Statistics and Soft Drink Essay Example

Statistics and Soft Drink Essay CASE 1 DEMAND ESTIMATION and ELASTICITY: Soft Drinks in the U. S. Demand can be estimated with experimental data, time-series data, or cross-section data. In this case, cross-section data appear in the Excel file. Soft drink consumption in cans per capita per year is related to six-pack price, income per capita, and mean temperature across the 48 contiguous states in the United States. QUESTIONS 1. Given the data, please construct (a) a multiple linear regression equation and (b) a log-linear (exponential) regression equation for demand by MS Excel. (20%) 2. Given the MS Excel output in question 1, please compare the two regression equations’ coefficient of determination (R-square), F-test and t-test. Which equation is a good (better) fit? Which equation shows the stronger overall significance to predict the future demand? Which equation will you choose for a better demand estimation? Explain your answer in the language of statistics. 20%) 3. Given your choice of equation in question 2, please interpret each coefficient of independent variable in the soft drink demand estimated equation. (10%) 4. Given your choice of equation in question 2, how many cans/capita/year on soft drink should be for a state in which 6-pack price=$2. 45, Income/Capita=$36,500, and Mean Temp= 68Â °F? (20%) 5. Given your choice of equation in question 2 and the numbers in question 4, please calc ulate the price elasticity of demand and income elasticity. We will write a custom essay sample on Statistics and Soft Drink specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Statistics and Soft Drink specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Statistics and Soft Drink specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Comment on whether the demand is elastic or inelastic and whether soft drink is necessity, normal good or luxury good. (10%) 6. Now omit the price and temperature from the regression equation then run the regression again. Given the Excel output of only one independent variable, income, should a marketing plan for soft drinks be designed that relocates most canned drink machines into low-income neighborhoods? Please explain your answer in the language of economics. (20%)

Biography of 20th Century Pote, Edna St. Vincent Millay

Biography of 20th Century Pote, Edna St. Vincent Millay Edna St. Vincent Millay was a popular poet, known for her Bohemian (unconventional) lifestyle. She was also a playwright and actress. She lived from  February 22, 1892 to October 19, 1950.   She sometimes published as Nancy Boyd, E. Vincent Millay, or Edna St. Millay.  Her poetry, rather traditional in form but adventurous in content, reflected her life in dealing forthrightly with sex and independence in women. A nature mysticism pervades much of her work. Early Years Edna St. Vincent  Millay was born in 1892. Her mother, Cora Buzzelle Millay, was a nurse, and her father,  Henry Tolman Millay, a teacher. Millays parents divorced in 1900 when she was eight, reportedly because of her fathers gambling habits. She and her two younger sisters were raised by their mother in Maine, where she developed an interest in literature and began writing poetry. Early Poems and Education By the age of 14, she was publishing poetry in the childrens magazine, St. Nicholas, and read an original piece for her high school graduation from Camden High School in Camden, Maine. Three years after graduation, she followed her mothers advice and submitted a long poem to a contest. When the anthology of selected poems was published, her poem, Renascence, won critical praise. On the basis of this poem, she won a scholarship to Vassar, spending a semester at Barnard in preparation. She continued to write and publish poetry while in college, and also enjoyed the experience of living among so many intelligent, spirited, and independent young women. New York Soon after graduation from Vassar in 1917, she published her first volume of poetry, including Renascence. It was not particularly financially successful, though it won critical approval, and so she moved with one of her sisters to New York, hoping to become an actress. She moved to Greenwich Village, and soon became part of the literary and intellectual scene in the Village. She had many lovers, both female and male, while she struggled to make money with her writing. Publishing Success After 1920, she began to publish mostly in Vanity Fair, thanks to editor Edmund Wilson who later proposed marriage to Millay. Publishing in Vanity Fair meant more public notice and a bit more financial success. A play and a poetry prize were accompanied by illness, but in 1921, another Vanity Fair editor arranged to pay her regularly for writing she would send from a trip to Europe. In 1923, her poetry won the Pulitzer Prize, and she returned to New York, where she met and quickly married a wealthy Dutch businessman, Eugen Boissevant, who supported her writing and took care of her through many illnesses.   Boissevant had earlier been married to  Inez Milholland Boiisevan, dramatic woman suffrage proponent who died in 1917.   They had no children In following years, Edna St. Vincent Millay found that performances where she recited her poetry were sources of income. She also became more involved in social causes, including womens rights and defending Sacco and Vanzetti. Later Years: Social Concern and Ill Health In the 1930s, her poetry reflects her growing social concern and her grief over her mothers death. A car accident in 1936 and general ill health slowed her writing. The rise of Hitler disturbed her, and then the invasion of Holland by the Nazis cut off her husbands income. She also lost many close friends to death in the 1930s and 1940s. She had a nervous breakdown in 1944. After her husband died in 1949, she continued to write, but died herself the next year. A last volume of poetry was published posthumously. Key works: Renascence (1912)Renascence and Other Poems (1917)A Few Figs from Thistles (1920)Second April (1921)The Harp-Weaver and Other Poems (1923)The Kings Henchman (1927)The Buck in the Snow and Other Poems (1928)Fatal Interview (1931)Wine from These Grapes (1934)Conversation at Midnight (1937)Huntsman, What Quarry? (1939)Make Bright the Arrows (1940)The Murder of Lidice (1942)Mine the Harvest (published 1954) Selected Edna St. Vincent Millay Quotations Let us forget such words, and all they mean,as Hatred,  Bitterness  and Rancor,Greed, Intolerance, Bigotry.Let us renew our faith and pledge to Manhis right to be Himself,and free. Not Truth, but Faith it is that keeps the world alive. I shall die, but that is all that I shall do for Death; I am not on his pay-roll. I will not tell him the whereabouts of my friendsnor of my enemies either.Though he  promise  me much I will not map himthe route to any mans door.Am I a spy in the land of the livingThat I should deliver men to death?Brother, the password and the plans of our cityare safe with me.Never through me shall you be overcome.I shall die, but that is all I shall do for death. Into the  darkness  they go, the wise and the lovely. The soul can split the sky in two,And let the face of God shine through. God, I can push the grass apartAnd lay my finger on thy heart! Dont stand so near me!I  am become a socialist. I loveHumanity; but I hate people.(character Pierrot in  Aria da Capo, 1919) There is no God.But it does not matter.Man  is enough. My candle burns at both ends... It is not true that life is one damn thing after another. It’s one damn thing over and over. [John Ciardi about Edna St. Vincent Millay] It was not as a craftsman nor as an influence, but as the creator of her own legend that she was  most alive  for us. Her success was  as  a figure of passionate living. Selected Poems by Edna St. Vincent Millay Afternoon on a Hill I will be the gladdest thing  Under the sun!I will touch a hundred flowers  And not pick one. I will look at cliffs and clouds  With quiet eyes,Watch the wind bow down the grass,  And the grass rise. And when lights begin to show  Up from the town,I will mark which must be mine,  And then start down! Ashes of Life Love has gone and left me, and the days are all alike.Eat I must, and sleep I will - and would that night were here!But ah, to lie awake and hear the slow hours strike!Would that it were day again, with twilight near! Love has gone and left me, and I dont know what to do;This or that or what you will is all the same to me;But all the things that I begin I leave before Im through -Theres little use in anything as far as I can see. Love has gone and left me, and the neighbors knock and borrow,And life goes on forever like the gnawing of a mouse.And to-morrow and to-morrow and to-morrow and to-morrowTheres this little street and this little house. Gods World O world, I cannot hold thee close enough!  Ã‚   Thy winds, thy wide grey skies!  Ã‚   Thy mists that roll and rise!Thy woods this autumn day, that ache and sagAnd all but cry with colour!   That gaunt cragTo crush!   To lift the lean of that black bluff!World, World, I cannot get thee close enough! Long have I known a glory in it all,  Ã‚   But never knew I this;  Ã‚   Here such a passion isAs stretcheth me apart, Lord, I do fearThoust made the world too beautiful this year;My soul is all but out of me, let fallNo burning leaf; prithee, let no bird call. When the Year Grows Old I cannot but remember  When the year grows old October November   How she disliked the cold! She used to watch the swallows  Go down across the sky,And turn from the window  With a little sharp sigh. And often when the brown leaves  Were brittle on the ground,And the wind in the chimney  Made a melancholy sound, She had a look about her  That I wish I could forget The look of a scared thing  Sitting in a net! Oh, beautiful at nightfall  The soft spitting snow!And beautiful the bare boughs  Rubbing to and fro! But the roaring of the fire,  And the warmth of fur,And the boiling of the kettle  Were beautiful to her! I cannot but remember  When the year grows old October November   How she disliked the cold!

An essay on ecotourism

An essay on ecotourism Ecotourism Essay Ecotourism involves responsible traveling to fragile, pristine and mostly protected areas. This takes place for different purposes, from educating the traveler, fostering respect for different cultures to directly benefiting the economic and political empowerment of local communities (Garana, 2008). Ideally, ecotourism incorporates the following criteria; promote biological and cultural diversity, touring unspoiled natural habitats, and the main attractions being local culture, flora and fauna. In short, ecotourism operations are defined by their commitment to the environment, education, nature and culture. The main objectives of ecotourism are providing nature-based, environmental education experiences for visitors and managing this in a sustainable manner (Badan the sustainable use of ecological resources, increased environmental and cultural awareness, conservation ethos, support of local economies through increased revenue from visitors and the use of   local supplies and services.

