Fundamental of Marketing - 1087 Words

Josh Hazel Fundamentals of Marketing 05/07/2005 Unit 1 Individual Assignment Attention Managers: The market is the set of actual and potential buyers of a product. Building customer value and satisfaction is the key to product success. Marketing is about understanding customers needs and developing a product that provides value and promotes effectively. Marketing, in addition, is also about wants and demands. Wants are shaped by culture and personality. Demands are wants that are backed by purchasing power. As a marketer responsibility is formed to provide a combination of products, services, information, or experience to satisfy these needs, wants, and demands. Customers form expectations about the value of products and†¦show more content†¦(Starling, 2002.) Using the current demographics we can see that there is a large share of consumers that we have not touched yet. By focusing on creation of a product, and directing the marketing advances toward these consumers (youth) the corporation can gain a share of the purchasing power, as well as influence on the parents of these individuals. For example, Chinese parents spend an estimated 40% of their income on their children. (Armstrong, Kottler, 2005. Page 74) Conglom s marketing should use current market trends in order to market new products. Trends such as; dieting, low-calorie, no sugar, all-natural products, low-carbohydrate, (Roberts 2004) and vitamin and mineral rich products appeal to the generation-x and baby boomers. (Starling, 2002) The appeal on this new healthy drink will ensure to maintain and grow adult customers. (Ascend Media, LLC. Euro-monitor PLC 2005) Support for youth oriented marketing to prove Congloms drinks are exiting, and popular athletes, singers, and actors enjoy these drinks. Other trends such as new flavors and product designs will attract youth. (Mastroberte 2005, Euromonitor PLC.) The marketing departments ability to study surveys such as; what colors make people thirstier, what role-models people imitate most, and such studies will aid in creating these designs andShow MoreRelatedThe Fundamental Basis Of Marketing936 Words   |  4 PagesThe fundamental basis of marketing is to communicate clearly the value of a company’s product and/or service offering to a specific target market (Boone Kurtz, 2014). Companies use extensive market analysis and research to determine and define which individuals best embody the end users of their products and/or services. After concluding the research the company defines a target market which consists of a â€Å"specific group of people a firm believes is most likely to buy its goods and services† (BooneRead MoreFundamentals Of Marketing ( 541 )1983 Words   |  8 Pages ASSESMENT NO: 2 Queens Academic Group Fundamentals of Marketing (541) REVIEW REPORT By Amritpal Singh (1512063) Jaskirat Singh (1601063) Paramjit Bhella (1510142) Lecturer: Faisal Qureshi Date of Submission: 9-6-2016 (1) History of McDonalds McDonald’s restaurants are international fast food restaurants. There are about 160 restaurants nationwideRead MoreKfc Marketing Fundamental1686 Words   |  7 Pagestheir effective marketing strategies. To create good marketing strategies, KFC needs to understand the market by conducting a market research and collecting information about micro and macro environment. 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However, this large group is made up of a number ofRead MoreMarketing Mix Is A Fundamental Ingredient For Every Business Success1536 Words   |  7 Pagesbusiness strategies especially in marketing. Essentially, marketing has become a fundamental ingredient for every business success. In this regard, it has become tricky for every competitor to survive in the market for a protracted period due to the high competition in the market. Consequently, enhancement of marketing strategy is frequently required. This helps in the achievement of marketing objectives and in the long run corporate objectives. In essence, marketing mix is one of the best strategiesRead MoreDescribe the Important Internet Properties That Affect Marketing and the Funda mental Changes the Internet Has Brought to Marketing.1157 Words   |  5 PagesInternet properties that affect marketing and the fundamental changes the Internet has brought to marketing. According to Strauss and Frost (2009), the Internet properties have affected the way marketing should be done and delivered to the consumers. Internet data is sent in bits and not in atoms – all the data and information are being stored and sent to the consumers in digital form. The digital form cannot be touch, tasted or smelled. In contrast to other types of marketing, the seller does not needRead MoreIng Direct (â€Å"Ing-D†) Case Study - Marketing Fundamentals2196 Words   |  9 PagesING DIRECT (â€Å"ING-D†) Case Study Course: Marketing Fundamentals Submission Date: 17th November 2009 Executive Summary ING-Direct (ING-D) is a marketing orientated bank that has launched into established markets in the last decade using differentiation as a way to build competitive advantage. This report splits into Section A, based on information provided by the ‘ING Direct USA – Rebel With A Cause’ Case Study by IMD International, and Section B which critically assesses the ING-D websiteRead Moreâ€Å"Knowledge of the Process That Organisational Buyers Follow in Making Purchasing Decisions Is Fundamental to Responsive Business Marketing Strategy.†1702 Words   |  7 Pagesâ€Å"Knowledge of the process that organisational buyers follow in making purchasing decisions is fundamental to responsive business marketing strategy.† INTRODUCTION In today’s globalised and forever changing world of business, different organisations around the world are finding it very difficult not only to compete but also to be managed efficiently and effectively by management. The world of business is very volatile and forever unpredictable and this is caused by changing and difficult forcesRead MoreEssay on MBA detail course outline1314 Words   |  6 PagesResearch Methods †¢ Research Methods †¢ Research Methods †¢ Organization Theory †¢ Organization Theory †¢ Financial Accounting †¢ Financial Accounting †¢ Project Management Fundamentals 2nd Quarter †¢ Project Management Fundamentals †¢ Project Management Fundamentals †¢ Project Management Fundamentals 4th Quarter †¢ Organizational Behavior – I †¢ Organizational Behavior – I †¢ Organizational Behavior – I †¢ Organizational Behavior – I †¢ Leadership †¢ Leadership Read MoreResponsibilities of a Marketing Manager686 Words   |  3 PagesMarketing is one of the central functions of a firm; the others typically being Research and Development (RD), Manufacturing or Operations, Finance, IT and Human Resources (HR). Whereas the other functions concentrate on internal matters, marketings focus is solely on the customer. Marketing is the most critical of all activities for without a customer there is no revenue, leaving little for the other functions to do. As such, the fate of the organization rests in the abilities of its marketing

Theory of Operant Conditioning - 933 Words

Theory of Operant Conditioning Instrumental conditioning, otherwise known as operant conditioning is a theory that B.F Skinner came up with and is defined as a learning process by which the consequence of an operant response affects the likelihood of the response recurring in the future. Basically, operant conditioning is a stimulus response prototype that when reinforced, conditions individuals or organisms response to a desired behavior (Huitt, W., Hummel, J., 1997) Our behaviors are shaped to be desirable or undesirable through reinforcements, punishment and extermination. Overall, operant conditioning is seen to be voluntary reaction that precedes the stimulus and the reinforcement. Classical conditioning is one of the techniques used in behavioral training. The process of classical conditioning works with the introduction of neutral stimuli before the original stimulus and the same reaction is elicited from the organism even without the presence of the original stimulus. The Pavlov dog salivated with every s ight of food as the original stimulus for the salivation. When a neutral stimulus was introduced like a bell that was rang each time before it was fed, the dog started salivating at the ringing of the bell even before the food was availed. Positive and negative reinforcement Introduction of the negative reinforcement to construe behavior entails removal of an unfavorable events or outcomes after the display of a behavior. A response is strengthened by theShow MoreRelatedThe Theory Of Operant Conditioning869 Words   |  4 Pagesthree and a half-year old Gertrude to whom I will apply the theory of operant conditioning to get her to meet a scheduled bed time. Her Mother is facing a steep learning curve with respect to; second language, new cultural, a newborn with a serious disease and isolated from her family (UK and Congo). It is of the utmost importance that we have Gertrude’s behaviour changed to ease the transition to Canada. Discussion Operant conditioning is happening in our everyday lives, it can be found at workRead MoreThe Theory Of Operant Conditioning1489 Words   |  6 PagesOperant Conditioning Operant conditioning is a form of learning where people or animals change their behavior because of the reinforcement given after a desired response. A good example of operant conditioning is, a teacher giving five percent of the marks to students, who have good attendance. The theory is useful in teaching programmed instructions, where the information is given in small bits to reinforce the responses (Litow Pumroy, 1975). Additionally, the theory can help in shaping students’Read MoreThe Theory of Operant Conditioning1136 Words   |  5 Pages The Theory of Operant Conditioning PSY390 October 6, 2014 Introduction The study of human behavior by psychologists such as B.F. Skinner, Edward Thorndike, Ivan Pavlov, and Watson is fascinating. These five psychologists each have different theories on human behavior. There are similarities and differences in each of the theories. Ivan Pavlov’s classical conditioning theory, studied animals and formed the basis for behavioral psychology (Cherry, 2013). Edward Thorndike’s theory of connectionismRead MoreThe Theory Of Operant Conditioning989 Words   |  4 PagesOperant Conditioning: Procrastination The principals of operant conditioning, teaches how having certain coping techniques can reward certain undesirable behaviors. Conditioning human behavior has been studied for many years, Psychologists Edward Thorndike and B.F. Skinner, have dedicated majority of their lives to the study. Thorndike’s theory Law of effect. Thorndike suggest that certain stimuli and response become connected or dissociated from each other. His experiment worked by placing a catRead MoreThe Theory Of Operant Conditioning1792 Words   |  8 PagesIn the textbook operant conditioning can be defined as â€Å"the control of behavior through manipulation of rewards and punishments in the environment, particularly the laboratory environment† (Cervone Pervin, 2013). B.F. skinner who created the operant conditioning procedure believed that all humans are controlled by the environments that they experience and that by changing the environment it is possible to reinforce a behavior that benefits e veryone (Cervone Pervin, 2013). Skinner also believedRead MoreThe Theory Of Operant Conditioning1934 Words   |  8 Pagesat the theory of Operant Conditioning and all the many aspects that go along with it. This theory of Operant Conditioning by B. F. Skinner is a great guideline that can be used in the classroom. Operant Conditioning is definitely a theory that can change the way a classroom is ran. Throughout this paper we will see what behaviorism is and what operant conditioning is as a whole, along with the educational implications of this theory. Biographical Background of (Theorist) The theory of Operant ConditioningRead MoreThe Theory Of Operant Conditioning1212 Words   |  5 PagesOperant conditioning (sometimes referred to as instrumental conditioning) is a method of learning that occurs through rewards and punishments for behavior. Through operant conditioning, an association is made between a behavior and a consequence for that behavior. For example, when a lab rat presses a blue button, he receives a food pellet as a reward, but when he presses the red button he receives a mild electric shock. As a result, he learns to press the blue button but avoid the red button. TheRead MoreThe Theory Of Operant Conditioning Theory Essay746 Words   |  3 Pagescame up with the idea of what is known as operant conditioning (Rholetter, 2013). Operant conditioning is one of two theories in learning that illustrates behaviorism (Kretchmar, 2015). It is according to Rholetter (2013), â€Å"the idea that behavior is the learned result of consequences†. Skinner believed that learning during operant conditioning is done based upon the outcome of a given situation (Lefrancois, 2012, p. 91). His operant conditioning theory is constructed on reinforcements consistingRead MoreBehaviorism And The Operant Conditioning Theory Essay1415 Words   |  6 Pagesalso. Learning theories are conceptualized frameworks which describe how individuals absorb, process and retain information. Behaviorists such as John B. Watson, B.F. Skinner, Edward L. Thorndike, Ivan Pavlov and Edwin R. Guthrie believed that all learners were passive in nature and only responded to extern al stimuli. Behaviorism, as explored by the before mentioned, is a biological basis of learning and focuses exclusively on observable behaviors. This includes Thorndike’s theory of connectionismRead MoreThe Theory Of Behaviorism And Operant Conditioning895 Words   |  4 Pages B.F Skinner Renowned American psychologist B.F. Skinner, well known for his theory on behaviorism and operant conditioning. He was the most influential 20th - century psychologist. His works includes â€Å"The Behavior of Organisms† (1938) which was about the results in his experiment with operant conditioning, and a novel based on his theories â€Å"Walden† (1948). He was not only a psychologist he was a behaviorist, teacher, author, inventor, and a social philosopher as well. Born as Burrhus Frederic

