All about Business and management

July 26, 2007

Balance of payments accounting system (BOP)

Filed under: International Business — Jagdish Hiray @ 7:48 pm

            Balance of payments accounting system (BOP) is an accounting system design to track buy and sell transactions between countries by an individuals, businesses and government agencies. It is double entry system in which each transaction creates a credit entry and a debit entry of equal value. Buying goods and services creates debit entries and selling things produces credits entries.

             BOP reocords only those trasactions that has some monetary value. It records transactions done in certain period of time, say for a year. It records transactions between residents of one country and residents of other countries. Residents can be individuals, businesses or government agencies. A branch of a firm is considered as resident of parent country since it is not incorporated in host country. Whereas a subsidiary is incorporated in host country and considered as resident of host country.

             Conceptually BOP system consists of four major accounts: current account, capital account, official reserv acount and errors and omissions. The current account records four types of transactions: exports and imports of merchandise, exports and imports of services, investment income and gift, between residents of different countries. Capital account records capital transactions such as purchaes and sales of assets. Capital account includes foreign direct investment (FDI) and portforlio investment. Official reserves account records official reserves held by a national government. It includes assets such as gold, SDRs, convertible currencies and reserve positions at IMF. The errors and omissions acount is used to adjust BOP balance such that sum of all four account type approximates to zero. 

            BOP helps to understand the performance of each country’s economy in international market. It helps business people identify emerging markets, understand market competitiveness and helps policy maker to define new policies accourding to market trend. It also helps policy maker to watch and act as feedback system for their newly implemented policies. It also gives exporters and importers good knowledge about internaltional market transactions and trend to plan their business better. It also reflects country’ export and import potential and in turn helps business analysts to monitor international market. 

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July 22, 2007

Taiwan : Journey from low income to high income country

Filed under: International Business — Jagdish Hiray @ 7:28 pm

                 Today Taiwan has one of the fastest growing economies in the world. Taiwan has achieved this rapid economical growth and development through its try, learn and improve policy backed by hard work of the people of Taiwan. This abstract is devoted to chronological development of Taiwan over period time and its rise from low-income country to high-income country in Asian.            

                 After World War II in 1945, government of Republic of China recovered Taiwan from Japanese, infrastructure was collapsed and the island was in a state of devastation. There was shortage of necessary food supplies, power and other goods. Population was growing fast and island was not able to procedure enough for its need. Government (Republi of China on Tiwan) is forced to take action and started concentrating on basic needs and foundation. It started agriculture reforms and started initiatives to grow locally. Till 1962 agriculture contributed more to GDP than industrial production and Taiwan had agriculture-based economy. During this period economy structure went through gradual changes due to international completion and growth of domestic industries.

             Taiwan’s industrial era started from 1962 when industrial output exceeded agricultural production, economy started transformed from agriculture based into industrial based. Government opened export processing zones, prompted exports, lifted many trade restrictions, lowered tariffs and created more employment. Took economical measures to attract foreign investment and encourage the development of export industries. Government started projects to improve basic infrastructure, promoted development of construction and chemical industry. The period between 1963 and 1980 marked as the most rapid growth period in Taiwan’s history. In 80s government focused on liberalization and globalization of economy as well as privatization of government run sectors. Taiwan’s economy continues to grow with in both agricultural and industrial sectors in next several years.

             Government initiatives and people’s hard work moved Taiwan’s economy from war zone to rapidly growing economy. Their spirit to survive and develop county, along with government initiatives made Taiwan to grow faster than other countries. People of Taiwan have showed to the world, how undeveloped country can change into a country with fastest economy in the world, backed by people’s hard work and government’s strategic planning and implementation.

July 13, 2007

Gray market

Filed under: Business management — Jagdish Hiray @ 2:08 am

             This article focuses on how Gray market develops, what factors are responsible for creating Gray market and how it affects firms. 

            A corporate firm generally adopts three type of pricing policies: Standard, two tiered and market pricing policy. In case of standard price policy, firm charges the same price for its products and services regardless of where they are sold. In case of two-tiered pricing policy, firm sets one price for all its domestic sales and different price for its international sales. In case of firm using market pricing policy, prices of goods varies on a market-by-market basis to maximize its profit in each market. Those firms, which follow market-pricing model, might get into notion called ‘arbitrage of goods’.  

             If price of the good differs between two markets (or country) there is tendency to buy good in the market with lower price and resell it in the market offering the high price. A Gray market is a market that results from arbitrage of goods. A Gray market is a phenomenon by which products are imported into country or bought to the market by other means of channels other than once authorized by the manufacturer. Firms those follow market pricing policy risks development of gray markets for its products as a result of arbitrage. 

            Gray markets generally arise when firm fails to adjust local prices after fluctuations in exchange rates. Gray markets are commonly seen in those countries having free market economy. Gray market sales can causes loss to firm and poosible damage to its distribution network due to price differences.

           

July 4, 2007

Network project

Filed under: Business management — Jagdish Hiray @ 4:26 pm

            A Network project is a project in which organization structure is centered on core driving organization, supported by networked peripheral organizations for other competencies needed for project. Due to advances in telecommunication, wide spread of Internet infrastructure and outsourcing, implementation of project in ‘Network’ model is very common and has significant impact on organizational development. 

            Network project offers many appealing advantages. Due to globalization and competition in different sectors of industry, organizations with specialized skills and expertise are available across globe. This gives opportunity to organization to concentrate and focus on its core specialized area and outsourced other work. For example, an organization can concentrate and spend to develop specifications, design a product and out source other project functions such as advertisement, marketing to other competitive specialized firms. By doing so organization gets cost effective solution provider and saves time to hire and form specialized groups within organization. This can also reduce critical path in project life cycle and hence product development cycle. This model also offers organization, choice to have multiple groups of same expertise to come up with different solution. This allows different group work in parallel and hence can reduce product development cycle. Network project model also increases competition among organizations and hence offers competitive package to core organization. Network project model therefore has strong potential for cost effective solution, reduced project cycle (critical path), create innovative products/solutions and early readiness to market product. Network project allows networked organization to function independently and gives opportunity to produce best results. Outsourcing of software project is best example of Network project; virtual teams spread across globe execute software project.                        

                   However, Network project model requires strong cooperation and coordination between networked organizations. Delay in once commitment can cause, delay in other stages of project. Due to nature of project model, where team from different organization with different cultures is involved, project management process has to be very robust and solid and needs close monitoring at each stage of project. Therefore strong leadership skills and ability to take strategic decision is must to manage these projects. Network project is collaborative team effort, crosses organizational boundaries and is one of challenging model of project implementation.

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