Discuss the rationale and impact of the decision on company law Essay - 1

Discuss the rationale and impact of the decision on company law - Essay Example The case and its subsequent ruling were significant in informing successive laws that would help mitigate on the numerous dispute arising from business engagement. The doctrine of corporate identity for example exempts the shareholders of an insolvent company from any case by creditors since the company becomes the defendant in such cases. Mr. Aron Salomon ran a successful shoe manufacturing in the United Kingdom. The boot manufacturing business was a major success thus enticing his sons who expressed interest in joining the business. As such, Mr. Salomon turned his business into a limited company, which then purchased his previous business at a cost of  £39,000. Mr. Salomon became the company’s largest shareholder after he purchased 20,001 shares of the company’s 20,007 shares. Additionally, he loaned the company  £10,000. Unfortunately, subsequent years became unfavorable for the business thus causing massive loses for the company. The government, which was the company’s major customer, withdrew its tender thereby leading to a massive decline of the company’s revenue. The company therefore began defaulting on the  £10,000 debenture it owed Salmon. Half of the debenture belonged to Broderip who the sued the company thus forcing the government to put the company under liquidation. The company paid Broderip his  £5,000 but this left the company at an unstable position since it could not pay the other unsecured creditors. The company failed to reimburse the unsecured creditors. The liquidator concluded that the government should not honor the floating charge. Such an action would make Salmon personally responsible for the debt. Salmon contested the decision in court thus instigating a lengthy court battle that would reform the country’s company law. At the end of the length court cases that ended up at the House of Lords, the lawmakers appreciated the fact that a company is independent and therefore a separate legal entity. In cases

The Coca-Cola Company Struggles with Ethical Crises Essay

The Coca-Cola Company Struggles with Ethical Crises - Essay Example The Belgian government ordered Coca-Cola to recall all its products, a move that was also witnessed in the Netherlands and Luxembourg. Coca-Cola at first underestimated the gravity of the matter, and took several days before correcting the situation or even going to the press about the issue. As a result of this delay, other people continued to suffer from the contaminated products, which had been determined to be the result of a consignment of carbon dioxide that had been improperly processed. France also reported about a hundred people had become ill after consuming coke, which led to all Coca-Cola products being banned from the country (Ferrell, Ferrell & Fraedrich ,2011) . The situation escalated and culminated in December the same year, when Belgium ordered Coca-Cola to halt a campaign it had launched to re-introduce its products in the country. Coca-Cola market eminence in Europe reduced significantly after this scandal, due to the incapability of the corporation to handle the cases professionally and with the seriousness they deserved. Coca-Cola was also accused of unfair competition in the international arena especially in European countries. In 1999, Coca-Cola sought to expand its market in France by trying to purchase a beverage company. The government intervened and stopped Coca-Cola from acquiring the company, under the antitrust laws of the European Union. Other countries such as Italy also accused Coca-Cola of anticompetitive prices and won a case against the company on the same. Other companies such as Pepsi also accused Coca-Cola of using discounts and refunds to get more consumers, something that was against European laws. Allegations of racial discrimination also plagued the Coca-Cola Company in 1999, after about 1500 employees of African-American descent sued the company on grounds of racial discrimination. The employees complained that favoritism was evident, in terms of payment, performance analysis and promotion. These allegations caused a lot of unrest in the company, and Coca-Cola had to pay 193 million dollars to settle the case (Griffin & Moorhead, 2011). Another case was in store for Coca-Cola, when it was accused of shipping more inventories to its supplies before a quarter was over, against business law. Afterwards, the company would count the shipments as sales, despite such goods remaining in the warehouses or being returned. These sales were then counted as revenue, thus creating the impression of a strong company, therefore, fooling investors who believed the inflated profits. Distributors of Coca-Cola products in the U.S sued the company in early 2006, after the company started using delivery agents to supply its products to warehouses. This move according to the distributors was against antitrust laws, and Coca-Cola had to find a way to settle this dispute. In Colombia, accusations surfaced between 2001 and 2004 that Coca-Cola had been intimidating its employees since 1989. Statistics showed that eight w orkers had died, 48 forced into hiding, and 65 issued with death threats in the Colombian bottling plant. The workers union sought compensation for the affected families, although Coca-Cola maintains that these allegations were unfounded. In India, the Coca-Cola subsidiary was accused of using contaminated ground water to make soft drinks, resulting in excess levels of pesticides in these drinks. In addition to this,

English Discussion Question Essay Example for Free

English Discussion Question Essay Irony plays a major part in Raymond Carver’s Popular Mechanics. As the man tries to seize the infant from her, the woman accuses him of hurting the baby. The irony is that she, too, hurts the baby. In fact, both of them are hurting the baby. Both of them want the best for their child, but they are unconscious that the effect of their separation will greatly affect the kid. Like in many broken families, the child suffers the most. Another irony in the story is that the couple wants to part ways. However, as they fight over the baby, nobody wants to give in. It is as if they are using the baby as an excuse to keep the separation at bay and waiting for anything that may change the break up to happen. Deep in their hearts, they don’t really want to separate after all. Compared to other stories with conventional style, the Popular Mechanics is different as the author uses unorthodox approach. What is unusual is the absence of the quotation marks for the direct speech in the conversation between the two main characters. This makes the story confusing because there is the tendency for the readers to mix up the narration with the dialog. The story also is direct and unadorned with rhetorical devices, which are common to many stories and novels. Aside from that, the author stays neutral and does not express his own opinion to either of the characters. He acts like a camera that transmits what is happening as he sees it. He leaves the story open for the readers to come out with their own speculations and conclusion. The story gives a vivid picture of what is going on to many families nowadays. The plot is very common: separation of married couple leads to the demise of their child/children. Due to its plainness, the story becomes insensitive. It is difficult to imagine a husband and a wife each pulling a hand of their infant. Although it is not indicated what happened to the infant, it is easy to assume that his tender limbs are impaired or, worse, detached. It is unfortunate that the settlement of the couple’s conflict is the demise of their child. Work Cited: Carver, Raymond. Popular Mechanics. Online July 17, 2009 http://www. uni-koeln. de/ew-fak/institut/engl/coit/essay/essayws5-6/carver. htm

Cloning :: essays research papers

Human embryo cloning should not be done because of the religious, moral, ethical, and social concerns that it places upon the human race. Although there may be some positive affects to cloning humans, there are far too many opposing factors in this situation. Many religious leaders of expressed their concern and condemnation of human cloning. The moral and ethical aspects outweigh any scientific evidence, and the social concerns are frightening. The most important question that needs to be asked, is whether the gains out weigh the losses--the gains being scientific research and the losses being the religious, moral, ethical, and social concerns that it poses on today’s society. A clone, as defined in â€Å"The Human Genome Project,† is; 1. a population of genetically identical unicellular organisms or viruses arising from successive replications of a single ancestral unicellular organism or virus. 2. a recombinant clone. 3. the fragment of foreign DNA contained in each member of a recombinant clone. 4. a population of identical cells arising from the culture of a single cell of a certain type, such as a human fibroblast or a rodent-human hybrid cell containing a full set of rodent chromosomes and a single human chromosome. Human embryo cloning starts with a standard in vitro fertilization procedure. Sperm and an egg cell are mixed together on a glass dish. After conception, the zygote (fertilized egg) is allowed to develop into a blastula (a hollow mass of cells). The zygote divides first into two cells, then four, then eight... A chemical is added to the dish to remove the â€Å"zona pellucida† covering; this material provides nutrients to the cells to promote cell division. With the covering removed, the blastula is divided into individual cells which are deposited on individual dishes. They are then coated with an artificial zona pellucida and allowed to divide and develop. That is how a human embryo clone is made using the â€Å"twinni ng method.† Some scientists believe that human embryo cloning and related research can have some positive results, however, many religious leaders feel that cloning and related research should not be permitted. Religion and science have been involved in an ongoing battle over many subjects in the past, but human embryo cloning has caused the biggest debate thus far. Many religious philosophies teach that human life is unique and special and should be created, determined and controlled only by their deities.