A Study on Futures and Potions Free Essays

string(70) " the various functions that are performed by the derivatives markets\." A STUDY ON FUTURES AND POTIONS Project submitted in partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION DECLARATION I hereby declare that this Project Report titled, â€Å"A STUDY ON THE DERIVATIVES† submitted by me to the Department OF BUSINESS ADMINISTRATION, XXXX and is a bonafide work under taken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before. Name and Address of the StudentSignature of the student Date : ACKNOWLEDGEMENT I wish to express my sincere deep sense of gratitude and also thank my guide XXX, Faculty of Finance for his significant suggestions and help in every aspect to accomplish the project work. His persisting encouragement, everlasting patience and keen interest in discussions have benefited me to the extent that cannot be spanned by words. We will write a custom essay sample on A Study on Futures and Potions or any similar topic only for you Order Now I take my pleasure to acknowledge XXXX for the facilities provided and constant encouragement. Finally I express bows to everyone who are involved with this project. CONTENTS INTRODUCTION METHODOLOGY 1 FUTURES 2 OPTIONS ANALYSIS OF THE STUDY SUMMARY AND CONCLUSIONS BIBLIOGRAPHY INTRODUCTION Nature of the problem: The turnover of the stock exchanges has been tremendously increasing from last 10 years. The number of trades and the number of investors, who are participating, have increased. The investors are willing to reduce their risk, so they are seeking for the risk management tools. Prior to SEBI abolishing the BADLA system, the investors had this system as a source of reducing the risk, as it has many problems like no strong margining system, unclear expiration date and generating counter party risk. In view of this problem SEBI abolished the BADLA system. After the abolition of the BADLA system, the investors are seeking for a hedging system, which could reduce their portfolio risk. SEBI thought the introduction of the derivatives trading, as a first step it has set up a 24 member committee under the chairmanship of Dr. L. C. Gupta to develop the appropriate regulatory framework for derivative trading in India, SEBI accepted the recommendations of the committee on May 11, 1998 and approved the phased introduction of the derivatives trading beginning with stock index futures. There are many investors who are willing to trade in the derivative segment, because of its advantages like limited loss and unlimited profit by paying the small premiums. IMPORTANCE OF THE STUDY: To evaluate the profit/loss position of option holder and option writer. OBJECTIVES OF THE STUDY: ? To analyze the derivatives market in India. ? To analyze the operations of futures and options. ? To find out the profit/loss position of the option writer and option holder. ? To study about risk management with the help of derivatives. SCOPE OF THE STUDY: The study is limited to â€Å"Derivatives† with special reference to futures and options in the Indian context and the Hyderabad stock exchange has been taken as a representative sample for the study. The study can’t be said as totally perfect. Any alteration may come. The study has only made a humble attempt at evaluating derivatives market only in Indian context. The study is not based on the international perspective of derivatives markets, which exists in NASDAQ, NYSE etc. LIMITATIONS OF THE STUDY: The following are the limitations of this study. The scrip chosen for analysis is STATE BANK OF INDIA and the contract taken is March 2005 ending one-month contract. ? The data collected is completely restricted to the STATE BANK OF INDIA of March 2005; hence this analysis cannot be taken as universal. METHODOLOGY The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic a gents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking–in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors. Derivatives are risk management instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest etc. Banks, securities firms, companies and investors to hedge risks, to gain access to cheaper money and to make profit, use derivatives. Derivatives are likely to grow even at a faster rate in future. DEFINITION: Derivative is a product whose value is derived from the value of an underlying asset in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines â€Å"derivative† to include – 1. A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. 2. A contract which derives its value from the prices, or index of prices, of underlying securities. PARTICIPANTS: The following three broad categories of participants in the derivatives market. HEDGERS: Hedgers face risk associated with the price of an asset. They use futures or options markets to reduce or eliminate this risk. SPECULATORS: Speculators wish to bet on future movements in the price of an asset. Futures and options contracts can give them an extra leverage; that is, they can increase both the potential gains and potential losses in a speculative venture. ARBITRAGEURS: Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. If, for example, they see the futures price of an asset getting out of line with the cash price, they will take offsetting positions in the two markets to lock in a profit. FUNCTIONS OF DERIVATIVES MARKET: The following are the various functions that are performed by the derivatives markets. You read "A Study on Futures and Potions" in category "Essay examples" They are: ? Prices in an organized derivatives market reflect the perception of market participants about the future and lead the prices of underlying to the perceived future level. ? Derivatives market helps to transfer risks from those who have them but may not like them to those who have an appetite for them. ? Derivative trading acts as a catalyst for new entrepreneurial activity. ? Derivatives markets help increase savings and investment in the long run. Types of derivatives: the following are the various types of derivatives. They are: Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at today’s pre-agreed price. Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Options: Options are of two types – calls and puts. Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date. Warrants: Options generally have lives of upto one year; the majority of options traded on options exchanges having a maximum maturity of nine months. Longer-dated options are called warrants and are generally traded over-the-counter. LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities. These are options having a maturity of upto three years. Baskets: Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average of a basket of assets. Equity index options are a form of basket options. Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are: Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency. _ Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite Direction. Swaptions: Swaptions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swaption is an option on a forward swap. RATIONALE BEHIND THE DEVELOPMENT OF DERIVATIVES: Holding portfolio of securities is associated with the risk of the possibility that the investor may realize his returns, which would be much lesser than what he expected to get. There are various factors, which affect the returns: 1. Price or dividend (interest). 2. Some are internal to the firm like – ? Industrial policy ? Management capabilities ? Consumer’s preference ? Labor strike, etc. These forces are to a large extent controllable and are termed as non Systematic risks. An investor can easily manage such non-systematic by having a well – diversified portfolio spread across the companies, industries and groups so that a loss in one may easily be compensated with a gain in other. There are yet other types of influences which are external to the firm, cannot be controlled and affect large number of securities. They are termed as systematic risk. They are: 1. Economic 2. Political 3. Sociological changes are sources of systematic risk. For instance, inflation, interest rate, etc. their effect is to cause prices of nearly all individual stocks to move together in the same manner. We therefore quite often find stock prices falling from time to time in spite of company’s earnings rising and vice versa. Rationale behind the development of derivatives market is to manage this systematic risk, liquidity and liquidity in the sense of being able to buy and sell relatively large amounts quickly without substantial price concessions. In debt market, a large position of the total risk of securities is systematic. Debt instruments are also finite life securities with limited marketability due to their small size relative to many common stocks. Those factors favour for the purpose of both portfolio hedging and speculation, the introduction of a derivative security that is on some broader market rather than an individual security. India has vibrant securities market with strong retail participation that has rolled over the years. It was until recently basically cash market with a facility to carry forward positions in actively traded ‘A’ group scrips from one settlement to another by paying the required margins and borrowing some money and securities in a separate carry forward session held for this purpose. However, a need was felt to introduce financial products like in other financial markets world over which are characterized with high degree of derivative products in India. Derivative products allow the user to transfer this price risk by looking in the asset price there by minimizing the impact of fluctuations in the asset price on his balance sheet and have assured cash flows. Derivatives are risk management instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, shares, bonds, currency etc. DERIVATIVE SEGMENT AT NATIONAL STOCK EXCHANGE: The derivatives segment on the exchange commenced with SP CNX Nifty Index futures on June 12, 20007. The FO segment of NSE provides trading facilities for the following derivative segment: 1. Index Based Futures 2. Index Based Options 3. Individual Stock Options 4. Individual Stock Futures |COMPANY NAME |CODE |LOT SIZE | |ABB Ltd. ABB |200 | |Associated Cement Co. Ltd. |ACC |750 | |Allahabad Bank |ALBK |2450 | |Andhra Bank |ANDHRABANK |2300 | |Arvind Mills Ltd. ARVINDMILL |2150 | |Ashok Leyland Ltd |ASHOKLEY |9550 | |Bajaj Auto Ltd. |BAJAJAUTO |200 | |Bank of Baroda |BANKBARODA |1400 | |Bank of India |BANKINDIA |1900 | |Bharat Electronics Ltd. BEL |550 | |Bharat Forge Co Ltd |BHARATFORG |200 | |Bharti Tele-Ventures Ltd |BHARTI |1000 | |Bharat Heavy Electricals Ltd. |BHEL |300 | |Bharat Petroleum Corporation Ltd. |BPCL |550 | |Cadila Healthcare Limited |CADILAHC 500 | |Canara Bank |CANBK |1600 | |Century Textiles Ltd |CENTURYTEX |850 | |Chennai Petroleum Corp Ltd. |CHENNPETRO |950 | |Cipla Ltd. |CIPLA |1000 | |Kochi Refineries Ltd |COCHINREFN |1300 | |Colgate Palmolive (I) Ltd. COLGATE |1050 | |Dabur India Ltd. |DABUR |1800 | |GAIL (India) Ltd. |GAIL |1500 | |Great Eastern Shipping Co. Ltd. |GESHIPPING |1350 | |Glaxosmithkline Pharma Ltd. |GLAXO |300 | |Grasim Industries Ltd. |GRASIM |175 | |Gujarat Ambuja Cement Ltd. GUJAMBCEM |550 | |HCL Technologies Ltd. |HCLTECH |650 | |Housing Development Finance Corporation Ltd. |HDFC |300 | |HDFC Bank Ltd. |HDFCBANK |400 | |Hero Honda Motors Ltd. |HEROHONDA |400 | |Hindalco Industries Ltd. |HINDALC0 |150 | |Hindustan Lever Ltd. HINDLEVER |2000 | |Hindustan Petroleum Corporation Ltd. |HINDPETRO |650 | |ICICI Bank Ltd. |ICICIBANK |700 | |Industrial development bank of India Ltd. |IDBI |2400 | |Indian Hotels Co. Ltd. |INDHOTEL |350 | |Indian Rayon And Industries Ltd | INDRAYON |500 | |Infosys Technologies Ltd. INFOSYSTCH |100 | |Indian Overseas Bank |IOB |2950 | |Indian Oil Co rporation Ltd. |IOC |600 | |ITC Ltd. |ITC |150 | |Jet Airways (India) Ltd. |JETAIRWAYS |200 | |Jindal Steel Power Ltd |JINDALSTEL |250 | |Jaiprakash Hydro-Power Ltd. JPHYDRO |6250 | |Cummins India Ltd |KIRLOSKCUM |1900 | |LIC Housing Finance Ltd |LICHSGFIN |850 | |Mahindra Mahindra Ltd. |MM |625 | |Matrix Laboratories Ltd. |MATRIXLABS |1250 | |Mangalore Refinery and Petrochemicals Ltd. MRPL |4450 | |Mahanagar Telephone Nigam Ltd. |MTNL |1600 | |National Aluminium Co. Ltd. |NATIONALUM |1150 | |Neyveli Lignite Corporation Ltd. |NEYVELILIG |2950 | |Nicolas Piramal India Ltd |NICOLASPIR |950 | |National Thermal Power Corporation Ltd. NTPC |3250 | |Oil Natural Gas Corp. Ltd. |ONGC |300 | |Oriental Bank of Commerce |ORIENTBANK |600 | |Patni Computer System Ltd |PATNI |650 | |Punjab National Bank |PNB |600 | |Ranbaxy Laboratories Ltd. RANBAXY |200 | |Reliance Energy Ltd. |REL |550 | |Reliance Capital Ltd |RELCAPITAL |1100 | |Reliance Industries Ltd. |RELIANCE |600 | |Satyam Computer Se rvices Ltd. SATYAMCOMP |600 | |State Bank of India |SBIN |500 | |Shipping Corporation of India Ltd. |SCI |1600 | |Siemens Ltd |SIEMENS |150 | |Sterlite Industries (I) Ltd |STER |350 | |Sun Pharmaceuticals India Ltd. SUNPHARMA |450 | |Syndicate Bank |SYNDIBANK |3800 | |Tata Chemicals Ltd |TATACHEM |1350 | |Tata Consultancy Services Ltd |TCS |250 | |Tata Power Co. Ltd. |TATAPOWER |800 | |Tata Tea Ltd. |TATATEA |550 | |Tata Motors Ltd. |TATAMOTORS |825 | |Tata Iron and Steel Co. Ltd. |TISCO |675 | |Union Bank of India |UNIONBANK |2100 | |UTI Bank Ltd. UTIBANK |900 | |Vijaya Bank |VIJAYABANK |3450 | |Videsh Sanchar Nigam Ltd |VSNL |1050 | |Wipro Ltd. |WIPRO |300 | |Wockhardt Ltd. |WOCKPHARMA |600 | REGULATORY FRAMEWORK: The trading of derivatives is governed by the provisions contained in the SC ( R ) A, the SEBI Act, the and the regulations framed there under the rules and byelaws of stock exchanges. Regulation for Derivative Trading: SEBI set up a 24 member committed under Chairmanship of Dr. L. C. Gupta develop the appropriate regulatory framework for derivative trading in India. The committee submitted its report in March 1998. On May 11, 1998 SEBI accepted the recommendations of the committee and approved the phased introduction of Derivatives trading in India beginning with Stock Index Futures. SEBI also approved he â€Å"Suggestive bye-laws† recommended by the committee for regulation and control of trading and settlement of Derivatives contracts. The provisions in the SC (R) A govern the trading in the securities. The amendment of the SC (R) A to include â€Å"DERIVATIVES† within the ambit of ‘Securities’ in the SC (R ) A made trading in Derivatives possible within the framework of the Act. 1. Any exchange fulfilling the eligibility criteria as prescribed in the L. C. Gupta committee report may apply to SEBI for grant of recognition under Section 4 of the SC (R) A, 1956 to start Derivatives Trading. The derivatives exchange/segment should have a separate governing council and representation of trading / clearing members shall be limited to maximum of 40% of the total members of the governing council. The exchange shall regulate the sales practices of its members and will obtain approval of SEBI before start of Trading in any derivative contract. 