Category: Economics

Executive Summary

The Saudi Arabian economy is among the biggest economies in the Middle East. Buoyed by oil revenues, the country enjoys among the most advanced industrial and service sectors in the Middle East. Investments in education and infrastructure are among the most significant achievements of the Saudi Arabian government. This paper analyses key macroeconomic indicators that propose a positive economic outlook for the oil-based economy. The main arguments in this report appear below

• The stock market should continue to provide high dividend yields through the improved performance of key economic sectors, such as the real estate, construction, and hotel sectors;
• Saudi Arabia should enjoy increased budget surpluses even in the wake of increased expenditures in the 12 months. Most of the public expenditure aims to reduce unemployment rates and increase the growth of the non-oil sector;
• The fiscal and monetary policies should maintain a steady money flow in the next 12 months because of low interest rates and the sustenance of economic subsidies;
• Government restrictions could limit the vibrancy of the private sector. The growth of the non-oil sector could equally be stifled by these restrictions because it depends on the vibrancy of the private sector;
• The extensive public expenditure on investment projects should reduce the unemployment rate, marginally, in the next 12 months to about 4%.

Economic Indicators

Stock Market

Based on strengthening consumer confidence and increased project financing, the Saudi Arabian stock market presents a positive trajectory for the next 12 months. This trajectory should boost dividend yields, initial public offerings (IPOs), and growth rates, as seen in December 2013 when the main index increased by 2.5% (Tadawul, 2014). Concerning IPOs, CMA (2014) reported a 120% and 33.3% increase in IPO offerings in the years 2012 and 2011 respectively. Appendix one shows that IPO shares have also increased by about 208% in the same period (CMA, 2014). The same analysis shows a significant rise of share private investments (231.4%) and right issues (65.1%) within the same period (CMA, 2014). These financial statistics show that the momentum for stock market vibrancy is already high and the same trend should continue in the next 12 months.

To support the positive economic outlook of dividend yields and economic growth, appendix four shows that the all-share index has been steadily increasing since January 2013 (NCB, 2014). Since the Saudi government has established the country as the greatest market for big economic projects in the Middle East, the all-share index should maintain its positive trajectory in the next 12 months, and beyond, thereby supporting increased dividend yield and growth rates (NCB, 2014).

However, appendix five shows that the uncertain effects of policy changes and the global economic uncertainties (such as the US Fed tapering) could cause declining trading volumes, thereby limiting the potential for growth (NCB, 2014). Nonetheless, these uncertainties should not have a dampening effect on growth estimates because the vibrancy of the real estate, construction, and hotel industries should support a strong economic growth, as they have recorded several positive gains in the last few years (Saudi Arabian Monetary Agency, 2014). For example, the real estate and construction sectors have posted positive gains of about 42.4% and 24.2% respectively (Tadawul, 2014).

Gross Domestic Product (GDP)

The energy sector has mainly supported Saudi Arabias GDP. The real GDP growth rate has greatly fluctuated in the past five years. For example, between 2008 and 2009, the countrys GDP growth rate decreased from 8.4% to 1.8% (NCB, 2014). This figure later increased to 7.4% in 2010. Lately, the GDP growth rate has averaged 4% (NCB, 2014). In 2014, this figure should remain relatively stable because of the stability of oil prices and the improving economic conditions in Europe and the United States (US).

Fiscal Policy

The Saudi Arabian Monetary Agency (2014) is the main government body mandated to formulate the countrys fiscal policies. In the last decade, Saudi Arabia has reduced its public debt, as shown in appendix seven. In detail, as a percentage ratio of public debt to GDP, the Saudi Arabian government has reduced public debt from 37.3% in 2005 to 3.7% in 2012 (Saudi Arabian Monetary Agency, 2014). The rate of public debt, as a percentage of GDP, should be negligible in 2014 because the government currently maintains a surplus budget (Ali, 2013). Therefore, there should be no need for future borrowing.

The Saudi Arabian government expenditure has mainly focused on expanding the economic sector to create more jobs for the youth (Ali, 2013). The 2013 budget showed that the government had a projected expenditure of $219 billion (Ali, 2013). In 2014, the government expects to spend $228 billion. Ali (2013) says this expenditure should not create any deficits, or surpluses. However, depending on the current account performances of the past three years, the possibility of surplus is high. The public expenditure for 2014 should represent about 30% of the countrys GDP (Ali, 2013). This figure shows that Saudi Arabias economy would depend on government expenditure for economic growth.

Monetary Policy

The Saudi Arabian money supply has been relatively bullish in recent months. Following increased oil demand and a strengthening domestic demand for goods and services, NCB (2014) says the rate of deposit growth reached 24% in 2013. Appendix six affirms this fact because it shows that the rate of deposits has increased in the last three years (NCB, 2014). The rate of liquidity should remain high in the next 12 months because market reforms favor increased money supply. For example, the ministry of labor has introduced different market reforms that have increased bank reserves around the country. These reforms should sustain time and savings deposits in 2014. Appendix three shows a sustained growth of monetary aggregates of about 10%, since 2010 (NCB, 2014). This sustained growth stems from stable interests and exchange rates.

