Assignment-1 Strategic Management (MGT-480)

Chapter 1: Porters 5 Forces Model Porters Five Factor Model: Porter's Five Forces is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven down to zero.

Fig: Porters Five Factors Model Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally, requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry.

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As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. The threat of the entry of new competitors: Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will tend towards zero (perfect competition). The threat of substitute products or services: The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Here if in a market there is enough alternative products are available than it becomes easy for the consumers to switch to other products. The bargaining power of customers (buyers): The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. The bargaining power of suppliers: The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm. The intensity of competitive rivalry: For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Chapter: 2 Key Ratios (Formula & Interpretation)

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Most widely used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items on the financial statement. Financial ratios are usually expressed in percentage or times. Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories:

Liquidity ratios measure a firm's ability to meet its current obligations. Profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business. Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time.

Efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business.

A ratio can be computed from any pair of numbers. Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard computation of them does not exist. The following ratio presentation includes ratios that are most often used when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company driven procedure. Analysts are drawn to and use the ones they are comfortable with and understand. Liquidity Ratios Operating cash flow ratio Operating cash flow (OCF), cash flow provided by operations or cash flow from operating activities (CFO), refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities.

Acid Test or Quick Ratio A measurement of the liquidity position of the business. The quick ratio compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and
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prepaid expenses in the calculation. Consequently, a business's quick ratio will be lower than its current ratio. It is a stringent test of liquidity. Formula Cash + Marketable Securities + Accounts Receivable Current Liabilities Current Ratio provides an indication of the liquidity of the business by comparing the amount of current assets to current liabilities. A business's current assets generally consist of cash, marketable securities, accounts receivable, and inventories. Current liabilities include accounts payable, current maturities of long-term debt, accrued income taxes, and other accrued expenses that are due within one year. In general, businesses prefer to have at least one dollar of current assets for every dollar of current liabilities. However, the normal current ratio fluctuates from industry to industry. A current ratio significantly higher than the industry average could indicate the existence of redundant assets. Conversely, a current ratio significantly lowers than the industry average could indicate a lack of liquidity. Formula Current Assets Current Liabilities For example, if WXY Company's current assets are $50,000,000 and its current liabilities are $40,000,000, then its current ratio would be $50,000,000 divided by $40,000,000, which equals 1.25. It means that for every dollar the company owes in the short term it has $1.25 available in assets that can be converted to cash in the short term. A current ratio of assets to liabilities of 2:1 is usually considered to be acceptable (i.e., your current assets are twice your current liabilities). Cash Ratio Indicates a conservative view of liquidity such as when a company has pledged its receivables and its inventory, or the analyst suspects severe liquidity problems with inventory and receivables. Formula Cash Equivalents + Marketable Securities Current Liabilities
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Profitability Ratios Net Profit Margin (Return on Sales) Return on Sales or Profit Margin (%): The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per dollar of sales and thus is a measure of efficiency of the company. The formula: Return on Sales or Profit Margin = (Net Profit / Net Sales) x 100. Return on Assets Measures the company's ability to utilize its assets to create profits. Return on Assets: The Return on Assets of a company determines its ability to utitize the Assets employed in the company efficiently and effectively to earn a good return. The ratio measures the percentage of profits earned per dollar of Asset and thus is a measure of efficiency of the company in generating profits on its Assets. The formula: Return on Assets = (Net Profit / Total Assets) x 100. Operating Income Margin a measure of the operating income generated by each dollar of sales. Formula Operating Income Net Sales Return on Investment Measures the income earned on the invested capital. Formula Net Income Long-term Liabilities + Equity Return on Equity Measures the income earned on the shareholder's investment in the business. Formula Net Income Equity

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Du Pont Return on Assets A combination of financial ratios in a series to evaluate investment return. The benefit of the method is that it provides an understanding of how the company generates its return. Formula Net Income Sales Gross Profit Margin Indicates the relationship between net sales revenue and the cost of goods sold. This ratio should be compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs. Formula Gross Profit Net Sales Financial Leverage Ratio Total Debts to Assets Provides information about the company's ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors. Formula Total Liabilities Total Assets Capitalization Ratio Indicates long-term debt usage. Formula Long-Term Debt Long-Term Debt + Owners' Equity Debt to Equity Indicates how well creditors are protected in case of the company's insolvency. Formula Total Debt Total Equity Interest Coverage Ratio (Times Interest Earned) Indicates a company's capacity to meet interest payments. Uses EBIT (Earnings Before Interest and Taxes) Formula x Sales Assets x Assets Equity