2. The exchange shall have minimum 50 members. 3. The members of an existing segment of the exchange will not automatically become the members of the derivative segment. The members of the derivative segment need to fulfill the eligibility conditions as lay down by the L. C. Gupta Committee. 4. The clearing and settlement of derivates trades shall be through a SEBI approved Clearing Corporation / Clearing house. Clearing Corporation / Clearing House complying with the eligibility conditions as lay down By the committee have to apply to SEBI for grant of approval. 5. Derivatives broker/dealers and Clearing members are required to seek registration from SEBI. 6. The Minimum contract value shall not be less than Rs. 2 Lakh. Exchanges should also submit details of the futures contract they purpose to introduce. 7. The trading members are required to have qualified approved user and sales person who have passed a certification programme approved by SEBI. FUTURES DEFINITION: A Futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. To facilitate liquidity in the futures contract, the exchange specifies certain standard features of the contract. The standardized items on a futures contract are: ? Quantity of the underlying ? Quality of the underlying ? The date and the month of delivery ? The units of price quotations and minimum price change ? Locations of settlement TYPES OF FUTURES: On the basis of the underlying asset they derive, the futures are divided into two types: ? Stock futures: The stock futures are the futures that have the underlying asset as the individual securities. The settlement of the stock futures is of cash settlement and the settlement price of the future is the closing price of the underlying security. ? Index futures: Index futures are the futures, which have the underlying asset as an Index. The Index futures are also cash settled. The settlement price of the Index futures shall be the closing value of the underlying index on the expiry date of the contract. Parties in the Futures Contract: There are two parties in a future contract, the Buyer and the Seller. The buyer of the futures contract is one who is LONG on the futures contract and the seller of the futures contract is one who is SHORT on the futures contract. The pay off for the buyer and the seller of the futures contract are as follows. PAYOFF FOR A BUYER OF FUTURES: [pic] CASE 1: The buyer bought the future contract at (F); if the futures price goes to E1 then the buyer gets the profit of (FP). CASE 2: The buyer gets loss when the future price goes less than (F), if the futures price goes to E2 then the buyer gets the loss of (FL). PAYOFF FOR A SELLER OF FUTURES: [pic] F – FUTURES PRICE E1, E2 – SETTLEMENT PRICE. CASE 1: The Seller sold the future contract at (f); if the futures price goes to E1 then the Seller gets the profit of (FP). CASE 2: The Seller gets loss when the future price goes greater than (F), if the futures price goes to E2 then the Seller gets the loss of (FL). MARGINS: Margins are the deposits, which reduce counter party risk, arise in a futures contract. These margins are collected in order to eliminate the counter party risk. There are three types of margins: Initial Margin: Whenever a futures contract is signed, both buyer and seller are required to post initial margin. Both buyer and seller are required to make security deposits that are intended to guarantee that they will infact be able to fulfill their obligation. These deposits are Initial margins and they are often referred as performance margins. The amount of margin is roughly 5% to 15% of total purchase price of futures contract. Marking to Market Margin: The process of adjusting the equity in an investor’s account in order to reflect the change in the settlement price of futures contract is known as MTM Margin. Maintenance margin: The investor must keep the futures account equity equal to or greater than certain percentage of the amount deposited as Initial Margin. If the equity goes less than that percentage of Initial margin, then the investor receives a call for an additional deposit of cash known as Maintenance Margin to bring the equity up to the Initial margin. Role of Margins: The role of margins in the futures contract is explained in the following example. S sold a Satyam February futures contract to B at Rs. 300; the following table shows the effect of margins on the contract. The contract size of Satyam is 1200. The initial margin amount is say Rs. 20000, the maintenance margin is 65% of Initial margin. |DAY |PRICE OF SATYAM |EFFECT ON BUYER (B) |EFFECT ON SELLER (S) |REMARKS | | | |MTM |MTM | | | | |P/L |P/L | | | | |Bal. in Margin |Bal. n Margin | | | | | | | | |1 | | | | | | | | | |Contract is entered and| | |300. 00 | | |initial margin is | | | | | |deposited. |2 | | | | | | | | | | | | | |+13,200 | | | | | | |-13,200 |B got profit and S got | | |311(price increased) | |+13,200 |loss, S deposited | |3 | | | |maintenance margin. | | | | | | | | | | | |B got loss and | | | | | |deposited maintenance | |4 | |-28,800 | |margin. | | |+15,400 |+28,800 | | | | | | | | | |287 | | |B got profit, S got | | | | | |loss. Contract settled| | | | | |at 305, totally B got | | | |+21,600 | |profit and S got loss. | | | |-21,600 | | | | | | | | | |305 | | | | Pricing the Futures: The fair value of the futures contract is derived from a model known as the Cost of Carry model. This model gives the fair value of the futures contract. Cost of Carry Model: F=S (1+r-q) t Where F – Futures Price S – Spot price of the Underlying r – Cost of Financing q – Expected Dividend Yield T – Holding Period. FUTURES TERMINOLOGY: Spot price: The price at which an asset trades in the spot market. Futures price: The price at which the futures contract trades in the futures market. Contract cycle: The period over which a contract trades. The index futures contracts on the NSE have one-month, two-months and three-month expiry cycles which expire on the last Thursday of the month. Thus a January expiration contract expires on the last Thursday of January and a February expiration contract ceases trading on the last Thursday of February. On the Friday following the last Thursday, a new contract having a three-month expiry is introduced for trading. Expiry date: It is the date specified in the futures contract. This is the last day on which the contract will be traded, at the end of which it will cease to exist. Contract size: The amount of asset that has to be delivered under one contract. For instance, the contract size on NSE’s futures market is 200 Nifties. Basis: In the context of financial futures, basis can be defined as the futures price minus the spot price. There will be a different basis for each delivery month for each contract. In a normal market, basis will be positive. This reflects that futures prices normally exceed spot prices. Cost of carry: The relationship between futures prices and spot prices can be summarized in terms of what is known as the cost of carry. This measures the storage cost plus the interest that is paid to finance the asset less the income earned on the asset. Open Interest: Total outstanding long or short positions in the market at any specific time. As total long positions for market would be equal to short positions, for calculation of open interest, only one side of the contract is counted. OPTIONS DEFINITION: Option is a type of contract between two persons where one grants the other the right to buy a specific asset at a specific price within a specified time period. Alternatively the contract may grant the other person the right to sell a specific asset at a specific price within a specific time period. In order to have this right, the option buyer has to pay the seller of the option premium. The assets on which options can be derived are stocks, commodities, indexes etc. If the underlying asset is the financial asset, then the options are financial options like stock options, currency options, index options etc, and if the underlying asset is the non-financial asset the options are non-financial options like commodity options. PROPERTIES OF OPTIONS: Options have several unique properties that set them apart from other securities. The following are the properties of options: ? Limited Loss ? High Leverage Potential ? Limited Life PARTIES IN AN OPTION CONTRACT: 1. Buyer of the Option: The buyer of an option is one who by paying option premium buys the right but not the obligation to exercise his option on seller/writer. . Writer/Seller of the Option: The writer of a call/put options is the one who receives the option premium and is there by obligated to sell/buy the asset if the buyer exercises the option on him. . TYPES OF OPTIONS: The options are classified into various types on the basis of various variables. The following are the various types of o ptions: I) On the basis of the Underlying asset: On the basis of the underlying asset the options are divided into two types: ? INDEX OPTIONS: The Index options have the underlying asset as the index. ? STOCK OPTIONS: A stock option gives the buyer of the option the right to buy/sell stock at a specified price. Stock options are options on the individual stocks, there are currently more than 50 stocks are trading in this segment. II. On the basis of the market movement: On the basis of the market movement the options are divided into two types. They are: ? CALL OPTION: A call options is bought by an investor when he seems that the stock price moves upwards. A call option gives the holder of the option the right but not the obligation to buy an asset by a certain date for a certain price. ? PUT OPTION: A put option is bought by an investor when he seems that the stock price moves downwards. A put option gives the holder of the option right but not the obligation to sell an asset by a certain date for a certain price. III. On the basis of exercise of Option: On the basis of the exercising of the option, the options are classified into two categories. ? AMERICAN OPTION: American options are options that can be exercised at any time up to the expiration date, most exchange-traded options are American. ? EUROPEAN OPTION: European options are options that can be exercised only on the expiration date itself. European options are easier to analyze than American options. PAY-OFF PROFILE FOR BUYER OF A CALL OPTION: The pay-off of a buyer options depends on the spot price of the underlying asset. The following graph shows the pay-off of buyer of a call option: S-Strike priceOTM – Out of the Money SP -Premium/LossATM – At the Money E1 – Spot price 1 ITM – In The Money E2 – Spot price 2 SR – profit at spot price E1 CASE 1: (Spot price Strike Price) As the spot price (E1) of the underlying asset is more than strike price (S). The buyer gets the profit of (SR), if price increases more than E1 than profit also increase more than SR. CASE 2: (Sport price Strike Price) As the spot price (E2) of the underlying asset is less than strike price (s). The buyer gets loss of (SP), if price goes down less than E2 than also his loss is limited to his premium (SP). PAY – OFF PROFILE FOR SELLER OF A CALL OPTION: The pay-off of seller of the call option depends on the spot price of the underlying asset. The following graph shows the pay-off of seller of a call option: [pic] S-Strike priceITM – In the Money SP – Premium/profitATM – At the Money E1-Spot price 1OTM – Out of The Money E2 -Spot price 2 SR-profit at spot price E1 CASE 1: (Spot price Strike price) As the spot price (E1) of the underlying asset is less than strike price (S). The seller gets the profit of (SP), if the price decreases less than E1 than also profit of the seller does not exceed (SP). CASE 2: (Spot price Strike price) As the spot price (E2) of the underlying asset is more than strike price (S). The seller gets loss of (SR), if price goes more less than E2 than the loss of the seller also increase more than (SR). PAY-OFF PROFILE FOR BUYER OF A PUT OPTION: The payoff of buyer of the option depends on the spot price of the underlying asset. The following graph shows the pay off of the buyer of a call option: [pic] S-Strike priceITM-In The Money SP-Premium/profitOTM-Out of The Money E1-Spot price 1ATM-At The Money E2-Spot price 2 SR-profit at spot price E1 CASE 1: (Spot