For example, economic reforms have ensured interest rates remain relatively stable and favorable in 2014 because the governments monetary policies aim to encourage more private sector growth to support its goal of diversifying the economy from excessive dependence on the oil sector. Existing monetary policies favor liquid non-interest bearing deposits that should further increase the rate of money supply in the coming months to support the same cause.

The Saudi Arabian Monetary Agency (2014) is the government regulator that formulates monetary policies for guiding the money market. Since The Saudi Arabian Monetary Agency (2014) pegged the performance of the Saudi Riyal to the US dollar, the future performance of the money market will similarly depend on the performance of the US economy (currency). Considering the American economy is showing marginal economic improvements (from the 2007/2008 global financial crisis), the performance of the US economy and the Saudi currency should equally reflect the same positive performance in 2014. Therefore, the money supply and interest rates should be relatively stable in the next 12 months.

Factors Affecting the Saudi Arabian Economy

Exports and Imports

Since Saudi Arabia is an oil-based economy, most of its exports are petroleum products. However, in the non-oil sector, the Arabian economy exports chemical products as its major export (NCB, 2014). NCB (2014) also says chemical products account for about 35% of the countrys total non-oil export volumes. Other significant non-oil exports include plastics, transport equipment, and electrical equipments (NCB, 2014). Saudi Arabias imports are mainly machines, equipments, cars, and medicine (NCB, 2014). However, motor vehicles and machinery account for most of the countrys imports. In fact, NCB (2014) explains that motor vehicles account for about 24% of the countrys imports, while machinery account for about 9% of the total imports.

Saudi Arabias position as an export country has characterized its history because according to the export and import table shown in appendix eight, the value of imports has been significantly lower than the value of exports, since 1968 (Saudi Arabian Monetary Agency, 2014). A closer analysis of this table shows that the gap between imports and exports has often varied, but the value of the countrys exports has consistently remained higher (buoyed by increased oil exports) (Saudi Arabian Monetary Agency, 2014). Because the global economy remains heavily reliant on oil, Saudi Arabias should remain an export country in the next 12 months. However, this situation may change in the future, as the non-oil sector grows.

Demand/ Supply

Future forecasts of goods and services in the Saudi Arabian market are positive. The government plays a vital role in sustaining some of the domestic demand for goods and services. Particularly, its focus on expanding specific sectors of the economy, such as the construction and education sectors, plays a significant role in sustaining future demand for goods and services. For example, the supply of cement should remain steady in the next 12 months as the government refocuses its energy to expand the construction sector (NCB, 2014).

Government investments in the construction sector demonstrate how the total demand for goods and services in the Saudi Arabian economy will maintain a positive trajectory because the government has heavily subsidized the raw materials needed in the production of cement. For example, the government has subsidized energy, fuels, and transportation costs. These subsidies should ensure the supply of goods and services remains steady in the next 12 months (not only for the construction sector). Appendix two shows significant time and savings that have emerged from government subsidies (NCB, 2014). The same graph shows that the demand for goods and services has increased in 2012 and 2013 (NCB, 2014).

However, government policies on exports and labor should limit the sustained demand and supply of goods and services in the Saudi economy. Particularly, export policies would guarantee marginal increased in demand for essential raw materials such as cement because the government has limited the volume of cement exports, thereby limiting the demand for the essential commodity to the regional market (NCB, 2014).

Labor policies on foreign workers are also likely to affect the future supply of goods and services because some economic sectors depend on foreign labor for production. The cement production industry is one such vulnerable industry because it is a labor-intensive industry. Labor restrictions have limited the supply of human resource to such industries, thereby limiting the production capacities of such industries (NCB, 2014). Despite these limitations, the economy has reported a stable demand and supply of goods and services. The same trend should continue in the next 12 months because the sustained government subsidies should promote economic growth in other sectors as well. Overall, the next 12 months should see a marginal growth in total demand and supply.

Inflation

NCB (2014) says the rate of inflation in Saudi Arabia has remained relatively low in 2013. This stability has led to minimal changes in the price of goods and services. In 2014, the rate of inflation should increase marginally because the demand for goods and services should increase in the coming months. For example, the price of rent should increase because the demand for housing greatly outstrips its supply (NCB, 2014). Similarly, the continued subsidization of energy products and essential goods and services should increase the rate of inflation as the national population increases. The projected rate of inflation should be independent of external forces in the money market.

Particularly, NCB (2014) says the bullish outlook of the US dollar should not increase the rate of inflation beyond the influences of the domestic market because the pegged SAR insulates the domestic currency from further inflationary pressures. However, the extent of external influence of the USD on the SAR depends on the economic outlook in the US (particularly its fiscal and budgetary performances). Nonetheless, based on the improved economic conditions in America, no rapid currency shocks should affect the countrys inflation rate.

Demographics/Population

The population of Saudi Arabia should increase in the next 12 months. This change should increase the total demand for goods and services. The population of expatriate population should also increase in the same periods because labor reforms have allowed the expatriate population to obtain Saudi citizenship (NCB, 2014). Particularly, foreign nationals who have a higher education degree are likely to increase the number of expatriate population in the kingdom because the law favors them (for citizenship). An increase of expatriate population would increase the level of skill specialization in the Saudi Arabian economy, thereby increasing its efficiency.

