Connecting to the Web :: Internet Cyberspace Essays

Associating with the Web The article Strike up the Bandwidth removed from Computer User is about the manner in which individuals can associate with the Internet. Data transmission is a little wire where the association experiences. For instance, when I go on my PC at home, and go onto the Internet it is extremely moderate and requires a long time to get associated. Our transfer speed is an exceptionally little wire which takes the association some time to go from the wire to the PC modem. The article gives you four recommendations how to associate with the Internet at home or at a little or medium size business. The recommended ways are immediate dial-up, ISDN (coordinated administrations advanced system), DSL (computerized supporter line), and link modems. The article likewise gives the costs of every approach to associate with the Internet and how much cash the association would cost to run on a month to month premise. This article clarifies the disadvantages and preferences to every approach to interface with the Internet. Organizations have a lot of choices with regards to interfacing with the Internet particularly a private company. Direct-dial up association is the most established approach to interface with the Internet. With this association a business can ride the web and send and get messages. The manner in which they will be charged when utilizing the immediate dial-up association is how frequently every month the business interfaces with the Internet alongside genuine time spent on the Internet. When utilizing, there are two fundamental drawbacks if organizations are thinking about utilizing this association. For one, the more individuals on the Internet the more difficulty they will have attempting to interface. The article recommends that the business should buy more modems if your business is wanting to utilize the Internet a great deal. The subsequent inconvenience is that the best speed a PC can get from the immediate dial up association is 56Kbps. This is fine on the off chance that they are just going to utilize the email highlight of the Internet however 56Kbps is very moderate if the business is wanting to ride the Web a ton. Another approach to interface with the Internet is by ISDN (incorporated administrations advanced system). ISDN is a phone line, which the business despite everything needs to dial their ISP (Internet specialist organization) when interfacing with the Internet. ISDN is offered at 68Kbps and 128Kbps. This component is acceptable if the business is going to ride the Web.

Definition Essay - The Word Private -- Definition Essays

Definition Essay - The Word 'Private' Private is a word with a huge number of implications, some known and others not all that known. When looked for in a word reference, it very well may be discovered that the definitions don't shift much between the three word references, in spite of the fact that the word reference from 1913 had a couple of divergent terms. The word private was turned upward in Webster Dictionary from 1913,â The American Heritageâ ® Dictionary of the English Language: Fourth Edition, and the Oxford English Dictionary: Second Edition. Numerous individuals consider private significance something in isolation, or mysterious. Perusing these word reference passages uncovered the confounded significance of the word private. A portion of the definitions appear to be fundamentally the same as the manner in which private is utilized in consistently life, anyway others appear to be covered up as if they were private definitions themselves. Most green beans at Michigan State University and understudies at Waterford Mott High School don't utilize that word normally in consistently discussion however when we do utilize it, the setting where it is utilized for the most part gives the inferred importance of being clandestine or protected fro...

Exports are good for the U.S. economy Essay Example | Topics and Well Written Essays - 250 words

Fares are useful for the U.S. economy - Essay Example In 2010, sends out utilized around 10 million individuals. Unmistakably send out is a wellspring of business. Production of business lessens the reliance proportion. A great many people get utilized consequently ready to win a living. To the administration, the cash that would have been utilized to take care of the jobless populace is diminished and used in different parts, for example, social insurance. It guarantees a decent soundness of laborers (Brux, 298). Besides, in the US, firms that send out their items are inspired to improve the nature of their items by high-pay levels. The organizations grow and utilize more specialists. At the point when these organizations are persuaded to deliver more, the US government acquires more as far as assessments. The sum earned in a roundabout way from the fares adds to the government’s development residential item. The cash will thusly support the government’s economy (Palmer). As indicated by the US measurements, occupations that are send out escalated pay well. Gigantic pay rates have empowered people to carry on with an extreme life. On comparable lines, the US government profits by these colossal duties from these gigantic pay rates. Plainly the higher the individual’s salary, the higher the measure of expense imposed. The colossal charges gathered add to the administration income in this manner utilized in the turn of events (McEachern, 523). The way that the US is known to send out quality products and enterprises, numerous individuals accept that it is because of high gifted work power and proximity to the crude materials. Consequently, it has called for direct speculators who propose on setting up firms in the US. The organizations make work for the jobless yet gifted people. All the more in this way, it brings about the improvement of foundation, for example, street. Moreover, the administration expands its income by burdening these remote direct financial specialists (Turco and Maggioni 4). In outline, all nations ought to welcome the sending out procedures. All the more so they ought to guarantee that fares surpass imports for the country’s economy to

The Impact of Interest Rate on Commercial Bank and Microfinance - Free Essay Example

The research includes the analyzing and understanding of banking sector, interest rates and their impacts. According to Oxford Advanced Learners Dictionary, interest is the extra money that you pay back when you borrow money or that you receive when you invest money. Interest is basically the charge for the borrowing of money, generally conveyed as an annual percentage rate. According to ACCION (Americans for Community Co-operation in Other Nations), Interest rate is the amount paid by a borrower to a lender in exchange for the use of the lenders money for a certain period of time. Bank interest is on both as a charge for money that is loaned to borrowers and an amount paid for attracting deposits funds. Interest that is due on consumer loans must be calculated in Annual Percentage Rate (APR). Interest on loans may include annual, late payment and over limit charges. Interest rate is ordinarily conveyed as a percentage per annum which is charged on money borrowed or lent. The interest rate may be fixed or variable. The name bank derives from the Italian word banco which means desk/bench/counter. Bank accepts deposits and makes loans and derives a profit from the difference in the interest paid to lenders and charged to borrowers. Banks as well make profit from fee charged for services. The three major classes of banks include central banks, comm ercial banks, and investment banks. Banks also enable customer payments thru other payment methods such as telegraphic transfer, EFTPOS, and ATM. Commercial bank is a type of bank and a type of financial intermediary. A commercial banking is also called business bank which provides saving accounts, money market accounts, checking accounts and that accepts time deposits. Commercial banks also supply foreign exchange, international banking and trade financing. Commercial banks provide different types of loans which include secured loans, unsecured loans, and mortgage loans. A commercial bank as a financial institution provides a variety of services that are helpful for business and general purpose. Now-a-days commercial banks are using microfinance as a part of the institution because of its benefits and the market share its gaining. Microfinance refers to the provision of financial services to low income individuals/clients, also including the self employed. Microfinance loans are either interest free or they carry interest which doesnt compound. Furthermore they offer flexible repayment plans. Microfinance by its name clearly is about more than just credit, otherwise we should always call it microcredit. In developing world, microfinance is most common and it started in the 1970s in Bangladesh. The World Bank estimates that more than 500 million people have directly or indirectly benefited from microfinance associated operations. Microfinance provides different varieties of financial services in the developing world. People are moving to microfinance institutions day by day because of their excellent services and repayment future plans. Microfinance identified the problems relating to loans and needs of individuals or groups of a small scale. Microfinance is developing day by day in this developing world and now it is so common that everyone know about microfinance and its benefits. Microfinance has made itself very useful and common for low income clien ts specially the poor. Today, microfinance is a dynamic sector which offers loans, sells insurance and provides remittance and savings services to about more than one hundred million of the poor people. Microfinance institutions have increased in multiplicity and complexity in income levels of customer which they serve. Commercial banks are facing competition increasingly in their retail markets which is causing the margin conflict. It also leads forward thinking banks to discover new possible markets which can generate the growth in numbers of clients with acceptable profit margins. As more and more commercial banks become fascinated by the thought of entering the microfinance market, the lessons learned from some of the more experienced players become useful in the decision making process. Some commercial banks are entering in the microfinance market due to growth opportunities and sustainable profit and commercial banks are investigating and inquiring for themselves. Many comm ercial banks have already identified the business opportunities of microfinance. Commercial banks have now ventured into microfinance in many countries where microfinance is at different stages of development. Some institutions normally meet only a small portion of microcredit demand in the regions they serve. Some microfinance institutions (MFIs) have been able to overcome this situation by gradually turning themselves into commercial banks specialized in microfinance. Banks and financial institutions have been entering the microfinance market in increasing numbers, ensuing in a growing number of formal regulated institutions partially or totally moving into microfinance. The central bank also called monetary authority or reserve bank as well plays an important role. The central bank has been given the authorization to conserve price stability as its primary objective and