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EBIT Interest Expense Long-term Debt to Net Working Capital Provides insight into the ability to pay long term debt from current assets after paying current liabilities. Formula Long-term Debt Current Assets - Current Liabilities Efficiency Ratios Cash Turnover Measures how effective a company is utilizing its cash. Formula Net Sales Cash Sales to Working Capital (Net Working Capital Turnover) Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company's working capital is working too hard. Formula Net Sales Average Working Capital Total Asset Turnover Measures the activity of the assets and the ability of the business to generate sales through the use of the assets. Formula Net Sales Average Total Assets Fixed Asset Turnover Measures the capacity utilization and the quality of fixed assets. Formula Net Sales Net Fixed Assets Days' Sales in Receivables Indicates the average time in days, that receivables are outstanding (DSO). It helps determine if a change in receivables is due to a change in sales, or to another factor such as a change in

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selling terms. An analyst might compare the days' sales in receivables with the company's credit terms as an indication of how efficiently the company manages its receivables. Formula Gross Receivables Annual Net Sales / 365 Accounts Receivable Turnover indicates the liquidity of the company's receivables. Formula Net Sales Average Gross Receivables Accounts Receivable Turnover in Days indicates the liquidity of the company's receivables in days. Formula Average Gross Receivables Annual Net Sales / 365 Days' Sales in Inventory Indicates the length of time that it will take to use up the inventory through sales. Formula Ending Inventory Cost of Goods Sold / 365 Inventory Turnover indicates the liquidity of the inventory. Formula Cost of Goods Sold Average Inventory Inventory Turnover in Days indicates the liquidity of the inventory in days. Formula Average Inventory Cost of Goods Sold / 365 Operating Cycle Indicates the time between the acquisition of inventory and the realization of cash from sales of inventory. For most companies the operating cycle is less than one year, but in some industries it is longer. Formula
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Accounts Receivable Turnover in Days + Inventory Turnover in Day Days' Payables Outstanding indicates how the firm handles obligations of its suppliers. Formula Ending Accounts Payable Purchases / 365 Payables Turnover indicates the liquidity of the firm's payables. Formula Purchases Average Accounts Payable Payables Turnover in Days indicates the liquidity of the firm's payables in days. Formula Average Accounts Payable Purchases / 365

Chapter: 3 Product Life Cycle

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A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

Fig: Product Life Cycle

Introduction Stage In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:

Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained. Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs. Distribution is selective until consumers show acceptance of the product. Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

Growth Stage
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In the growth stage, the firm seeks to build brand preference and increase market share.

Product quality is maintained and additional features and support services may be added. Pricing is maintained as the firm enjoys increasing demand with little competition. Distribution channels are added as demand increases and customers accept the product. Promotion is aimed at a broader audience.

Maturity Stage At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.

Product features may be enhanced to differentiate the product from that of competitors. Pricing may be lower because of the new competition. Distribution becomes more intensive and incentives may be offered to encourage preference over competing products. Promotion emphasizes product differentiation.

Decline Stage As sales decline, the firm has several options:

Maintain the product, possibly rejuvenating it by adding new features and finding new uses. Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment. Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being

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harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

Chapter 4: BCG Matrix

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The BCG Matrix is a business method that was created by the Boston Consulting Group in the 1970s. This business method bases its theory on the life cycle of products. To understand the Boston Matrix, understanding how market share and market growth is interrelated is important. Market share is the percentage of the total market that is being serviced by a company, measured either in revenue terms or unit volume terms. The higher the market share, the higher the proportion of the market control. The Boston Matrix assumes that if one enjoys a high market share, he will be making money. (This assumption is based on the idea that a company will has been in the market long enough to have learned how to be profitable, and will be enjoying scale economies that give it an advantage). The question it asks is, "Should it be investing additional resources into a particular product line just because it is making money?" The answer is, "not necessarily." This is where market growth comes into play. Market growth is used as a measure of a market's attractiveness. Markets experiencing high growth are ones where the total market is expanding, meaning that its relatively easy for businesses to grow their profits, even if their market share remains stable. By contrast, competition in low growth markets is often bitter, and while one might have high market share now, it may be hard to retain that market share without aggressive discounting. This makes low growth markets less attractive. The BCG Matrix is also known as the Boston Box or Grid, BCG Charts are divided into four types of scenarios, Stars, Cash Cows, Dogs and Question Marks.

