Business Plan For Patel Electric Scooter Marketing Essay

Business Plan For Patel Electric Scooter Marketing Essay PATEL Electric Scooters will offer quality used electric scooters and electric scooter parts to a growing market of electric scooter hobbyists. PATEL Electric Scooters will sell new and second-hand electric scooters as well as accessories, such as jackets, boots, jeans, helmets, waxing products, childrens clothing, and spares. It will also repair and service electric scooters. Additional services such as insurance may be provided. Why are electric scooters better than gas ones?  · Environmentally Friendly: Zero tailpipe emissions. Save the planet!  · Lower Operating Costs: Approximately 1/20th of gas equivalents. And since gas prices continue to rise, this gap will only widen. Plus, most electrics require little or no maintenance.  · Quieter Usage: Electrics are extremely quiet, with no loud noisy engine, which means they can be used in areas which require quiet, such as corporate walkways between buildings of an office campus.  · Cleaner Operation: No gas, fumes, or smokes to deal with. Youll smell better.  · More Reliable: Fewer moving parts for less maintenance and less that can break.  · Reduced Oil Dependence: The more electric motors we use, the less we depend on gas motors, and hence the less oil your country depends on. In the beginning, Patel electric scooters will offer excellent value for the first scooters. These will not bust the customers budget as 50 to 75 percent of the costs for repairs and modifications will be reduced due to experienced riders and the quality parts that will be used. Sales of scooters continue to rise as they are seen as an answer to many traffic problems; they take up less space on the road, emit fewer harmful gases and are far cheaper to run than cars. Demand for touring and specialist scooters has also increased. Traffic schemes, which allow electric scooters, mopeds and motor scooters to use their own lanes to ease congestion, are likely to become more widespread. PATEL Scooters will specialize in scooter rentals for leisure and corporate travelers at discount prices. PATEL Scooters will offer a rental rate that is guaranteed to be the lowest among all scooter rental companies. This is PATEL Scooters commitment to customer satisfaction. Scooters are more efficient then cars in many ways: they have better fuel efficiency, go at low maintenance and have lower operating costs .And also the insurance is available for a cheap price of $30-$50 a year. The targeted customers for business will be about 125000 students from Connecticut State (USA). And so the word of the customer service will eventually spread There a lot of students who use the public transport to due the problem of finding parking spaces. As the public transport offer very few options we are expecting the economical moped and car services will come into action very quickly. There are a lot of students who cannot afford to buy a car or moped but they can afford to rent a car or a moped for $50 a month or can chip in for to rent one car together. Connecticut Scooters would purchase used scooters for less than $1,000 and lease them out. Patels connection with the electric scooter community and the growing demand for quality used electric scooters and electric scooter parts will make PATEL Electric Scooters one of the most popular shops in the city. Objectives The objectives of PATEL Electric Scooters are: Capture the majority of the used electric scooter business in the Connecticut State. give a good quality service for less. â‚ ¬Ã‚  a survey will be conducted for measuring customer satisfaction; repeat customers will be the targeted customers for surveys. Primary goal will be to achieve 45% of profit margin in first two years. Mission The mission of PATEL Electric Scooters is to become the primary resource for used electric scooter parts in Connecticut. Ways of Success The key ways of success for PATEL Electric Scooters are: Repeat customers Satisfaction. Maintaining the price, quality and time beyond customers expectation. Joining experienced professionals and putting them together to work in a team. Secure and busy location near by University. As supplier play main role in any business, so establishing a supplier network become a necessity. Somehow business also depends on employee moral behavior, so rewarding them at their success, is a step ahead in customer satisfaction direction. Company Summary PATEL Electric Scooters will offer quality used electric scooters and electric scooter parts to a growing market of electric scooter hobbyists. The shop will purchase used and damaged scooters as well as used electric scooter parts. Company Ownership PATEL Electric Scooters is owned by Sumitraben Patel Start-up Expenses A electric scooter sales, repair and servicing business costs will vary considerably, depending on services provided. By selling electric scooter parts, riders who undertake their own repairs will be attracted. The premises must be big enough to display several large scooters plus accessories. An existing business could be purchased, with established reputation and customer goodwill, etc. Electric scooter Trader Directory lists suppliers of machines, components, spares, auctioneers, etc, with contact names and addresses. Initial and ongoing costs could include: A range of electric scooters, scooters, mopeds, etc. A large range of accessories, clothing, spare parts, etc. A tool kit ($300-$700). Spot welder ($200). Paint stripping equipment (from $50). Other equipment, e.g. scales ($250), brake tester ($3,700-$4,750), headlamp tester ($495). Electric scooters lift ($520-$1,300). Paddocks stand ($150). Tire fitting equipment, e.g. tire changer ($1300-$1600), wheel balancer ($1500-$1900). Mig welder (from $350). Manuals. Promotion. Staff. Insurance. Start-up Summary Sumitraben Patel will invest and also secure a $20,000 loan. The focus of the initial inventory will be on engine and electrical parts. The source of these parts is electric scooter hobbyists who sell the parts in order to purchase upgrade parts for their own electric scooters. The following table and chart show projected initial start-up costs for PATEL Electric Scooters. Legal $1,000 Stationery etc. $500 Insurance $500 Rent $1,000 Display Equipment $3,000 Expensed Equipment $5,000 Total Start-up Expense $11,000 Start-up Assets Needed Cash Balance on Starting Date $24,000 Start-up Inventory $45,000 Total Assets $69,000 Total Requirements $80,000 Funding Investment Sumitraben Patel $80,000 Total Investment $80,000 Total anticipated annual turnover for first year: $250,000 Total anticipated annual net profit: $112,500 Products We believe it is important to have quality electric scooters at a low cost, and will back each cycle with a 30 day limited warranty. Our company will make a profit by generating sales. It will provide job satisfaction and fair compensation to its employees, and a fair return to its owners. Hard work and performance is rewarded through bonuses and commissions. Job satisfaction is very important for employees and owners; we will create a work environment that is enjoyable and profitable for all. Why are electric scooters better than gas ones?  · Environmentally Friendly: Zero tailpipe emissions. Save the planet!  · Lower Operating Costs: Approximately 1/20th of gas equivalents. And since gas prices continue to rise, this gap will only widen. Plus, most electrics require little or no maintenance.  · Quieter Usage: Electrics are extremely quiet, with no loud noisy engine, which means they can be used in areas which require quiet, such as corporate walkways between buildings of an office campus.  · Cleaner Operation: No gas, fumes, or smokes to deal with. Youll smell better.  · More Reliable: Fewer moving parts for less maintenance and less that can break.  · Reduced Oil Dependence: The more electric motors we use, the less we depend on gas motors, and hence the less oil your country depends on. Electric scooters are more preferable because they:  · Scooting desires are fulfilled;  · Easy and quick, fun making local errand; Environmental friendly while saves some bucks; Convenient point to point transportation; Solves problem of parking and helps with shortcuts; Brings more fun and freedom in ones life. In comparison to gas-powered scooters, electric scooters bring better advantages for transportation as well as recreation. Comparing to gas-powered scooters, electric scooters are allowed in train plane bus etcà ¢Ã¢â€š ¬Ã‚ ¦ Reduction of Noise as well as air pollution. Maintenance is lowered due to use of simple electric motors. Quick and better response when starting or climbing on hill. Many times electric scooters are purchased as a toy, still they have long life as transportation. 1.(a) rules of safety while riding scooters.  · Riders do no duck out of the traffic irresponsibly.  · Friends should not let friends ride scooters when drunk.  · Riders should not ride at high speeds on the sidewalk.  · People should not let inexperienced riders ride soaped-up scooters.  · Riders should keep in mind that pedestrians always have the right to pass first.  · Responsible parents should be sure that their children wear proper safety gear when riding scooters. PATEL Electric Scooters offers the following products: Used Electric scooters: These cycles have been inspected and occasionally reconditioned in order to offer the customer the best value. Used Parts: These quality parts include engine parts, bodywork, gas tanks, electrical parts, frame, and chassis wheels and brakes. Used Electric scooters We will have at times 20 to 50 used electric scooters. Electric scooter crash repairs PATEL Electric Scooters offers a complete range of electric scooter crash and damage repair services: Fuel Tank Repair Damaged fuel tanks dent will be repaired by using needed stud gun which welds dent area with draw pins, with the use of side hammer the dent will be pulled, by these way it makes possible to remove dent without drilling or filling. After that area will be cleared by a thin coat of glazing surface, block sand, and then high premier quality coat will be added. When it dries, tank gets ready for wet sand and final base color coat which gives a perfect finish. Plastic Repair and Welding. We will Repair plastic body parts that are costlier, like parts having scathes, cracks etcà ¢Ã¢â€š ¬Ã‚ ¦ plastic welder and rods will be used of best quality to repair cracked parts. Surety for quality We get hundred percent guarantees when the parts are perfect. And there will be no sign of damage. We will occasionally be able to repair damaged race fiberglass. We will recommend replacing the with new parts if the body work has moderate to heavy damage. parts. It takes hours get a heavily damaged part into the right shape so that it can be painted. And if the job is not dome properly the paint will look ugly and we are very keen on having a good painting job done. The money spent on the repair of a heavy damaged part will be twice the cost of a new part and secondly the part will always have the mark of the crash or the signs of hairline cracks around the mounting holes. The cost to repair a less damaged part is  ¼ the cost of a new part. In such cases we recommend to get it repaired rather than replace it. Electric scooter