has been granted liberty from government to make sure that short term Political considerations do not interf ere with attaining this objective. Central bank charges interest on the loans made to borrowers, primarily the government and to other commercial banks as it acts as a lender of last resort to the banking sector. Its main responsibilities as well include controlling money supply, subsidized loan interest rates and implementing monetary policy. According to Henry C.K. Liu, The rate at which the central bank lends money can indeed be chosen at will by the central bank; this is the rate that makes the financial headlines. Central banks can influence market interest rates and can set rate to a fixed number. The central bank can simply announce its intention to raise or lower the relevant interest rate. The structure of interest rates most frequent or common in an economy is of vital importance for economic decision making. The interest rate structure of the economy of Pakistan primarily consists of rates on banks deposits and lending schemes, yields on government securities such a s treasury bills, PIBs and profit rates on national savings schemes, interest rates charged and offered by non-bank financial institutions (NBFIs) and rates of return on term finance certificates (TFCs). Inflation is a general increase in prices as it is when the prices of most goods and services continue to crawl upward. Basically, inflation is a continuous decline in purchasing power of money and when inflation rate increases, governments or companies that issue debt instruments need to attract investors with a high interest rate. The central banks use interest rate to control the supply of money and, accordingly, the rate of inflation. When interest rate increases then the borrowings become more expensive. Monetary policy is also an important tool. Monetary policy is the procedure by which the central bank or monetary authority of a country controls the money supply, availability of money, and rate of interest to achieve a set of objectives oriented towards the growth and c onstancy of the economy. Monetary policy is primarily associated with interest rate and credit. In some countries, the monetary authority may be able to authorize some specific interest rates on savings accounts, loans and other financial assets. A central bank can contract or decrease, under its control, the supply of money by increasing interest rate. Monetary policy is contrasted with fiscal policy which pertains to government borrowing, spending and taxation. Monetary policy can be of two types as expansionary policy and contractionary policy. Expansionary policy also known as easy monetary policy, used to combat unemployment by lowering interest rates and contractionary policy also known as tight monetary policy, involves raising interest rates to combat inflation. Low interest rates compel banks to compete for loans therefore banks are able to offer attractive interest rates which appeal to customers to beat out the competition. At the same time that leads to new customers and the customer can do comparison for ensuring that the bank is offering him the best rate. An economy consists of the economic system of a country which include capital, labor and land resources that participate in production, distribution and consumption of goods/services. When economy is growing then companies become profitable unemployment is low as consumers are spending money. Increasing interest rates result in slowing the economy because increasing interest rate means increasing borrowing costs for businesses and individuals which mean consumers have less money for spending. When the economy is slowing, the central bank will decrease short term rates as decreasing short term rates makes the borrowing less expensive and therefore businesses and individuals can spend and buy more which resulting in speeding up the economy. Purpose of study: The research is conducted in order to analyze the factors impacting interest rate regarding commercial bank and microfinance. Fa ctors determining interest rate changes have a direct affect on consumer, banking sector and country therefore to analyze and understand the factors is a top priority. This research can also help in comparison and evaluation of interest rates and borrowing/lending of money for good. Literature Review Banks try to compete with other banks for loans and deposits as Kwangwoo Park and George Pennacchi (January, 2009) emphasize that small single market banks compete with large multi market banks. As large multi market banks are assumed to set retail interest rates across markets therefore loan competition increases and deposit competition decreases in concentrated markets. In context, Isil Erel (May, 2009) concur that bank competition influence banks to reduce the increasing ability of banks lending rates even when money market rates move up therefore the bank interest rates and the changes over time expect to depend on bank competition. Nishant Dass and Massimo Massa (2009) state that banks try to build strong relationship with firms by acquiring information about those firms which they lend to for improving borrowers corporate governance. With this procedure the firm value is affected and in financial markets the standard implications are developed. The fixed interest rate paid to a bank by private firms for industrial investment financing has an essential importance in the economy. When there is stronger loan market competition then larger bank spreads on current account and time deposits and the banks that are under competition they compensate for lowering their deposit rates. In context with that, banks borrow for increasing their activities, whether for lending or for investing, and for this service the interest is paid to clients. Both the levels of bank interest rates and their changes over time are expected to depend on the degree of competition. In concentrated markets, retail lending rates are substantially higher, while deposits rates are lower. R egarding the effect of competition on the way banks adjust their lending and deposit rates. Hannan and Berger (1991) find that deposit rates are significantly more rigid in concentrated markets. Especially in periods of rising monetary policy rates, banks in more consolidated markets tend not to raise their deposit rates. Emilia Bonaccorsi di Patti and Giovanni DellAriccia (2004) concur that low interest rates also create a sense of urgency as if a consumer is saving for purchasing something, like a house, a low interest rate will play an intricate role in determining when he takes that financial plunge. This will cause the economy to expand because the consumer has more disposable income and more confidence when spending money. Iris Biefang-Frisancho Mariscal and Peter Howells (2002) state that the role of central bank is reduced to set short term interest rates as central bank indicates commercial banks to keep the price that will make liquidity available as reserve to the bank ing system. Therefore according to market rates the price increases and decreases. In context with that, in the form of reserves or currency, banks are required for having certain amount of total deposits as percentage which are liabilities of central bank, and hence fully guaranteed. If the monetary policy makers desire to reduce supply of money then they will raise interest rate as making it attractive for depositing funds and reducing borrowings from central bank and if monetary policy makers desire to raise the supply of money then they will raise interest rate as making it attractive for borrowing and spending money. Some banks offer funds on basis of first come first serve especially commercial banks. If bank doesnt have sufficient liquidity as according to customer demands, it can borrow the additional funds from the central bank. Central bank doesnt favor any particular bank. Central banks may hold reserves of commercial banks based on ratio of commercial bank deposits. All commercial banks may be required to keep a deposit/reserve ratio as it is another means of controlling the supply of money. In context, Graeme Guthrie and Julian Wright (2004) concur that the central bank implements monetary policy by targeting short term interest rates to stabilize the money supply in the country. The target rate can be changed when preferred rate and current target rate reach to critical level. According to Jordi Gali, J. David Lopez-Salido and Javier Valles (2004), the discount rate keeps the banks from continuous borrowing which would disorder the money supply in the market and monetary policy of the central bank. Commercial banks will be mobilizing more money in system by borrowing more than necessary. The use of discount rate can be limited by making it unattractive while using frequently. Furthermore, David E. Rapach and Mark E. Wohar (October, 2005) indicate that inflation rates and real interest rates often together increase and decrease as government chang es. Therefore the change in monetary policy is an important source of changing in real interest rates. In context with that, monetary policy affects nominal interest rate only that is unadjusted for inflation. Nominal interest rate is the combination of real interest rate and inflation premium. Monetary policy operates by influencing the price of money, i.e. the cost of borrowing and the income from saving. Isil Erel (2009) emphasizes that usually high inflation leads to high interest rates. The interest rate for borrowing money will increase when demand of money is high and when interest rate changes then the borrowers feelings also changes because borrowers dont like quick shifts in interest rates and inflation when shifts are not in their favor particularly. In context, inflation is caused by too much money chasing too few goods or too much demand for too little supply, which causes prices to increase. When the inflation rate is high, the interest rates are more likely to rise . It happens because the lenders will be demanding the high interest rates for compensation of the decreasing in purchasing power of money which will be repaid in future. Patrick Gagliardini, Paolo Porchia, and Fabio Trojani (October, 2009) state that the purchasing power of money loses during inflationary periods and with that each unit of currency is affected. If more money is available than needed to accommodate normal growth then consumers and businesses try to purchase more goods and services to produce with current resources causing upward pressure on prices and the market does not have time to adjust other prices downward in response therefore a short term increase in overall prices takes place. Changes in inflation rate cause corresponding changes in interest rates as inflation affects the value of lenders money therefore the interest rate increases to compensate the loss. According to David E. Rapach and Mark E. Wohar (2005), for controlling inflation, monetary policy has b een chosen as the primary tool as its goal is to reduce the inflation. Inflation changes unpredictably and it can interrupt the economy which cause uncertainty in financial decisions. James D. Hamilton and Ã’scar Jordà   (October, 2002) emphasize that level of federal funds rate is determined by the Federal Reserve which is one of the most anticipated and publicized economical indicator in financial world and it targets only rates in the federal funds market. In context, if Federal Reserve wants to decrease