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The Stars is the scenario where there is the optimum situation of high growth and high share, this method requires an increased investment due to the continuous growth. The Cash Cow cycle deals with low growth and high share. This scenario requires a low investment, but the growth is very slow. The Dogs method is the situation where the growth is low and the market share is low, this is one of the worst situations. In this situation if the products are not delivering the cash then it is best to liquidate. The last part of the cycle is the Question mark which is high market growth but low shares. In this situation there is a high demand but low returns. It is best to try and increase market share or get it to deliver cash. The limitation of this business theory is that it only works with high market share and this is not the only meter for success. Also there are many situations in business where the Dogs can out earn the Cash Cows. The BCG grid may provide a basis for a business development strategy for large business but what about the small business? It is possible to have a high market share and not have increased profits, or have a low market share and still be profitable.
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The BCG Matrix is a great stepping stone for market research and has great possibilities, but for today's companies it may need to be tweaked just a little. This business model is a pretty decent model and if used in the right situation it can help a business to increase and monitor its market share and growth. All business big or small should have some type of a business plan or model that they can base their business products on and by keeping an eye on the market and watching what consumers want they can increase their profit.

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Chapter 5: SWOT Analysis SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies. A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis may be incorporated into the strategic planning model. Strategic Planning has been the subject of much research.

Strengths: characteristics of the business or team that give it an advantage over Weaknesses: are characteristics that place the firm at a disadvantage relative to Opportunities: external chances to make greater sales or profits in the Threats: external elements in the environment that could cause trouble for the

others in the industry.

others.

environment.

business.

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Chapter: 6 Fishbone Analysis Ishikawa diagrams were proposed by Kaoru Ishikawa[2] in the 1960s, who pioneered quality management processes in the Kawasaki shipyards, and in the process became one of the founding fathers of modern management. It was first used in the 1940s, and is considered one of the seven basic tools of quality control.[3] It is known as a fishbone diagram because of its shape, similar to the side view of a fish skeleton. Also Called: Cause-and-Effect Diagram, Ishikawa Diagram are causal diagrams that show the causes of a certain event -- created by Kaoru Ishikawa (1990).[1] Common uses of the Ishikawa diagram are product design and quality defect prevention, to identify potential factors causing an overall effect. Each cause or reason for imperfection is a source of variation. Causes are usually grouped into major categories to identify these sources of variation. Whatever name you choose, remember that the value of the fishbone diagram is to assist teams in categorizing the many potential causes of problems or issues in an orderly way and in identifying root causes. This fishbone diagram was drawn by a manufacturing team to try to understand the source of periodic iron contamination. The team used the six generic headings to prompt ideas. Layers of branches show thorough thinking about the causes of the problem. For example, under the heading Machines, the idea materials of construction shows four kinds of equipment and then several specific machine numbers. Note that some ideas appear in two different places. Calibration shows up under Methods as a factor in the analytical procedure, and also under Measurement as a cause of lab error. Iron tools can be considered a Methods problem when taking samples or a Manpower problem with maintenance personnel.

When to Use a Fishbone Diagram: When identifying possible causes for a problem. Especially when a teams thinking tends to fall into ruts.

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Figure: Fishbone Model How to Use the Tool Follow these steps to solve a problem with a Cause and Effect Diagram:
1. Identify the problem:

Write down the exact problem you face in detail. Where appropriate identify who is involved, what the problem is, and when and where it occurs. Write the problem in a box on the left hand side of a large sheet of paper. Draw a line across the paper horizontally from the box. This arrangement, looking like the head and spine of a fish, gives you space to develop ideas.
2. Work out the major factors involved:

Next identify the factors that may contribute to the problem. Draw lines off the spine for each factor, and label it. These may be people involved with the problem, systems, equipment, materials, external forces, etc. Try to draw out as many possible factors as possible. If you are trying to solve the problem as part of a group, then this may be a good time for some brainstorming 3. Using the 'Fish bone' analogy, the factors you find can be thought of as the bones of the fish.