price Strike price) As the spot price (E1) of the underlying asset is less than strike price (S). The buyer gets the profit of (SR), if price decreases less than E1 than the profit also increases more than (SR). CASE 2: (Spot price Strike price) As the spot price (E2) of the underlying asset is more than strike price (s), the buyer gets loss of (SP), if price goes more than E2 than the loss of the buyer is limited to his premium (SP). PAY-OFF PROFILE FOR SELLER OF A PUT OPTION: The pay off of seller of the option depends on the spot price of the underlying asset. The following graph shows the pay-off of seller of a put option: [pic] S-Strike priceITM-In The Money SP-Premium/profitATM-At The Money E1-Spot price 1OTM-Out of The Money E2-Spot price 2 SR-profit at spot price E1 CASE 1: (Spot price Strike price) As the spot price (E1) of the underlying asset is less than strike price (S), the seller gets the loss of (SR), if price decreases less than E1 than the loss also increases more than (SR). CASE 2: (Spot price Strike price) As the spot price (E2) of the underlying asset is more than strike price (S), the seller gets profit of (SP), if price goes more than E2 than the profit of the seller is limited to his premium (SP). FACTORS AFFECTING THE PRICE OF AN OPTION: The following are the various factors that affect the price of an option. They are: Stock price: The pay-off from a call option is the amount by which the stock price exceeds the strike price. Call options therefore become more valuable as the stock price increases and vice versa. The pay-off from a put option is the amount; by which the strike price exceeds the stock price. Put options therefore become more valuable as the stock price increases and vice versa. Strike price: In the case of a call, as the strike price increases, the stock price has to make a larger upward move for the option to go in-the –money. Therefore, for a call, as the strike price increases, options become less valuable and as strike price decreases, options become more valuable. Time to expiration: Both Put and Call American options become more valuable as the time to expiration increases. Volatility: The volatility of n a stock price is a measure of uncertain about future stock price movements. As volatility increases, the chance that the stock will do very well or very poor increases. The value of both Calls and Puts therefore increase as volatility increase. Risk-free interest rate: The put option prices decline as the risk – free rate increases where as the prices of calls always increase as the risk – free interest rate increases. Dividends: Dividends have the effect of reducing the stock price on the ex dividend date. This has a negative effect on the value of call options and a positive affect on the value of put options. PRICING OPTIONS The Black Scholes formulas for the prices of European Calls and puts on a non-dividend paying stock are: CALL OPTION: C = SN (D1)-Xe-rtN(D2) PUT OPTION: P = Xe-rtN(-D2)-SN (-D2) C – VALUE OF CALL OPTION S – SPOT PRICE OF STOCK X – STRIKE PRICE r – ANNUAL RISK FREE RETURN – CONTRACT CYCLE D1 – (ln(s/x) +(r+ )/2) t)/ D2 – D1- Options Terminology: Strike Price: The price specified in the options contract is known as the Strike price or Exercise price. Option Premium: Option premium is the price paid by the option buyer to the option seller. Expiration Date: The date specified in the options contract is known as the expiration date. In-The-Money Option: An in the money option is an option that would lead to a positive cash inflow to the holder if it is exercised immediately. At-The-Money Option: An at the money option is an option that would lead to zero cash flow if it is exercised immediately. Out-Of-The-Money Option: An out of the money option is an option that would lead to a negative cash flow if it is exercised immediately. Intrinsic Value of an Option: The intrinsic value of an option is ITM, if option is ITM. If the option is OTM, its intrinsic value is ZERO. Time Value of an Option: The time value of an option is the difference between its premium and its intrinsic value. DESCRIPTION OF THE METHOD: The following are the steps involved in the study. 1. Selection of the scrip: The scrip selection is done on a random basis and the scrip selected is RELIANCE COMMUNICATIONS. The lot size of the scrip is 500. Profitability position of the option holder and option writer is studied. 2. Data collection: The data of the RELIANCE COMMUNICATIONS has been collected from the â€Å"The Economic Times† and the internet. The data consists of the March contract and the period of data collection is from 30th December 2008 to 31st January 2008. 3. Analysis: The analysis consists of the tabulation of the data assessing the profitability positions of the option holder and the option writer, representing the data with graphs and making the interpretations using the data. ANALYSIS ANALYSIS The objective of this analysis is to evaluate the profit/loss position of option holder and option writer. This analysis is based on the sample data, taken RELIANCE COMMUNICATIONS scrip. This analysis considered the March ending contract of the SBI. The lot size of SBI is 500. The time period in which this analysis is done is from 30/12/2007 To 31/01/2008 Price of SBI in the Cash Market. |DATE |MARKET PRICE | | | | |30-Dec-07 |685. 1 | |31-Dec-07 |714. 65 | |1-Jan-08 |695. 6 | |2-Jan-08 |706. 4 | |3-Jan-08 |717. 1 | |4-Jan-08 |713. 45 | |7-Jan-08 |726. 6 | |8-Jan-08 |724. 05 | |9-Jan-08 |720. 85 | |10-Jan-08 |742. 1 | |11-Jan-08 |736. | |14-jan-08 |734. 1 | |15-Jan-08 |731. 75 | |16-Jan-08 |728 | |17-Jan-08 |726. 2 | |18-Jan-08 | | | |727. 8 | | | | |21-Jan-08 |722. 7 | |22-Jan-08 |693. 25 | |23-Jan-08 |657. 7 | |24-Jan-08 |664. 4 | |28-Mar-08 |665. 6 | |29-Jan-08 |641. 7 | |30-Jan-08 |661. 05 | |31-Jan-08 |654. 8 | pic] The closing price of SBI at the end of the contract period is 654. 80 and this is considered as settlement price. The following table explains the amount of transaction between option holder and option writer. ? The first column explains the trading date. ? The second column explains the market price in cash seg ment on that date. ? The call column explains the call/put options which are considered. Every call/put has three sub columns. ? The first column consists of the premium value per share of the contracts, second column consists of the volume of the contract, and the third column consists of total premium value paid by the buyer. ? NET PAYOFF FOR CALL OPTION HOLDERS AND WRITERS |MARKET PRICE |CALLS |VOLUME (‘000) |PREMIUM (‘000) |PROFIT TO HOLDER|NET PROFIT TO |NET PROFIT TO | | | | | |(‘000) |HOLDER (‘000) |BUYER (‘000) | | | | | | | | | |654. 8 |640 |199. 5 |3634. 15 |2952. 6 |-681. 55 |681. 55 | |654. 8 |660 |1463 |21600. 35 |0 |-21600. 35 |21600. 35 | |654. |680 |2008 |51831. 53 |0 |-51831. 525 |51831. 525 | |654. 8 |700 |3297 |85603. 45 |0 |-85603. 45 |85603. 45 | |654. 8 |720 |3796. 5 |74881. 93 |0 |-74881. 925 |74881. 925 | |654. 8 |740 |2309. 5 |30208. 4 |0 |-30208. 4 |30208. 4 | OBSERVATIONS AND FINDINGS: ? Six call options are considered with six different strike prices. ? The current market price on the expiry date is Rs. 654. 80 and this is considered as final settlement price. The premium paid by the option holders whose strike price is far and greater than the current market price have paid high amounts of premium than those who are near to the current market price. ? The call option holders whose strike price is less than the current market price are said to be In-The-Money. The calls with strike price 640 are said to be In-The-Money, since, if they exercise they will get profits. ? The call option holders whose strike price is less than the current market price are said to be Out-Of-The-Money. The calls with strike price of 660, 680,700,720,740 are said to be Out-Of-The-Money, since, if they exercise, they will get losses. [pic] FINDINGS: The premium of the options with strike price of 700 and 720 is high, since most of the period of the contract the cash market is moving around 700 mark. [pic] FINDINGS: ? The contracts with strike price 660, 680, 700, 720, 740 get no profit, since their strike price is more than the settlement price. ? The contract with strike price 640 gets the profit. NET PAY OFF OF PUT OPTION HOLDERS AND WRITERS. |MARKET PRICE |PUTS |VOLUME (‘000) |PREMIUM (‘000) |PROFIT TO HOLDER |NET PROFIT TO HOLDER |NET PROFIT TO WRITER| | | | | |(‘000) |(‘000) |(‘000) | | | | | | | | | |654. |600 |25 |47. 625 |0 |-47. 625 |47. 625 | |654. 8 |640 |323. 5 |993. 5 |0 |-993. 5 |993. 5 | |654. 8 |660 |1239. 5 |9506. 575 |6445. 4 |-3061. 175 |3061. 175 | |654. 8 |680 |1399. 5 |21894 |35267. 4 |13373. 4 |-13373. 4 | |654. 8 |700 |1858 |30871. 28 |83981. 6 |53110. 325 |-53110. 325 | |654. |720 |1468. 5 |23727. 83 |95746. 2 |72018. 375 |-72018. 375 | | | | | | | | | OBSERVATIONS AND FINDI NGS: ? Six put options are considered with six different strike prices. ? The current market price on the expiry date is Rs. 654. 80 and this is considered as the final settlement price. ? The premium paid by the option holders whose strike price is far and greater than the current market price have paid high amount of premium than those who are near to the current market price. The put option holders whose strike price is more than the current market price are said to be In-The-Money. The puts with strike price 660,680,700,720 are said to be In-The-Money, since, if they exercise they will get profits. ? The put option holders whose strike price is less than the current market price are said to be Out-Of-The-Money. The puts with strike price of 600,640 are said to be Out-Of-The-Money, since, if they exercise their puts, they will get losses. [pic] FINDINGS: ? The premium of the option with strike price 700 is higher when compared to other strike prices. This is because of the moveme nt of the cash market price of the SBI between 640 and 720. [pic] FINDINGS: The put option holders whose strike price is more than the settlement price are In-The-Money. ? The put options whose strike price is less than the settlement price are Out-Of-The-Money. DATA OF SBI THE FUTURES OF THE JANUARY MONTH |DATE |FUTURES CLOSING PRICE (Rs. ) |CASH CLOSING PRICE (Rs. ) | | | | | |30-Dec-07 |689. 6 |685. 1 | |31-Dec-07 |720. 65 |714. 65 | |1-Jan-08 |700. 5 |695. 6 | |2-Jan-08 |710. 9 |706. 4 | |3-Jan-08 |720. 85 |717. 1 | |4-Jan-08 |716. 85 |713. 45 | |7-Jan-08 |729. 2 |726. 6 | |8-Jan-08 |728. 25 |724. 05 | |9-Jan-08 |723. 35 |720. 5 | |10-Jan-08 |745. 3 |742. 1 | |11-Jan-08 |741. 35 |736. 9 | |14-Jan-08 |738. 95 |734. 1 | |15-Jan-08 |735. 7 |731. 75 | |16-Jan-08 |733. 15 |728 | |17-Jan-08 |730. 75 |726. 2 | |18-Jan-08 |732. |727. 8 | |21-Jan-08 |725. 25 |722. 7 | |22-Jan-08 |695 |693. 25 | |23-Jan-08 |660. 1 |657. 7 | |24-Jan-08 |666. 7 |664. 4 | |28-Jan-08 |667. 75 |665. 6 | |29-J an-08 |642. 7 |641. 7 | |30-Jan-08 |662. 5 |661. 05 | |31-Jan-08 |655. 95 |654. 8 | [pic] OBSERVATIONS AND FINDINGS: The cash market price of the SBI is moving along with the futures price. ? If the buy price of the futures is less than the settlement price, then the buyer of the futures get profit. ? If the selling price of the futures is less than the settlement price, then the seller incur losses. SUMMARY, CONCLUSIONS AND RECOMMENDATINONS SUMMARY ? Derivatives market is an innovation to cash market. Approximately its daily turnover reaches to the equal stage of cash market. Presently the available scrips in futures are 89 and in options segment are 62. ? In cash market the profit/loss of the investor depends on the market price of the underlying asset. The investor may incur huge profits or he may incur huge losses. But in derivatives segment the investor enjoys huge profits with limited downside. ? In cash market the investor has to pay the total money, but in derivatives the in vestor has to pay premiums or margins, which are some percentage of total money. ? Derivatives are mostly used for hedging purpose. ? In derivative segment the profit/loss of the option holder/option writer is purely depended on the fluctuations of the underlying asset. CONCLUSIONS In bullish market the call option writer incurs more losses so the investor is suggested to go for a call option to hold, where as the put option holder suffers in a bullish market, so he is suggested to write a put option. ? In bearish market the call option holder will incur more losses so the investor is suggested to go for a call option to write, where as the put option writer will get more losses, so he is suggested to hold a put option. ? In the above analysis the market price of State Bank of India is having low volatility, so the call option writers enjoy more profits to holders. RECOMMENDATIONS ? The derivative market is newly started in India and it is not known by every investor, so SEBI has to take steps to create awareness among the investors about the derivative segment. In order to increase the derivatives market in India, SEBI should revise some of their regulations like contract size, participation of FII in the derivatives market. ? Contract size should be minimized because small investors cannot afford this much of huge premiums. ? SEBI has to take further steps in the risk management mechanism. ? SEBI has to take measures to use effectively the derivatives segment as a tool of hedging. BIBLIOGRAPHY BIBLIOGRAPHY BOOKS: FUTURES AND OPTIONS – N. D. VOHRA, B. R. BAGRI DERIVATIVES CORE MODULE WORKBOOK – NCFM MATERIAL FUTURES AND OPTIONS – R. MAHAJAN WEBSITES: www. nseindia. com www. equitymaster. com www. peninsularonline. com NEWS EDITIONS: THE ECONOMIC TIMES BUSINESS LINE How to cite A Study on Futures and Potions, Essay examples