Indian Banking Sector

A bank is an institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and make loans or make an investment to derive a profit from the difference in the interest rates paid and charged, respectively. In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities.Some are of Indian origin and some are foreign players. India’s economy has been one of the stars of global economics in recent years. It has grown by more than 9% for three years running. The economy of India is as diverse as it is large, with a number of major sectors including manufacturing industries, agriculture, textiles and handicrafts, and services. Agriculture is a major component of the Indian economy, as over 66% of the I ndian population earns its livelihood from this area. Banking sector is considered as a booming sector in Indian economy recently.Banking is a vital system for developing economy for the nation. However, Indian banking system and economy has been facing various challenges and problems which have discussed in other parts of project. INDIAN BANKING SYSTEM Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit.The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's r egular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money.Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: †¢Early phase from 1786 to 1969 of Indian Banks †¢Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial ; Banking Sector Reforms after 1991. After 1991, under the chairmanship of M Narasimham, a committee wa s set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.This resulted that Indian banking is growing at an astonishing rate, with Assets expected to reach US$1 trillion by 2010. â€Å"The banking industry should focus on having a small number of large players that can compete globally and can achieve expected goals rather than having a large number of fragmented players. † KINDS OF BANKS Financial requirements in a modern economy are of a diverse nature, distinctive variety and large magnitude. Hence, different types of banks have been instituted to cater to the varying needs of the community.Banks in the organized sector may, however, be classified in to the following major forms: oComm ercial banks oCo-operative banks oSpecialized banks oCentral bank †¢COMMERCIAL BANKS Commercial banks are joint stock companies dealing in money and credit. In India, however there is a mixed banking system, prior to July 1969, all the commercial banks-73 scheduled and 26 non-scheduled banks, except the state bank of India and its subsidiaries-were under the control of private sector. On July 19, 1969, however, 14 major commercial banks with deposits of over 50 Corers were nationalized.In April 1980, another six commercial banks of high standing were taken over by the government. At present, there are 20 nationalized banks plus the state bank of India and its 7 subsidiaries constituting public sector banking which controls over 90 per cent of the banking business in the country. †¢CO-OPERATIVE BANKS Co-operative banks are a group of financial institutions organized under the provisions of the Co-operative societies Act of the states. The main objective of co-operative bank s is to provide cheap credits to their members.They are based on the principle of self-reliance and mutual co-operation. Co-operative banking system in India has the shape of a pyramid a three tier structure, constituted by: †¢SPECIALIZED BANKS There are specialized forms of banks catering to some special needs with this unique nature of activities. There are thus, oForeign exchange banks, oIndustrial banks, oDevelopment banks, oLand development banks, oExim bank. †¢CENTRAL BANK A central bank is the apex financial institution in the banking and financial system of a country.It is regarded as the highest monetary authority in the country. It acts as the leader of the money market. It supervises, control and regulates the activities of the commercial banks. It is a service oriented financial institution. India’s central bank is the Reserve Bank of India established in 1935. A central bank is usually state owned but it may also be a private organization. For instance, the Reserve Bank of India (RBI), was started as a shareholders’ organization in 1935, however, it was nationalized after independence, in 1949. It is free from parliamentary control.CHALLENGES FACED BY INDIAN BANKING INDUSTRY The banking industry in India is undergoing a major transformation due to changes in economic conditions and continuous deregulation. These multiple changes happening one after other has a ripple effect on a bank trying to graduate from completely regulated sellers market to completed deregulated customers market. oDEREGULATION This continuous deregulation has made the Banking market extremely competitive with greater autonomy, operational flexibility, and decontrolled interest rate and liberalized norms for foreign exchange.The deregulation of the industry coupled with decontrol in interest rates has led to entry of a number of players in the banking industry. At the same time reduced corporate credit off take thanks to sluggish economy has resulted in large number of competitors battling for the same pie. oNEW RULES As a result, the market place has been redefined with new rules of the game. Banks are transforming to universal banking, adding new channels with lucrative pricing and freebees to offer. Natural fall out of this has led to a series of innovative product offerings catering to various customer segments, specifically retail credit. EFFICIENCY This in turn has made it necessary to look for efficiencies in the business. Banks need to access low cost funds and simultaneously improve the efficiency. The banks are facing pricing pressure, squeeze on spread and have to give thrust on retail assets. oDIFFUSED CUSTOMER LOYALTY This will definitely impact Customer preferences, as they are bound to react to the value added offerings. Customers have become demanding and the loyalties are diffused. There are multiple choices; the wallet share is reduced per bank with demand on flexibility and customization.Given the relatively low switching costs; customer retention calls for customized service and hassle free, flawless service delivery. oMISALLIGNED MINDSET These changes are creating challenges, as employees are made to adapt to changing conditions. There is resistance to change from employees and the Seller market mindset is yet to be changed coupled with Fear of uncertainty and Control orientation. Acceptance of technology is slowly creeping in but the utilization is not maximized. oCOMPETENCE GAPPlacing the right skill at the right place will determine success. The competency gap needs to be addressed simultaneously otherwise there will be missed opportunities. The focus of people will be on doing work but not providing solutions, on escalating problems rather than solving them and on disposing customers instead of using the opportunity to cross sell. STRATEGIES OPTIONS WITH BANKS TO COPE WITH THOSE CHALLENGES Leading players in the industry have embarked on a series of strategic and tactical initiatives to sustain leadership.The major initiatives include: oInvesting in state of the art technology as the back bone of to ensure reliable service delivery oLeveraging the branch network and sales structure to mobilize low cost current and savings deposits oMaking aggressive forays in the retail advances segment of home and personal loans oImplementing organization wide initiatives involving people, process and technology to reduce the fixed costs and the cost per transaction oFocusing on fee based income to compensate for squeezed spread, (e. . CMS, trade services) oInnovating Products to capture customer ‘mind share’ to begin with and later the wallet share oImproving the asset quality as per Basel II norms INDIAN ECONOMY The Indian Economy is consistently posting robust growth numbers in all sectors leading to impressive growth in Indian GDP. The Indian economy has been stable and reliable in recent times, while in the last few years it’s experienced a positive up ward growth trend.A consistent 8-9% growth rate has been supported by a number of favorable economic indicators including a huge inflow of foreign funds, growing reserves in the foreign exchange sector, both an IT and real estate boom, and a flourishing capital market. All of these positive changes have resulted in establishing the Indian economy as one of the largest and fastest growing in the world. The process of globalization has been an integral part of the recent economic progress made by India.Globalization has played a major role in export-led growth, leading to the enlargement of the job market in India. As a new Indian middle class has developed around the wealth that the IT and BPO industries have brought to the country, a new consumer base has developed. International companies are also expanding their operations in India to service this massive growth opportunity. The same thing has followed by international banks that are entering in Indian market and pulling their hug e investments in Indian economy. This is helping to accelerate the growth of Indian economy.Economy can be studied from two points of views†¦ ?MICRO ECONOMIC POINT OF VIEW The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets.Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. ?MACRO ECONOMIC POINT OF VIEW It is a field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as c hanges in unemployment, national income, rate of growth, gross domestic product, inflation and price levels. Macroeconomics looks at the big picture (hence â€Å"macro†). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world.For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 6% rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels. ECONOMIC SYSTEMS An economic system is loosely defined as country’s plan for its services, goods produced, and the exact way in which its economic plan is carried out. In general, there are three major types of economic systems prevailing around the world they are†¦ Market Economy oPlanned Economy oMixed Economy MARKET ECONOMY In a market ec onomy, national and state governments play a minor role. Instead, consumers and their buying decisions drive the economy. In this type of economic system, the assumptions of the market play a major role in deciding the right path for a country’s economic development. Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.The absence of central planning is one of the major features of this economic system. Market decisions are mainly dominated by supply and demand. The role of the government in a market economy is to simply make sure that the market is stable enough to carry out its economic activities properly. PLANNED ECONOMY A planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the government.The planned economy is government directed, and market forces have very little say in such an economy. This type of economy lacks the kind of flexibility that is present a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply and demand. On the other hand, a planned economy aims at using all available resources for developing production instead of allotting the resources for advertising or marketing. MIXED ECONOMY A mixed economy combines elements of both the planned and the market economies in one cohesive system.This means that certain features from both market and planned economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of that country – both sectors play an important role in the economic decision-making of the country. In a mixed economy there is flexibility in some areas and government control in others. Mixed economies include both capitalist and socialist economic policies and often arise in societies that seek to balance a wide range of political and economic views. IMPORTANT BANKING AND ECONOMIC INDICATORS CASH RESERVE RATIO Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. The amount of which shall not be less than three per cent of the total of the Net Demand and Time Liabilities (NDTL) in India, on a fortnightly basis and RBI is empowered to increase the said rate of CRR to such higher rate not exceeding twenty percent of the Net Demand and Time Liabilities (NDTL) under the RBI Act, 1934. STATUTORY LIQUIDITY RATIO In terms of Section 24 (2-A) of the B. R. Act, 1949 all Scheduled Commercial Banks, in addition to the average daily balance which they are required to maintain in the form of†¦. oIn cash, Or oIn gold valued at a price not exceeding the current market price, Or oIn unencumbered approved securities valued at a price as specified by the RBI from time to time. ?REPO RATE Repo rate, also known as the official bank rate, is the discounted rate at which a central bank repurchases government securities.The central bank makes this transaction with commercial banks to reduce some of the short-term liquidity in the system. The repo rate is dependent on the level of money supply that the bank chooses to fix in the monetary scheme of things. Repo rate is short for repurchase rate. The entity borrowing the security is often referred to as the buyer, while the lender of the securities is referred to as the seller. The central bank has the power to lower the repo rates while expanding the money supply in the country. This enables th e banks to exchange their government security holdings for cash.In contrast, when the central bank decides to reduce the money supply, it implements a rise in the repo rates. At times, the central bank of the nation makes a decision regarding the money supply level and the repo rate is determined by the market. The securities that are being evaluated and sold are transacted at the current market price plus any interest that has accrued. When the sale is concluded, the securities are subsequently resold at a predetermined price. This price is comprised of the original market price and interest, and the pre-agreed interest rate, which is the repo rate. ?BANK RATEBank rate is referred to the rate of interest charged by premier banks on the loans and advances. Bank rate varies based on some defined conditions as laid down the governing authority of the banks. Bank rates are levied to control the money supply to and from the bank. From the consumer's point of view, bank rate ordinarily d enotes to the current rate of interest acquired from savings certificate of Deposit. It is most frequently used by the consumers who are concerned in mortgage Some commonest types of bank interest rates are as follows: oBank rate on CD, i. e. , on certificate of deposit Bank rate on the credit of a credit card or other kind of loan oBank rate on real estate loan ?INTERBANK RATE The rate of interest charged on short-term loans made between banks. Banks borrow and lend money in the interbank market in order to manage liquidity and meet the requirements placed on them. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length. Banks are required to hold an adequate amount of liquid assets, such as cash, to manage any potential withdrawals from clients.If a bank can't meet these liquidity requirements, it will need to borrow money in the interbank market to cover the shortfall. Some ba nks, on the other hand, have excess liquid assets above and beyond the liquidity requirements. These banks will lend money in the interbank market, receiving interest on the assets. There is a wide range of published interbank rates, including the LIBOR & MIBOR, which is set daily based on the average rates on loans made within the London interbank market & Mumbai Interbank Market. ?GROSS DOMESTIC PRODUCTThe monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX Where: ?†C† is equal to all private consumption, or consumer spending, in a nation's economy. ?†G† is the sum of government spending. ?†I† is the sum of all the country's businesses spending on capital. ?† NX† is the nation's total net exports, calculated as total exports minus total imports. NX = Exports – Imports) GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. ?INFLATION Inflation can be defined as a rise in the general price level and therefore a fall in the value of money. Inflation occurs when the amount of buying power is higher than the output of goods and services. Inflation also occurs when the amount of money exceeds the amount of goods and services available. As to whether the fall in the value of money will affect the functions of money depends on the degree of the fall.Basically, refers to an increase in the supply of currency or credit relative to the availability of goods and services, resulting in higher prices. Therefore, inflation can be measured in terms of percentages. The percentage increase in the price index, as a rate per cent per unit of time, which is usually in years. The two basic price indexes are used when measuring inflation, the producer price index (PPI) and the consumer price index (CPI) which is also known as the cost of living index number. ?DEFLATION It is a condition of falling prices accompanied by a decreasing level of employment, output and income.Deflation is just the opposite of inflation. Deflation occurs when the total expenditure of the community is not equal to the existing prices. Consequently, the supply of money decreases and as a result prices fall. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. ?DISINFLATIONWhen prices are falling due to anti-inflationary measures adopted by the authorities, with no corresponding decline in the existing level of employment, output and income, the result of this is disinflation. When acute inflation burdens an economy, disinflation is implemented as a cure. Disinflation is said to take place when deliberate attempts are made to curtail expenditure of all sorts to lower prices and money incomes for the benefit of the community. ?REFLATION Reflation is a situation of rising prices, which is deliberately undertaken to relieve a depression.Reflation is a means of motivating the economy to produce. This is achieved by increasing the supply of money or in some instances reducing taxes, which is the opposite of disinflation. Governments can use economic policies such as reducing taxes, changing the supply of money or adjusting the interest rates; which in turn motivates the country to increase their output. The situation is described as semi-inflation or reflation. ?STAGFLATION Stagflation is a stagnant economy that is combined with inflation. Basically, when prices are increasing the economy is de ceasing.Some economists believe that there are two main reasons for stagflation. Firstly, stagflation can occur when an economy is slowed by an unfavourable supply, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable. In the 1970's inflation and recession occurred in different economies at the same time. Basically, what happened was that there was plenty of liquidity in the system and people were spending money as quickly as they got it because prices were going up quickly.This gave rise to the second reason for stagflation. ?FOREIGN INSTITUTIONAL INVESTMENTS Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the Indian company and 10 per cent for NRIs/PIOs.The limit is 20 per cent of the paid up capital in the case of public sector banks, including the State Bank of India. ?FOREIGN EXCHANGE RESERVES Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions. This broader figure is more readily available, but it is more accurately termed official reserves or international reserves.These are assets of the central bank held in different reserve currencies, such as the dollar, euro and yen, and used to back its liabilities, e. g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions . Large reserves of foreign currency allow a government to manipulate exchange rates – usually to stabilize the foreign exchange rates to provide a more favorable economic environment. ROLE OF BANKS IN DEVELOPING OF ECONOMY A safe and sound financial sector is a prerequisite for sustained growth of any economy.Globalization, deregulation and advances in information technology in recent years have brought about significant changes in the operating environment for banks and other financial institutions. These institutions are faced with increased competitive pressures and changing customer demands. These, in turn, have engendered a rapid increase in product innovations and changes in business strategies. While these developments have enabled improvement in the efficiency of financial institutions, they have also posed some serious risks.Banks play a very useful and dynamic role in the economic life of every modern state. A study of the economic history of western country shows that without the evolution of commercial banks in the 18th and 19th centuries, the industrial revolution would not have taken place in Europe. The economic importance of commercial banks to developing countries may be viewed thus: oPromoting capital formation oEncouraging innovation oMonetsation oInfluence economic activity oFacilitator of monetary policy Above all view we can see in briefly, which are given below:PROMOTING CAPITAL FORMATION A developing economy needs a high rate of capital formation to accelerate the tempo of economic development, but the rate of capital formation depends upon the rate of saving. Unfortunately, in underdeveloped countries, saving is very low. Banks afford facilities for saving and, thus encourage the habits of thrift and industry in the community. They mobilize the ideal and dormant capital of the country and make it available for productive purposes. ENCOURAGING INNOVATION Innovation is another factor responsible for economic development.The entre preneur in innovation is largely dependent on the manner in which bank credit is allocated and utilized in the process of economic growth. Bank credit enables entrepreneurs to innovate and invest, and thus uplift economic activity and progress. MONETSATION Banks are the manufactures of money and they allow many to play its role freely in the economy. Banks monetize debts and also assist the backward subsistence sector of the rural economy by extending their branches in to the rural areas. They must be replaced by the modern commercial bank’s branches. INFLUENCE ECONOMIC ACTIVITYBanks are in a position to influence economic activity in a country by their influence on the rate interest. They can influence the rate of interest in the money market through its supply of funds. Banks may follow a cheap money policy with low interest rates which will tend to stimulate economic activity. FACILITATOR OF MONETARY POLICY Thus monetary policy of a country should be conductive to economic development. But a well-developed banking system is on essential pre-condition to the effective implementation of monetary policy. Under-developed countries cannot afford to ignore this fact.A fine, an efficient and comprehensive banking system is a crucial factor of the developmental process of economy. RESERVE BANK OF INDIA AS A REGULATORY INSTITUTION IN INDIAN ECONOMY The RBI was established under the Reserve Bank of India Act, 1934 on April 1, 1935 as a private shareholders' bank but since its nationalization in 1949, is fully owned by the Government of India. The Preamble of the Reserve Bank describes the basic functions as ‘to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally, to operate the currency and credit system of the country to its advantage'.The twin objectives of monetary policy in India have evolved over the years as those of maintaining price stability and ensuring adequate flow of cred it to facilitate the growth process. The relative emphasis between the twin objectives is modulated as per the prevailing circumstances and is articulated in the policy statements by the Reserve Bank from time to time. Consideration of macro-economic and financial stability is also subsumed in the mandate. The Reserve Bank is also entrusted with the management of foreign exchange reserves (which include gold holding also), which are reflected in its balance sheet.While the Reserve Bank is essentially a monetary authority, its founding statute mandates it to be the manager of market borrowing of the Government of India and banker to the Government. The Reserve Bank's affairs are governed by a Central Board of Directors, consisting of fourteen non-executive, independent directors nominated by the Government, in addition to the Governor and up to four Deputy Governors. Besides, one Government official is also nominated on the Board who participates in the Board meetings but cannot vote . IMPORTANT FUNCTIONS PLAYED BY RESERVE BANK OF INDIA IN ECONOMY MAIN FUNCTIONS oMONITORY AUTHORITY The Reserve Bank of India formulates implements and monitors the monetary policy. Its main objective is maintaining price stability and ensuring adequate flow of credit to productive sectors. oREGULATOR AND SUPERVISOR OF FINANCIAL SYSTEM Prescribes broad parameters of banking operations within which the country’s banking and financial system functions. Their main objective is to maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public. MANAGER OF EXCHANGE CONTROL The manager of the exchange control department manages the Foreign Exchange Management Act, 1999. Its main objective is to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. oISSUER OF THE CURRENCY The person who is issuer issues and exchanges or destroys currency and co ins not fit for circulation. His main objective is to give the public adequate quantity of supplies of currency notes and coins and in good quality. oDEVELOPMENTAL ROLEThe reserve bank of India performs a wide range of promotional functions to support national objectives. The promotional functions are such as contests, coupons, maintaining good public relations, and many more†¦.. oRELATED FUNCTIONS There are also some of the relating functions to the above mentioned main functions. They are such as Banker to the Government, Banker to banks etc†¦. ?BANKER TO THE GOVERNMENT It performs merchant banking function for the central and the state governments; also acts as their banker. ?BANKER TO THE BANKS Maintains banking accounts of all scheduled banks. ?SUPERVISORY FUNCTIONSThe Reserve Bank act, 1934 and the Banking Regulation act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, br anch expansion, liquidity of their asset, management and methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorized to carry out periodical inspections of banks and to call for returns and necessary information from them. The supervisory functions of the RBI have helped a great deal in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation. PROMOTIONAL FUNCTIONS With economic growth assuming a new urgency since Independence, the range of the Reserve Bank’s functions has steadily widened. The bank now performs a variety of developmental and promotional functions, which, at one time were regarded as outside the normal scope of central banking. The RBI was asked to promote banking habit, extend banking facilities to rural and semi-urban areas, and establish and promote new specialized financing agencies. PROBLEMS FACED BY INDIAN ECONOMY Macro-economic environment in India has taken a seriou s turn since the beginning of the year.Unprecedented rise in crude prices, surge in inflation and continued strong growth in money supply (M3) have forced the government and RBI to take strong fiscal and monetary measures leading to liquidity tightening, significant rise in interest rates and slowdown in economic growth. Economic shocks are events which adversely affect the economy and the government’s macroeconomic objectives such as growth, inflation, unemployment and the balance of payments. CERTAIN PROBLEMS FACED BY INDIAN ECONOMY oFALL IN SAVINGS RATIO The savings ratio is the % of income that is saved not spent.A fall in the savings ratio implies that consumer spending is increasing; often this is financed through increased borrowing. EFFECTS OF FALL IN SAVINGS RATIO ?HIGHER LEVEL OF CONSUMPTION This results in increase in Aggregate Demand. The increase in AD will cause an increase in economic growth and lower unemployment. However, rising Aggregate Demand may cause inf lation. Inflation will occur when growth is faster than the long run trend rate. This is now a potential problem in the India. Inflation has recently gone above 12% ?BOOM AND BUST A fall in the savings ratio is usually accompanied by a rise in confidence.It is the rise in confidence which encourages borrowing and consumers to run down savings. Therefore, there is always a danger that a falling savings ratio can be a precursor to a boom and bust situation. ?ECONOMY MORE SENSITIVE TO INTEREST RATES With a fall in the savings ratio interest rate changes will have a bigger effect in reducing spending. This is because levels of borrowing are higher and therefore a rise in interest rates has a significant impact on increasing interest repayments. Also, higher rates will not be increasing incomes from savings as much. ?BALANCE OF PAYMENTWith higher levels of consumer spending, there will be an increase in imports. Therefore this will lead to deterioration in the current account. The curren t account deficit could put downward pressure on the exchange rate in the long term. However, some people argue a fall in the savings ratio is not a problem, but, it is just a reflection of strong economy and booming housing market, which increases scope for equity withdrawal. oINFLATION Inflation is posing a serious challenge to the economic growth of India. Since Jan’08 onwards, inflation in the country has surged by 8. 