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3. Identify possible causes:

For each of the factors you considered in stage 2, brainstorm possible causes of the problem that may be related to the factor. Show these as smaller lines coming off the 'bones' of the fish. Where a cause is large or complex, then it may be best to break it down into sub-causes. Show these as lines coming off each cause line.
4. Analyze your diagram:

By this stage you should have a diagram showing all the possible causes of your problem. Depending on the complexity and importance of the problem, you can now investigate the most likely causes further. This may involve setting up investigations, carrying out surveys, etc. These will be designed to test whether your assessments are correct.

Chapter: 7 The Key Indicators of Macroeconomics

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They are important variables, which show and reflect the state of economy. In another hand, they show how economy works healthy or sick. Macroeconomics key indicators are as follows:

GDP or Gross Domestic Product Inflation Employment and Unemployment Balance of Payment Exchange Rate

Gross Domestic Product (GDP): It is the market value of all final goods and services that are produced by the factors of production located with in a country during a period of year, usually one year. GDP per capita is often considered an indicator of a country's standard of living; GDP per capita is not a measure of personal income. It should not be miss match with GNP (Gross National Product) which is the value of all final goods and services that are produced by the factors of production owned by the nationals of a country of irrespective of their location, during a specific period usually one year. The components of GDP: Y (GDP) = C+I+G+NX Consumption (C): spending by households on goods and services, with the exception of purchases of new housing. Investment (I): spending on capital equipment, inventories, and structures, including households purchase of new housing. Government purchases (G): spending on goods and services by local, state and federal governments. Net exports (NX): spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports). Inflation: Inflation is an upward movement in general price level. This term also can be defined as the general price level persistently rising upwards. Inflation and unemployment are two key concepts in macroeconomics; these two are related but often have conflicting policy implications. The inflation rate is the percentage changes in the general price from a reference
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point in the past. A common measure of inflation rate is done by the Consumer Price Index, CPI. Another measure of inflation rate is Cost of Living Index (CLI). Inflationary affects the three groups in different ways: Traders- Inflation can be a tool for the traders to make windfall profit, if they have old stocks. As inflation increases the price, thus they would like to trade in the new prices includes inflation rate and make the profit as the actual cost is less. Consumers - Any means of increase in price is a bad news for the consumers. Similarly, inflation means the increase in general price level and it erodes the purchasing power and reduces the standard of living. Manufacturers: As inflation means increasing of general price level that means the raw materials cost goes up too. Therefore it increases the cost of production, so it does finished goods. As inflation reduces purchasing power or value of money, so less goods will be sold and it will incur too much of storing cost. Inflation rate (2009) = General Price level (2009) General Price level (2008) X 100 General Price Level (2008) Unemployment: A person is stated to be unemployed if he/she has the ability to work at the prevailing wage rate but can not find a work. -

Natural rate of unemployment: 5% Labor force = No. of employed + No. of unemployed Unemployment rate: No. of unemployed x 100 Labor force Labor force participation rate: Labor force x100 Adult population

Frictional unemployment: Unemployment that results because it takes time for worker to search for the jobs that best suit their taste and skills. Causes of frictional unemployment: (i) Transition: As we have learned about two philosophy; the Western philosophy which is frequently changing job and the other eastern philosophy which is stay as long as possible with
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a specific job. However, people shifting one job to another, it between of this process they might be unemployed. (ii) Queing: Someone applied for the job but may be put on the shortlist and will be called for the job. In between the person he/ she may be unemployed. (iii) Relocation: Sometime a company merges or relocates their factory location from one area to another; again the character of the company might changes which might also create the frictional employment. Cyclical unemployment: The normal rate of unemployment around which the unemployment rate fluctuates is called the natural rate of unemployment and the deviation of unemployment from its natural rate is cyclical unemployment. Structural Unemployment: Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one. This occurs when the quantity of labor supplied exceeds the quantity demanded. Causes of unemployment: 1. Contracting economic activities: this is a situation where GDP growth stands still or negative. Also where there is investment gap as less investment leads to unemployment as less possible jobs available. 2. Mismatch in skills/education: another causes of unemployment is lack of skills and education qualifications. As a company lacks for qualified people to take part in a job but people who are not skilled nor even had education remain unemployed, while a skilled person might have the demand of being employed. 3. Institutional factors: This factor mainly deals with the wage rigidity due to minimum wage legislation, subsistence wage and quasi- Political CBA minimum wage. 4. Imperfect mobility 5. Incomplete information Balance of payments: The Balance of Payments figures for a country show the amount of currency being received from other countries and that being paid to other countries as a result of many different types of transactions over a given period of time, usually one year.
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The Balance of Payments can be broadly divided into two main sections: (a) Current Account consists of: (i) (ii) (iii) The Balance of Trade (difference between visible exports and visible imports). The Balance of services or Invisible Balance (difference between invisible exports and invisible imports) Transfers items