Employment/Unemployment Rates

The Saudi Arabian unemployment rate has been relatively stable. The current unemployment rate, of about 6%, should decrease in the next 12 months because the government has introduced several economic expansion plans that aim to diversify the economy from oil to non-oil sectors (Ali, 2013). Therefore, several industrial sectors should expand to create more opportunities for employment. The governments public expenditure should also contribute to the reduction of the unemployment rate, as most investments aim to expand the economy and create more jobs (Ali, 2013).

Particularly, it is pertinent to highlight that most of the public expenditure programs for 2014 aim to create more job opportunities for the youth (Ali, 2013). Lastly, the ongoing changes in the labor market, that aim to deport illegal workers, are bound to create a downward pressure on domestic unemployment (NCB, 2014). Although the benefits of some of these policy changes and investment plans may manifest in the long-term, their cumulative effect is bound to have a marginal reduction of unemployment rates in the short term.

Foreign Exchange Policy

Saudi Arabias foreign exchange policy has strived to protect the local currency from excessive fluctuations because of fluctuations in foreign currencies. As such, SAMA introduced strong fundamentals to underpin how the local currency interacts with foreign currencies (Saudi Arabian Monetary Agency, 2014). This effort has depended on a fixed exchange monetary regime that pegs the Riyal to the US dollar. Since the Saudi government aims to continue protecting the Saudi Riyal from external forces, it should continue its protectionist foreign exchange policy for the next 12 months.

Government Restrictions

The Saudi Arabian government has always closely guarded its economy through the micromanagement of economic affairs. Despite the pressures to change this trend, it is unlikely that the government will ease its control on the economy. In fact, evidence shows that the government may increase its control of the economy through increased involvement in private sector growth (Ali, 2013). For example, the labor market has increasingly come under sharp government scrutiny because the authorities want to deport illegal workers from the country (NCB, 2014). Such government controls have existed under a wide umbrella of labor market reforms. The same restrictions exist in the manufacturing and construction sectors because the government has imposed new restriction on exports (such as cement exports) to support the growth of local industries (NCB, 2014).

Political Risk

Saudi Arabia has historically had a favorable political climate. However, there is a high sense of political intolerance in the kingdom. However, the lack of democracy has not affected economic progress. Instead, it has had a positive effect on the economy because Saudi Arabia enjoys a strong political stability (NCB, 2014). In fact, even in the wake of the 2011 Arab revolutions that toppled governments in Egypt, Tunisia, and Libya, Saudi Arabia remained relatively peaceful. Since there are no foreseeable forces that would destabilize the political harmony currently existing in the kingdom, political risk should remain relatively low, if not negligible, in the next 12 months.

Exchange Rates

Based on the foreign exchange rate regime of Saudi Arabia, NCB (2014) says the performance of the Saudi Arabian currency depends on global central bank policies, global politics, and the global economic growth. An analysis of these indices shows that the global economic environment is improving. The positive economic outlook portends that Saudi Arabias foreign exchange market similarly has a positive economic outlook.

The same outlook also exists in Europe because the Euro has been relatively stable in the last few months of 2013 (NCB, 2014). The same trend should persist in the next 12 months. For example, some of Europes ailing economies, such as Italy and Spain, are showing signs of recovery through their bond markets (NCB, 2014). Therefore, the Euro has been resilient against other major world currencies and the same stability should influence Saudi Arabias foreign exchange market. Comprehensively, the exchange rate between the Riyal and other world currencies should remain relatively stable in the next 12 months.

Sentiment

The macroeconomic indicators of the Saudi Arabian economy paint a promising future for the kingdom. Nonetheless, concerns regarding the tightening of government controls on future economic activities exist. However, the Saudi Arabian case presents a special situation in this regard because government controls strive to expand the growth of non-oil sectors. The positive outlook of the stock market is (by far) the strongest indicator of the positive outlook of the Saudi economy, but the growing contributions of the non-oil sector to the national GDP affirms the countrys future economic dominance. Based on a deeper assessment of Saudi Arabias economic indicators, the kingdom should surpass its economic forecasts.

Conclusion/Recommendations

This report shows that the future of the Saudi Arabian economy is positive. Although some sectors of the economy should grow faster than others do, the overall outlook of the economy is positive. Government policies outline the backbone of this growth because they provide the guidelines for future economic growth. Government policies also play a significant role in stabilizing the countrys exchange rates, unemployment rates, and current account balances. Therefore, the positive economic future of the kingdom should ride on the back of public expenditure and supportive government policies.

The biggest concern regarding the involvement of the government in informing Saudi Arabias economic outlook is the excessive restrictions placed on the performance of different economic sectors. There is a need to observe a balance between government and market forces because the private sector cannot be vibrant if the government interferes with market forces. For example, the ban on cement export limits the market for players in the cement industry. The same interventions exist in the labor market. Therefore, the government should adopt more trade liberalization policies if it intends to promote the growth of the non-oil sector through private sector investments.