Abstract Tuberculosis free essay sample

First, let us ascertain what Tuberculosis is. Tuberculosis is a disease caused by bacteria which infects the lungs and hinders the proper functioning of the respiratory system. Pulmonary TB is when the lungs are infected, while extra-pulmonary TB is when the other portions of the body is infected like kidneys, bones, and even lymph nodes. Tuberculosis is a lingering epidemic which most people ignore. About 1,300 cases are reported annually in the state of New York alone. On a global scale, more than one-third of the world’s population is infected with this contagious disease. TB bacterium and the disease itself are considered one of the most dangerous and contagious disease in the world, which is causes relative diseases and death as well. More than 8 million people become ill with TB annually, and more than 2 million die from this dreaded disease alone. In 1995, 22% of all foreign-born persons with TB (8% of the national total) were born in the Hispanic state of Mexico; of these, 81% were reported by the four U. We will write a custom essay sample on Abstract Tuberculosis or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page S. states bordering Mexico Arizona, California, New Mexico, and Texas) The bacteria known as Mycobacterium tuberculosis is the primary culprit for the disease tuberculosis. In 1882, Scientist Robert Koch discovered the bacteria, which he described as rod-shaped germs or bacilli in appearance with the help of his humble microscope. The bacteria can also inflict cattle animals, the bacterium in cattle is known as Mycobacterium Bovis. Experts believe that Tuberculosis became wide-spread due to the domestic proliferation of cattle centuries ago. TB germs can be transmitted from drinking a cow’s milk which is infected by the disease. However, pasteurization has helped farmers eliminate the disease from spoiling their cattle, because the pasteurization process destroys residual bacilli. Tuberculosis along with its consequent stigmas and discrimination issues are associated with the barriers, which halt the progress of providing apt care, support, and treatments for patients. Such stigmas are deemed universal, and are considered perilous per se, which leads to feelings of indifference and isolation of people who endure TB. Tuberculosis tends to generate unfavorable notions that lead people to do and omit things. Matters which are supposed to be done, and tends to have a consequences that deny them entitlements which is caused by relative discrimination. For instance, most health workers are the primary cause of TB discrimination whenever a person is not admitted in a hospital for treatment or in a prison that denies a prisoner his right to be treated through health services privileges. The stigmatization of Tuberculosis traces its root from deep-seated social norms and structures. Such stigma greatly affects Hispanic individuals, which give them even more social pressures. This also makes them even more prone and vulnerable to marginalization along with the consequences of contracting component of this work plan that reflects its priority to address the disparity of TB patients and the people around them. Arguably, TB is considered â€Å"the disease of the poor†, which tends to associate Hispanic countries like Mexico. It is surmised that the recent link with the HIV virus have surfaced due to the HIV stigma that affects TB patients shown in high-HIV prevalent communities. It hampers the consequences of having TB alone namely:   divorce, desertion and separation from their children. Studies have shown that women and the Hispanic population are highly affected by the stigma that TB carries, which deters them from being cured and disheartens them from requesting a diagnosis in order to be treated immediately. This paper further discusses the very nature of Tuberculosis, its causes and, its alternative treatments.

As I walked through the ghostly streets of my pind (village), I felt as if someone was following my every footstep Essays

As I walked through the ghostly streets of my pind (village), I felt as if someone was following my every footstep Essays As I walked through the ghostly streets of my pind (village), I felt as if someone was following my every footstep Essay As I walked through the ghostly streets of my pind (village), I felt as if someone was following my every footstep Essay As I walked through the ghostly streets of my pind (village), I felt as if someone was following my every footstep. With each of my trembling paces the terrifying sounds behind me intensified rapidly, increasing my tension to the limit. By now my heart was beating faster than a train at full speed, which forced me to run as fast as possible and turn into the next alley way. Frightened as the raged man stopped about a metre away and looked around, terrified that he would find me I held my breath and closed my eyes. As I gradually opened my eyes I watched the person sprint off into the mist. After being sure I was safe, I let out a sigh of relief and started to walk out of the alley but before I could take one step out, a shadowy figure grabbed me from behind, with one of his hands covering my mouth, and his wild hair over my face, he dived his other hand into each of my pockets and stole all of my belongings, after which he through me into the wall whilst ripping my chain from my neck , after he ran off I became unconscious because of hitting my head on the wall. Once I regained consciousness I slowly got together the courage to rise to my feet thinking of what to do next and where to go after a while I realised that I could go home and crush my hopes or I could follow my dreams where ever they lead me. Subsequent to that incident all my confidence of continuing had been demolished so I decided to return home, while I was walking home I could not stop wishing that Babuji had not found out yet. With the feeling that Sharan-jeet would tell Babuji any minute now about all my previous plans and that I had run away, I ran as fast as I could not worrying about anything else but as I reached home I realised that Babuji had already found out as I saw him throwing all my belongings, clothes and pictures out of the house, while swearing at me uncontrollably with mother trying her best to stop him. Once I saw and heard how much Babuji hated me, I hastily became enraged whilst being emotionally fragile. I ran off towards the bus stop increasing my confidence all the way while being haunted by the images of Babuji throwing my belongings away, enforcing tears to flow down my face. While still being upset, I reached the bus stop and got on the bus to Mumbai while wiping the tears off my face. As usual the bus became packed at the next stop, hardly having any space to breathe I tried to keep my mind away from what Babuji did, even though being squashed at the back of the bus I still could not stop thinking about it. Soon a conductor arrived and got on at the front of the bus. He stated asking for tickets, very slowly pushing his way through the crowd, making me panic as I had no money. Unfortunately after many stops, he reached me and asked for my ticket, I looked around pretending I did not hear, but from that he knew I had no ticket. Like a strike of lightning he clutched my colla r, lifted me up and pushed through the crowd and took me to the door, whilst blowing a ferocious whistle to stop the bus. Just as the bus stopped he threw me out of the bus with all his strength. I was in extreme pain, I still had my courage and I decided to continue towards Mumbai by foot. After many gruelling hours I reached Mumbai, each day I went to different movie studios asking for a role in a movie but many times I was thrown out by security or told to get lost, youre too young and there are no roles for you. Due to this I never earned any money and I starved each and every day in the unforgiving heat, feeling death coming closer each day, while sitting in the same spot all day losing energy and seeing the amount of garbage and dirt mounting. Each night became hell when each Bollywood movie came to life as I watched people getting their brains shot out and the numerous gang wars, barely surviving each one. Virtually dead I was found by probably the last surviving kind-hearted person, who helped me return from the clutches death by caring for me like a son. As soon as I recovered I started to work with him as a chai-wala (someone that gives tea) for local movie studios. Months passed by doing the same things each day again and again, but fortunately one day on my way to a studio, lonely and depressed, slowly walking remembering mother, and being worried by her whilst being disturbed by the terrifying memories of Babuji, when a Natak (theatre) audition poster caught my eye, remembering my past dreams and hoping for the best I entered. As I stood waiting in the stretched queue waiting my turn, I developed new dreams of becoming the SRK (Shahrukh Khan) of theatre. Next as I was called in I started to become nervous but I still entered and performed. Although I gave a magnificent performance I still only got the role of an extra, even though I was happy to be selected the role was a bit too small. Years passed and I slowly made my way up the ladder from an extra to the lead role. After 2 years of hard work and dedication I finally became what I wanted the SRK of theatre. After many shows we decided to do a Mumbai tour of 8 shows. While on the Mumbai tour I was approached by the god of movie makers Yash Raj Chopra and offered a role in his latest movie, obviously I said yes while thinking of my family and how I was mocked when I said I wanted to be a movie star. Once I got signed for the movie and fulfilled my dreams, I decided to return home. Again I walked through the ghostly streets of my pind on my way home, whilst being followed by those disturbing memories, and being held back so I did not retuning, but this could not stop me as I am not that foolish anymore. As I continued childhood memories came back, with the rocky sand seeping into my shoes and the mist collecting with the laughter of children in the distance as I entered my house. The whole house looked exactly the same as when I left. Not even one thing had changed, while remembering all the good times I searched the whole house for mother, Sharan-jeet and Babuji, as I could not find then so asked around and found out that Sharan-jeet had got married 6 months ago, which broke my heart because I was not their for her special day and she would never forgive me for that, but tears started to flow when I found out that Babuji had passed away 3 months ago and mother 2 weeks later due to shock. After the bad news I was shattered and emotionally unstable, but I made t he decision to continue my life as before because I would be hurting their souls if I stayed like this, so I continued with my movie career with them always in my heart.