interest rates then it makes loans to banks (short term) in the Federal Funds market then the banks lend that money to investors with a profit. This lending process creates an effect of increasing the money which is in circulation. If the Fed increases the federal funds rate, it becomes  more expensive for banks to borrow money from the Fed. The Fed will lower short term rates when the economy is slowing as lowering rates makes it less expensive to borrow money and con sumers and businesses can afford to buy more products and services. Graeme Guthrie and Julian Wright (2004) concur that the central bank, which is charged for maintaining the constancy and stability of the financial system, increases or decreases the short term rates in an attempt to maintain that stability. In response for economic ups and downs, the central bank takes these actions on a regular basis so that the country goes through on a pretty routine basis. If central bank changes interest rates at which banks borrow money then those changes passed on to the economy. In perspective, if the central bank decreases the rate then banks can borrow money for less and then the banks can decrease the interest rates they charge to individual borrowers as making loans more competitive and attractive. If an individual was thinking about buying something and the interest rates suddenly decreases then he/she  might decide for taking out a loan and spend. As consumers spend more, th e economy grows more. Antonio Argandoà ±a (2003) and Alexander Konovalov (2005) emphasize that Federal Reserve is central bank of the United States of America and is accountable for determining interest rates. The function of central bank is to create the financial security and stability for the economy. Whether the rate is high or low, banks have to borrow from the central bank at the set interest rate. The banks are capable to pass some of the savings on to customers when interest rates are low and the customers will be paying more money for borrowing the money they need when interest rates are high. Borrowers dont like to borrow money when interest rates are high which leads to economic decline. In context, interest rate frequently decreases during the slow economy which makes borrowings less expensive. The result of this interest rate change promote and encourage businesses and individuals to spend more money by borrowing more loans inducing economic growth but if economy grows too quickly then it will lead to economic decline and for that reason interest rate frequently increase, discouraging individuals and businesses as making borrowings more expensive which resulting in less borrowing and less spending. Daniel Horgos and Klaus W. Zimmermann (2009) state that for a central bank, changing interest rate is the way to help economy to move in direction of continuous economic growth. When central bank changes the interest rate, basically it doesnt affect all consumers. Only those with credit cards and variable rate loans are affected. Interest rate changes, however, do affect the whole economy. In context, the affect of raising interest rate is that the banks increase the interest rates they charge their customers for borrowing money and through increasing in mortgage interest rates and credit card especially when they carry variable rate, individuals are affected. It affects the decreasing in the amount of money that consumers can spend. Therefore people c an spend less money and that affects businesses as they have to pay bills and when bills are more expensive then they will be left with less amount of disposable income. Juvà ©nal Ndayiragije (1999) emphasize that when Federal Reserve increases the interest rate, the stock market doesnt have an instant and immediate affect. The stock market inclines when Federal Reserve decreases the interest rate and that is an indication to investors that companies will be increasing the production and creating more jobs and that people will buy goods and services more than before. In context, basically the raising interest rates causes the price of stocks to fall as the investors, in that case, will be purchasing fewer stocks. Soon, prices fall enough and encouraging the investors to start purchasing again which raises the stock prices. The stock demand increases when interest rate decreases, causing the price of securities to raise and it leads to economic growth. Amit Bubna and Bhagwan Chowdhr y (2010) concur that the banks profit from difference between interest it charges by lending and interest that bank pays for the deposits. If bank is not lending then consumer is not spending thus the economy stagnates and economy cant survive stagnating therefore central bank has to make some adjustments for economy to start and move in right direction. Furthermore, when people are having high disposable income then it means that people like to spend more than to save. METHODOLOGY As this research is related to the study of impacts of interest rates therefore Survey based research using Qualitative method was conducted. In sampling technique, Stratified Random Sampling Method (Probabilistic Sampling) was used. The banks are divided into two groups: Commercial Bank and Microfinance, which include 06 (60%) Commercial Banks and 04 (40%) Microfinance. 50 Branches of 10 different randomly selected Banks (05 Branches each) of Karachi have been selected randomly. The selected Banks and their Branches are as follows: Bank AlFalah: MCB: Standard Chartered: I. Chundrigar Road North Nazimabad Nazimabad Branch Clifton PECHS SITE Gulshan-e-Iqbal Saddar Abdullah Haroon Road PECHS Gulshan-e-Iqbal Baloch Colony Shahrah-e-Faisal Hassan Square Safoorah Goth UBL Bank: Citi Bank: Askari Bank: Corporate I. I. Chundrigar Road Saima Trade Tower Baba-e-Urdu Road World Trade Centre Gulshan-e-Iqbal City Shahrah-e-Faisal SMCHS M. M. Khana Khyaban-e-Shahbaz Clifton Bunder Road DHA Phase II Lal Masjid Pak Oman Microfinance: Rozgar Microfinance: Tameer Microfinance: Qayyumabad Clifton Malir Kemari Iqra SITE Orangi Town Taiser Town North Karachi PECHS Dalmia KCHS Mehmoodabad Shahrah-e-Qaideen Dak Khana Network Microfinance Bank: Shahrah-e-Faisal Gul Tower FTC Shah Faisal Colony Orangi Town The research includes both primary and secondary data. The primary data was collected through 50 questionnaires from 50 Branches, filled by Branch staff members. The questionnaire, comprising a total of 15 questions was used and it includes questions relating to commercial banking and microfinance with relation to interest rates, using an interval five-point Likert scale ranging from (1) strongly disagree to (5) strongly agree. The secondary data was collected through Journals, Research Articles, Books, Thesis, Published Reports, News Articles, Websites, etc. Limitations of the Research: Research data is not 100% accurate. Our research has certain limitations which include: Lack of experience in survey based research, which was overcome with the help of keeping our teachers advice as well as the textbooks. Another limitation was the availability and willingness of the respondents because people find no time out of their busy schedule. HYPOTHESIS: Two hypothesis were formulated in order with our objectives. There was one hypothesis for each segment we would consider in our sam ple which are as under. Impact of interest rate on commercial bank is high. Impact of interest rate on microfinance is high. DATA ANALYSIS: You prefer variable rate instead of fixed rate on deposit, lending, and borrowing. Table 01 Particular Commercial Bank Microfinance (1) Strongly Disagree 7 6 (2) Disagree 0 0 (3) Neutral 18 12 (4) Agree 1 2 (5) Strongly Agree 4 0 Total 30 20 Table: 01: The focus of this question was to determine the rate banks prefer, fixed or variable rate, for borrowing and lending. This question has great importance as different banks prefer different rates. As visible from the results, interest rate fluctuates after a certain period of time therefore most respondents (60%) prefer neutral in commercial bank and microfinance as interest rates may be fixed or variable. There is a decrease in rate of interest due to bank competition. Table 02 Particular Commercial Bank Microfinance (1) Strongly Disagree 5 5 (2) Disagree 14 15 (3) Neutral 11 0 (4) Agree 0 0 (5) Strongly Agree 0 0 Total 30 20 Table: 02: This question was asked to find out the perception about interest rate changes due to bank competition. The results show that the most preference is given with 47% of respondents from commercial bank and 75% of respondents from microfinance as they disagree that due to bank competition there is a decrease in rate of interest. You prefer variable rate when bank is under competition. Table 03 Particular Commercial Bank Microfinance (1)Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 9 6 (4) Agree 21 10 (5) Strongly Agree 0 4 Total 30 20 Table: 03: This question was asked to determine the rate banks prefer when they are under competition. The result shows that 70% respondents of commercial bank agree and 50% respondents agree from microfinance to prefer variable rate when bank is under competition. When the interest rate is low, the borrowing becomes less expensive and at that time people try to borrow and spend more therefore banks offer variable rate to attract more customers and compete each other. The high interest rate creates problem in paying against borrowings. Table 04 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 7 0 (4) Agree 13 10 (5) Strongly Agree 10 10 Total 30 20 Table: 04: This question was asked to determine that if high interest rates creating problem against borrowings. The results show that 43% respondents of commercial bank and 50% respondents of microfinance agree as when the interest rates are high, the borrowings become more expensive. There is a decrease in bank lending due to high interest rate. Table 05 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 0 0 (4) Agree 8 9 (5) Strongly Agree 22 11 Total 30 20 Table: 05: The focus of this question was to determine that if bank lending is affected due to high interest rate. The result shows that 73% respondents of commercial bank and 55% respondents of microfinance strongly agree as rising interest rate means rising borrowing cost which has the affect of lowering the amount of money that consumer can spend as consumer stops borrowing from banks because it becomes more expensive. You prefer high interest rate on repayment of loans (including borrowing, lending, and deposit). Table 06 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 19 12 (3) Neutral 11 8 (4) Agree 0 0 (5) Strongly Agree 0 0 Total 30 20 Table: 06: The focus of this question was to determine that if banks prefer high interest rate on repayment of loans. The results show that 63% respondents of commercial bank and 60% respondents of microfinance disagree that they dont prefer high interest rate on repayment of loans as high interest rate makes borrowing more expensive. You prefer borrowing from Central Bank instead of Public Deposits. Table 07 Particular Commercial Bank Microfinance (1) Strongly Disagree 18 14 (2) Disagree 3 2 (3) Neutral 7 4 (4) Agree 2 0 (5) Strongly Agree 0 0 Total 30 20 Table: 07: The focus of this question was to determine that if banks prefer central bank instead of public deposits for funds. The result shows that 60% respondents of commercial bank and 70% respondents of microfinance strongly disagree as the more customers bank will have the more