use direct marketing to sell their products overseas. For managers, considering international direct marketing, a careful assessment of market prospects and a thoughtful evaluation of the PEST environment should maximize potential opportunities while minimizing the risks associated with foreign market [3].
[1]- Culture and globalization: a Latin American challenge Elena Granell Industrial and Commercial Training Volume 32.Number 3. 2000 89±93
[2] The Cultural Impact of Globalization: Economic Activity and Social Change
Nader Asgary and Alf H. Walle
[3]http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/3250010102.html
TSP3251
Applied Probability and Stochastic Process
Mini-Project
.
Student Admission Model
Question 1
The aim of this project is to determine how Markov Chain could be used to model the process of student admission for the course of Communication offered by the Faculty of Broadcasting of Oxford University in UK.
A model is thus being designed to describe a system which at any given point of time, is in one, and only one, of the defined sets of states and most importantly the future state of the system depends only on the current state and not on any of the past states. For this reason the Markov Chain is often referred to as a “memoryless” model.
This model approximates the process of student admission as a series of transitions between four possible states where a potential student would be in. They are:
• State 0: has not applied to OXFORD UNIVERSITY
• State 1: has applied to OXFORD UNIVERSITY but an accept/reject decision has not yet been made
• State 2: has applied to OXFORD UNIVERSITY and has been rejected
• State 3: has applied to OXFORD UNIVERSITY and has been accepted (a successful placement has been made)
The following diagram shows how the process of admission takes place and identifies the states involved at a given time. The states can be identified by the Bolded lines.
As illustrated in the diagram above, a potential student of OXFORD UNIVERSITY can be classified under one, and only one, of the four states. When a potential student applies for the Communication course, his state could change between the given four states. For example, after one month of his application, he may well be in State 1, 2 or 3, i.e. the decision to accept/reject his application may not have been decided yet; or his application could have been rejected or; his application could have been accepted.
At the start of the year (month 1 in the admissions year) all potential students are in state 1.
A probability could be assigned to any of the transitions by analyzing the admission statistics of the course for a quite considerable period of time. The specific probabilities and factors which need to be considered would be discussed later in Question 2 of this project.
State 0(E0) State 1(E1) State 2(E2) State 3(E3)
State 0: has not applied to OXFORD UNIVERSITY P00 P01 0 0
State 1: has applied to OXFORD UNIVERSITY but an accept/reject decision has not yet been made 0 P11 P12 P13
State 2: has applied to OXFORD UNIVERSITY and has been rejected 0 0 1 0
State 3: has applied to OXFORD UNIVERSITY and has been accepted 0 0 0 1
A transition matrix could be obtained from the transition table and could be summarized as below.
T is called the transition matrix of the above system. In our example, a state is the stage at which any potential student of OXFORD UNIVERSITY is in the system at a particular time. The entry Pij in the above matrix represents the probability of transition from the state corresponding to i to the state corresponding to j.
In the model some of the transitional probabilities would always remain constant. For example, it would have been the final result if a potential student did apply to do Communication in OXFORD UNIVERSITY and was rejected. Thus even after a month, two and always the probability of transition from State 2 to State 2 would always be 100%, i.e. 1.
Furthermore, when we look at our matrix in detail we would understand that the Admissions manager has control over the elements in one row of the above transition matrix, namely row 1. The elements in this row reflect:
• Transition from 1 to1: the speed with which applications are processed each month.
• Transition from 1 to 2: the proportion of applicants who are rejected each month.
• Transition from 1 to 3: the proportion of applicants who are accepted each month.
To be more specific, the Admissions manager has to decide the proportion of applications that should be (i) handled within that month (ii) accepted that month, and (iii) rejected that month.
Thus, for example, the transition probability P12 (a potential student who have applied for placement to be rejected) or P13 (a potential student who have applied for placement to be accepted) depends mainly on the capability of the Admissions manager to evaluate the applications.
The objective of the model is not just to analyze the history of how the admissions to the course have been made, but more importantly it could be used in order to predict future admissions to the Communication course will take place.
The model would inform the management how long it would take to process an average application in the future, what factors needs to be considered in order to improve the situation, etc.