(b) The Capital Account consists of: (i) (ii) The capital items (inflows or outflows) Official financing (adding to or drawing from foreign reserves)

1. The difference in value visible exports and visible imports is called the Balance of Trade. If the visible export value exceeds the visible import values, the Balance of Trade is said as to be favorable or in surplus. If the visible import value exceeds the visible export values, the Balance of trade is said as to be unfavorable or in deficit. 2. A countrys Balance of Trade can be assessed from annual statistical records obtained from customs declaration forms for imports and exports. The Balance of Trade is very important because: (a) All imports have to be paid for with the proceeds received from sale of exports. (b) Thus, in the long run, a country can not import more than its export. (c) If the Balance of Trade has been unfavorable for many successive years, then the government has to take steps to discourage imports and encourage exports. 3. A country also exports and imports services: shipping, tourist, educational etc. Bangladesh exports tourism when a foreign travels in Bangladesh. The total value exported within a year forms the invisible exports, whilst that of services imported forms the invisible imports. 4. Transfer items refers to interest, profits or dividends sent abroad as a result of foreigners investing in the home country. It includes the repatriation of profits, interest and dividends from abroad to the home country as a result of its nationals investing abroad. 5. Capital items refers to the amount of money which has flowed into or out of a country. (a) Examples of capital outflows are as follows: (i) (ii) Nationals invest in businesses abroad, buy properties or shares abroad. The government in the home country gives monetary aid to other countries.

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(iii)

Nationals in the home country lend to nationals or organizations or governments of other countries.

(b) Examples of capital inflows are as follows: (i) (ii) (iii) year. (a) If total payments exceed total receipts, we have a Balance of Payments deficit. (b) If total receipts exceed total payments, there is a surplus in the Balance of Payments. (8) A countrys balance of payments is of utmost importance. (a) If the country continues over a period of years to experience a Balance of Payments deficit, it will eventually not have enough foreign exchange to pay its creditors. (b) No country wishes this to happen for it will cause economic ruin in the long run. (9) If a country does not have sufficient foreign currency to pay its creditors abroad, it can temporarily borrow money from International Monetary Fund (IMF) which is specially set up to help countries having Balance of Payments problems. However, this would mean that foreigners can now control the economic policies of the government of such a country. (10) The calculation of Balance of trade and Balance of Payments:
Country: Bangladesh Value (2009)of goods exported Value of goods imported Value of services Value of exportedservice imported Net transfers Capital items Millions 4,400 4,800 8,000 7,000 - 50 200

Nationals sell of their properties, businesses and shares abroad and bring the money home. The government in the home country receives monetary aid from overseas. Nationals or government in the home country borrow from abroad.

(7) It is very unlikely that total receipts will exactly be equal to total payments over a particular

Country Bangladesh Balance of Payments for the Year 2009 Value of goods exported Value of goods imported Balance of Trade 2007 Value of services exported Value of services imported Invisible balance 8,000 million 7,000 million +1,000 million
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Net transfers Balance on Current Accounts Capital items Total currency flow (net)

-50 million +150 million +200 million +350 million

(a) The figure shows that the Balance of Trade for country Bangladesh in 2007 is unfavorable

or adverse because the cost of goods imported is higher than those exported by 800.
(b) In the same period, however, Bangladesh has a net positive balance of 1,000 million from

her invisible trade. Money earned from her export of services abroad exceeded her import of services. (c) The overall amount of net transfers of interest, profits and dividends abroad is 50 million. (d) Bangladesh has a favorable balance on Current Account of 150 million in 2007. (e) In 2007, Bangladesh has an overall net inflow of capital of 200 million. (f) In 2007, Bangladesh has a surplus of 350 million on her Balance of Payments. This means that Bangladesh receives 350 million more than what she paid out to the rest of the world in the same period. (g) Since the Balance of Payments is positive in 2007, this means the Bangladesh Bank (Central Bank of Bangladesh) can build up her reserves of foreign currency. This reserve can be used to pay for future deficits or to repay funds previously borrowed from IMF.