market share it will capture. Monetary policy stabilizes the interest rate in the economy. Table 08 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 0 0 (4) Agree 22 13 (5) Strongly Agree 8 7 Total 30 20 Table: 08: This question was asked to analyze that monetary policy can stabilize the interest rate to make economy better. The result shows that 73% respondents of commercial bank and 65% respondents of microfinance agree as the central bank implements monetary policy by targeting interest rate to stabilize the supply of money in the country. High operating cost creates problem in lending. Table 09 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 17 0 (3) Neutral 13 0 (4) Agree 0 17 (5) Strongly Agree 0 3 Total 30 20 Table: 09: This question was asked to determine that if operating cost creates problem in lending as different banks have different operating costs. The results show that 57% respondents of commercial bank disagree and 85% respondents of microfinance agree as commercial banks offer loans of large size and microfinance offer loans of small size to many which increases the operating cost. The inflation creates problem when borrowing, lending, and deposit. Table 10 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 0 0 (4) Agree 18 15 (5) Strongly Agree 12 5 Total 30 20 Table: 10: This question was asked to analyze about inflation affecting borrowings, lending, and deposit. As visible from the results 60% respondents from commercial bank and 75% respondents of microfinance agree that inflation creates problem while borrowing, lending, and depositing. When interest rates change, the borrowers feelings also change. When inflation rate is high then more interest rate will be high as lenders demand high interest rate for compensating the decrease in purchasing power of money which will be paid back in the future. Lending by banks is decreased due to high inflation. Table 11 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 23 0 (3) Neutral 7 20 (4) Agree 0 0 (5) Strongly Agree 0 0 Total 30 20 Table: 11: This question was asked to determine if bank lending decrease due to inflation. The result shows that 77% respondents of commercial bank disagree and 100% respondents of microfinance are neutral as high inflation leads to high interest rate and when interest rates are high, borrowings become more expensive and bank lending decreases. Unemployment is an important cause in decreasing the lending by commercial/microfinance banks. Table 12 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 10 4 (3) Neutral 20 16 (4) Agree 0 0 (5) Strongly Agree 0 0 Total 30 20 Table: 12: This question was asked to determine that commercial bank and microfinance lending decreases due to unemployment. The results show that 67% respondents of commercial banks and 80% respondents of microfinance are neutral as when interest rates are high, banks charge more from businesses they lend. Moreover, consumers dont borrow and spend as it becomes more expensive. When the business reaches to a critical level as expenses are high and profits are less, it cuts costs. Cutting costs usually begins by seeking cheaper suppliers. After that, if need remains then business lay off employees and resulting in increase in unemployment rate. Businesses lay off more employees as consumers spend less on goods and services and until the rates are reduced, the cycle continu es. Due to taxes, you prefer lending at high interest rate. Table 13 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 18 0 (3) Neutral 12 9 (4) Agree 0 11 (5) Strongly Agree 0 0 Total 30 20 Table: 13: This question was asked to determine the preference level of interest rate due to taxes. The result shows that 60% respondents of commercial bank disagree and 55% respondents of microfinance agree as after deducting operating costs and taxes the income remains low therefore banks insist to increase the lending interest rate. Poverty is a negative element for the economy and the meanwhile it affects the lending by commercial/microfinance banks. Table 14 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 7 (2) Disagree 0 13 (3) Neutral 14 0 (4) Agree 16 0 (5) Strongly Agree 0 0 Total 30 20 Table: 14: This question was asked to determine if poverty is affecting bank lending and economy. The result shows that 53% respondents of commercial bank agree and 65% respondents of microfinance disagree as poverty reduction and alleviation is a result of increasing economic growth as increasing production levels including advanced industrial technology creates additional wealth available for people who were too poor to afford them. When poverty rate is high then commercial banks cannot lend to those who cannot afford to pay the cost and that it will be risky. Microfinance provides loans to poor which are interest free or they may carry interest which doesnt compound. The economy is affected due to changes in interest rates. Table 15 Particular Commercial Bank Microfinance (1) Strongly Disagree 0 0 (2) Disagree 0 0 (3) Neutral 0 0 (4) Agree 18 15 (5) Strongly Agree 12 5 Total 30 20 Table: 15: The focus of this question is to analyze the economy and its affects due to changes in interest rate. The result shows that 60% respondents of commercial bank and 75% respondents of microfinance agree as when the central bank changes the rates at which banks borrow, those changes move on to the rest of the economy. If the central bank decreases the interest rate, banks can borrow for less and can make loans attractive by charging lower interest rate to borrowers. If the consumer will spend more then the economy will grow more. Testing of Hypothesis: Null Hypothesis: Ho:  µ1 =  µ2 or  µ1  µ2 = 0 Alternative Hypothesis: H1:  µ1 ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã‚ °Ãƒâ€šÃ‚    µ2 or  µ1  µ2 ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã‚ °Ãƒâ€šÃ‚   0 Level of Significance: ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± = 0.01 Test Statistic: Since ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢1 and ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢2 are unknown (assumed ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢1 = ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢2) and n1 = 30 and n2 = 30 then the appropriate test statistic would be t Statistic Where t = d.f. = n1 + n2 2 Where Sp = Since Then Sp = = = = 1.03 Then t = = = = 0.24 Therefore t Cal = 0.24 Critical Region: The C.R. at ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± = 0.01 with d.f. n1 + n2 2 = 30 + 20 2 = 48 is t t 0.005(48) = 2.576 and t t 0.005(48) = -2.576 Conclusion: Since calculated value of t falls in acceptance region, therefore we accept Ho. OR Since | ÃÆ'Ã… ½- Cal | = 0.23 and | ÃÆ'Ã… ½- Tab | = 2.576 and Since | ÃÆ'Ã… ½- Cal | | ÃÆ'Ã… ½- Tab |, we accept Ho and conclude that the samples do not provide sufficient evidence at ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± = 0.01 that a difference does not exist between the impact of interest rate on commercial bank and microfinance. Conclusion Interest rate impacts a number of factors including inflation, bank competition, economy, etc. which has a direct affect on consumers, banking system and country. Microfinance interest rates are usually higher than commercial bank interest rates as microfinance provides small amount of loans to many. Commercial banks have made microfinancing activities as a part of their institution and microfinance also providing commercial banking activities therefore the difference does not exist between commercial bank and microfinance regarding impacts of interest rates . Interest rate changes are sometimes profitable for financial institutions and sometimes for consumers. Central bank plays an important role in stabilizing interest rate and providing funds to commercial banks and microfinance banks. Investments in banks have less rate of return than other means but it is not risky as it is assured. According to results, we conclude that a difference does not exist between the impact of interest rate on commercial bank and microfinance. REFERENCES Park, Kwangwoo and Pennacchi, George (2009), Harming Depositors and Helping Borrowers: The Disparate Impact of Bank Consolidation, The Review of Financial Studies, pp. 1-40 Argandoà ±a, Antonio (2003), The New Economy: Ethical Issues The New Economy: Ethical Issues, Journal of Business Ethics, Vol. 44, No. 1, pp. 3-22 Horgos, Daniel and Zimmermann, Klaus W. (2009), Interest Groups and Economic Performance: Some New Evidence Interest Groups and Economic Performance: Some New Evidence, Public C hoice, Vol. 138, No. 3/4, pp.301-305 Bubna, Amit and Chowdhry, Bhagwan (2010), Franchising Microfinance, Review of Finance, Vol. 14, No. 3, pp. 451-476 Gagliardini, Patrick el (2009), Ambiguity Aversion and the Term Structure of Interest Rates, The Review of Financial Studies, Vol. 22, No. 10, pp. 4157-4188 Dass, Nishant and Massa, Massimo (2009), The Impact of a Strong Bank-Firm Relationship on the Borrowing Firm, The Review of Financial Studies, doi:10.1093/rfs/hhp074 Hannan, Timothy H. and Berger, Allen N. (1991), The Rigidity of Prices: Evidence from the Banking Industry, The American Economic Review, Vol. 81, No. 4, pp. 938-945 Ndayiragije, Juvà ©nal (1999), Checking Economy, Linguistic Inquiry, Vol. 30, No. 3, pp. 399-444 Gali, Jordi el (2004), Rule-of-Thumb Consumers and the Design of Interest Rate Rules, Journal of Money, Credit and Banking, Vol. 36, No. 4, pp. 739-763 Hamilton, James D. and Jordà  , Ã’scar (2002), A Model of the Federal Funds Rat e Target, The Journal of Political Economy, Vol. 110, No. 5, pp. 1135-1167 Patti, Emilia Bonaccorsi di and DellAriccia, Giovanni (2004), Bank Competition and Firm Creation, Journal of Money, Credit and Banking, Vol. 36, No. 2, pp. 225-251 Mariscal, Iris Biefang-Frisancho and Howells, Peter (2002), Central Banks and Market Interest Rates, Journal of Post Keynesian Economics, Vol. 24, No. 4, pp. 569-585 Rapach, David E. and Wohar, Mark E. (2005), Regime Changes in International Real Interest Rates: Are They a Monetary Phenomenon?, Journal of Money, Credit and Banking, Vol. 37, No. 5, pp. 887-906 Konovalov, Alexander (2005), The Core of an Economy with Satiation, Economic Theory, Vol. 25, No.3, pp. 711-719 Erel, Isil (2009), The Effect of Bank Mergers on Loan Prices: Evidence from the United States, The Review of Financial Studies, doi:10.1093/rfs/hhp034 Guthrie, Graeme and Wright, Julian (2004), The Optimal Design of Interest Rate Target Changes, Journal of Money, Cr edit and Banking, Vol. 36, No. 1, pp. 115-137

Sustainable Cities A Sustainable City - 760 Words

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The Rates Of Teen Pregnancy Essay - 3072 Words

INTRODUCTION Throughout the United States, rates of teen pregnancy are significantly high. In 2013, there were 26.5 births for every 1,000 adolescent females ages 15-19, or 273,105 babies born to females in this age group.1 Young, minority women between the ages of 15 and 24 appear to be at greater risk for becoming pregnant. Minority populations are also linked with low socioeconomic status, whether in terms of education or income, or both. Having low income and lower levels of education (the most commonly used measures of SES) were also associated with increased risk for unintended pregnancies, with 62% of pregnancies being unintended among those earning 200% of the FPL.2 In addition, with minority populations growing rapidly, many of these young women and their families live in smaller, more rural areas. 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Change Detection free essay sample