Miracle Movie Review Essays

Miracle Movie Review Essays Miracle Movie Review Paper Miracle Movie Review Paper The film is pretty easy to follow and has many breathtaking moments, s long as you enjoy sports. When the US hockey program Is falling to be at Its best, Coach Herb Brooks Is brought in to give the team some direction. Coach Brooks lost his shot at beating the number one team in the world before, and he knows that this could be his last chance. When Coach Brooks chooses his perfect team of hockey players from all around the country, they seem to be in dire need of some discipline. Many of the boys are more interested In settling old rivalries rather than working together to become a team. Herb pushes the boys to the Max until the entire team wants to feat the Intimidating Soviets Just as much as he does. The team practically becomes family as they prepare towards playing the most important hockey game of their lives. In the final moments of the Olympic Games, the film becomes a suspense filled seat clenches. The miracle on ice gave the country hope in a time when it needed it most. The film did a great Job portraying the true story of the US Olympic hockey team in 1980. It showed what was going on at the time In history and how It was affecting everyone. Despite the war going on, the movie stays focused on he amazing talent of the two hockey teams and doesnt make the movie too politically focused as the two teams compete for the gold medal. The united States hockey team that was chosen was full of talented hockey players who know the game well. The movie seems to show Coach Brooks focusing more on training their attitudes off the ice rather than training them on ice for the game. He obviously is an amazing coach on the Ice, however, the movie wanted the audience to see Just how Important It was to really be a team and know what It takes to win the game. The USIA in the movie really helped suit the setting. Showing how close the team had grown, they celebrated Christmas together. The film played songs such as White Christmas and Rocking Round the Christmas Tree. The movie plays a variety of classical musical instrument tunes. These types of songs are great to emphasize how the team is doing in the game. The music is fast paced and has very low and very high parts which make watching the game more Interesting. The closing credits played the song Dream On by Aerostatic. This song Is a perfect song, and makes o feel the happiness that the team is experiencing after their big win. Not just the happiness of winning, but for conquering something that no one believed was possible. It includes the amazing line, Dream until your dreams come true. This is a perfect song to conclude the movie. As the film is a true story, the writers of the film could not leave out the history taking place outside of the Olympics. The country was at war Witt ten soviet Nylon won also napes to nave ten worlds greatest hockey team. The background history seemed to make the film more homeland as it showed how much the country needed a win in the Olympics to give the country a chance to believe again. However, the history can be considered a downside as well seeing as much of the targeted audience was not born in this time period and may not be interested in the Cold War. The film seems to be targeted at the audience of young boys and young men who dream of becoming hockey stars as well as chasing their dreams. The film may be a bit on the boring side for the younger viewers. Besides fans of hockey, it is difficult to determine if the movie loud be interesting to the general public. The hockey players in the movie are all advanced hockey players who were brought in to beat the best team in the world. The games that take place in the movie move very fast leaving no room for learning. However, knowing the story and the hard work leading up to the game may be enough to captivate the viewer, whether they are familiar with the game or not. The director of Miracle, Gavin OConnor puts a lot of emphasize on the character of Coach Brooks. The team may have been playing the game, but the film did an amazing Job wowing the effort and strength that Coach Brooks had to make it all possible. Kurt Russell did an amazing Job portraying the main character Herb Brooks. Coach Brooks knew Just what to do to get the team at their A game level, even if it meant torture. His determined and aggressive attitude could not have been played out any better than it was. Although the boys of the hockey team are not very recognized faces, they portray the correct personalities of any hockey player ready for the Olympics. Watching the boys on their Journey from day one leading up to the Olympics proves he story to be that much more inspiring. The newly team of boys were going to be playing the Soviets who had been playing together for 10 years. It was time for the 20 men from around the country to become one. For anyone who watches the film that has been part of a team, they may recognize the feeling of the classic team bonding. The film was a very captivating story that could inspire anyone to go after their dreams. The movie Miracle is an all around great film for people who love hockey. However, it is not too hard to follow for someone who is unfamiliar with the name, and could even turn out to be a favorite film. Kurt Russell did an amazing Job acting the role of Coach Herb Brooks. While there was a lot of history taking place as far as the Cold War, the film could turn out be a bore for some of the younger crowds. This is an amazing film for any aspiring hockey players as well as an all around great film for Just about any age group who has somewhat of an interest in hockey. Watching the unbelievable story of the US hockey team in 1980 is exciting and inspiring. It is a story that relives its beauty as you watch it from your television screen.

Barbican Centre Description and analysis of motivations behind the Essay

Barbican Centre Description and analysis of motivations behind the planning scheme - Essay Example Then, the effects of the site on the social and economic life of the local community should be identified, as possible. Also, the resources available for the realization of the particular planning scheme have to be taken into account. In current paper another aspect of urban planning schemes is explored: the motivations that can exist behind such schemes. Particular emphasis is given to the potential influence of modern and postmodern culture on the planning schemes developed within cities. The case of Barbican Centre in London is used as an example for checking the interaction between urban planning and culture. The literature developed in this field is reviewed aiming to show that urban planning is not independent from the cultural environment of modern cities. However, the level at which an urban planning scheme is affected by culture is not standardized; the practice followed in other urban planning schemes developed locally is commonly used as the basis for defining the cultural characteristics of urban planning schemes. In the case under examination the above finding is explained as follows: the designers of the Barbican Centre were based on cultural trends used in the high majority of similar buildings across UK. Of course, differences between Barbican Centre and other sites of similar use have not been avoided, a fact that it is related to the personal perceptions of its designers but also to the needs that the specific Centre has to cover. In addition, through the years, the alterations of certain of the Centre’s initial parts have been necessary under the influence of postmodern culture, an issue discussed analytically below. 2.0 Barbican Centre as a planning scheme reflecting modern and postmodern culture 2.1 Barbican Centre – Description and key characteristics The interaction between the Barbican Centre and the modern/ postmodern culture can be understood only by referring primarily to the key characteristics of Barbican Centre, meani ng especially its construction elements/ structure both in its initial phase, in 1982, and after its two refurbishments, in 2006 and in 2012. The Barbican Centre in the City of London can be characterized as an exceptional architectural work. The idea for the Centre’s establishment can be identified in 1955 but it was quite later, in 1982, that the Centre was finally completed;1 the Queen was invited to open the Barbican Centre in 1982, an invitation to which the Queen responded positively.2 At that time, the Barbican Centre was thought to be an exceptional work, not just in aesthetic terms but also in functional terms: the Centre included not only theatres and cinema but also ‘a library and a series of galleries’.3 Figure 1 – Photos of Barbican Centre, as in 1982 (E-architect 2013) The cost of Barbican Centre has been estimated to ?153m.4 In 2006 the refurbishment of the Centre was considered as necessary so that certain functional weaknesses of the Centr e to be addressed; the works done on the Centre in 2006 reached a cost of ?14m.5 Today, the Barbican Centre is the largest complex of buildings dedicated to art.6 The Centre is consisted of a series of buildings of different size; the London Symphony Orchestra is one of the most important buildings of Barbican Centre.7 The annual visitors of Barbican Centre are about 1.5million.8 An important characteristic of the construction process has been its duration.9 In fact, when the Centre was finally completed its main construction material, ‘the concrete hulk, had fallen out of fashion’.10 The access to the Centre is rather strange: ‘at street level the available connections are limited’.11 Instead, the Centre can be accessed easier by ‘

Diabetes Essay Example | Topics and Well Written Essays - 500 words - 2

Diabetes - Essay Example Exercise plan is ideal for patients with this condition provided they do not fall in the following scenarios, which make them at risk of aggravating cardiovascular diseases. First, they should not be older than 35 years and should not have suffered from type 2 diabetes for more than 10 years. There should be no other risk factors for coronary artery disease. The patients should not have proliferative retinopathy or nephropathy microvascular disease such as microalbuminuria, peripheral vascular disease or autonomic neuropathy. Scientific research has produced enough supportive evidence that a gradual drop in fitness and muscle mass and strength in diabetics could be reversed through regular and moderate exercises. It has also been established that lack of physical activity results in the decrease in insulin sensitivity in middle-aged type II diabetics. Noticeably, physical inactivity is more widespread in populations at risk of contracting type II diabetes. Middle-aged patients have been targeted in many recent studies on the effects of regular and moderate exercise on diabetics. Hence, mild and regular exercise is highly recommended for middle-aged type 2 diabetics (American Diabetes Association, 2007). According to the American Heart Association, the two-pronged exercise for middle-aged type II diabetics should involve swimming and walking, which are aerobic activities associated with the strengthening of muscles, lungs and the heart. Walking and swimming controls diabetics’ blood pressure and sugar besides making their arteries flexible. The other effect of aerobics is weight loss and shedding of excess body fat (American Diabetes Association, 2007). Through their effects on responses to insulin, swimming and walking helps improve the health of a type II diabetic. The recommended exercise include walking and other moderately intense exercises that run for

Fire Essay Example | Topics and Well Written Essays - 500 words

Fire - Essay Example These aspects will include appropriation, crowding, privacy, territoriality, and personal space. A hospital setting needs to be spacious to allow patients to feel well accommodated and enhance visiting process by their friends and relatives. People in hospitals need personal space to feel at home. According to Sommer, personal space means an emotionally tinged zone around the human body that people feel they own it. The zone varies according to internal states, culture, and context (Sommer, 2002). There is need to design a cubical for each patient to give them enough personal space. In case of a fire originating form one of the cubicles, it is easier to contain it, control it, and put it off before it spreads to other cubicles. This is unlike a situation where many patients share same room. A territory is another aspect of human interaction with the environment. According to Griffon, territoriality is a pattern of behaviour or attitudes held by a person attempting to control a physical space by marking, personalisation, defence, or physical occupation (Brown, 2005). In a hospital setting, persons will tend to defend their territories for a period of time they will be in the hospital. It will vary by characters of person’s gender, and age. Therefore, designing places that people of differing characters can call their own when in the hospital will allow nurses to give them care in a convenient setup. However, it is necessary to take care not to put lockable doors on the cubicles. In case of fire, it is easy to remove curtains on the doors and evacuate patients through it other than breaking in if there was a door. Every human being needs privacy, which include access to self and one’s group. In a hospital setting, patients, nurses, and visitors need privacy as they attend to each other. Nurses need a quiet workplace with social places where they can connect to each other outside work. Additionally,