Exchange Rate: The exchange rate is the rate at which currency of one country traded for the currency of other. An exchange rate can always be expressed in two ways. It can either mean the price of the foreign currency in terms of local currency or the price of the local currency in terms of foreign currency. Thus, if the exchange rate is TK.67 per USD $, it also $ 1/67 (0.015) per taka. - Appreciation: A currency is state to appreciate if less of it can be one unit of the foreign currency. Similarly, a currency is stated to be appreciated if one unit it can buy more of the foreign currency.

- Depreciation: A currency is stated to depreciate if more of it requires buying one unit of foreign currency. This is the same thing saying taka depreciates when dollar become more costly in terms of taka and it appreciates if dollar become less costly in terms of taka.
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- The term depreciation and appreciation are used to describe changes in the exchange rate resulting from changes in the foreign market. In contrast, the terms devaluation and revaluation are used to describe changes in the exchange rate brought by (the government) administration. - Demand for foreign currency may be interpreted as the demand for imports. If the price of foreign currency goes up, imports will become more expensive in terms of the local currency. Hence, demand for import and therefore demand for foreign currency will decline. - On the other hand, supply of foreign currency may be interpreted as demand for exports, since supply of foreign currency comes primarily from exports. There are two other important sources of foreign currency namely, remittance from abroad and capital inflow which includes foreign direct investment (FDI) and foreign aid.

Chapter: 8 Cost Push Inflation and Demand Pull Inflation: Cost Push Inflation: Persistently rising general price levels brought about by rising input costs. In general, there are three factors that could contribute to cost-push inflation: rising wages, increases in corporate taxes, and imported inflation (when imported raw or partlyfinished goods become more expensive, often as a result of currency depreciation). For inflation to be cost-push in nature, increases in input prices must affect a large proportion of the country's producers, so as to be able to push up the general price level.

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Inflation can result from a decrease in aggregate supply. The two main sources of decrease in aggregate supply are

An increase in wage rates An increase in the prices of raw materials

These sources of a decrease in aggregate supply operate by increasing costs, and the resulting inflation is called cost-push inflation Other things remaining the same, the higher the cost of production, the smaller is the amount produced. At a given price level, rising wage rates or rising prices of raw materials such as oil lead firms to decrease the quantity of labor employed and to cut production. Aggregate supply is the "the total value of the goods and services produced in a country" "The supply of goods". The supply of goods can be influenced by factors other than an increase in the price of inputs (say a natural disaster), so not all inflation is cost-push inflation.

Figure:

Aggregate

supply aggregate

demand model illustration of aggregate supply (AS) Demand Pull Inflation: Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls. This is commonly described as "too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods", since only money that is spent on goods and services can cause inflation. This would not be expected to persist over time due to increases in supply, unless the economy is already at a full employment level.

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Fig: demand faster than production/supply.

Aggregate increasing

BIBLIOGRAPHY BOOKS Philip Kotler, Gary Armstrong, (2005), Principles of Marketing, New Delhi, Prentice Hall of India. Philip Kotlet, Kevin Lane Keller (2006), Marketing Management, New Delhi, Prentice Hall of India.
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Assignment-1 Strategic Management (MGT-480)

Belch, G.E. & Belch, M A (2003) Advertising and Promotion : An Integrated marketing Communication Perspective New Delhi. Tata Mc Graw Hill Manfred Gartner, 3rd Edition, Macroeconomics

INTERNET - www.quickmba.com/strategy/porter.shtml - en.wikipedia.org/wiki/Financial_ratio - marketingteacher.com/lesson-store/lesson-plc.html - www.valuebasedmanagement.net/methods_bcgmatrix.html - en.wikipedia.org/wiki/Ishikawa_diagram

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