Introduction Most people are unaware of the changes in their visual environments until attention is drawn directly to those minor changes. Individuals do not often detect changes because of the lack of attention or insignificance of the change. In order for an individual to notice a change like color, location and identity of an object, attention must somehow be drawn to that object. A general conclusion from this body of work is that attention is necessary for detecting change (Rensink et al. , 1997). Being unable to detect a change in an object is called change blindness. Researchers seem to think that change blindness is the cause of many car accidents. Looking away from a road then looking back is a change that is very difficult to perceive which results in quite a few car accidents. Method In this experiment two pictures were represented in modification for each trial. On half of the trials the two pictures were alike but in the other half the pictures changed in some way. We will write a custom essay sample on Change Detection or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page For each pair either the pictures appeared instantly after each other or they flickered. The participants in this study consist of a psychology class in the College of Staten Island. In order to start this experiment, students were asked to sign in to their CogLab accounts. To start the first trial of the change detection experiment, participants were required to press the space bar. One picture will appear after the other. The task in this experiment is to detect whether or not there is a change in the two pictures. If the image changes students press the â€Å"c† key but if the image doesn’t change students press the â€Å"n† key. This test measures our reaction time as well as our ability to detect changes in the pictures. The independent variable in this experiment is was the flicker and no flicker conditions. Two dependent variables were measured which were reaction time and proportion of correct judgments. Reaction time was the time between the appearance of the stimuli and the time that it took participants to make a response. Results It has been predicted that the percentage correct is smaller and the reaction time is slower for the flicker condition the no flicker condition. In the no flicker condition it is easier to identify the change in the picture because the change is almost immediately distinguished. On the other hand, the pictures with the flicker condition, the blank gray leads to changes throughout the picture which results in participants having to look at the picture item by item until the change is noticed. My results show that these predictions are somewhat true. In the flicker condition my reaction time was 11281. 6 ms and the proportion correct of change detected was 0. 625. In the no flicker condition my reaction time was 7667. 143, which is apparently significantly longer than predicted to be, but my proportion correct was . 875 which is slightly greater. Discussion The basic idea of this experiment is that people cannot store many details of a scene in memory. The vital aspect seems to be attention. In order to identify a change in an object, it is necessary to pay attention to that certain object; otherwise no change will be detected. The brain is unable to see a change happening to an element it has not yet stored. Selective attention is a key part in detecting a change in an object, scene or picture. My results for this experiment confirm that divided attention and change detection come hand in hand.

Zara vs. Uniqlo Essay Example

Zara vs. Uniqlo Paper Clothing Industry ZARA vs. UNIQLO Team J: Bingbing Ge Lei Du Sophia Maduka Salman Syed Azim Thanadol Boonyaviwat Tanya Goel 1 Index Content Page Number Executive Summary†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 4 Introduction†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 5 Industry Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦5 Competitive Environment†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 5 Strategic Groups†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 6 ZARA†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 7 Critical Success Factors†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦7 Strategic Issue: What should ZARA do next?.. Strategic Options for ZARA and Inditex†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 10 UNIQLO†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 11 Critical Success Factors†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦11 St rategic Issue: Should UNIQLO compete with ZARA†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 12 Strategic Options for UNIQLO and Fast Retailing†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 13 Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 14 2 Appendices Index Content Page Number Appendix 1 : Porter’s Five Forces 15 Appendix 2 : PESTEL Analysis 7 Appendix 3 : Risk Factors 18 Appendix 4 : Strategic Groups.. 19 Appendix 5 : ZARA Business Model 20 Appendix 6 : CAGE Framework. 21 Appendix 7 : ZARA’s TOWS Matrix†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦22 Appendix 8 : Clothing retailers’ sales and profits.. 3 Appendix 9 : Case of UNIQLO failing to compete with ZARA. 24 Appendix 10 : Customer Analysis.. 26 Appendix 11 : UNIQLO Business Model 27 Appendix 12 : Detailed Strategies for UNIQLO. 28 Appendix 13 : Comparison Between ZARA and UNIQLO.. 30 Appendix 14 : UNIQLO’s TOWS Matrix.. 1 Appendix 15 : Inditex and Fast Retailing Ansoff Matrices 32 3 Executive Summary This report aims to provide a comprehensive analysis of two major players in the clothing industry: ZARA and UNIQLO. The clothing industry is highly segmented with several sub markets, ZARA targets at customers who need high fashion, whereas UNIQLO positions itself in the low fashion low price segment. Different from most retailers who adopt a mass production for strategic positioning, ZARA implemented a mass differentiation strategy to compete in the market by vertically integrating its value chain. With full control of all its all activities, ZARA has successfully gained large market share and established good brand awareness by providing customers with fashionable, highly exclusive, fast changing products. For further expansion, ZARA chose to keep penetrating existing markets rather than entering into a new segment. The long distance between Spain and America has brought ZARA with a strategic issue as it cannot take full advantage of its effective business model, which means ZARA has to change its business model or establish a new centralized production and distribution centre for further performance improvement. Moreover, UNIQLO follows the traditional strategy adopted by most retailers that is to reduce cost by outsourcing production regions with low labour cost. UNIQLO also succeeded in gaining market share by offering customers with products with rich functionalities at low price. With inspiring sales performance, UNIQLO entered into the new segment to compete with ZARA. However, this expansion strategy has resulted as a failure, which implies UNIQLO should focus on its current market, expand into a new segment either by launching a new brand and business model or taking full advantage of its current unique RD capability. Introduction The fashion industry is one of the most complicated industries in the world. It is the largest employer of all the creative industries and directly employs 816,000 people across a wide range of jobs and professions from fashion designers to fashion retailers. In the UK economy, it is estimated that the fashion industry contributes a direct value worth 21 bil lion pounds (Casciato, 2010). The world of fashion is filled with competitors, who are struggling for public awareness. ZARA and UNIQLO are two companies operating in this market and spare no effort to survive and prosper in this industry. We will write a custom essay sample on Zara vs. Uniqlo specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Zara vs. Uniqlo specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Zara vs. Uniqlo specifically for you FOR ONLY $16.38 $13.9/page Hire Writer This report will start by providing an industry analysis, and then it will discuss ZARA’s strategy, strategic issues and its strategic options. Finally, it will analyze the critical success factors of UNIQLO, the reason why it failed to compete with ZARA and its strategic options. Industry analysis Competitive Environment The Clothing industry is a very competitive in nature and due to this several sub segments have been created in the market and coupled with the number of players involved, in addition to the seasonal nature of the products; has led to excess capacity within the industry. The modern markets trends of the industry is globalization which has led to intensified competition between local brands and international brands alike. From our Porter 5 Forces analysis, which can be found in Appendix 1, we can see that the highly competitive and labour intensive nature of the industry have led firms to pursue cost leadership strategies. A general trend has been to outsource production to developing countries such as Bangladesh, Vietnam and China (The reasons for doing are highlighted by our PESTEL Analysis, as Appendix 2 indicates). Another important way in which firms try and create a barrier to entry is by product differentiation. The perception of products overall can be deemed to be equal and therefore, apart from price, the key differentiating factors are brand image, reputation and design. As a result firms tend to utilize a lot of capital in order establish a reputation and create brand awareness. 