2% to hit a 13-year high of ~12%.M3 growth in the economy too continued to remain strong at 20% (in July’08), well above the RBI’s comfort level of 17%. The WPI inflation rate flared up during the period driven by significant increase in the prices of commodities, primary articles and manufactured products, even though very small part of global crude price increase has been passed on to the Indian consumers. oGLOBAL RECESSION It appears that Europe, Japan and the US are entering into recession. Falling house prices, crisis in the financial syst em, and lower confidence could lead to a sharp downturn, with the worst still to come.Many argue that India’s growth is not so dependent on growth in the West. However, the Indian stock markets have been hit by the global crisis. India’s growing service sector and manufacturing sector would be adversely impacted by a global downturn. oRISE IN CRUDE PRICES How global crude prices would behave probably has no easy answers; however we believe that the current challenging and uncertain macro-economic conditions does not lead Indian financials into a state of crisis. But continued rise in crude prices and its resultant impact on inflation, interest rates and government finances has the potential to do so.Hence, crude price remains the key risk to our positive stance on the Indian financials. In the last couple of months oil prices have surged by 45% from US$ 100 to US$ 145 (and now back to US$ 115). India currently imports 70% of its crude requirement, resulting in pressure on government coffers on back of rising crude prices. oDEPRICIATING INR Surge in crude prices has severely impacted current account deficit of the country. This coupled with the outflow of FII investments has resulted in INR to depreciate sharply against dollar further fueling inflation. IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALSThe current macro-economic conditions are expected to result in oSLOWDOWN IN CREDIT GROWTH oIMPACT ON MARGINS OF BANKS oPREASURE ON CREDIT QUALITY †¢SLOWDOWN IN CREDIT GROWTH While the rise in interest rates should lead to a moderation in demand for credit, Indian banks too are exercising caution while lending. Credit growth of 18% in FY09E and 17% in FY10E vs. 22% in FY08. Risks and uncertainties in the system have increased given the higher crude and commodity prices and its inflationary impact. This would curtail consumption, which would impact economic growth adversely.Further higher rates will not only impact the profitability of Indian corp orate but also impact IRRs of various proposed capex projects. This coupled with elections next year could lead to some postponement of capex plans of corporate, leading to negative impact on demand for credit. Higher rates have particularly impacted retail loan growth. As can be seen in the exhibit below, retail loan growth has slowed down significantly from 26. 5% in FY07 to ~13% in FY08. SLR Ratio of the system has started rising since mid FY08 and currently stands at 28. %. Given the expected negative impact on credit growth. †¢IMPACT ON MARGINS OF BANKS During the past 18 months, CRR has increased by 400 bps to 9. 0% currently and RBI has also discontinued with interest payment on CRR balances. Every 50 bps hike in CRR generally negatively impacts margins by ~5 bps. Till June’08, most of the banks had restrained from hiking lending rates despite significant monetary tightening. However on account of recent measures by RBI, banks have resorted to hiking PLRs in July/ August by 50-150 bps to preserve their margins.In fact in an environment, where liquidity is tight, interest rates are at elevated levels and risk premiums have increased, the banks tend to regain the pricing power. This would not only help the banks to adequately price in risks but also help protect their margins. Apart from hiking PLRs, banks are also resorting to reprising (in fact right-pricing) the loans that were sanctioned well below PLRs. Significant portion of fixed rate loans would also get re-priced over the period of 12-18 months. †¢PRESSURE ON CREDIT QUALITY Higher lending rates are expected to impact credit quality for the banking system.The extent of the impact on credit quality would also be bank specific given the loan mix (retail vs. corporate), proportion of unsecured lending, credit profile of corporate loan book and industry wise exposure. Indian banks’ fundamentals are relatively resilient with better risk management systems, dramatically improved a sset quality, stronger recovery mechanisms (legal provisions) and with adequate capitalization and provisioning. Even Certain sectors (like real estate, airlines industry) might feel the stress due to the changing macro environment and rise in interest rates.Many companies where crude forms a key raw material component are expected to get hit more severely. Similarly, sectors like real estate and SMEs, which are interest rate sensitive, would face higher delinquencies if interest rates strengthen further by 100-200 bps. NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO TACKLE ECONOMIC PROBLEMS As most of economists feel that the most horrible problem which India is facing currently is inflation which has crossed 12%. To come out of these problems RBI and ministry of finance and other relevant government and regulatory entities are taking various initiatives which are as follows†¦ RBI MONITORY POLICY With the introduction of the Five year plans, the need for appropriat e adjustment in monetary and fiscal policies to suit the pace and pattern of planned development became imperative. The monitory policy since 1952 emphasized the twin aims of the economic policy of the government: oSpread up economic development in the country to raise national income and standard of living, and oTo control and reduce inflationary pressure in the economy. This policy of RBI since the First plan period was termed broadly as one of controlled expansion, i. e. a policy of â€Å"adequate financing of economic growth and at the same time the time ensuring reasonable price stability†. Expansion of currency and credit was essential to meet the increased demand for investment funds in an economy like India which had embarked on rapid economic development. Accordingly, RBI helped the economy to expand via expansion of money and credit and attempted to check in rise in prices by the use of selective controls. OBJECTIVES OF MONITORY POLICY ?PRICE STABILITY ?MONITORY TAR GETTING ?INTEREST RATE POLICY ?RESTRUCTURING OF MONEY MARKET ?REGULATION OF FOREIGN EXCHANGE MARKET WEAPONS OF MONITORY POLICYCentral banks generally use the three quantitative measures to control the volume of credit in an economy, namely: oRaising bank rates oOpen market operations and oVariable reserve ratio However, there are various limitations on the effective working of the quantitative measures of credit control adapted by the central banks and, to that extent, monetary measures to control inflation are weakened. In fact, in controlling inflation moderate monetary measures, by themselves, are relatively ineffective. On the other hand, drastic monetary measures are not good for the economic system because they may easily send the economy into a decline.In a developing economy there is always an increasing need for credit. Growth requires credit expansion but to check inflation, there is need to contract credit. In such a encounter, the best course is to resort to credit contr ol, restricting the flow of credit into the unproductive, inflation-infected sectors and speculative activities, and diversifying the flow of credit towards the most desirable needs of productive and growth-inducing sector. It should be noted that the impression that the rate of spending can be controlled rigorously by the contraction of credit or money supply is wrong in the context of modern economic societies.In modern community, tangible, wealth is typically represented by claims in the form of securities, bonds, etc. , or near moneys, as they are called. Such near moneys are highly liquid assets, and they are very close to being money. They increase the general liquidity of the economy. In these circumstances, it is not so simple to control the rate of spending or total outlays merely by controlling the quantity of money. Thus, there is no immediate and direct relationship between money supply and the price level, as is normally conceived by the traditional quantity theories.Wh en there is inflation in an economy, monetary restraints can, in conjunction with other measures, play a useful role in controlling inflation. †¢FISCAL POLICY Fiscal policy is another type of budgetary policy in relation to taxation, public borrowing, and public expenditure. To curve the effects of inflation and changes in the total expenditure, fiscal measures would have to be implemented which involves an increase in taxation and decrease in government spending. During inflationary periods the government is supposed to counteract an increase in private spending.It can be cleared noted that during a period of full employment inflation, the aggregate demand in relation to the limited supply of goods and services is reduced to the extent that government expenditures are shortened. Along with public expenditure, governments must simultaneously increase taxes that would effectively reduce private expenditure, in an effect to minimise inflationary pressures. It is known that when m ore taxes are imposed, the size of the disposable income diminishes, also the magnitude of the inflationary gap in regards to the availability of the supply of goods and services.In some instances, tax policy has been directed towards restricting demand without restricting level of production. For example, excise duties or sales tax on various commodities may take away the buying power from the consumer goods market without discouraging the level of production. However, some economists point out that this is not a correct way of combating inflation because it may lead to a regressive status within the economy. As a result, this may lead to a further rise in prices of goods and services, and inflation can spread from one sector of the economy to another and from one type of goods and services to another.Therefore, a reduction in public expenditure, and an increase in taxes produces a cash surplus in the budget. Keynes, however, suggested a programme of compulsory savings, such as def erred pay as an anti-inflationary measure. Deferred pay indicates that the consumer defers a part of his or her wages by buying savings bonds (which, of course, is a sort of public borrowing), which are redeemable after a particular period of time, this is sometimes called forced savings. Additionally, private savings have a strong disinflationary effect on the economy and an increase in these is an important measure for controlling inflation.Government policy should therefore, include devices for increasing savings. A strong savings drive reduces the spendable income of the consumers, without any harmful effects of any kind that are associated with higher taxation. Furthermore, the effects of a large deficit budget, which is mainly responsible for inflation, can be partially offset by covering the deficit through public borrowings. It should be noted that it is only government borrowing from non-bank lenders that has a disinflationary effect.In addition, public debt may be managed in such a way that the supply of money in the country may be controlled. The government should avoid paying back any of its past loans during inflationary periods, in order to prevent an increase in the circulation of money. Anti-inflationary debt management also includes cancellation of public debt held by the central bank out of a budgetary surplus. Fiscal policy by itself may not be very effective in combating inflation; therefore a combination of fiscal and monetary tools can work together in achieving the desired outcome. †¢DIRECT MEASURESDirect controls refer to the regulatory measures undertaken to convert an open inflation into a repressed one. Such regulatory measures involve the use of direct control on prices and rationing of scarce goods. The function of price control is a fix