Insurance Repairs We will handle insurance repairs and claims to get your electric scooter back in perfect shape. All repairs will be done using factory OEM replacement parts where needed. Pick-up will be available by appointment. Electric scooter Insurance Repairs and Claim Handling PATEL Electric Scooters will work with you and your insurance company. We handle everything from writing your repair estimate and handling your insurance claim to picking up your crashed electric scooter. The insurance repair process will work as follows: Once an scooter arrives at the Patel electric scooters it will be inspected for any crash damages and a detailed written document will be made that will cover all the all the damages that occurred before the scooter arrived. We call the insurance company once the estimate of the repairs is complete they will then send an adjuster to our shop to compare our estimate to theirs. Once the estimate has been approved by the adjuster and gives the approval for the estimate after that only will the insurance company sand us the payment for the Upon approval of the estimate by the adjuster, he will submit approval of payment to the insurance company. Factory oem replacements will be ordered for every part that need replacements for the scooter to get ready for re assembling when the the new parts arrive. Market Analysis Summary The traditional customers of a electric scooter retailer are young males. The number of riders taking basic training has risen, largely due to an increase in the number of older riders (25+). They may or may not have had scooters before, will buy for leisure purposes and also tend to buy higher price scooters which have higher profit margins for the retailer. They will be car owners, and being used to service from the car market, will want to buy from clean, smart dealerships. Higher prices could be charged, as they will generally be willing to pay for a high level of service and will have a higher disposable income to spend on accessories. Women are an increasingly important customer group, as the number of female riders rises. Customers are becoming more demanding of good service, back-up and information provision, so keeping ahead of the competition will involve rigorous training for employer and staff in order to keep abreast of new technology in the market. Only a small proportion of the population owns a electric scooter, therefore there is still a large potential market for sales. The number of full electric scooter licenses held in this country far exceeds the number of scooters on the road, so it is not essential to target new riders. It may be possible to persuade lapsed riders to take up the hobby again. There is also a business sector. As roads become more clogged, car speeds in cities are decreasing significantly, and a electric scooter courier industry has developed. In such conditions scooters are substantially faster. The police and paramedics have begun to use more electric scooters for the same reason. A shop could develop a relationship with a commercial or public sector customer, taking on supply and upkeep of a fleet of scooters. Some of the larger electric scooter dealers have suffered over the last year as consumer demand has decreased. Electric scooter dealers usually have multi-franchises; links with several manufacturers rather than selling the product of one manufacturer, as happens in the car dealership market. However, developing links with a manufacturer can be very difficult. Manufacturers are trying to increase profits, and this usually means developing and assisting existing successful franchise outlets. Most areas are now well covered for dealerships. Competition also includes the car market. Despite environmental concerns, for most people the car is still the first choice for independent travel. Over the past ten years, riding has developed an entirely new customer base among baby boomer men, ages 40 to 65. Last year, electric scooter sales for this age group were twice that of young men, ages 18 to 25. These two groups represent 80% of electric scooter sales. In Connecticut State, electric scooter sales exceeded $36 million in 2009 and sales are predicted to grow by 10% this year. The demographics suggest that there is a large market for used electric scooters and electric scooter parts, especially among experienced scooters. This is particularly important because the experienced customer will seek out a shop where the owner has a reputation for quality and service in the electric scooter community. Market Segmentation PATEL Electric Scooters will focus on two customer groups: Male baby boomers, ages 40 65. Young men, ages 18 25. Competitive Comparison The suppliers have the lot of power in negotiating and setting of the prices of the products on the shop. This is a fact that the suppliers earn the most money form these kind shops and companies. It is consolidate that the repair industry have the deepest pockets and a a limit numbers of substitute customers. Finally there are the only most important suppliers to Connecticut electric scooters industry. Market Trends The market demand for electric scooter sales, repair and service industry has been relatively stable over the past decade. However, the average price per scooter has seen a steady increase, especially within the last five years. These more expensive scooters have, on average, much higher repair costs per vehicle than any older scooters. This has upset the short-term equilibrium of the industry and given incentives for new firms to enter the market. Strategy and Implementation Summary The location of a electric scooter sales, repair and services business