5 Due to the globalized nature of the industry majority of the risks involved are applicable throughout the industry as a whole. These risks are often beyond any of the firms’ controls and therefore it is very difficult to foresee them and adopt strategies to deal with them. A list of some of these risk factors is listed in the Appendix 3. Strategic groups In the clothing industry, there are generally three strategic groups: low fashion low price, high fashion low price and high fashion and high price (See Appendix 4). Retailers like GAP and UNIQLO belong to the first category as those companies mainly focus on providing customers with relatively low fashion and cheap products. Both GAP and UNIQLO adopt the same business model, which aims to reduce price through mass production. Compared with GAP and UNIQLO, companies such as HM and ZARA, classified in the second strategic group, position themselves in the market with more differentiation by proving high fashion products with low price. The last group includes those luxury brands such as LV and GUCCI, who provide high income customers with most fashionable design along with a very high price. There is possibility for companies in the first strategic group to strategically stretch to the second group through differentiating their products towards more fashionable. For those companies in the second group, they could also strategically stretch towards to the first group by mass production via intensive outsourcing to reduce its cost. 6 ZARA The Success of ZARA ZARA is one of the most successful clothing retailers in the world today. ZARA (operating under the flagship of Inditex, a holding company located in Northwest Spain) has around 2500 stores in 62 different countries across the world (Tiplady, 2006) and is still growing. The success of ZARA is astounding as they succeeded using a strategy which went outside the generic strategies used in the industry. Where others went for mass production, ZARA went for Mass Customization. When others spent fortunes on marketing, ZARA held a no advertising policy. When others outsourced their supply chain ZARA stuck with their own manufacturing facilities. ZARA’s secret is their Business Model, as illustrated by Appendix5. ZARA’s value chain ZARA’s business model is characterized by the search for flexibility in adapting production to market demand by controlling the supply chain throughout the different stages of design, manufacture and distribution (Inditex, 2009). This vertical integration of the value chain enhances internal information flow with the help of IT service and an autonomous and flexible corporate culture, giving ZARA capability to fully control their entire manufacturing and distribution process from their factories to the shop floor. ZARA’s success is based on a business model that achieves a ‘speed of response’ to market demand that is without precedent in the fast-moving clothing sector. ZARA’s cycles of design, production, and distribution are substantially faster than any of its main competitors. All their products are designed at the Inditex headquarters in La Coruna, approximately 50% of which are produced in its own network of 22 Spanish factories and the rest 50 % is outsourced to factories in Asia and Africa. Their finished products are dispatched by their centralized distribution facility twice a week, to each of its retail outlets, located in different time zones with accurate shipping times. Other fashion retailers usually have a six-month time lag between completing a new design and delivery. ZARA on the other hand can take a new design from the drawing board to the shop floor in as little as three weeks. 7 Merchandizing Strategy With full control of its production and coupled with their brand image, ZARA manages to create rapid product turnover, which in turn creates a climate of scarcity and opportunity in their retail stores. The exclusivity of its products are intended to increase consumer frequency, which corresponds to higher sales. As a result, ZARA’s high turnover rate allows the company to sell more items at full price, which helps ZARA achieve a 15 to 20 percent of markdown merchandise cost reduction compared to traditional retailers (Craig et al, 2004). Quick Response Strategy With a unique quick response system, comprising of human resource, information technology infrastructure and customer feedback, ZARA is able to respond to the demand of its customers better than its competition. On one hand, ZARA delegates its product development teams to attend high-fashion fairs and exhibitions to interpret latest trends of the season. On the other hand, ZARA’s store managers are responsible for reporting daily sales activity, products life cycles, and store trends to their designers. These measures along with accurate customer feedback, have provided ZARA with the tools to cater for their customers’ diverse requirements (Craig et al, 2004). Distribution Strategy ZARA’s centralized inventory management system gives them competitive advantage by minimizing the lead-times. ZARA’s internally or externally produced goods go to their distribution center, where they are inspected and immediately shipped. In order to increase speed of delivery, the shipments are scheduled by time zones and shipped by way of air, land or sea. Typically, products will be dispatched to stores in Europe within 24 hours, in the United States within 48 hours and in Japan within 48 to 72 hours (Ferdows et al, 2002). Zero Advertising Strategy As mentioned earlier, ZARA does not have a marketing policy, instead investing in an aggressive store expansion policy. Compared to their competitors, who have an adevertising budget in between 3 to 4% , ZARA’s advertising budget of 0. 3% ( primarly for its online and 8 catalogue venture) provides them with a degree of economies of scale on regards to their international expansion (Craig et al, 2004). They have a department in charge of acquiring global real estate in prime locations around the world, frequent refurbishing of store layouts and the creating the window displays for their global retail operations. ZARA strategically locates themselves in exclusive territory, to provide the allure of high fashion as it is not uncommon to find ZARA next to high end designer boutiques. This also provides them with a unique vantage point to mimic their competitor’s styles, with the hope that customers will go into these boutiques, see what they like and come to ZARA and buy it for a third of the price. Its centralized control over their stores has given ZARA an image of prestige and elegance, irrespective of their price point. Strategic Issue: What should ZARA do next? During 2009, ZARA went ahead and opened 103 stores globally and 15 stores in America. They had substantial sales growth in their European and Asian markets, however sales in there American markets decreased substantially by 0. 5%, after the expansion. From our CAGE analysis, which is listed in Appendix 6, we can see that the geographical distance coupled with the inability of their business model to adapt to the American market can be cited as the main reasons for their failure. Due to the sheer size of America the styles in different side of the country would be different. For example:- Coats and sweaters would most likely be available in ZARA stores in New York during winter months, however, those items would not be stocked in ZARA stores in LA, since the temperatures in that part of the country remain fairly constant throughout the year. The differences in weather patterns pose another challenge to their business model especially since they do not have a factory on the continent. In order to enter new markets, ZARA launched their online sales catalogue in September 2010. Currently their online services are only available in Europe; however, if successful it will be launched globally. However, the question remains whether or not their business model can cope with this added facility or will ZARA run it online store via a different channel. Their current business model transfers stock in batches to their own stores who then sell it to customers and therefore adapting to a model where ZARA will have to sell one of items to individuals will be a challenge. Another important concern regarding ZARA online 9 sales venture is informing people about it. Since they do not have an advertising policy, how the general is public supposed to know about their new service. Strategic options for ZARA and Inditex By looking at their CAGE Framework and their TOWS matrix (Appendix 7), our advice to ZARA is simple: To be competitive in America: In order to compete in America, a manufacturing operation is a must. If the plant in the States is unfeasible then they could try and set up in Mexico or sub-contract their manufacturing operations to an existing plant in Mexico, like they have done in Asia. Otherwise in order to compete in America, ZARA has to change from its current business model, to a model which caters for mass production. This seems unlikely as they will compromise their biggest critical success factor which is to delivery styles quickly. They also have to make efforts to educate people regarding their styles and designs. Marketing and Advertising will be key if they are to be successful in the States and therefore, they must revoke their â€Å"no advertising strategy†. Online Sales operations: We believe that entry into the online sales market is a positive step but, they have to be cautious. Due to the nature online sales, it will be impractical to use their current value chain. The value should be separate from the current ZARA model as it is going to have to deal with postal returns, online refunds and sales of one of items. They also have to answer important logistical questions such as, which distribution centre will the orders be dispatched from? Once again marketing will be a key issue to address as they have to inform of their new service, therefore they will HAVE to revoke their current policy. Advice to Inditex: Inditex should keep on doing what they are in terms of expansion. However, they could begin to penetrate existing markets where ZARA has been successful using their other brands. This allows them to capture other market segments within those markets. They can also thinking about investing more towards RD to improve functionality of clothes. R D requires significant investment; however, they might reap rewards in the 10 long run and help them to research further market segments in the future. For example: provide trendy scruffs with heat absorbent technologies, the item will appeal to their current segment but can also crave its way into other segments. UNIQLO Do they challenge ZARA? UNIQLO see themselves as a direct challenger to ZARA, and their sales figures for 2009 do not disagree, as shown in Appendix 8. In the 2009 annual shareholders report and after a record year in profits, Tadashi Yanai the CEO of Fast Retailing, confidently claimed, â€Å"We can now stand as equals on the battlefield with other global retailers, such as HM, ZARA and GAP. And, just maybe, we can even emerge victorious. † (UNIQLO, 2009). However, they tried to do so this year and it did not go very well (refer to Appendix 9 for a Case study regarding their failure). In short company lost 26% of their global market share and sales fell by 6. 4% in Japan, a market which is responsible for 80% of their revenue (Business Week 2010). The first question for UNIQLO is to ask themselves, is whether or not they compete in the same market. By using the generic strategy graph below we can clearly see that UNIQLO and ZARA are using two completely different strategies in the market place. This coupled with the information derived from the Customer Matrix (see Appendix 10); we do not think they are immediate competitors. UNIQLO’s Critical Success Factors Although UNIQLO consider themselves to be direct competitors to ZARA, their critical success factors which have allowed them to achieve such monolith growth in such a short space of time, is also the reason they have so far failed to enter ZARA’s Market ( as emphasized by the UNIQLO failure case study in the appendix 9). The SPA business model Unlike ZARA, UNIQLO followed the generic strategies of the industry of high volume and low price. They have also invested millions trying to develop their brand identity. UNIQLO 11 credits its continual growth and its ability to provide high quality, functional casual wear at competitive rates to its SPA (Specialty-store/retailer of Private-label Apparel) business model, a model which they adapted from GAP in 1997 (UNIQLO, 2009). UNIQLO business model allows them to be fully involved in all activities of the supply chain from product design, to the sourcing of material, to manufacturing operations(even though they are contracted out to external suppliers) all the way to their sales and retailing operations. This enables UNIQLO to ensure costs are kept to a minimal and quality is maintained. Profitability can also be maximized as rents and personnel costs can be restrained. The Success of UNIQLO’s implementation of the SPA business model has prompted Fast Retailing to slowly integrate all their SBU’s acquired with this model. Appendix 11 provides an illustration of their model. Tadashi Yanai, the founder of UNIQLO, contributes the success of his company to Peter Drucker’s idea of â€Å"customer creation†, which is the idea of delivering products which creates demand (Business Week, 2010). In order to do so the SPA model was designed to be highly customer centric, i. e. customer feedback regarding products played an integral part in new product development. ZARA’s business model on the other hand caters takes customer feedback into account only to manage inventory. Customer feedback has been instrumental in the development of their highly successful Heat Tech and Airtech clothing range, and is taken into account in all levels of company development (UNIQLO website). From the Analysis of the value chain, the most important factor in the business model is UNIQLO’s RD department. Unlike ZARA limited RD budget, UNIQLO have spent a vast amount of time and resources to improve partnerships with suppliers like Toray industries, in order to create clothing which are functional. Why they cannot compete with ZARA It is understandable why UNIQLO wants to target ZARA as it seems that they want to make head ways into the women’s market, a market which is twice the size of the men’s market and they are taking various measures to do so. ( refer to UNIQLOs growth strategies in Appendix 12), such as acquiring other firms , setting up fashion lines only catered towards women and building large format stores. 