Assessing The Scope Of Competitive Rivalry

Assessing The Scope Of Competitive Rivalry Scope of competitive rivalry mainly deals with a global focus, however, local computer makers should also be considered. For the large corporations, having a presence in foreign markets is essential. Companies like Dell, HP, Lenovo/IBM, and Acer all compete in multiple international markets. If individuals in a particular country are capable of buying a PC, the top competitors all fight for their purchases. Competition is not cut throat per-se, but if a company like HP falters in any one of its multiple segments, Dell could come in and take its market share. Stage in Industry Life Cycle The thing about technology is that it constantly changes. The personal computer, servers, printers, and data storage devices have existed for decades, but constant RD is employed to make these high-tech machines smaller, run faster, and operate more efficiently. Computers and their peripherals will likely remain in the growth stage for a very long time. Though growth has slowed in developed countries like the United States, it has increased in other developing countries like Brazil, India, and China. On that note, the idea itself has reached maturity. For example, servers (as well as personal computers) can offer long usage time if they are properly serviced over the years. Computers configured four years ago, if built with quality high-end components, can still compete with ones coming out today. New technologies make adding performance to personal computers and servers effortless, which furthers the life of the machines. Degree of Vertical Integration According to Thompson and Gambles research, There were too many technologies and manufacturing intricacies to master for a vertically integrated manufacturer to keep its products on the cutting edge. Therefore, the industry has a very low degree of vertical integration. Companies search for the best manufacturers of parts and services and combine them to create a name-brand computer. Providers need to be accessible for when they are demanded. If they fail, companies like Dell and HP can switch as quickly as living creatures blink. Ease of Entry/Exit Because the industry has long been established and defined by the current competition, ease of entry/exit is not exactly easy. In fact, it would be nearly impossible for a start-up firm to enter. A long established company like Sony, for example, was able to enter late in the game because of their existing company structure and size. Only already established large companies would be able to enter the market, unless some entrepreneur discovered a way to enhance existing business models which maximized efficiencies in nearly every aspect of the venture. Technology Innovation The industry is highly characterized by innovation, considering it is nothing but technology. New products are constantly developed, daily in fact. Intel, for example, releases computer processing units (CPUs) every three months. As a result, costs decline .5% weekly. These CPUs are among the main components of the computer. Since technology is evolving at a rapid rate, computer companies always look for ways to reduce inventory carryover while still having enough in inventory if demand spikes. Product Characteristics Defining the product characteristics is rather complex, as not only are the computers intricate in nature, but the number of products associated with this industry colossal. Looking at the main composition, the industry includes computers (servers, desktops, laptops), peripherals associated with the computer like wireless routers and printers, and external storage. Focusing on the computers and depending on the price, they vary in terms of processing speed, hard drive capacity, number of video display outputs, number of channels of surround sound, and amount of random access memory. Economies of Scale As with most industries, the name of the game is getting the best products for the best price. Gray areas do exist, however. CPUs for personal computers, for example, are only made by two competitors (AMD and Intel). Other manufacturers like SIS and Centaur exist, though they are not as well known and certainly not trusted enough to be in name brand PCs. The same goes for video cards. Many manufacturers do exist, but there are only two significant competitors in the market (Nvidia and ATI). Most manufacturers of video cards actually incorporate the chipsets of the two top competitors into their own models. There is a substantial amount of marketing and advertising that goes into the products of the top competitors. The public must be constantly reminded which computers are the best to buy. Because of cost cutting (as well as international expansion), many companies have some, if not the majority, of their processes outsourced. To further reduce costs, inventory carryover is kept low. Learning and Experience Curve Effects The industry is highly characterized by the philosophy of learn by doing. For example, Dell has been improving efficiencies in their business model for the past eighteen and a half years (as of 2008). As a result, they are a leader in many aspects of their value chain. The competition follows suit, but they do not have as much experience as Dell does in this instance. Capacity Utilization Once again, as with all industries, it is important to have high capacity utilization in order to maximize efficiencies. Because there is little markup on computers and their components, companies need to squeeze savings out of every aspect of their operations. Industry Profitability If a company is well managed and knows what its customers want, then industry profitability can be high. Once processes begin to fall short or crumble, company profitability can go from black to red in a short amount of time. Compaq (before it became HP) was an example of a company with poor management structure. Executives ran the company into the ground because they were not finding ways to be profitable. Despite holding a large portion of market share, the company operated in the red for many of its quarters. Industry Driving Forces Though the industry possesses many driving forces, three come to mind as being most prevalent. For one, increasing globalization plays a big role in analyzing company size and strength. Outsourcing processes to many different countries leads to cheaper manufacturing costs across the entire value chain. India, for example, is a common location for technical support call centers. As the world grows smaller, having a well established brand name in multiple markets will keep top competitors successful. A second driving force is the diffusion of technical know-how across more companies and more countries. Just like in increasing globalization, outsourcing helps to locate the best RD opportunities in the least expensive country. The more minds there are on a project, the more opportunities there are for innovation. As a result, emerging countries may have different thought processes and needs compared to developed economies, so new ideas may be generated. A third driving force is changes in cost and efficiency. As mentioned earlier, it is imperative for companies in this industry to master the Just in Time strategy. Computer components are decreasing in price weekly and are becoming more energy efficient. These changes ultimately lead to newer and better products than those of three months ago. Key Success Factors Just like the driving forces, there are many key success factors that relate to this industry. For one, top competitors most certainly have an expertise in a particular technology or specific research (in this case, computer designing). They hand select the best components (or cheapest depending on the business model) for customers to choose from. After all, the quality of components defines the quality of the computer. A second key success factor is the proven ability to improve production processes. This includes the aforementioned industry-wide decrease in days of inventory holdings, and lessening vertical integration improves competitiveness. As computer components become cheaper to manufacture, the prices decrease. As a result, computer prices fall. Improving production processes are effective methods of keeping profitability high. A third key success factor is quality control know-how. No matter what the problem is with ones computer, it is always the fault of the manufacturer. If HP or Dell builds unreliable computers, buyers will simply switch to another brand with little hesitation. Therefore, it is imperative for the top competitors to maintain their quality control in the factories. If a certain component of the computer keeps failing, then it is likely the fault of the component manufacturer, and not the brand name computer creator. Other key success factors include product performance, reputation/image, and customer service capabilities PORTERS FIVE FORCES MODEL OF COMPETITION Dell has been able to remain innovative in their approach to building computers. They proved throughout their years of existence that providing differentiated, customizable computers with exceptional customer service at reasonable prices is possible. During the early years, Dell was able to undercut the competition by substantial margins. When they developed their strategic plans to sell computers internationally, they were quickly able to capture some of the market share once held by super-giant IBM. As a result, in 2007 International sales accounted for over 41% of Dells sales. To expand upon their business model, they diversified their product offerings to include Dell branded speakers, printers, and ink cartridges. Though not all diversification efforts were successful, Dell proved they could be innovative in their approaches to reaching customers. Michael Dell knew exactly what he wanted to do with his business when he first started his venture, and sticking to that vision has c reated one of the most successful computer ventures ever. Rivalry Among Competing Sellers Dells rivals include more than PC manufacturers. They compete and tally revenues in the following product categories: desktop PCs, mobility products (laptop PCs and workstations), software and peripherals (printers, monitors, TVs, projectors, ink and toner cartridges), servers and networking hardware, consulting and enhanced services, and storage products. Principal competitors amongst these categories include HP, Lenovo/IBM, Apple, Acer, Toshiba, Sony, Fujitsu-Siemens, Sun Microsystems, EMC, Hitachi, Cisco, Broadcom, Enterasys, Nortel, 3Com, Airespace, Proxim, Lexmark, Canon, Epson, Accenture, and EDS. Rivalry among competitors is fierce. If one company falters even the slightest bit anywhere along the value chain, other competing companies will enter and capitalize on the transfer of market share. For example, in the first quarter of 2008, Dell had 15.7% of the total global market share, which is up from 14.8% in the fourth quarter of 2007. The rest of the competition outside of the top five competitors (HP, Dell, Acer, Lenovo, and Toshiba) lost 5% of the total market share. These numbers vary from quarter to quarter, but when the top five competitors see increases in market share, it is clear who dominates. Dell happens to offer a highly differentiated product. They pride themselves on providing high quality computers at better prices points than the competition as a result of directly selling to customers. Prior to Dell, no company successfully offered such a business concept. Sales and promotions are targeted toward special bundle packages (like monitor, printer, and computer in one purchase) and slightly dated computer designs. With Dells premier account, for example, businesses and schools are encouraged to buy specially configured computers (which can be further customized). Savings tend to be larger when consumers purchase computers bundled with an anti-virus package, and Dell warranty, and interest free payments for six months if customers own a Dell premier credit card. Though competitors like Sony offer similar incentive programs, none of them can match Dell. Though Dell was strictly direct-to-consumer oriented for the longest time, they were losing significant market share to Apple as a result of not offering their computers in stores. As a result, they agreed to a contract with Best Buy and Wal-Mart. Though customers would technically pay for the markup at Best Buy or Wal-Mart for the same computer they could purchase through Dell, this tactic helped to keep Dell from losing market share to HP and Apple. In addition, Dell began offering white-box PC solutions in 2003 which helped them achieve an additional $380 million in revenues. Though critics were skeptical of the decision to move into this segment, most saw it as an effort to take on white box dealers in China. Potential New Entrants The threat of potential new entrants is minimal if even possible. There is a considerable presence of sizable economies of scale in production and other areas of the operation include the following: a substantial amount of marketing and advertising that goes into Dells products and the ability to outsource areas of the business they cannot make profitable by locating in the US. In addition, Dell is the industry leader in minimizing inventory on hand. In addition to the economies of scale, the learning and experience effects curves have to be taken into consideration. Dell has followed the simple model of learn by doing. As a result, they have been improving efficiencies in their business model for the past eighteen and a half years (as of 2008). The competition cannot match Dell. As with any industry that has been defined for decades, there is a strong brand preference and somewhat high degrees of customer loyalty. Because Dell is focused on being the lost-cost leader in the industry, they need not worry about customers switching purely on price. Customers want an established brand name that has the proven ability to withstand the test of time. As a result, HP, Dell, Acer, Lenovo, and Toshiba will remain the top competitive global competitors for the years to come. Though Apple is a leader in the US, they will not be able to compete in price conscious countries. Because the market share is dominated by the big five, any completion will fight for the remaining half that is crowded with hundreds and thousands of un-established brands. As with most industries that have long been established, there would be extensive capital requirements for a new company. Entry would likely cost millions, is not billions of dollars. As a result, the same brand names have existed for decades. On top of that, striking deals with distributors and retail stores would prove to be difficult. What basis would new consumers have for trusting a brand new computer company? That is why Insignia failed. Assuming the company has these issues sorted out, they would still have to deal with restrictive regulatory policies and tariffs and international trade restrictions. A new threat will only exist if the company can figure out how to succeed at every one of these difficult situations. Substitute Products Substitute products are becoming an issue within the industry. As technology progresses the products of yesterday become obsolete. The smart phone is becoming the biggest threat to the personal computer. Though they are much smaller and fit in the palm of the customers hand, they are capable of doing many of the tasks that a computer can do. For users that compute on larger scales such as film makers, musicians, and reporters, the computer can never be replaced. As