a legal ceiling, beyond which prices of particular goods may not increase. When ceiling prices are fixed and enforced, it means prices are not allowed to rise further and so, inflation is supp ressed. Under price control, producers cannot raise the price beyond a specified level, even though there may be a pressure of excessive demand forcing it up.In times of the severe scarcity of certain goods, particularly, food grains, government may have to enforce rationing, along with price control. The main function of rationing is to divert consumption from those commodities whose supply needs to be restricted for some special reasons; such as, to make the commodity more available to a larger number of households. Therefore, rationing becomes essential when necessities, such as food grains, are relatively scarce. Rationing has the effect of limiting the variety of quantity of goods available for the good cause of price stability and distributive impartiality.Another control measure that was suggested is the control of wages as it often becomes necessary in order to stop a wage-price spiral. During galloping inflation, it may be necessary to apply a wage-profit freeze. Ceilings o n wages and profits keep down disposable income and, therefore the total effective demand for goods and services. On the other hand, restrictions on imports may also help to increase supplies of essential commodities and ease the inflationary pressure. However, this is possible only to a limited extent, depending upon the balance of payments situation.Similarly, exports may also be reduced in an effort to increase the availability of the domestic supply of essential commodities so that inflation is eased. In general, monetary and fiscal controls may be used to repress excess demand but direct controls can be more useful when they are applied to specific scarcity areas. As a result, anti-inflationary policies should involve varied programmes and cannot exclusively depend on a particular type of measure only. RECENT INNOVATIONS IN INDIAN BANKING HDFC Bank’s ‘Net Safe’ card is a one-time use card with a limit that’s specified, taken from Tendon’s credi t or debit card.Even if Tandon fails to utilize the full amount within 24 hours of creating the card, the card simply dies and the unspent amount in the temporary card reverts to his original credit or debit card. Welcome to one of the myriad ways in which bankers have been trying to innovate. They’re bringing ATMs, cash and even foreign exchange to their customers’ doorsteps. Indeed, innovation has become the hottest banking game in town. Want to buy a house but don’t want to go through the hassles of haggling with brokers and the mounds of paperwork? Not to worry.Your bank will tackle all this. It’s ready to come every step of the way for you to buy a house. Standard Chartered, for instance, has property advisors to guide a customer through the entire process of selecting and buying a house. They also lend a hand with the cumbersome documentation formalities and the registration. Don’t fret if you’ve already bought your house or car â€⠀œ you can do other things with both. You can leverage your new house or car these days with banks like ICICI Bank and Stanchart ready to extend loans against either, till it’s about five years old.Loans are available to all car owners for almost all brands of cars manufactured in India that are up to five years old. Last month, Kotak Mahindra Bank introduced a variant of the sweep-in account. If the balance tops Rs 1. 5 lakh, the excess runs into Kotak’s liquid mutual fund. â€Å"Even if the money is there only for the weekend, a liquid fund can earn you a clean 4. 5 per cent per annum,† points out Shashi Arora, vice president, marketing, Kotak Mahindra Bank. That’s not a small gain considering that your current account does not pay you any interest.And if, meanwhile, you want to buy a big-ticket home theatre system, the minute you swipe your card the invested sum will return to your account. Banks are also attempting to reach out to residents of metropo litan cities where people are pressed for time (what with long commuting hours, traffic jams and both spouses working), beyond conventional banking hours. ICICI Bank, for example, introduced eight to eight banking hours, seven days of the week, in major cities. Not to be outdone, some of the other private banks have also done this too.HDFC Bank even has a 24-hour branch at Mumbai’s international airport. INDIAN BANKING IN 2010 The interplay between policy and regulatory interventions and management strategies will determine the performance of Indian banking over the next few years. Legislative actions will shape the regulatory stance through six key elements: industry structure and sector consolidation; freedom to deploy capital; regulatory coverage; corporate governance; labor reforms and human capital development; and support for creating industry utilities and service bureaus.Management success will be determined on three fronts: fundamentally upgrading organizational capa bility to stay in tune with the changing market; adopting value-creating M&A as an avenue for growth; and continually innovating to develop new business models to access untapped opportunities. Through these scenarios, we can paint a picture of the events and outcomes that will be the consequence of the actions of policy makers and bank managements. These actions will have dramatically different outcomes; the costs of inaction or insufficient action will be high. Specifically, at one extreme, the sector could account for over 7. per cent of GDP with over Rs.. 7,500 billion in market cap, while at the other it could account for just 3. 3 per cent of GDP with a market cap of Rs. 2,400 billion. Banking sector intermediation, as measured by total loans as a percentage of GDP, could grow marginally from its current levels of ~30 per cent to ~45 per cent or grow significantly to over 100 per cent of GDP. In all of this, the sector could generate employment to the tune of 1. 5 million comp ared to 0. 9 million. Today availability of capital would be a key factor — the banking sector will require as much as Rs. 00 billion (US$ 14 billion) in capital to fund growth in advances, non-performing loan (NPL) write offs and investments in IT and human capital up gradation to reach the high-performing scenario. Three scenarios can be defined to characterize these outcomes: oHIGH PERFORMANCE In this scenario, policy makers intervene only to the extent required to ensure system stability and protection of consumer interests, leaving managements free to drive far reaching changes. Changes in regulations and bank capabilities reduce intermediation costs leading to increased growth, innovation and productivity.Banking becomes an even greater driver of GDP growth and employment and large sections of the population gain access to quality banking products. Management is able to overhaul bank organizational structures, focus on industry consolidation and transform the banks into industry shapers. In this scenario we witness consolidation within public sector banks (PSBs) and within private sector banks. Foreign banks begin to be active in M&A, buying out some old private and newer private banks. Some M&A activity also begins to take place between private and public sector banks.As a result, foreign and new private banks grow at rates of 50 per cent, while PSBs improve their growth rate to 15 per cent. The share of the private sector banks (including through mergers with PSBs) increases to 35 per cent and that of foreign banks increases to 20 per cent of total sector assets. The share of banking sector value adds in GDP increases to over 7. 7 per cent, from current levels of 2. 5 per cent. Funding this dramatic growth will require as much as Rs. 600 billion in capital over the next few years. oEVOLUTION Policy makers adopt a pro-market stance but are cautious in liberalizing the industry.As a result of this, some constraints still exist. Processes to create highly efficient organizations have been initiated but most banks are still not best-in-class operators. Thus, while the sector emerges as an important driver of the economy and wealth in 2010, it has still not come of age in comparison to developed markets. Significant changes are still required in policy and regulation and in capability-building measures, especially by public sector and old private sector banks. In this scenario, M&A activity is driven primarily by new private banks, which take over some old private banks and also merge among themselves.As a result, growth of these banks increases to 35 per cent. Foreign banks also grow faster at 30 per cent due to a relaxation of some regulations. The share of private sector banks increases to 30 per cent of total sector assets, from current levels of 18 per cent, while that of foreign banks increases to over 12 per cent of total assets. The share of banking sector value adds to GDP increases to over 4. 7 per cent. oSTAGNATION I n this scenario, policy makers intervene to set restrictive conditions and management is unable to execute the changes needed to enhance returns to shareholders and provide quality products and services to customers.As a result, growth and productivity levels are low and the banking sector is unable to support a fast-growing economy. This scenario sees limited consolidation in the sector and most banks remain sub-scale. New private sector banks continue on their growth trajectory of 25 per cent. There is a slowdown in PSB and old private sector bank growth. The share of foreign banks remains at 7 per cent of total assets. Banking sector value adds meanwhile, is only 3. 3 per cent of GDP. oNEED TO CREATE A MARKET DRIVEN BANKING SECTOR WITH ADEQUATE FOCUS ON SOCIAL DEVELOPMENTThe term â€Å"policy makers†, refers to the Ministry of Finance and the RBI and includes the other relevant government and regulatory entities for the banking sector. The coordinated efforts between the v arious entities are required to enable positive action. This will spur on the performance of the sector. The policy makers need to make coordinated efforts on six fronts: †¢Help shape a superior industry structure in a phased manner through â€Å"managed consolidation† and by enabling capital availability.This would create 3-4 global sized banks controlling 35-45 per cent of the market in India; 6-8 national banks controlling 20-25 per cent of the market; 4-6 foreign banks with 15-20 per cent share in the market, and the rest being specialist players (geographical or product/ segment focused). †¢Focus strongly on â€Å"social development† by moving away from universal directed norms to an explicit incentive-driven framework by introducing credit guarantees and market subsidies to encourage leading public sector, private and foreign players to leverage technology to innovate and profitably provide banking services to lower income and rural markets. Create a un ified regulator, distinct from the central bank of the country, in a phased manner to overcome supervisory difficulties and reduce compliance costs. †¢Improve corporate governance primarily by increasing board independence and accountability. †¢Accelerate the creation of world class supporting infrastructure (e. g. , payments, asset reconstruction companies (ARCs), credit bureaus, back-office utilities) to help the banking sector focus on core activities. †¢Enable labor reforms, focusing on enriching human capital, to help public sector and old private banks become competitive. NEED FOR DECISIVE ACTION BY BANK MANAGEMENT Management imperatives will differ by bank. However, there will be common themes across classes of banks: †¢PSBs need to fundamentally strengthen institutional skill levels especially in sales and mar marketing, service operations, risk management and the overall organizational performance ethic. The last, i. e. , strengthening human capital will be the single biggest challenge. †¢Old private sector banks also have the need to fundamentally strengthen skill levels.However, even more imperative is their need to examine their participation in the Indian banking sector and their ability to remain independent in the light of the discontinuities in the sector. †¢New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/ HNI segments; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms.Attracting, developing and retaining more leadership capacity would be key to achieving this and would pose the biggest challenge. †¢Foreign banks committed to making a play in India will need to adopt alternative approaches to win the â€Å"race for the customer† and build a value-creating cus tomer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value-creation mindset will be their greatest challenge.The extent to which Indian policy makers and bank managements develop and execute such a clear and complementary agenda to tackle emerging discontinuities will lay the foundations for a high-performing sector in 2010. CONCLUSION We can conclude that the financial sector is a nerve system of Indian economy. Banking plays an important role in development of economy. For steady growth in economy innovations and development in financial sector is very important. Economy of any country faces lots of challenges and problems. To tackle those problems financial sector plays a vital role.The financial sector makes the economy efficient to the extent where it can rival other developed economies in t he world. Financial sector also faces lots of problems but it should develop certain strategies to come out of these problems which is very important for healthy growth of economy. BIBLIOGRAPHY ?FINANCIAL SRVICES AND MARKET GORDAN AND NATRAJAN ?INDIAN BANKING SYSTEM V. K. BHALLA ?INTRODUC TION TO ECONOMIC ANALYSIS R. PRESTON MCAFEE ?MONEY, BANKING, INTERNATIONAL TRADE AND PUBLIC FINANCE D. M. MITHANI ?BANKING AND PRACTICE P. N. VARSHNEW ?MONEYCONTROL. COM ?MONEYPORE. COM ?RBI. ORG. IN