References

Ali, J. (2013). Saudi Arabia uses current budget surpluses for future. Web.

CMA. (2014). Publication and Reports: Annual Reports. Web.

NCB. (2014). Saudi Economic Review. Web.

Saudi Arabian Monetary Agency. (2014). SAMAs Functions. Web.

Tadawul. (2014). Tadawul. Web.

Appendix

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Appendix 6

Appendix 7

Source: Saudi Arabian Monetary Agency (2014).

Appendix 8

Export and import table.

Source: Saudi Arabian Monetary Agency (2014).

Introduction

Capital budgeting is the process assumed by a firm to make long-term decisions, which have a direct effect on the investment of the company or business for that matter. It determines whether an organizations long-term objectives are worth pursuing and budgets on the substantial capital investment of a business and the expenditures.

Capital budgeting projects generate the cash flows for years. Any capital budgeting project can be accepted or rejected depending on its effect on the net value and internal rate of return method (Good pasture, 2004). Some characteristics of capital budgeting projects may cause the net present value and the rate of return method to the ranking of the projects to be extremely differently.

Characteristics of mutually exclusive capital budgeting projects

In mutually exclusive budgeting projects, only one of the projects is chosen. The selection is in accordance to the effect on Net Present value and internal rate of return. However, these characteristics do not consider the future cash flows of the business in the future. As a result, the flow of cash, if discounted comparing with the cost of capital, is not effective. This event is extraordinarily dangerous because the project may not last for a long time (Brigham & Houston, 2008).

These types of budgeting fail to consider the period that can lead to the recovery of the capital outlay for the budgeted project. These types use the shortest payback period not considering the risks that may occur such as losses and administrative complications at the end of cash flow of the business if negative. These mutually exclusive projects may fail to maximize the wealth of the shareholders hence may not so effective.

Compared to the independent projects, which focus more on maintaining the cash flows in cases of accepting or rejecting of a decision meant for other projects, many differences arise. However, for the decision-making manager, it is wise to figure out the impacts that are mutually exclusive to the relevant projects and can result to the desired outcome.

Mostly, these are only acceptable when dealing with a small business and not in cases where lots of money is involved (Keown, 2004). A manager should be keen to find out what suits the firm best and after what period. Cash flows of a firm operating with lots of money is necessary for constant growth of the business.

When making a decision for a firm, it is necessary to calculate the internal rate of return in order to find out which is the best project to undertake and maximize profits. However, depending on the properties of a significant capital budgeting, it is wise for a project chosen to consider the cash flows of a firm in the future.

However, the budget that maximizes the wealth of the shareholders is the best to choose when making a decision (Baker & Powell, 2005). Therefore, before making any decision for a firms budget, a lot of concern must be part of the considerations set to ensure that all strategies work as planned. In many cases, risks are always there, and they profoundly affect the budget of any firm. Therefore, it is better to prevent risks and maintain the flow of cash.

References

Baker, H. & Powell, G. (2005). Understanding Financial Management: A practical Guide. London: Blackwell Publishing Ltd.

Brigham, E. & Houston, J. (2008). Fundamentals of Financial Managemet. NewYork: Cengage Leaning.

GoodPasture, J. (2004). Quantitative Methods in Project Management. Washiongton D.C: J. Ross Publishing Inc.

Keown, A. (2004). Foundations of Finance: The Logic & Practice of Financial Management. Hong Kong: Tsingua University Press.

Saudi Arabia is well placed in the Middle East region. The region has experienced an economic boom over the last decade. This has been due to the discovery of high levels of oil and natural gas in the country (Euromoney 1). These discoveries, coupled by a high population make the market attractive for business investment.

As the growth in population and finance from oil and natural gas exports increases, Saudi Arabias population has continued to enjoy a strong purchasing power (CIA 1). Strong consumer purchasing power is one of the fundamental factors which make the Saudi Arabia market more attractive to foreign investors. The market is promising since according to the current statistics the country has a GDP of 6.8 percent (CIA 1).

The level of competition in Saudi Arabia is very high. This offers investors a chance to invest wisely and come up with marketing strategies that offers them a competitive advantage over their competitors. Rapid expansion in the manufacturing industry coupled with an increase in the level of investment from both foreign and domestic investors has increased the level of competition in Saudi Arabias market.

A high level of competition makes the market less attractive since new investors will be required to come up with strategies which are above the current production standards. In addition, new investors (entrants) face a threat from already existing competitors and rival companies.

Saudi Arabia shares the same cultural beliefs and practices with Dubai. Therefore, by opening a branch in Saudi Arabia, cultural shock and language barrier that may hinder business success are eliminated. Moreover, sharing of culture reduces psycho-cultural conflicts between different countries (Ross 164). Geographically, Saudi Arabia is centrally placed which makes it easily accessible by any investor in the MENA region.

In addition, its geographical location provides an easy access to export market in various destinations. This makes it more attractive to foreign investors. Manufactured end products can easily be transported to the neighboring countries without any hindrance. The geographic location of Saudi Arabia also opens its market to emerging economies in Asia and Europe.