Furthermore the model could be compared with newly designed models in order to predict and discover an ideal time period for an application to complete given the competitive environment in which OXFORD UNIVERSITY operates. Even though this would not be so relevant in the current context, as OXFORD UNIVERSITY is the only university offering a course in Communication in UK, it would, however, be necessary in the future for them to be informed on ways to tackle the competition faced by OXFORD UNIVERSITY in offering Communication as a Undergraduate degree in UK.
Question 2
As seen in the Transition Matrix in Question 1 above, there are five transitions for which we need to define the probability. They include the probability of P00, P01, P11, P12, and P13. The remaining 11 probabilities would remain constant regardless of the duration of the transition as shown in the transition matrix in Question 1.
As discussed before, these probabilities could be assigned after analyzing the admission statistics of the course for a considerable period of time. Suppose for example after analyzing the data for the past 3 years for the course of Communication, and by discussion sessions held by experienced persons in this field, the probabilities were decided as follows for each month:
P00 = 0.97
P01 = 0.03
P11 = 0.10
P12 = 0.15
P13 = 0.75
Thus the new transition matrix is as follows:
Since each potential student could be categorized to one and only one of the four states, each row sums to 1. Because we are dealing with probabilities, each entry must be between 0 and 1, inclusive. The most important fact that lets us model this situation as a Markov chain is that the next state of the potential student depends only on the current state, not previous history.
The resulting transition diagram could be drawn as follows:
Checking whether the chain is ergodic
Since f0 is < 1, therefore E0 is a Transient State
Since f1 is < 1, therefore E1 is a Transient State
Since f2 is = 1, therefore E2 is a Persistent State
Since f3 is = 1, therefore E3 is a Persistent State
As all of the states are not Persistent, the chain is therefore not ergodic.
Calculation of Steady-State Distribution
from this we get:
we also know that
which solves to
this indicates that this Markov Chain does not have a steady-state distribution as the transition matrix is not regular.
Proof that the transition matrix is not regular
A Square matrix is called regular if for some integer n all entries of Tn are positive. For example when n =2,
Thus, transition matrix T is not a regular matrix, because for all positive integer n, all the entries in Tn are not positive.
The steady-state distribution is used to depict a long-term conclusion using a Markov Chain Model. In this case, the steady-state vector does not exist; therefore, it is not possible to make predictions on the longer term. For example it is not possible to correctly make assumptions using the Student Admission Model for long periods, for example for 3 years.
Applied Probability and Stochastic Process
Mini-Project
.
Student Admission Model
Question 1
The aim of this project is to determine how Markov Chain could be used to model the process of student admission for the course of Communication offered by the Faculty of Broadcasting of Oxford University in UK.
A model is thus being designed to describe a system which at any given point of time, is in one, and only one, of the defined sets of states and most importantly the future state of the system depends only on the current state and not on any of the past states. For this reason the Markov Chain is often referred to as a “memoryless” model.
This model approximates the process of student admission as a series of transitions between four possible states where a potential student would be in. They are:
• State 0: has not applied to OXFORD UNIVERSITY
• State 1: has applied to OXFORD UNIVERSITY but an accept/reject decision has not yet been made
• State 2: has applied to OXFORD UNIVERSITY and has been rejected
• State 3: has applied to OXFORD UNIVERSITY and has been accepted (a successful placement has been made)
The following diagram shows how the process of admission takes place and identifies the states involved at a given time. The states can be identified by the Bolded lines.
As illustrated in the diagram above, a potential student of OXFORD UNIVERSITY can be classified under one, and only one, of the four states. When a potential student applies for the Communication course, his state could change between the given four states. For example, after one month of his application, he may well be in State 1, 2 or 3, i.e. the decision to accept/reject his application may not have been decided yet; or his application could have been rejected or; his application could have been accepted.
At the start of the year (month 1 in the admissions year) all potential students are in state 1.
A probability could be assigned to any of the transitions by analyzing the admission statistics of the course for a quite considerable period of time. The specific probabilities and factors which need to be considered would be discussed later in Question 2 of this project.