is very important in attracting customers. A site close to the centre of town will be easily accessible to potential customers in all areas of the region. Being located near public transport routes will make it convenient for customers to use alternative forms of transport while their electric scooter is being serviced. Early and evening opening hours will accommodate those customers who need to drop off their electric scooters on their way to work, or collect them afterwards. Good presentation of the shop and staff will be useful for attracting repeat business. Neat premises and helpful, friendly staff will instill confidence in customers and further promote the business through word of mouth recommendation. To target customers in the local area, advertisements can be placed in local publications. Listings in directories will be useful, e.g. the Yellow Pages. Advertising monthly special deals on certain types of repair work in the local newspapers, is another option. Some parts suppliers offer promotional support programs for independent garages in return for stocking only their products. Often these packages include signage, point of purchase support material as well as advertising support. An increasing number of businesses are advertising their services on the Internet. Competitive Edge Sumitraben Patel, owner of PATEL Electric Scooters is one of most respected and best known Business man in Connecticut, she also own three motels in different parts of United States. Marketing Strategy PATEL Electric Scooters will establish and maintain close links with a electric scooter rider training company. Licensing requirements mean most learners will look first for a rider training company; they may not approach a dealer until they have passed their test. A good reputation is essential. If the business establishes a reputation for a friendly, knowledgeable and helpful service, new riders (including women and older riders) will be encouraged to trust and buy from it in an ongoing relationship. There are many electric scooter exhibitions and festivals; these are a good place to meet customers and others in the trade. Advertising will be undertaken according to the target market. The majority of active motorcyclists in the US read a electric scooter magazine all of which have a Product and Services Guide, plus adverts from dealers. Listings in the Yellow Pages and local business directories will be worthwhile. Local electric scooter clubs will be contacted to inform them of the services. Sales Strategy PATEL Electric Scooters will open with a Customization Show and Competition. During the first month of operation, PATEL Electric Scooters will offer a 15% discount on all purchases over $50. Sumitraben will also offer a standard 10% discount to members of the citys seven electric scooter organizations. Management Summary Bhagvat Patel will manage the daily operations of the shop under sumitraben patels supervision. Yakub and zahgir are two motorcyclist specialist, will be handling all repairs, where there salary will be 1250/month for each. Besides Sumitraben Patel, PATEL Electric Scooters will have three additional employees. Strategic Direction SWOT Analysis This is a summary of the businesss most important strengths, weaknesses, opportunities and threats. Strengths of the Business Excellent quality product Which means that Adds to reputation. Good management skills. Which means that Well run business Good ability to extract information. Which means that Can control the business.- Weaknesses of the Business New Player. Which means that Credibility problem may affect initial sales Lack of systems Which means that The Company needs to develop systemised operational sales techniques or sacrifice profits Opportunities in the Marketplace Add-on products such as ** Which means that A potentially enormous market for PATEL electric scooters to tap into. Growing market segments. Which means that PATEL electric scooters should target these segments. Threats in the Marketplace Increasing supplier prices. Which means that Resulting in reduced profitability. Declining size of the ** segment. Which means that Need to focus on growing segments to spread the companys portfolio The Actual Plan (annually) Business Objectives Corporate Objectives (Goals) Short Term Corporate To achieve a sales level of $250000 To achieve profit level of 45% Marketing Objectives (Goals) {your product} #1 Segment: To achieve sales to $30000 #2 Segment: To achieve sales to $60000 #3 Segment: To achieve sales to $70000 #4 Segment: To achieve sales to $90000 New Products To evaluate and launch new products or services which will turn over $120000 in the first year. Other Objectives (Goals) To not exceed a marketing budget of $4800 To not exceed a payroll budget of $42000 To not exceed a general overhead budget of $21360 The major task objectives for each area of the organization, together with responsibilities and timings are detailed in the Roll-Out Plan. Marketing Plan MARKETING OBJECTIVES Sales Objective To achieve sales by 45% Sales Objectives by Market Segment. #1 Segment: To achieve sales to $30000 #2 Segment: To achieve sales to $60000 #3 Segment: To achieve sales to $70000 PROMOTIONAL STRATEGIES Print Advertising Develop a corporate brochure. Advertise in local publications Advertise monthly in magazines that are specifically targeted to the ** and ** segments. Advertise monthly in magazines that are aimed at the general industry. Lead Generation Program Conduct monthly on-going lead generation program. Send out monthly direct mail leaflets with response coupons. Qualify leads and make appointments by using telemarketing staff. Centres