2 However, the main reason they cannot compete with ZARA is because their business model cannot cater for quick style changes. Production for items starts a full year ahead of ZARA; in addition UNIQLO caters for logo less minimalist designs targeted at mostly a unisex segment. This is illustrated in a comparison table which can be found in Appendix 13. It seems that there aggressive marketing tactics have dug a huge hole into their existing market segment and whatever they try they simply just cannot get out and move into the high fashion women’s market. UNIQLO’s Strategic options By analysing their Value chain and their TOWS matrix (see Appendix 14) we can make the following recommendations to UNIQLO: Market Segment: UNIQLO should stick to their current market segment and try and build upon it further. By looking at their Strategic group diagram in the Appendix 4, it is clear that they simply do not have the strategic stretch to compete with ZARA and maintain their dominance in their segment. If they are to challenge ZARA then we would recommend that they do it with another brand, which has a similar value chain to ZARA’s. Their current strategy of incorporating acquired brands with their SPA business model will not work. If they insist on doing that then they should just maintain focus on their immediate competitor who is GAP. Niche market development: The R D aspect of UNIQLO’s value chain is so unique that, the products derived from that department such as their Heattech and Airtech range of clothing can be classed as niche products. This is because the clothes incorporating technology are still rare in the market and these two lines are UNIQLO’s best selling lines. Acknowledging them as niche market products can further open doors into different market segments. Advice to Fast Retailing: Although Fast Retailing are targeting the women’s market, with high quality women’s clothing, their decision to move production to Bangladesh suggests that they are more concerned with cutting costs rather than further helping their existing Chinese manufacturers to develop new competencies to deliver high quality. Judging by their Ansoff matrix (illustrated in the Appendix 15), this might provide them with the strategic advantage 13 f moving into India. However, if Fast Retailing wants to target ZARA, they should start from scratch and move into the high fashion women’s market with a new brand following a different business model. Conclusion Base on the analysis, both ZARA and UNIQLO should further utilize their current business model. On one hand, ZARA, with the support of the centralized distribution facility, imprints its fame of flexib ility on customers’ awareness and maintain in the top position of fast fashion industry. By expanding into new market, ZARA should carry on its business model and develop manufacturing operation within the approached market in order to preserve the valuable flexibility. UNIQLO, on the other hand, has a cost leadership advantage. UNIQLO provides a wide range of products with reasonable price. Also, with the very keen RD department, UNIQLO is leading the market in term of functionality. It is impossible for UNIQLO to compete with ZARA by its existing business. In order to effectively expand into new market segment, it is not necessary for Fast Retailing and Inditex to develop new brands and new business models. 14 Appendices Appendix 1: Five Forces: Threat of entry in clothing industry is low. Due to many existing retailers have realized economies of scales, established good brand images, and have access to efficient distribution channels, the entry barriers are very high. Threat of substitutes in clothing industry is very low because there are hardly any substitutes for clothing. However there are substitutes in terms of sub segments. For example, casual war or active wear can be seen as the substitutes of formal wear. The threat of substitutes among sub segments is high. Switching costs between sub segments are almost non-existent as styles are individualistic. Bargaining power of buyer is very high. Due to the competitive nature of this industry, consumers have lots of choice in terms of brands and styles. Buyers also have abundant access to the products information, leading to an easy comparison between brands. Bargaining power of supplier is high in clothing industry. Since wool and cotton is vital part ingredient in cloth, it is difficult to find a viable substitute; therefore switching costs of raw material are high. Moreover, the prices of commodities such as cotton blends, wool etc can fluctuate depending on factors such as weather, yield of production and transportation etc. Suppliers have a high bargaining power over those retailers. Furthermore, the bargaining power also depends on the degree of control companies have over a specific resource. For example, UNIQLO has a close partnership with Toray, which provide UNIQLO with the specialized fleece and fabric for its highly successful â€Å"AIRTECH† and â€Å"HEAT TECH† range of clothing. Since not many companies have the capability to produce such special fleece and fabric, the supplier has high degree of control during negotiations. Internal rivalry clothing industry is very high. There are several sub segments in clothing industry such as: high fashion, formal wear, and sportswear, and the competition in very intense duo to there are a number of retailers in each segment. The large number of retailers and the seasonal nature of products have led to excess capacity in the industry. Moreover, globalization leads to market saturation as it has intensified competition between local brands and international brands. 15 Bargaining power of supplier - ­? Difficult to find viable substitute for wool or cotton, high switching cost of raw material - ­? Specific know- ­? how of suppliers ncreases their bargaining power Threat of entry Existing retailers have - ­? achieved economies of scale - ­? good brand image - ­? access to effective distribution channels Threat of substitutes - ­? No substitute for clothing Internal rivalry - ­? substitutes exist in different segment of this industry Bargaining power of buyer - ­? consumers have lots of choice in te rms of brands and styles - ­? Buyers also have abundant access to the products information, an easy comparison between brands - ­? Large number of players in segments and seasonal nature of product lead to excess capacity - ­? Globalization ntensify competition, resulting in market saturation 16 Appendix 2: PESTEL: (Grant, 2010) Political: - ­? Export Processing Zone (EPZ) set up by governments especially in the developing countries to boost Foreign investment into the country - ­? Tax Benefits offered by governments in charge - ­? Import Quotas on tariff on Raw materials - ­? Relaxed Employment Laws Economic: - ­? Wages: Tend of be very low in developing nations - ­? General Shipping and handling cost: Countries which have access to ports, or road links between major markets - ­? Inflation Exchange rate - ­? Interest rates: Firms ffering FDR investments into country usually get favourable rates of interest on borrowings (this tends to be true for Bangladesh a nd Vietnam. Socio- ­? Cultural: - ­? Population profile: Developing nations tend to have high degree of youth (18- ­? 35); therefore the available workforce is high - ­? Earning Profile: Due to rampant poverty in those nations, the earnings profile is very low. Technological: - ­? Most developing nations tend to not have access to the latest manufacturing technologies, however, that is slowly beginning to change. - ­? However, Infrastructure technology such as, high speed nternet, advanced high powered generators and state of the art washing plants are already available in countries such as Vietnam and Bangladesh. 17 Appendix 3: Risks factors: (UNIQLO, 2009) O? Fluctuations in the cost of shipping ( Retail week, 2010) O? MA risks: If future business acquisitions take place then it will have an adverse effect on the business O? Risk of Production: Majority of products in the industry are manufactured by contracted firms, therefore the industry as a whole is affected by an y political, economic, legal changes and Environmental factors such as natural disasters. O? Foreign exchange risks: Transactions for the majority of the products imported for the UNIQLO business are conducted in U. S. dollars. Therefore in order to stabilize procurement costs they conclude foreign exchange contracts to lock in exchange rates for its imports three years in advance. However, if there are major movements in exchange rates that persist for prolonged periods, this could have an adverse impact on the business O? Rise in commodity prices:- Cotton 18 Appendix 4: 19 Appendix 5: 20 Appendix 6: CAGE Framework for ZARA regarding their American expansion Economic Administrative and Political Geographic Cultural America is a huge market with a lot of opportunities if approached correctly. Due to the protective government regulations in place in America, it is difficult for foreign companies to establish themselves in the American market Logistics and co-ordination issues created by distance between U. S. and European. Which really stretched their Value chain model European countries and U. S. share different Fashion values, which ZARA failed to identify in their initial American launch 21 Appendix 7: ZARA’s TOWS Matrix Internal Factors External Factors Opportunities Strengths Further develop their manufacturing capabilities in Spain in order to try and get better cost benefits. ZARA could venture in to new markets through franchising, a tactic they have used to enter the Arab market. Another opportunity for ZARA lies in opening a manufacturing plant or finding a suitable manufacturing plant in America where they then might be able to implement their existing business model Weaknesses ZARA’s existing IT capabilities are untested