The level of current and future demand is very high making the region more attractive to investment. For instance, according to Al Adhami (3) the population of Saudi Arabia is expected to be twice the current population by 2050. The double increase in population shall affect the countrys buying power and size perspectives.

This could make Saudi Arabia the largest economic hub of the GCC region and the fastest growing economy owing to the increased buying power. Therefore, the country has a potential for future growth in terms of an increase in market demand. Saudi Arabia is a growing market which makes it even more attractive to investments.

Market viability is an important component which is considered before investing in a new market. According to Thompson (177), a market viability analysis is not limited to the market environment, distribution, competitors and availability of similar products. Saudi Arabia is the largest economy in the region which makes it sustainable to investors and consumers (CIA 1).

In addition, Saudi Arabia is a potential market and its large size makes Saudi business enjoy from large economies of scale. Foreign inventors benefit from well developed value chains and business clusters which makes it a viable market to invest into. Other sectors such as energy and transport are well developed and hence enhance the rate and degree of production.

Works Cited

Al Adhami, Saad n.d., Saudi Arabian Construction Market. Web.

CIA 2012. Saudi Arabia. 2012. 2012. Web.

Euromoney n.d. International banking finance and capital markets news and analysis. Web.

Ross, Marc Howard. Psychocultural Interpretations and Dramas: Identity Dynamics in Ethnic Conflict. Political Psychology 22.1 (2001): 157-178. Print.

Thompson, Allan 2005. What are the dimensions of business viability. 2005. Web.

Introduction

Over the last few years, the Australian economy has performing poorly. This is despite of the policy makers efforts to maintain a highly performing economy. Due to poor performance, many activities in this economy have deteriorated.

When an economy is performing poorly, the government is unable to provide public services effectively. The level of unemployment also goes up (Mankiw 2011). Therefore, this condition poses a major issue in Australian economy.

There has been an increase in the financial obligations owed to non residents by the country. High financial obligations of an organisation to the non-residents contribute to an increase in the external liabilities levels (Stern 2007). There has also been an increase on the real assets in the country that are owned by non-residents. These are the main reasons why there has been an increase in the external liabilities in Australia.

Due to the increase in the level of external liabilities, more cash is flowing from the Australian Economy to other economies. As more income out flow, the balance of payment of the country deteriorates i.e. it will be moved towards the deficit.

Discussion

There are several factors that have led to the poor results in the Australian economy. One of the main factors, which have significantly contributed to this problem in the country, is external liabilities. Australia has a significant level of external liabilities. These have failed over the previous years. This has threatened the performances of the economy. It has led to poor performance of this economy.

In most cases, the global crisis adversely affects the economies with huge external liabilities (Stern 2007). Australian economy has been adversely affected by recession due to large external liabilities. Due to large external liabilities, the economy slows down as a result of recession. In other words, many economic activities are adversely affected by recession when an economy has large external liabilities.

The countries with large external liabilities in most cases have a tendency to have more depreciated exchange rates (Arnold 2010). On the other hand, countries with net foreign assets tend to have more appreciated exchange rates.

Having significantly higher levels of external liabilities, the Australian exchange rates depreciate. It therefore becomes expensive for the country to import from other countries. For instance, it becomes expensive to import technology and other capital goods that may be useful in production. This can adversely affect the total GDP in the economy.

Balance of payment accounts and the International investment position.

From the above statistics, it is clear that the economic conditions in Australia has been facing difficulties in 2010/2011 economic years. For instance, the current account has been running at a deficit. The balance of current account was -8 829 on June 2011 (Australian Bureau of Statistics 2011).

The above statistics reveals that there are negative net transactions between the Australian economy and other economies. However, Australias international debt level has been decreasing over the recent past.

Conclusion

This discussion has clearly shown that high levels of external liabilities have adversely affected the Australian economy. More income is flowing from the economy to other economies at a higher rate than inflows. As a result, there is depreciation of the foreign exchange.

This makes it expensive for the country to import from other economies. The economy also becomes more prone to effects of recession when it has large external deficits.

Reference List

Australian Bureau of Statistics. 2011 Balance Of Payments and International Investment Position, Australia. Web.

Arnold, R.A. 2010. Macroeconomics. New York, Cengage Learning.

Mankiw, N.G. 2011. Principles of Macroeconomics. Mason, OH, Cengage Learning.

Stern, R.M. 2007. Balance Of Payments: Theory & Economic Policy. U.S.A., Transaction Publishers.

Abstract

The mandate of this paper is to offer advisory opinion on international investments to Content Cow Dairy Inc. given by Alexander and Kravis (A&K). The core mandate is to explain what is meant by investments and portfolio diversification. The key objective is to establish reasons why it is advisable to have foreign investments, particularly, in Egypt where the firm seeks to invest. In addition, it will explain the risks associated with international investments. Direct foreign investments

Direct foreign investment is defined as the process by which a firm in some particular country seeks to increase its production capacity in other regions. It implies increasing production in other regions after succeeding in its parent country. It offers solace to any firm that seeks to have portfolio diversification with an aim of reducing risks that may arise.

It involves the inflow of investments by the firm seeking to boost its market share in other regions. The investment is a sum of short- and long-term capital, normally manifested in the balance of payment.