Of Influence Program Personally contact at least ten potential partners each week. Produce a monthly newsletter that shows examples of (your products) and how customers have benefited from using them. PR Program PR release to be initiated each month to various trade journals and magazines. Sales Force Employ telemarketing staff. Implement a new structural program for the sales force, allocating sales reps to accounts and segments rather than area. Organize training program to be implemented. Lost Customers Contact monthly all past customers that have not re-ordered to ask why not and see whether we can win back their business. Follow up Enquiries Contact all enquirers monthly and determine if they have purchased from a competitor and, if so, why. Existing Customers Follow up all new customers two weeks after they purchase to ensure they are satisfied with the product. Send quarterly newsletter to existing customers to keep them informed of our other products. Try and up-sell all enquiries for our standard range to our premium range. Sales Promotion Develop an ongoing sales promotion to target existing customers. GENERAL MARKETING STRATEGIES Competitor Profile Keep updated competitor profile. Marketing information system Document on every enquiry How did you hear about us? Document on every order How did you hear about us? Produce monthly sales reports by product, by market segment, by territory and by sales representative. Financial Plan FINANCIAL Next Years Objectives Net Profit To achieve forecast net profit of $112500. Budget To not exceed the following expense budgets. Marketing Budget $ 4800 Payroll Budget $ 42000 Management Overheads $ 21360 FINANCIAL STRATEGIES Cash Flow Eliminate cash shortage in the traditional tight periods of December to January Collection Days Reduce the average collection days from 30 days to 15 days. Payment Days Maintain payment of bills, on average, to 20 days. Expenses Develop and implement new policies on approval and signatories on expenses. Leases Pay off the existing lease on PATEL equipment, thus reducing the monthly financial burden. Wages Pay all wages on a monthly basis instead of weekly. Inventory Improve the number of stock turns to 30000 a year. Rent Negotiate new terms on the premises and reduce existing payments by 10% Organizational Plan ORGANISATIONAL AND MANAGEMENT Next Years Objectives Budget To not exceed the payroll budget of $42000 HUMAN RESOURCE STRATEGIES Organizational Draw organizational chart. Develop incentive scheme related to job requirements. Policies and procedures Develop policies and procedures manual. Employ telemarketers. Training Carry out training needs analysis. Morale Install suggestion box. Organize monthly meetings to follow up tasks

El Cid and Kracauer’s Mass Ornament :: Medievalism Kracauer Film Cinema Movies

The numerous historical films that merely illustrate the past are attempts at deception according to their own terms. Since one always runs the danger, when picturing current events, of turning easily excitable masses against powerful institutions that are in fact often not appealing, one prefers to direct the camera towards a Middle Ages that the audience will find harmlessly edifying. The further back the story is situated historically, the more audacious filmmakers become. They will risk depicting a successful revolution in historical costumes in order to induce people to forget modern revolutions, and they are happy to satisfy the theoretical sense of justice by filming struggles for freedom that are long past.1 Kracauer’s analysis of the historical film culminates in a dismissal of historical, and thereby factual, efficacy. In this circumstance, the period piece can assume an earlier time frame as a departure from the burden of accuracy rather than an acceptance of it. Academic records indicate that El Cid (dir. Anthony Mann, 1961) ignores much of Rodrigo Dà ­az de Bivar’s factual exploits as a warrior for hire, fighting more often for compensation than any religious or moral certitude. Why, then, was this character’s story so appealing as a platform for a historical epic film? El Cid’s historical ambivalence suggests that it’s story is more appropriately detailed for potential aesthetic achievement than realism. Kracauer begins describing the aesthetic condition of the mass ornament as a reference to the Tiller Girls, a performance group based on visual uniformity. He focuses on their performance of emulation and repetition, through which they are â€Å"no longer individual girls, but indissoluble girl clusters whose movements are demonstrations of mathematics.... One need only glance at the screen to learn that the ornaments are composed of thousands of bodies, sexless bodies in bathing suits. The regularity of their patterns is cheered by the masses, 1 This passage is taken from Siegfried Kracauer’s essay â€Å"The Little Shopgirls Go to the Movies.† themselves arranged by the stands in tier upon ordered tier.2† Already, there is an allegory bridging this performance art with the cinema. The masses are clearly the film’s intended audience gathered in a theater, which composes the modern medium for the cinematic ornament. The film’s actors become the performative aspect of this equation, wherein their acting and involvement in a character role, no matter how important, is meager and unnecessary without the remainder of the operative whole. The film opens with a revelatory glance at this phenomenon, as Rodrigo carries a cross through an empty landscape. In retrospect, his great battles and leadership are abstract and ineffectual without the massive army of followers. As the stand-in Christ figure, he showcases the absence of the epic’s ornament: a solitary figure,