How Is the Child’s Exploration and Orientation in His Physical Environment Complimented by the Montessori Materials and Presentation

How is the child’s exploration and orientation in his physical environment complimented by the Montessori materials and presentation? Dr. Maria Montessori’s goal of education is to develop a global vision within the children. Montessori calls the path to this perspective â€Å"Cosmic Education†, which develops in children a sense of gratitude for the universe and their lives within it. The concept of cosmic education presents a comprehensive whole picture of the world- a world in which the child sees himself as being a part. Montessori had much to say about world peace. She always says about the importance of developing an understanding of the human problem and restricting human society. She firmly believed that the way to do this was through the child, and that the work of education was to establish a lasting peace. Throughout history, humans have relied on their ingenuity and adaptability for survival. Regardless of race, country ,or culture, people follow similar patterns. After years of careful observation in children, Maria Montessori was able to identify 14 important tendencies that compel human beings to construct and refine the world around them, which she considered these as â€Å"Tendencies of man†, they are exploration, order, gregariousness, communication, abstraction, curiosity, calculation, repetition, concentration, self-control, perfection, creativity, independence and work. The Montessori prepared environment with its carefully chosen and beautifully arranged materials is build around these tendencies. Because of this, Montessori teachers do not need to force their students to; children are naturally drawn to the materials because they appeal to their instinctive drives. Today’s child unconsciously displays the same traits that early human did, and without realizing it,we often stand in the way of their exploration and manipulation because it is an inconvenience to us. When we are able to remove any hinderences to a child’s natural tendencies, the child will flourish and likely surprise us with their pursuit of knowledge, their innovative thinking, and their limitless curiosity. Children are naturally attracted to the nature. So a Montessori environment bust well prepared with natural things such as choice of plants and flowers with a small garden in the outdoor and with some pats such as rabbits, gold fish. These simple things attract the child to study about the plants and animals, to care for them and also to explore specimens found in our living world. The Montessori cultural materials were designed to allow the child to explore an abstract concept in the concrete form. Like the other areas of Montessori curriculum, the sequence of presentation begins with simple to complex and concrete to abstract. The next activity is identifying animals (more specially grouped). This activity also presented in the same way as loosely group, but each group is specifically grouped, for e. g. Birds that can fly and Bird that can’t fly. This activity leads the child further into classification by encouraging groups and also make the child aware of similarities and differences between spices. The next activity in zoology is Jigsaw puzzle of an animal. The materials for this activity are Animal puzzle and identical picture card as control card. The child is given a particular animal puzzle and she will be discussed about that animal. For e. g. Fish, at first the child will be asked â€Å"What is this animal? , What does it eat? , Where does it live? Then the teacher will point each part and asks the child, â€Å"Do you know what part is this? If the child doesn’t know she will teach the names of the parts. Then the teacher will show the child how to place the head in the picture card and she asks the child to place the rest. Then again putting back she reinforces the child by, â€Å"Would you like to put the fin first? In this manner the directress will present the activity. So while working with this material the child will get a sensorial awareness of the different parts of animals and also provide information and increase the child’s vocabulary as well. The next activity in zoology is Terminology cards (Identifying parts of the animals). The materials for this activities are a set of control cards which the parts of the body of a particular animal is highlighted in red and the names of the parts are written on them. The next setof cards are picture cards same as control cards but unnamed and the name tags. There are two cards non-highlighted pictures of a particular animal. This activity also has two presentation one for non-reading child and the other one for reading child. For the non-reading child the teacher will place the non-highlighted pictures of an animal, for e. g. Elephant the control card near the child and she will discuss about elephant. Then she will give any of the highlighted picture of an elephant say for e. g. the head and she will ask , â€Å"Do you know what part is this? If the child knows he will tell, if the child doesn’t know teacher will tell the name of the part, â€Å"Head†. Like wise the child will be discuss each part of an elephant. Then the teacher will gives the picture cards to match with the control cards. For reading child she does the same way as non-reading child, she gives the name tags and have the child read and place it under the correct card. When the child finishes she gives the control cards and ask the child to checks her work. After working with this materials the child will knows the parts of the animals, his vocabulary increase, it develop awareness of similarities and differences in animals, develop child observational and classification skills. The next activity will be Terminology cards; identifying plant parts. This activity presented in the same manner as Terminology cards; identifying animals’ body, but the pictures should be a plant picture and each part of plant is highlighted in red. This activity teach the names of the parts of the plants, it provide information about the plants, develop awareness of similarity and differences in the plants and also it develop the child’s observation and classification skills. The next activity is flower pressing. Children love flowers, so this activity provides them to work with flowers. They are encouraged to find different types of flowers and leaves and they are showed how to press them and make lovely greeting card, or a design for them to hang in their room wall. This activity prepares the child for art and also it appreciates the design in nature. The next activity in botany is first introduction to the leaf cabinet. This cabinet is same as geometrical cabinet in sensorial area, having three leaf shape drawers and the removable insets which are in green. In this activity children are encouraged to trace the shape of the leaves, there fore it create awareness of the variety of leaf shapes in the environment through visual and muscular knowledge of leaf shapes. So this activity increase the children observation skill, it help foster the child’s respect for the wide diversity of plant forms in the world and also it prepare the child for future works in botany and create interest in designs. The next activity which is an important activity which is presented to the children is the importance of the sun. Teacher talks about the children why sun is important? She tells the children it gives us heat, otherwise it will be cold, it would be difficult for us human , animals and plants to survive. She explains some other important facts about sun. Teacher shows the children how sun is important using chart, the food chain how the sun helps the plants to grow, when the plants grow only animal can eat plant and they can grow, if the animals grow only we can get food from animals, so all are dependent in the single element that is sun. The teacher must be creative and innovative to present this activity. So the children will understand how the sun is important for all living creatures. This activity prepares the child for future work in photosynthesis. The next activity which is presented to the children is growing plants. The children are shown how to grow a plant. They were asked to water the plant daily and also not to expose the pot to the sun too much which cause the plant to dry or die and also they were asked to observe the development daily. This activity teach the children to plant seeds and how to care for plants, it develop a sense of responsibility and ownership in the child and also children will have the concrete experience as to what a plant needs to grow. The last activity presented to the children is plants life stories. The pictures of life cycle of a plant are made as frieze. The picture shows the seed, sun, water and finally a plant. This will be present in the same manner as life stories of animals. By showing each picture the teacher will describe each stage, how water and sun important for the seed to grow and finally how the plant grown fully. This activity help the children to understand the life cycle of plants, to identify the sequence of growth, and also this leads the child to take care of the plants. The next subject which is presented to the children is Geography. Maria Montessori adds this subject in cultural subjects to launch the child’s exploration of the world’s physical environment. Montessori approach always introducing new ideas with concrete objects or pictures for the child to see, touch and manipulate. The first activity which is presented in Geography is Sandpaper globe. The globe which has the continents covered with sandpaper and the sea is painted in blue. The teacher brings the sandpaper globe to the table and shows the child how to feel it with her both hands and she ask the child to feel the same. Then she gives the name of land and water using three period lessons by feeling with her two fingers. So while working with the sandpaper globe initially the child learn things the shape of the world is sphere and that is made up of land and water. The next activity which is presented to the child is the coloured globe. In the coloured globe the continents painted in different colours- Europe is red, Asia is yellow, Africa is green, Australasia is brown, north America is orange, South America is pink and the Antartica is white. Teacher brings the colored globe and sandpaper lobe to the table and shows the child, the coloured globe is same as sandpaper globe. Then using the coloured globe she tells the child that the land on the colored globe is divided by colors and each colour represents masses of land and they are call as continents. While working with the colored globe, the child will become aware of the relative sizes, shapes and positions of the land masses and oceans. The next activity which is presented to the child is Jigsaw map of the world. The Montessori Jigsaw map of the world made up with 2 hemispheres, each with the continents removable as whole puzzle pieces. The colours are the same as the colored globe. It is easier for a young child to see how the world is represented on a flat map. There is a control map for the child to place the pieces on that. Directress will shows the child how to place the pieces on the control map and she invites the child to do the same. The child learns the names of the continents with the Jigsaw map of the world with the three period lessons. The next activity is continent cards. The child will further reinforce to learn the names of the continents with this activity. After learning the names of the continent the child learn about animals which live in each continent. This activity given to the child to relate animals to the continents on which they live. After learning about each continent the child will learn how they are divided into different countries which are areas of land with a name, flag and national anthem. Then the child learns various countries with the pictures from various continents. The child also has a great natural interest in others who are different from him self. The teacher will shows the child any picture of a country flag, the important places, their foods, their festivals and etc. he learns much more about the lives of others through this presentation. The next activity which is presented to the children is introduction of the three elements. The child will be discussed about the three elements and she tells the child theses three elements are very important and without any one of them, earth will not exist† so the child will be aware how important these three elements how to save them from pollution. So children have freedom to choose to their own inner needs. Repetition is necessary for them to master and perfect his skills and build his competency and knowledge. Through free choice and repletion children acquire their knowledge step by step depending on their own needs. So the teacher needs to understand that children will reveal him self through work. She can help them to remove their obstacles and guide them to next step according to their own needs and desires. If the teacher helps him in this manner, it cultivate the child’s character, it help children to live in peace and harmony with all people and establish an innate awareness that they are citizens of the world and stewards of their own communities. Dr. Montessori said, â€Å"To serve the children is to feel one is serving the spirit of man, a spirit which has to free itself (Absorbent Mind, Chapter 27, p. g. 283) Bibliography Maria Montessori, To educate the human potential, A KALAKSHETRA PRESS, 84, kalakshetra road, madrass- 600 041. PAULA POLK LILLARD, MONTESSRI TODAY, Schocken Books inc, New York. LESLEY BRITTON, MONTESSORI PLAY & LEARN, Vermilion, re print by Random House, 20 Vauxhall Bridge Road, London, SW*1* V *2* SA. *Maria Montessori, The Absorbent Mind, Henry Hold and company, LLC, 115, West 18th* street, Ney York, New York, 10011, 1995. DMT 108, Modern Montessori International LTD, 107 Bow Road, Bow London E3 2AN. Maria Montessori, the Discovery of the Child, The Random House Publishing group, New York, 1967.