In this regard, Content Cow Dairy Inc. can use several avenues presented by foreign investments to increase its market share. It is advisable that companies like Content Cow Dairy Inc. take advantage of their massive technological know-how and influence the market. Once a company has excelled in offering quality products and services within its locality, it should consider moving

Offshore and replicate the same. This is a very sane way of reducing the risks associated with having all the investments within the same locality. Similarly, Content Cow Dairy Inc. has excelled in offering quality products in the local market, it can replicate them in Egypt .This is because the country has not fully benefited from technological advancement in as far as milk and its products are concerned.

The above discussion justifies the reason why foreign direct investment is a proper way to have portfolio diversification.

Foreign investments

As explained below, it is advisable to have foreign investments. A company that enjoys comparative advantage should consider making use of it. This can be done by investing in other countries that are under utilized. (Strachman et al, 2010)

Similarly, the returns can be sustainable owing to the fact that few international companies have ventured into the country. Content Cow Dairy Inc. just like any other company must make use of their capacity by investing in underutilized markets. By so doing, they will be increasing their revenue. On the same note, they will be reducing their risks. This is the essence of portfolio diversification for any company. The technological advancement of Content Cow Dairy, Inc. means that it can competitively fight for its place in that market.

A company can diversify its portfolio if the prevailing market condition is unfavourable. By investing in other markets, it will be in a position to either maintain its income or increase its income. It should move to other countries that have not been fully utilized.

The USA currently has a volatile market. This is attributed to numerous companies that have continuously offered stiff competition to Content Cow Dairy Inc. Therefore, it is imperative that the firm diversifies to avoid any future risks attributed to having all the investments in one country. (Hagin, 2004)

Portfolio diversification enables a firm to invest in other markets once it has fully exploited its current market. This will increase the revenue of the firm.

Content Cow Dairy Inc. needs to invest in other countries because it has fully exploited the USA market. On this note, it is advisable for the firm to invest abroad to continue enjoying its enormous returns. Such an undertaking can increase the revenues beyond the current gains. (Krugman, Obstfeld & Melitz 2007)

Risks of foreign investments

These are basically divided into two; economic and political. Political aspects are concerned with political well-being of the country. Many countries including Egypt have had their share of challenges. These problems can pose threats to firms that have invested in these countries.

For example, recently, Egypt had political challenges that saw the impeachment of the former President. The calamity impacted negatively on the foreign firms in the country. Political instability can influence the productivity of foreign investments. They lead to uncertainties that are not very good for the firms. (Strachman et al, 2010)

Foreign investments can be affected by poor tax regimes in the foreign world. Lack of deep knowledge of these markets, can affect the returns of the investors. Poor human resource in the regions can also offer a blow to the firms.

Unfavourable Economic condition is one of the risks associated with investing internationally. It makes the business environment volatile. The result is less revenue from the business. Content Cow Dairy Inc is likely to face challenges in Egypt because of pre- and post-Arab world crisis in the country.

These factors could lead to the firm failing in its quest to invest internationally. A country must look at the Gross Domestic Product of the potential market. Additionally, the foreign market must have sound financial and good institutions. A disadvantage of having foreign investments is because the other country may have weak institutions that can bring loses. (Hagin, 2004) Methods for investing in an international market

Content Cow Dairy, Inc. faces different parameters that can be used to foster its international investments. To start, the firm can venture in the market through intermediaries. Alternatively, it can have a direct entry. Unless the firm has enough knowledge about the country, the best strategy is to use direct entry.

Content Cow Dairy, Inc. has to know the best sourcing method in such a case. The company is faced with different alternatives; it can opt to buy or make the goods. It, therefore, means that the firm can either import raw materials or buy locally produced raw materials.

Another important thing is how to invest in the country. The firm can have acquisition or joint venture. On the same note, the firm can decide to have a global partner. The best alternative is to have an acquisition. It can acquire the firms that are not performing very well in the country and the region. Similarly, firms can adapt and conform to the right footing as a strategy. A firm can also decide to lower its price or modify the products existing in the market. Another strategy is to make use of technical innovation (Hagin, 2004).

A firm can penetrate into the market, by adopting good strategies. The firm can offer quality but affordable products. This is possible because of the technical know-how that the firm possess and the economies of scale. Egypt has good infrastructure that makes the production of milk possible. The tax regime is also favourable. It is advisable to be aware of the market before investing.

Conclusion

Portfolio diversification is crucial for the economic growth and development of the entire globe. Furthermore, it can foster peaceful coexistence between different countries.

References

Hagin, R. (2004). Investment management portfolio diversification, risk, and timingfact and fiction. Hoboken, N.J: Wiley.

Krugman, P., Obstfeld, M. & Melitz, M. (2007). International Economics: Theory and Policy. New Jersey: Prentice Hall PTR.

Strachman, D.A., & Bookbinder, R. (2010). Fund of funds investing a roadmap to portfolio diversification. Hoboken, NJ: John Wiley & Sons.

In 1992, Okun gave two empirical associations linking the unemployment rate to real output, through simple equations. This association obtained the name Okuns law. This paper describes the associations that get described as Okuns law. The two associations of Okun stem from the examination that additional labor becomes required to create more products and services in an economy.