Objectives Project Essay

Project termination can happen for many reason some out of control of the project managers. If the project is successful or not successful you have to ensure that many task are complete to terminate the project. Our project is going to be successful and when the project is complete will be sure that all final task will be closed out properly. There will be a proper termination of the project making sure that it ends effectively and efficient. At the ends of the project the following task must be completed the project will be complete, it will be delivered and accepted by the client, a finalized report will be prepared, all bills will have been paid and invoiced to the client, all resources will be returned to the proper places, all documentation for the project will be stored in the proper manner, and the project books will be properly closed. The methods that we are going to use to ensure that the project met its objectives is by using retrospectives. While conducting the retrospectives we will evaluate many sections from the project context and descriptions, the project timelines, and evaluations of what is going right and what went wrong throughout the project and how to prevent those issues in the future. By evaluation where the project had issues and coming up with a solution will better provide us an example of thing to avoid in the future. There are six main criteria that will be reviewed to the fullest to determine the success rate of the project. The first criteria is the schedule, was the project completed in the proper time frame if it was not what was the issues that caused the project to take longer to complete to be successful. The second criteria is going to be cost. Was the project completed under budget, on budget, or over budget and if over budget what was the cause of being over budget. The third criteria would be product, was the product satisfactory and meet the need of the client. The fourth criteria is use, was the project implemented and used for its original purpose and was it function able. Fifth criteria being value, was the project and overall success. The last criteria is going to be learn, what was learned throughout the project, should have there been changes that could have been made to make the project more successful. Reviewing all six of these criteria will ensure that our project was successful on our part and that our client is also satisfied.

The Roles That A Financial System Performs Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2187 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? When the individuals, business and government give instruction to the financial system, financial system need to respond and do transfer funds to other parties. For example, when a traveler uses the credit card to obtain cash in a foreign country, or when a firm needs to pay for the import from abroad, the financial system will complete the transaction. Financial systems make it be possible for countries government to deposits fund straightly into individuals bank accounts. Moreover, financial system allows the transfer funds between two different countries to become easy and cheap, regardless any currency the payer desires to use. The traveler loved this most acutely when communications are disrupted and the banking machines on which she is relying for her weekend expenditures do not dispense the cash she expected to obtain. The classifications of savers are the individual who earn more than they spend and businesses whose profits exceed their capital expendit ures. We assume that, the money which been spend will not be the saving. When individuals save, they usually allocate some of their surplus funds in cash or non-interest-bearing deposits, some in return forms such as interest-bearing securities or deposits or other securities expected to yield a combination of dividend income and capital gains. In the developed countries, individuals saving is assigned among bank deposits, investments in pension and mutual funds, and marketable securities. Normally, the proportions of individuals will distribute between those investments is according to the average returns each type yields. It means that, the greater average returns always mean greater risk as well, and consumers make tradeoffs between expected return and the risk of earning that return. Businesses are just like individual who hold a combination of liquid assets having no or low returns, and other financial assets such as securities, typically bearing higher returns. However the goal of investment between businesses and individual are different, as a result the particular combinations of financial assets they hold are also totally different. For example, businesses and individual always will consider at least to some extent on how unpredictable its short term cash inflows and outflows are likely to be. Most of the savers want a reasonable return on their saving, and they do ensure their funds are invested safely. Since most of the investors are risk averse, they demand asset return matching with the perceived risk of investment. The important conclusion of modern financial theory is the investor demand a yield premium that increase with investment risk. A simple example is individuals tend to buy stock rather than bonds because they consider stocks to be riskier and have higher expectation than bonds. Although most of the investors behave as a risk averters, but we still can find the clashing behavior cases. For example, some saver didnt pay much atte ntion on the potential risk when faced with an investment promising an unusually