State 0(E0) State 1(E1) State 2(E2) State 3(E3)
State 0: has not applied to OXFORD UNIVERSITY P00 P01 0 0
State 1: has applied to OXFORD UNIVERSITY but an accept/reject decision has not yet been made 0 P11 P12 P13
State 2: has applied to OXFORD UNIVERSITY and has been rejected 0 0 1 0
State 3: has applied to OXFORD UNIVERSITY and has been accepted 0 0 0 1
A transition matrix could be obtained from the transition table and could be summarized as below.
T is called the transition matrix of the above system. In our example, a state is the stage at which any potential student of OXFORD UNIVERSITY is in the system at a particular time. The entry Pij in the above matrix represents the probability of transition from the state corresponding to i to the state corresponding to j.
In the model some of the transitional probabilities would always remain constant. For example, it would have been the final result if a potential student did apply to do Communication in OXFORD UNIVERSITY and was rejected. Thus even after a month, two and always the probability of transition from State 2 to State 2 would always be 100%, i.e. 1.
Furthermore, when we look at our matrix in detail we would understand that the Admissions manager has control over the elements in one row of the above transition matrix, namely row 1. The elements in this row reflect:
• Transition from 1 to1: the speed with which applications are processed each month.
• Transition from 1 to 2: the proportion of applicants who are rejected each month.
• Transition from 1 to 3: the proportion of applicants who are accepted each month.
To be more specific, the Admissions manager has to decide the proportion of applications that should be (i) handled within that month (ii) accepted that month, and (iii) rejected that month.
Thus, for example, the transition probability P12 (a potential student who have applied for placement to be rejected) or P13 (a potential student who have applied for placement to be accepted) depends mainly on the capability of the Admissions manager to evaluate the applications.
The objective of the model is not just to analyze the history of how the admissions to the course have been made, but more importantly it could be used in order to predict future admissions to the Communication course will take place.
The model would inform the management how long it would take to process an average application in the future, what factors needs to be considered in order to improve the situation, etc.
Furthermore the model could be compared with newly designed models in order to predict and discover an ideal time period for an application to complete given the competitive environment in which OXFORD UNIVERSITY operates. Even though this would not be so relevant in the current context, as OXFORD UNIVERSITY is the only university offering a course in Communication in UK, it would, however, be necessary in the future for them to be informed on ways to tackle the competition faced by OXFORD UNIVERSITY in offering Communication as a Undergraduate degree in UK.
Question 2
As seen in the Transition Matrix in Question 1 above, there are five transitions for which we need to define the probability. They include the probability of P00, P01, P11, P12, and P13. The remaining 11 probabilities would remain constant regardless of the duration of the transition as shown in the transition matrix in Question 1.
As discussed before, these probabilities could be assigned after analyzing the admission statistics of the course for a considerable period of time. Suppose for example after analyzing the data for the past 3 years for the course of Communication, and by discussion sessions held by experienced persons in this field, the probabilities were decided as follows for each month:
P00 = 0.97
P01 = 0.03
P11 = 0.10
P12 = 0.15
P13 = 0.75
Thus the new transition matrix is as follows:
Since each potential student could be categorized to one and only one of the four states, each row sums to 1. Because we are dealing with probabilities, each entry must be between 0 and 1, inclusive. The most important fact that lets us model this situation as a Markov chain is that the next state of the potential student depends only on the current state, not previous history.
The resulting transition diagram could be drawn as follows:
Checking whether the chain is ergodic
Since f0 is < 1, therefore E0 is a Transient State
Since f1 is < 1, therefore E1 is a Transient State
Since f2 is = 1, therefore E2 is a Persistent State
Since f3 is = 1, therefore E3 is a Persistent State
As all of the states are not Persistent, the chain is therefore not ergodic.
Calculation of Steady-State Distribution
from this we get:
we also know that
which solves to
this indicates that this Markov Chain does not have a steady-state distribution as the transition matrix is not regular.
Proof that the transition matrix is not regular
A Square matrix is called regular if for some integer n all entries of Tn are positive. For example when n =2,
Thus, transition matrix T is not a regular matrix, because for all positive integer n, all the entries in Tn are not positive.
The steady-state distribution is used to depict a long-term conclusion using a Markov Chain Model. In this case, the steady-state vector does not exist; therefore, it is not possible to make predictions on the longer term. For example it is not possible to correctly make assumptions using the Student Admission Model for long periods, for example for 3 years.