Additional labor can emerge from various approaches, such as making employees work for more hours or employing more personnel. Okun supposes that the rate of unemployment can act as a valuable review of the quantity of labor that an economy uses (Cuaresma 439). The following is a discussion of Okuns law versions.

The Difference: First Relationship

This first relationship demonstrates the way change in the rate of unemployment between quarters shifts with quarterly increase in real output. The version can be explained by the following equation.

Change in the rate of unemployment = a + b (Real output growth) (Prachowny 333).

This association can be referred as the difference version of Okuns law. The association demonstrates the simultaneous relationship between changes in unemployment and the expansion of output. This is how expansion in output diverges concurrently with movements in the rate of unemployment. The factor b gets referred as Okuns coefficient. We would anticipate a negative Okuns coefficient, in order to associate swift output growth with a declining rate of unemployment. Conversely, a negative or slow output increase can be related to an increasing unemployment rate.

Knotek (75) used quarterly information from the 2nd quarter of 1948 to the 4th quarter of 1960, to estimate the equation above, and he established several facts, as discussed below.

Unemployment rate Change = 0.30  0.07 (Real output growth) (Knotek 75).

Going by this approximation, a real output growth of zero in a certain quarter became related to a rise of 0.3 percentage, in the unemployment rate, during that quarter. The increase in rate of output, invariable with a stable rate of unemployment, was slightly above 4%.

The figure of Okuns coefficient indicated that every percentage point above 4%, of real output growth, became related with a decrease in the rate of unemployment of 0.07 % point (Knotek 75).

The gap: Second Relationship

Whereas difference Version depended on readily available macroeconomic statistics, Okuns second relationship linked the unemployment height to the gap amid actual output and potential output. Okun tried to discover the amount that the economy would generate, in potential output, under circumstances of full employment. Okun thought of what he deemed, an adequate, low unemployment level, to create as much as feasible without creating lots of inflationary force, in full employment.

Also, Okun thought that a high unemployment rate would, characteristically, be linked with redundant resources (Cuaresma 439). We would anticipate the actual rate of output to be less than its potential, in such a situation. An extremely low rate of unemployment became linked to the opposite scenario. Therefore, the gap version of Okuns law takes the form illustrated below.

Rate of Unemployment = c + d (Cuaresma 445; Knotek 75).

The c, which is a variable, may be construed as the unemployment rate related to full employment. So as, to follow the above intuition, coefficient d should be positive.

Full employment and potential output cause setback since both are not directly visible macroeconomic statistic. Particularly, they make a room for substantial elucidation on the side of the researcher.

Production-Function

Okun formulated the production-function versions after realizing another fault in his suggested relationships. He realized that the rate of unemployment was an alternative variable for the entire approaches in which output got influenced by redundant resources. This consideration founded production-function versions of Okuns law, which usually merges a hypothetical production function to create output, using the gap-based version of the law.

The Dynamic

At some point, Okun made observations that both current and previous output could affect the present height of unemployment. Within the difference version of Okuns law, this means that several related variables must have faced elimination from the right part of the equation.

At present, several economists employ a dynamic version of Okuns law, basing on this submission. Variables on the right part of the equation, in a regular structure for the dynamic version of Okuns law, should include past real output growth, current real output growth and past changes in the rate of unemployment (Knotek 77). The variables can then elucidate the present change in the rate of unemployment on the left part.

In conclusion, Okun law has several versions. The first version demonstrates the way change in the rate of unemployment between quarters shifted with quarterly increase in real output. This first version depends on readily available macroeconomic statistics. Conversely, Okuns second relationship links the unemployment level to the gap amid actual output and potential output.

The dynamic version holds the principle that both current and previous output can affect the present height of unemployment. Lastly, production-function versions of Okuns law, merges a hypothetical production function to create output, using the gap-based version of the law. These versions keep away from entailing powerful and, occasionally, contentious assumptions concerning the description and calculation of full employment and potential output.

Works Cited

Cuaresma, Jesus. Okuns Law Revisited. Oxford Bulletin of Economics and Statistics 65.4(2003): 439451.Print.

Knotek, Edward. How Useful is Okuns Law? Economic Review (2007): 73-103. Web.

Prachowny, Martin. Okuns Law: Theoretical Foundations and Revised Estimates. Review of Economics and Statistics 75.2(1993): 331336.Print.

Political/Regulatory Environment

The Canadian government is committed at ensuring that the country attains a high rate of economic development. Consequently, it promotes the establishment of businesses in different economic sectors¹. One of the ways through which the government attains this goal is by ensuring that entrepreneurs access permits and licenses easily to run businesses. Additionally, the government has instituted strong regulations aimed at fostering effective business operations by incorporating regulations aimed at protecting customers, for example by ensuring that customers are offered healthy food, safe equipment, and facilities. Ontario Camping Association is also committed at ensuring that competitors do not engage in unhealthy competitive practices, and this aspect has played an important role in ensuring that Camp Wahanowin operates in an effective business environment.