high return. Saver are fail to recognize that the promised rewards are always taking great risks. When the financial institution is paying extremely high rate of return to the depositors, and it is growing extremely quickly, you will witness the example of savers are actually taking very great risks. One of the example happened in the 1990s notable frauds were perpetrated in both Albania and Romania, with some depositors losing as much as two years income when the fraudulent institutions failed. Primary and secondary transactions Figure: Flow of funds diagram Liabilities Assets Regulation Sectors typically supplying funds Households Governments Reset of the world Sectors typically using funds Non-financial firms Governments Reset of the world Financial System Financial Markets Financial Intermediaries Government (Fiscal policy) Central Bank (Mo netary policy)The purpose of financial system is raises funds from the lenders or investors, making them available to the borrower or other users. Lenders and other investors are called suppliers of funds while the borrower and other users are called demand of funds. These funds can be either uses for finance the current expenditure for consume good, implement the plant and equipment for business firms. The transactions are measured through a system of accounts known as funds flow accounts or financial flow accounts. As Edwin H. Neave stated in his book, funds flow accounts is trace net borrowing or lending transactions between major sectors in the economy. The sectors defined in the accounts are households and unincorporated business, private non-financial business, government, private financial business and the rest of the world. The figure above show that the funds financing new investment flow mainly through intermediaries, with only a small proportion being transmitted di rectly through financial markets. The economic agent who spends more than the current earnings must either sell assets or borrow funds to finance the difference. Primary transactions are the activity deals for raising new funds and involve creating new financial instruments. The new securities can be either shares, bonds, promissory notes, loan contracts and etc. These securities may be sold to investors through the securities markets or may be acquired by financial institutions which advance funds directly to their clients. The Primary transactions is important because their effects on the economic growth. If the domestic financial system does not finance certain kinds of deals, then the capital formation will be inhibited-unless the necessary funds can be raised offshore. Secondary transactions are the activity deals involving trades in existing securities. It represents a reallocation of existing financing rather than the creation of new arrangement. The secondary market purchases of securities are used to invest surplus funds; secondary market sakes of securities are uses to raise funds. Normally, secondary transactions take place in the stock markets, the bond markets or the money markets. The instruments representing loans provided by banks or other intermediaries are rarely resold in the marketplace. The companys or governments securities which active in secondary trading are improves the liquidity of its primary securities issues and helps evaluate new information about the issuer. Why we say secondary transaction will enhance the liquidity of primary issues? This is because they indicate it will likely prove relatively easy to trade the securities at some subsequent point in time. Risk Management Instead of being used to raise new funds, some financial deals are struck with the principal purpose of dividing up and trading risks. Although risk management is often regarded as having emerged in the 1970s and 1980s,that view stems princi pally from observations of the very rapid growth of risk trading during those decades. Actually, the idea of risk management is familiar to some of the financiers for a much longer time. For example, some risks have been insured since long trading first became a reality. After the problem happen, the insurance company were formed principally to assume risks that people were unwilling to accept. The clients is actually selling risk to the insurance company, when individual or business are buy a policy from insurance company to protect their loss through fire or damage. At the real world, the risks assumed by insurance companies are not actively traded. Other instruments such as commodities futures have long been used to trade risks actively. For example, crop growers sell commodities futures allowing them to hedge against the risks of fluctuating crop prices, while speculators buy the same futures contracts to assume the risks. The origin of the commodities futures markets is by s ecurities firms that were both familiar and comfortable with the idea of secondary through market trading. In the late 1960s, 1970s and 1980s, the risk management had expanse greatly in volume and importance. The first country is United States, and then the next country is follow by Great Britain, Japan and other countries. The shift in demand for risk management and the change in the supply of instruments suitable for risk management can result in the trade in derivative securities. From the demand view, the risk management becomes more popular as the financial environment at year 1969 to year 1990.At the same time, the internationalization of business implied very fast increases in the foreign currency transactions, increasing the demand for managing these kinds of risks. The cases on late 1970s and earlier 1980s show that the increasing strength of the Japanese yen