S

History of DONG Energy A/S Introduction Established in the year 1972, DONG Energy is the largest of all energy production companies in the country of Denmark. Its headquarters are also situated here, with a significant amount of its work going into the production of energy both on and off land.Advertising We will write a custom essay sample on History of DONG Energy A/S specifically for you for only $16.05 $11/page Learn More The company was started as a company to provide energy to the state, with the original title of Dansk Naturgas A/S being changed at the beginning of the last decade to its current name DONG, which stands for Dansk Olie org Naturgas A/S. In this case study, research and analysis of the company over a period of ten years or will be done. The case study will make use of the company’s annual reports for 10 years including both primary and secondary sources together with other publicly available sources. Literature Review There is scanty literature detailing th e performance of DONG Energy in the Danish and international markets. The secret to the performance of a company is based on the implementation of the recommendations in most of the case studies done in time. In history, most of the companies that triumphed can be studied to indicate the necessary steps towards profitability (McCraw 1998). Companies should have clear strategies on how they will meet their objectives. This helps in the consolidation of profits in the various operations. According to Micklethwait and Wooldridge (2003), the average performance of a company can be gauged from the financial returns that it posts every year. Methodology The case study will utilise primary and secondary sources to derive the statistical performance of the company through a period of ten years beginning 2002. The use of secondary sources will be significant as it provides information that is not widely available in the literature. Some gaps in the literature concerning the performance of th e company will be analysed using the sources, with the data being quoted in the case study. Qualitative and quantitative research methods will also be utilised in the study, with the different sources being analysed in this form. The information from the literature review and sources will then be presented in a logical and meaningful manner.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Company Analysis The performance of DONG Energy Company over the past decade can be effectively evaluated using the annual reports that the company posts. These have the necessary financial and technical performance indices necessary for the company. In the 2012 annual report, for example, the company prided itself as being among the leaders in the energy business, with the main roles being the procuring production and distribution of energy in the region including energy trade (DONG Energy A/S A nnual Report 2012, p. 2). The company also reported having 7000 employees, with the headquarters still in Denmark. The 7000 employees are an increase from 1,043 it employed in 2004 who were also more than the 996 that were employed in the year 2005 (DONG Energy A/S Annual Report 2005, p. 17). The company reported shareholding as 79.96% for the Danish State, 10.88% for the SEAS-NVE Holding with the rest 9.16% being held by the other shareholders (DONG Energy A/S Annual Report 2012, p. 2). The core activities as indicated for the same year included â€Å"oil and gas exploration and production, construction of wind farms located offshore, generation of electricity from power stations, wholesale activities in the power sector, and distribution of the same† (DONG Energy A/S Annual Report 2012). The company has also seen significant growth in the financial and operation magnitudes, thus ranking among the best performing companies in the industry in the world. In 2012, the component s of power company contributed to a share capital of DKK 2,144 million, with the Equity being 14, 655 million (DONG Energy A/S Annual report 2002). The profit after tax for the same year was DKK 1476 with which represented a poor performance as compared to the previous two years (DONG Energy A/S Annual Report 2002, p. 6). The revenue from the different activities was also not even for activities. Natural gas exploration and mining constituted the largest proportion at 70.2%. This was followed by the exploration and production of energy in general, with this making up 26.7%. The rest of the proportions were made up of oil transportation and renewable energy production among other activities (DONG Energy A/S Annual report 2002, p. 7).Advertising We will write a custom essay sample on History of DONG Energy A/S specifically for you for only $16.05 $11/page Learn More In the same year of 2002, the total net interest bearing debt was DKK 6,919 million, which ind icates what the financial year closed at (DONG Energy A/S Annual report 2002, p. 23). In terms of liquidity, the company had a total of DKK 3,655 million, with this mainly being the fixed term deposits that the company had made with banks and a part of it being mortgage bonds (DONG Energy A/S Annual report 2002, p. 23). The company also made a few policies based on the risks that it faces in the industry, and these were to be implemented in the years that followed. In the year 2003, the performance was better in terms of profits, with the company making a net profit of DKK 1,941million, which was better compared to the year that followed where the same company reported a net profit of DKK 1,881 million (DONG Energy A/S Annual Report 2004, p. 5). The year 2004 was however an improvement, with the non-recurring income being as high as DKK 647 million (DONG Energy A/S Annual Report 2004, p. 5). This can be attributed to the profits that were gotten from the revaluation of one of the co mpanies that was a major shareholder, which improved to a share value of DKK 562 million with an observed reversal of some of the previous write-downs (DONG Energy A/S Annual Report 2004, p. 5). As stated above, there was a drop in the net profit for the year 20004 compared to the previous year. Some of the reasons for the observation include loss of the company’s market share in its home country of Denmark, the hedging of oil, and the USD exchange rate exposure. The charge in exploration also depreciated for the year compared to the previous year (DONG Energy A/S Annual report 2004, p. 5). The year 2004 had some of the significant mergers that the company has engaged in, with Elsam and DONG embarking on working together in electricity generation and distribution. The company thus enjoyed large shareholdings in Elsam. This contributed to the rapid expansion seen in the year. As a result of the merger and other activities that the company undertook in the year 2004, profits im proved, with the year 2005 having an observed profit after tax of DKK 2, 818 million (DONG Energy A/S Annual report 2005, p. 5). The non-recurring income was also a departure from the one reported in the year 2004, which stood at DKK 360 million (DONG Energy A/S Annual report 2005, p. 5).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This was a reduction from the previous year’s value of DKK 889 million. The better performance of the company could be attributed to several factors, with one of the most significant being the better performance of the price of oil on the international front for the same year. There were also significant reductions in the exploration costs in the same year, which prompted a record profit margin for the company (DONG Energy A/S Annual report 2005, p. 5). The company continued its expansion into the electricity sector, with its partnership with Elsam continuing together with the introduction of new partnerships with companies such as Energi E2 and Nesa (DONG Energy A/S Annual report 2005, p. 5). The transition from the year 2005 to 2006 had some of the greatest of changes in the company, with the same being reflected on the performance at the end of the year 2006. As indicated above, the company had 1,018 employees in its payroll. This figure changed significantly to 4,585 empl oyees for the year 2006 (DONG Energy A/S Annual report 2006, p. 3). The revenue rose from that recorded in the year 2005 in the exploration and production as well as other activities that the company performed. In 2006, the exploration and production revenue stood at DKK 5,556 million, which was a marked improvement from the DKK 4, 346 million that was reported for the previous year as stated above (DONG Energy A/S Annual report 2006, p. 3). The revenue from energy generation also improved from DKK 114 million in 2005 to a total of DKK 7,620 million for the year 2006 (DONG Energy A/S Annual report 2006, p. 3). The other observed change in the year 2006 was in the size of assets, with these totalling to DKK 105 billion, which was an improvement from the previous DKK 47 billion in 2005 (DONG Energy A/S Annual report 2006. p. 4). Distribution revenue that the company gets from distributing power and gas across the continent grew from DKK 857 million to DKK 2,560 million for the year 20 06, with the market revenue growing to DKK 24,114 from the previous 13, 885 million (DONG Energy A/S Annual report 2006, p. 4). In general, the company grew in 2006 to reach the current heights. This was attributed to the relative profitability in the industry at the time, networking, and expansion that the company enjoyed during this period. The year 2007 was also a continuous improvement year for the company, with the generation part raising about DKK 12,335 million in revenue, which was an improvement from the DKK 7,682 million that was reported the previous year of 2006 (DONG Energy A/S Annual report 2007, p. 4). The exploration and generation part also had improved profits, with revenue of DKK 4,869 million being reported as an improvement from DKK 5,556 million in the year 2006 (DONG Energy A/S Annual report 2007, p. 4). The distribution revenue rose from DKK 2,560 million in 2006 to DKK 4,520 million that was almost double in 2007 (DONG Energy A/S Annual report 2007, p. 4). T he market revenue, however, remained constant at DKK 24,583 million, with only about DKK 277 million improvements from the previous value of DKK 24,306 million (DONG Energy A/S Annual report 2007, p. 4). The year 2007 was also marked by various trade agreements with some of the related companies. The milestones in the year include the agreements with Wingas GmbH and other companies such as Wintershall Holding AG and the acquisition of Conoco Philips company (DONG Energy A/S Annual report 2007, p. 3). The company increased its offshore wind farms, increased its revenue by selling some of its activities in Portugal and Spain, and started production of gas from the Ormen Lange gas fields that it owned a significant proportion in shareholding (DONG Energy A/S Annual report 2007, p. 3). The marked growth continued in the year 2008, with growth in revenue in all the sections that the company prides itself as owning. In the exploration and production sector, for example, the revenue grew f rom the DKK 4,409 million recorded in the year 2007 to a record DKK 7,114 million (DONG Energy A/S Annual report 2008, p. 2; DONG Energy A/, 2008). The generation part of the company also grew from DKK 12,358 million to DKK 15,298 million, with the energy markets growing from the DKK 20,262 for the year 2007 to the 2008 value of DKK 38,087 million (DONG Energy A/S Annual report 2008, p. 2). The same growth was seen in the sales and distribution sector, with this reporting a record DKK 15,595 million from the previous DKK14, 552 million (DONG Energy A/S Annual report 2008, p. 2). The revenues by proportion included 50% from the energy and production part, 21% from the sales and distribution section, 20% from the generation and the remainder 9% being contributed by the exploration and production part (DONG Energy A/S Annual report 2008, p. 5) In the year 2009, some of the important highlights of the company include the discovery of gas in the Glenlivet, with a license being obtained f or the same (2009, p. 39). The company also signed one of the most important agreements in the energy production sector, with an agreement between it and Siemens constituting the largest offshore wind turbine agreement ever (DONG Energy A/S Annual report 2009, p. 44). It also sold its shares in the Walney wind project to the SSE, thus ending its minority stake in the same project (DONG Energy A/S Annual report 2009, p. 44). With the sale of the stake in this project, the company further acquired 25%shares in another offshore wind project dubbed Lincs (DONG Energy A/S Annual report 2009, p. 44; DONG Energy AS Wind Energy Market Analysis, 2009). Some of the other developments include the creation of more offshore wind farms, selling of its fibrotic network, and selling of shares in the Swedegas Company (DONG Energy A/S Annual report 2009). The company however scored poorly financially, with a reduction in revenue generated in all sectors that constitute its operations. In the followin g year of 2010, the company improved and recovered from its previous underperformance. This was marked by a revenue improvement in all sectors that the company operates, with the exploration and production recording a revenue of DKK 8,224 million up from the previous low of 6,579 (DONG Energy A/S Annual report 2010, p. 2). Generation revenue grew from the levels experience in 2009 of DKK 10,818 million to the experienced revenue of DKK 11,330 million (DONG Energy A/S Annual report 2010, p. 2). The energy markets revenue grew from the previous DKK 28,201 million to DKK 31,764 million, with the sales and distribution growing from DKK 13,386 to DKK 14,185 million for the year 2010 DONG Energy A/S Annual report (2010, p. 2). The company continued with its upward growth for the year 2011, with the revenues improving and surpassing all sectors and operations. The company also had some remarkable performance on the international front by engaging in bilateral agreements and making trade ag reements. In the exploration and production sector, the company got DKK 10,469 million in revenue, which was an improvement from the previous year (DONG Energy A/S Annual report 2011, p. 4). The energy markets also stabilised, with the revenue significantly improving to DKK 33,689.million (DONG Energy A/S Annual report 2011, p. 4). In the sales and distribution sector, the company got DKK 13,009 million in revenue as an improvement from the previous years of DKK 14,185 million, with other activities being additive to the total revenues (DONG Energy A/S Annual report 2011, p. 4). The year 2012 was marked by improvement in some of the quarters although with marked losses for the year (DONG Energy A/S Annual report 2012, p. 2; DONG Energy A/S SWOT Analysis, 2012). The company reported losses in the year. These amounted to DKK 4,021 million (DONG Energy A/S Annual report 2012, p. 2). For the year 2013, the financial estimates favour the positive performance of the company, with the firs t quarter performing better than the previous year’s quarter (DONG Energy A/S Annual report 2013, p. 2). The performance for the year also indicates that the company will perform better that the previous years. The enhanced performance is also indicated by the figures in the pricing of the main commodity that is oil. Industrial Competition The company has grown in various areas. In the past decade, it has managed to overcome competition both locally and internationally. The industry is competitive on the global. Several companies are well established in the field. The performance of DONG Energy has maintained a steady rise in profitability and size despite the international competition. It has maintained its position as the largest company in Denmark in the same industry. The performance for the year 2007 was particularly affected by the industrial competition at the time, with the continuous improvement over the years being cut short (DONG Energy A/S Annual report 2007, p. 4 ). The same trend was experienced for the year 2011, with the company recording some poor performance because of the advancing competition (DONG Energy A/S Annual report 2011; Energy Companies, 2012). Conclusion In conclusion, DONG Energy is one of the best performing energy exploration and production companies in the world. It is the largest in Denmark. The company has performed positively over the last decade as analysed in the review. This may indicate a working strategy adopted by the management. The trend is an upward one for the better part of the decade, only being interrupted by a single slowing in development in 2007. The analysis proves that the company is ready to be the best in the world within the energy production and distribution. References DONG Energy A/S 2008, DONG Energy A/S SWOT Analysis, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2002, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2004, Compa ny Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2005, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2006, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2007, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2008, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2009, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2010, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report’ 2011, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Annual report 2012, Company Report, The Danish Wind Energy Industry, Denmark. DONG Energy A/S SWOT Analysis 2012, DONG Energy A/S SWOT Analysis, The Danish Wind Energy Industry, Denmark. DONG Energy A/S Wind Energy Market Analysis 2009, M2presswire, The Danish W ind Energy Industry, Denmark. DONG Financials for 2013, The Danish Wind Energy Industry, Denmark. Energy Companies 2012, Global Energy Market Research: Denmark, The Danish Wind Energy Industry, Denmark. McCraw, T 1998, Creating Modern Capitalism: How Entrepreneurs, Companies, and Countries Triumphed in Three Industrial Revolutions Cambridge, Harvard University Press, Mass. Micklethwait, J Wooldridge, A 2003, The Company: a Short History of a Revolutionary Idea, Modern Library, New York.