especially in the world of online sales. This is an opportunity to develop those capabilities. Threats Although this is an opportunity for ZARA to establish a presence in this area but whether their business model is up to it is another question. How will people know about their new feature? They will have to Advertise which mean their current â€Å"no advertising policy† might be have to be changed Continuing to grow in America without understanding why they are failing in that market to begin with. 22 Appendix 8: Source: The economist, 2010 23 Appendix 9: CASES of UNIQLO failing to compete with ZARA. UNIQLO failure: A case of UK Expansion UNIQLO expanded into the U. K. in 2001, aiming for 50 stores by 2004. They opened 21 outlets all over the country before shutting 16 in 2003 to stem losses and restructure (business week 2010). Their entry strategy was so aggressive as it seemed that they wanted to corner the market, by taking up prime location so competitors could not set up and hoping that there lower prices would steal away customers from ZARA and HM. The reason for failure: (The Sunday times 2003) †¢ †¢ Failed multi- million pound advertising campaign failed to arouse interest Failed to offer clothes that were sufficiently distinct from rivals such as ZARA and HM and lacked design content and quality †¢ Expensive real estate. However now UNIQLO have now consolidated their position in the UK and have restructured there operations, where they currently have 15 locations, 10 in prime real estate in London and 5 in greater London (UNIQLO website) and have been very successful. Repeat of 2001: In the 2009 annual shareholders report and after a record year in profits, Tadashi Yanai, confidently claimed â€Å"We can now stand as equals on the battlefield with other global retailers, such as HM, ZARA and GAP. And, just maybe, we can even emerge victorious. † (2009 annual Report) 24 However, since then Fast Retailing’s shares have plunged 26 percent in 2010. Sales through August fell by 6. 4 percent in Japan where Fast Retailing and UNIQLO earn more than 80% of its revenue(business week 2010). Sales at stores which have been open more than a year fell by 25 percent in September and were continuing to slide through November. The company forecasted its first profit decline in four years for the fiscal year ending in August (business week 2010). The reason for this decline:These losses took place due to a paradigm shift in the company’s policy of low cost and functional clothing. The company wanted to tackle competitors such as ZARA and HM head on and started to produce high fashion items, (a strategy which they employed when they initially launched in the UK) which unfortunately did not sell very well. However, now they are reverting back to their core values which is mass producing functional clothing and use its product line to compete with ZARA via product differentiation (business week 2010). A recent survey indicated that most consumers use UNIQLO products primarily as inner wear (62 percent women and 61 percent men). They are mainly used as a mere econdary player to highlight more fashionable clothes from competitors such as ZARA. (UNIQLO Japan Review) This is an indication that UNIQLO has a long way to go before they can compete with ZARA in the high fashion stakes. 25 Appendix 10: Customer Analysis ZARA and UNIQLO have positioned themselves in different market segments. ZARA’s target market is young educated women who like and sensitive to fas hion. To answer its customers’ need, ZARA has developed a business model that reacts to the recent fashion as fast as it could and become very successful. UNIQLO, at the same time, initially dedicates on casual menswear. Recently, after a revealing from sales report, UNIQLO now try to emphasize more on women market since most of its revenue came from women garment. Nonetheless, UNIQLO does not abandon its middle market, middle aged customers who shop at the brand for its low prices. UNIQLO’s basic clothing is good examples that reflect its target market and through the quality of garments and reasonable price, it has attracted many customers and become successful as well as ZARA. In term of perceived value and price from customers, ZARA has placed themselves in a higher position in both perceived value and price, compared to UNIQLO. ZARA brand and product is more prestige in the sense of product value and ZARA’s customers are willing to pay more in order to acquire the valuable fashion. 26 Customer Matrix 5 4 3 2 1 0 0 100 200 300 400 500 Perceived Price ZARA UNIQL O HM MS LV Perceived Use Value Primark Appendix 11: 27 Appendix 12: Detailed strategies for UNIQLO Partnership with Toray Industries Inc (Product Development Strategy) 28 UNIQLO considers its partnership with Toray Industries Inc who is Japans biggest synthetic fiber manufacturer as a definite competitive advantage. Toray supplied fabric for UNIQLO’s fleece jackets in 1998, its first major successful product, which retailed for 1900 yen each in 1998, while similar products from other manufacturers were priced 4 times higher. UNIQLO’s sales of fleece items topped 26 million units in 2000 and remain at about the same level over the last decade, according to UNIQLO. UNIQLO also developed their highly successful HEATTECH clothing range in conjunction with Toray Industries and they plan to boost sales of their HEATTECH apparel by 40% to 70 million units by 2011 (business week 2010) Growth Strategy By adhering to their SPA model UNIQLO have been allowed achieved phenomenal growth. They have done this by †¢ †¢ Tam, Expanding operations to major cities around the globe. Mergers and Acquisitions: Over the year’s fast retailing have acquired Princess Tam. Theory and COMPTOIR DES COTONNIERS, Cabin and Gov retailing. The acquisition of Gov retailing provided UNIQLO with the know how to launch UNIQLO shoes. All the companies acquired had women as their primary market segment. (Annual report 2009) †¢ Diversifying into new products: In September 2009 UNIQLO launched their Brand, this was enabled by the acquisition of Gov retailing as it provided UNIQLO Shoe †¢ them with the expertise to enter the shoe market. Product development through RD: UNIQLO are very keen to develop products which are not only competitively priced and deliver high quality, but also incorporate new fabrics and manufacturing techniques in order to improve efficiency and functionality of their products. Examples include: Airtech and heat tech product ranges. Cost Reduction Strategy †¢ †¢ Trimming footwear product line by a 100 shoes in order to reduce costs and increase Focusing on minimalistic clothes, which take less material to produce and reduces product focus on their best selling shoes ( annual report 2009) production time. 29 †¢ †¢ †¢ Keeping 1000 styles less than other competitors and on the shelves longer than their Focusing on a wide range of colours rather than a wide range of styles ( business Moving production to Bangladesh in order to benefit from the countries low wage ompetition( the economist 2010) week 2010) infrastructure. Marketing Strategy (UNIQLO Japan Review) UNIQLO deserves credit for its constant stream of proactive campaigns designed to win over a large number of diverse consumer groups, both in Japan and abroad. Examples include: †¢ Proactive and powerful marketing campaign such as â€Å"UNIQLOck†, which is a very popul ar screensaver downloadable from there site. The UNIQLOck was very popular with Japanese teenagers. †¢ †¢ The bilingual free magazine â€Å"UNIQLO PAPER† helped associate the brand image Retail space played a key part in brand expansion. They have stores in only the with hip New Yorker culture expensive real estate in cities and his is a signal of intent for UNIQLO to be associated with High Fashion †¢ †¢ Innovative packaging such as selling t-shirts in canisters and unique store layout Affiliate programs to encourage websites to market the UNIQLO Brand. ( UNIQLO website) Appendix 13: 30 Comparison between ZARA and UNIQLO Appendix 14: UNIQLO’s TOWS Matrix 31 Internal Factors External Factors Opportunities Further expansion in Asia. UNIQLO’s production and customer base are mainly in Asia. They are currently further looking to reduce costs by moving Production to Bangladesh. This move opens up the Indian market for the company at the while making further expansion into China. Looking to further Develop the functionality of their clothes via their strategic partnerships with existing suppliers. Penetration in the existing market by providing more product choices. UNIQLO’s product great weakness is the limit number of style. With the current low-price apparel market being underdeveloped, UNIQLO has high opportunity to gain more market share by providing more product choices. Secondly, it seems that Fast Retailing is looking market their acquired brands using UNIQLO as a vessel. This would over stretch their market and make it impossible to further penetrate their existing markets. Not recognizing their own strengths. One of the best qualities of UNIQLO’s product range is there functionality. With the supported RD team, UNIQLO could be very competitive and be further differentiated in another market segment then high fashion, for example under wear They should not compete with ZARA or HM as their value chain does not support it. Concentrate on more immediate competitors such as GAP, If they continue to compete with high fashion women’s wear they are over stretching their capabilities and will lose focus with their current market segment. Over Expansion:-Fast Retailing should also learn from the past and test the market first without jumping head first into new markets. The initial UK launch and failure in America can be cited as examples Strengths Weaknesses Threats Appendix 15: Inditex Ansoff Matrix SBU’s 32 MARKET Existing Existing Concentrating on penetrating existing Markets where ZARA has achieved success:- this can be done by deploying Inditex’s other brands such as PULL BEAR, BEREKSHA and MASSUMI DUTTI in order to capture other segments Going into the online market place, a step that they have already done with ZARA but if successful include their other brands with the same online model New Invest in an RD to improve clothes functionality. They can apply new techniques they acquire to boost the quality of their existing lines. New Go into new markets using other distribution channels such as franchising FAST RETAILING’S Ansoff Matrix SBU’s MARKET Existing Existing Continue development on their HEATTECH and AIRTECH range of clothing Fast retailing can use UNIQLO to expand into new markets. Moving production to Bangladesh, gives UNIQLO the scope to move into India, which can potentially be a very big market New Further develop their existing market by getting into new product line. UNIQLO recently launched UNIQLO shoes. Acquiring or developing a new brand to target the women’s market. In order to be successful, the brand must follow a different value chain. New References: Craig, A. Jones, C. Nieto, M (2004) ZARA: Fashion Follower, Industry Leader [Online], available at: http://www. philau. edu/sba/news/ZARAreport. pdf [18 Dec 2010] 33 Cosciato, P. (2010) Fashion worth more than $30 billion to UK economy[Online], available at: http://www. reuters. com/article/idUSTRE68F3UX20100916 [18 Dec 2010] Fashion Auction, (2010) ZARA Clothing [Online] available at: [18 Dec 2010] Fujimura, N. Ozasa, S. 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