make the Japanese investors suffered large capital losses on their US dollar denominated investment, because m any of them took the form of US government securities. From the supply view, market trading of risk management instruments as a derivatives security is based on the same considerations which led insurance companies to write liabilities and commodities traders to purchase futures contracts. In the earlier 1970s, there have 2 important supply side was changed; technological is increasing the risk of the trading. First, traders in the instruments learned the importance of standardizing terms, which lowered the costs of both contact origination and of subsequent trading. Second, traders learned the importance of guaranteeing contact performance. Secondary market risk trading services the primary undertaking of risky projects, just as secondary markets for securities improve the functioning of primary markets for raising funds. An economy with access to cheap and easy secondary trading of risk instruments will assume more viable risky projects than one without secondary markets, ma inly because the parties originally undertaking to face the risk find it easier to divide into different components that are attractive to purchasers with specialized requirements. Finance and economic activity When we study macroeconomic, we know that the major determinants of economic activity are consumption, investment and government spending. In particular, the changes of interest rate have great impact on the growth of economic. Moreover, the kind of investment undertaken affects the kind of productive capability the economy acquires. By making primary financings easier to arrange, the financial system can encourage economic growth. Financiers do not directly stimulate capital formation by deciding to put up funds for projects, but they can certainly constrain decisions to acquire long term capital if they refuse to provide funding. If the funds are not available domestically, business can seek financing offshore, but business that is unknown to the financiers of a forei gn country may not always be successful in obtaining funds. Economic growth can also stimulate financial system growth. Both financial system developments, and many individual financing decisions, are driven by attempts to respond to changing demands for funds. In addition, the financial system evolves to overcome emerging impediments to financing new kinds of deals. Let talk 1 example, over 1970s a world-wide increase in the demand for more risk management services was met by increased trading activity and the development of many new risk management products, as already mentioned. The interest costs and the availability of finance differ between countries. The difference in financiers capabilities affect the availability and the cost of finance. A second source of differences in cost and availability is the cost of producing deal information in differing milieu. High financing costs or limited availability of funds signal financial underdevelopment. We can say that by improvi ng the economys growth prospects means improving its existing financial system capabilities, its access to offshore finance, or both. The purpose of the interest rate is to serve the overcoming financial underdevelopment, but that is not an easy task since it requires structure up new capabilities to screen and govern financial deals. Financial system development is most likely to occur in an already sophisticated financial system, because that is where innovation is least costly and most likely to be profitable. In the most developed economies, establish large business with profitable track records do not have much difficulty finding financing. Normally, such a business is more tend important to the consideration on the cost. Smaller businesses short term financing needs can also be satisfied relatively easily, at least so long as the business has marketable assets to offer as security. Small businesses have no difficulty to raising the funds to financing the acquisitions of inv entory or accounts receivable, being able to rely on bank loans or trade credit to do so. Financial systems vary in their capability to fund innovative or familiar projects backed only by uncertain earnings or illiquid assets. Other economies have relative few imaginative financiers capable of seeking at such kinds of deals constructively as well as critically. Countries which have foster divers financing arrangements normally do a better job of encouraging creative. The more likely the economy will be able to maintain international competitiveness through updating its productive capacity is follow the more diverse the capabilities of a financial system and the more its regulatory climate encourage responsible experimentation. For the economies, the growth is very important, but particularly to less developed ones where both infrastructural and business capital are likely to be in relatively short supply. This is the truth that financial system development is very difficult in the undeveloped countries, placing them at additional disadvantages that can only be overcome with patiently building up elements of a sound financial system over time. When the undeveloped countries rely on the external capital, the decision of offshore financiers can determine the kinds of projects that will be funded, and it will not always be the case that the most highly productive projects are first in line to obtain whatever limited funds are available from the offshore sources. Don’t waste time! Our writers will create an original "The Roles That A Financial System Performs Finance Essay" essay for you Create order