a result of the smart phones popularity, computer companies are now competing in this segment. Supplier Bargaining Power The supplier bargaining power through Dell is mainly weak, though there is some slight flexibility. For example, Dell cycles through the top two CPU suppliers (Intel and AMD). Because they are in fierce competition, they continue to make quality products and are normally differentiated only by price. When Dell switched to AMD in 2006, they switched because AMD was able to provide Dell with a better performing chip for a better price. Similar situations occur with peripherals like printers (switch from HP to Lexmark then Dell branded), several speaker offerings from Altec Lansing and Dell branded, and different suppliers for the motherboard. Dell will switch to the best supplier for the best price as long as component quality does not suffer. Buyer Bargaining Power Buyer bargaining power, on the other hand, is high. There are a variety of products to choose from at lower price points than the competition. Purchasing items in bundles leads to greater saving, especially if customers have a Dell premier account. In addition, refurbished or customer-returned computers are offered at even greater discounts. Because technology continually evolves, buyer preferences change, ultimately leading to product adaptations. Customers demand the best product at a better price than the competition. If Dell fails at their own mission statement, they will lose the market share they currently possess. INTERNAL ANALYSIS: SWOT STRATEGIC COST ANALYSIS Value Chain Analysis Dell aims to provide low prices on a diversified line of customizable personal computing solutions by selling direct to customers. In addition, they have an efficient supply chain and manufacturing process that allows them to maintain a leadership position in the industry. As a result, they can sell premium quality products at price points their customers can afford. Just recently to compete with Apple, they have extended their product offerings into retail stores like Best Buy and Wal-Mart. When surveys were conducted in 2008, Dell was found to be deficient in the laptop market segment. As a result, they began contracting part of their assembly process to manufacturing facilities in Asia. Once the basic assembly was completed in the Asian facilities, the half built computers were sent back to the US for final product completion. The problem was that this incurred more costs than if they outsourced the entire operation. As a result, laptops became 100% built overseas. Other cost reduction techniques include minimizing the number of days of stocked inventory. By 2002, Dell was able to minimizes their supplies to anywhere between 2.7 and 4 days. These low stocking days in addition to their purchasing model put Dell at a great advantage. When customers configure their computers online or at the kiosks, they are required to pay in full before their computer can be built. This puts Dell at a great advantage because they have the money for the computer (or other products) before the customer even has the tangible product. They also offer special deals for professional organizations, schools, and other preferred Dell account members. Because they keep a close relationship with their customers, they can create value in other areas like expanded product offerings and 24/7 customer service. Additionally, Dell runs several tests throughout the build process of the computers. Multiple levels of testing reduce the number of manufacturing errors, which furthers their cost reduction efforts. By the end of the manufacturing process, the computers are pre-loaded with an operating system and several programs to enhance buyer value. In short, when the customer receives their computer, they simply have to turn on the unit to begin us e. Dell believes that maintaining close relationships with their suppliers leads to better computers, which will improve customer satisfaction and keep costs low. Once customer satisfaction is high, they will likely buy additional products from Dell such as printers. Further, by providing twenty-four hour technical support, Dell can continue to emphasize the importance of their customers in their eyes. By outsourcing operations like laptop manufacturing and customer service call centers, Dell has found ways to produce products at better price points. Similarly, if Dell produced their own PC components, they would never be able to maintain their competitive edge. Costs for RD and production capacity would eliminate profit margins, even possibly putting Dell into a troubling situation financially. Updates to current model offerings are employed every couple of months. They include improved performance, new input device technologies (like eSata and USB 3.0) and increase energy efficiency. Benchmarking Activities In most industries, Benchmarking tends to have at least some importance in creating better products and improving efficiencies. In any technology driven industry, however, it is essential in order to survive. Dells goal is simple; they keep prices low by allowing customers to create a complete personalized computer according to pre-defined specifications. Doing this enables Dell to avoid carrying pre-configured computers in inventory. Though they do offer refurbished models for discounts, it is not a substantial part of the business. Because their business model is so unique, they can provide customizable solutions that minimize costs, eliminates much of the need for inventory carry-over, and requires customers to prepay (or set up a preferred payment account) before receiving the computer. By cutting out the middleman, Dell can pass on savings to the customer. In addition, by continually searching for ways to improve the manufacturing process, how customer orders are filled and ship ped, and how employees are trained, Dell can retain its competitive edge. Activity Based Costing Dell breaks down its individual activities of the value chain into several components that will provide cost estimates and capital requirements. Categories include advertising, researching, development, technical support (hardware and software related), selling, general, and administration, engineering, and logistics. When one activity is altered, its effects can be felt through the other activities throughout the chain. Once Dell establishes their cost estimates, they can analyze their competitiveness with companies like HP, Lenovo, and Acer. From there, they can make the necessary adjustments to maintain success. Competitive Strength Assessment Analyzing Dell for the competitive strength assessment is analyzed over two criteria. First, how does Dell rank relative to competitors on each of the important key success factors that determine market success? The second, does Dell have a net competitive advantage or disadvantage versus major competitors? Dell understands that in order to remain competitive, they must not lose sight of their business model. The continually search for ways to reduce costs along every aspect of the value chain. As a result, they fair well in the competitive strength assessment. They continue to satisfy their customers by providing total computing solutions. This assessment includes the comparison of the pre-defined industry key success factors against the top competitors: expertise in a particular technology or in scientific research, proven ability to improve production processes, and quality control know how to other competitors. In addition, other strength measures will be weighted. Included measures are product performance, reputation/image, and customer service capabilities. Once the key success factors are reviewed, the weighted overall strength rating will be determined. Weightings rank from highest (strongest) to lowest (weakest). This assessment helps pinpoint which areas Dell excels. Similarly, it also illustrates where they should improve. As illustrated by the competitive strength assessment, Dell still remains stronger than HP, but not Apple. But just because Apple ranks higher does not mean they sell more units. In 2007, Dell shipped (US) 19,645,000 units whereas Apple shipped 4,081. On a worldwide outlook, Apple is not ranked whereas HP shipped 50,526,000 and Dell shipped 39,993,000. Apples product line, however, is priced higher overall than the competition. Their theory is that extensive RD must be made to determine which parts work best together. Apple spends a great deal of time researching components to find out which ones talk best to each other. Their customers believe Apple computers tend to be more stable and last longer than the competition. Whether this is purely an advertising gimmick or legitimate fact has not been proven, but customers seem to believe this is the case. FINANCIAL ANALYSIS BUSINESS STRATEGY ANALYSIS: PORTERS GENERIC STRATEGIES Best-Cost Provider Strategy By late 1997, it was clear that Dell was defining their position in the market. They had become a low-cost leader that was discovering new ways to harness efficiencies from their direct sales business model. They wanted to provide quality computers at price points lower than the competition, and they succeeded. This strategy gave them the upper hand in the industry, and as a result, they are a top competitor with a high percentage of the overall market share. Dell achieved their best-cost status from the ability to provide customers with customizable computing solutions at lower than expected prices by cutting out the middleman. By employing this strategy over multiple product offerings, they were able to target a wide range of computer users from the business end to personal home users. Owner Michael Dell achieved this status by constantly benchmarking company performance. He continually searched for ways to improve all aspects of the business, which includes ongoing improvements in the assembly efficiency, improved quality control, enhancing partnerships with suppliers, adopting just-in-time inventory practices, website rebuild, customer service/technical support improvements, and placing Dell computers in retail stores. As a way to enhance value, Dell held forums that gave senior management the opportunity to listen to their best customers for determining future needs and expectations of buyers. In 2007, Dell began enhancing customer value through IdeaStorm, a website that allows customers to post suggestions for ways to improve the company. Improvements yield great reward, as Dell was rated number one (in 2005) for providing exceptional customer service to large enterprises. Vertical Integration When the industry was relatively new, it was essential for a PC manufacturer to be at least partially integrated. If they were not, customers did not receive their product well. That logic shifted over time, however, to the point where being vertically integrated would be detrimental to long-term company success. To not be vertically integrated is the best way for Dell to mass-produce computers. Today, Dell has an arms-length relationship between specialist suppliers, manufacturer/assemblers, and end users. It is unlikely for Dell to ever revert back and become even partially integrated, as the industry as a whole is becoming less integrated daily. Transaction Cost Economics Dell aims to keep transaction costs low and continually searches for ways to save. There are no surprises for customers when they visit the Dell website, unless medications have been made to the layout. Customers expect low prices for quality computers, and that is what they receive. Improving bargaining power between suppliers is highly unlikely, due to the fact that discounts on technology can only go so far. They are typically regulated and controlled, and have even been scrutinized for selling components for more than they are worth. Dell accepts PayPal, MasterCard, Visa, American Express and Discover credit cards in addition to their own premier account credit card. They believe that having multiple payment methods encourages customers to purchase more goods. In addition, other typical transaction cost economics include the time it takes to configure a computer online (or at one of the newly introduced kiosks), the time it takes to research what components fit customer needs the best, the time it takes to actually place an order, and the time it would take if customer service/technical support is needed. Cooperative Strategies Michael Dell believed that partnerships with suppliers would be better for the company than if it were to integrated backwards and manufacturer its own components. As a result, they have relationships with processor manufacturers Intel and AMD, hard disk drives manufacturers Seagate and Western Digital, speaker manufacturers Altec Lansing (often rebranded as Dell), and multimedia component manufacturers creative technology ltd. Other suppliers for parts like RAM, motherboards, fans, and DVD drives change depending on who supplies parts for the least amount of money. When Dell agrees to purchase components from suppliers, they are required to purchase a certain percentage of stock per order. As a result, Dell is able to demand products when needed. They can expect timely shipping and service from the suppliers as well. Suppliers often have locations within close proximity to Dells manufacturing facilities. In addition, these suppliers are often treated as Dell family members. Finally, these partnerships help drive down costs. Offensive Strategies Dells suppliers act offensively daily. They have to in order to keep up with changing technology. Coming from Dells perspective, they too act offensively. Though they are not necessarily pioneering new and better technologies, they demand the latest and great from suppliers at the quickest rate possible. They refresh their product line every few months to make it seem as though they are revamping their product line often. In addition, if there are new technologies that exist for determining ways to lower costs along the assembly line, they investigate and incorporate. They have been the leader in direct-marketing of computers and will likely remain at the top so long as they remain offensive. After all, they are the low-cost leader. Defensive Strategies Though Dells attempts at defensive strategies have not always been positive, they nevertheless attempted to fill a void in their product line. Responses to the changing marketplace include Dell televisions and Mp3 players. Though these products were highly competitive, they were never able to reach customers hands the way existing products could. This is one instance where Dells direct selling strategy proved to hurt their business model. A positive defensive strategy, however, was the release of the Inspiron notebook. Dell began outsourcing their entire laptop manufacturing operation to cut costs and maximize efficiencies. As a result, they were able to remain competitive and increase the market share that had began to lose. The global recession has also affected Dell, but most businesses have seen some sort of negative change from it anyway. First-Mover Advantages In 1984, Michael Dell began his journey of creating custom built computers sold directly to customers. This, in itself, is the first-mover advantage of the entire industry. No competitor has been able to match the success of Dell in terms of direct selling to consumers. They have had far more years of experience operating in this manner than any of the other competitors. It is for this reason Dell will likely remain the top competitor in direct-to-consumer computer sales. CORPORATE STRATEGIES: DIVERSIFICATION Beca