Demographic Environment

Businesses have to ensure that they are effective in targeting their customers². One of the factors taken into consideration relates to the societys demographic characteristics. In the course of its operation, the camp has mainly targeted children both in the domestic and international market.

Social-Cultural Environment

In their decision making process, consumers are influenced by friends and relatives to purchase a particular product or service³. In the course of its operation, Camp Wahanowin has managed to offer high quality camping services. The firms management has effectively developed a strong market reputation.

The management team is also cognizant of the prevailing cultural diversity⁴. Consequently, it has designed the camp in such a way that individuals of diverse cultural background can patronize the facility. The facility has also managed to nurture a positive perception amongst customers. By ensuring that customers attain a high level of satisfaction, the facility can enhance market awareness⁵. This assertion emanates from the fact that customers spread the information to their friends and relatives through the word of mouth.

A large proportion of domestic and international campers have developed a positive attitude towards the camp, which has resulted from the effectiveness with which the camp provides unique services to campers. For example, the camp provides campers with an opportunity to connect with their friends. By targeting children and ensuring that they derive a high level of satisfaction, the Camp Wahanowin has managed to influence parents to consider taking their children to the facility.

Economic Environment

The prevailing economic environment determines the profitability of a firm⁶. Intense competition in a particular industry shrinks the market profitability. In the course of its operation, Camp Wahanowin faces a major challenge emanating from the intense competition. The competitive pressure faced by the firm emanates from the high degree of market saturation. Some of the major industry players include day camps and residential summer camps. Additionally, the emergence of summer travel business and the high rate of market consolidation through the formation of partnerships have also contributed towards the increment in the intensity of competition. Assessing the economic environment is vital in an effort to incorporate effective competitive strategies⁷.

Natural Environment

Considering the high rate of climate change, it is paramount for businesses to operate in an environmentally sustainable manner⁸. One of the ways through which the firm can achieve this goal is by ensuring that the activities conducted within the campsite do not contribute to environmental pollution. By caring for the environment within which it operates, the firm will be successful in creating a positive perception of the society within which it operates, which will culminate in improved social responsibility.

Technological Environment

Technology is one of the elements that can enhance the competitiveness of a firm⁹. Firms can use technology to improve their competitive advantage. As a result, they will be in a position to survive in the future¹⁰. In the 21^st century, the Internet has emerged as one of the most important technological assets that a firm can exploit in order to succeed in the international market¹¹. For example, a firm can use the Internet to improve the market awareness of its products and services. Despite the opportunity presented, Camp Wahanowin has not utilized the Internet effectively. Its website has not been updated for a considerable duration. Additionally, the firm has not incorporated Internet marketing in the course of its operations.

Situational Analysis

Bibliography

Berger, Eliud. The talent management: creating organizational excellence by identifying, developing and promoting your best people. Oxford: McGraw-Hill, 2010.

Burgemeister, Simon. Market analysis. New York, GRIN Verlag, 2008.

Dowling, Peter, and Marion Festing. International human resource management: managing people in a multinational context. London, Thomson Learning, 2008.

Gitman, Lewin, and Charles McDaniel. The future of business: The essentials. Mason Cengage, 2009.

Kakabadse, Andrew. Leading smart transformation: A roadmap for world class government. Basingstoke: Palgrave McMillan, 2011.

Meiners, Roger, and Edwards Frances. The legal environment of business. Mason, OH: Cengage Learning, 2008.

Needle, David. Business in context: An introduction to business and its environment. London, 2004.

Paludi, Michelle. Managing diversity in todays workplace; strategies for employees and employers. Santa Barbara: ABC-CLIO, 2012.

Peter, Michelle. Technology in the 21^st century. London: Sage, 2003.

Thompson, Russell, and Linda Russell. Strategic planning 101. ASTD Press, Alexandria, 2006.

Footnotes

1. Roger Meiners and Edwards Frances, The legal environment of business (Mason: Cengage Learning, 2008), 54.
2. David Needle, Business in context: An introduction to business and its environment (London: Thompson, 2004), 76.
3. Eliud Berger, The talent management: creating organizational excellence by identifying, developing and promoting your best people (Oxford: McGraw-Hill, 2010), 34.
4. Michelle Paludi, Managing diversity in todays workplace; strategies for employees and employers (Santa Barbara: ABC-CLIO, 2012), 54.
5. Russell Thompson and Linda Russell, Strategic planning 101 (ASTD Press, Alexandria, 2006) 111.
6. Phillip Kotler, Marketing management, millennium edition (New Jersey: Pearson Education Publishers, 2000), 76.
7. Simon Burgemeister, Market analysis (New York: GRIN Verlag, 2008), 42.
8. Andrew Kakabadse, Leading smart transformation; a roadmap for world-class government (Basingstoke: Palgrave McMillan, 2011), 54.
9. Michelle Peter, Technology in the 21^st century (London: Sage, 2003) 85.
10. Gitman Lewin and Charles McDaniel, The future of business: The essentials (Mason: Cengage, 2009), 34.
11. Peter Dowling and Festing Marion, International human resource management: managing people in a multinational context (London, Thomson Learning, 2008), 234.

Demand refers to a specific quantity per unit time which a customer is able and willing to buy at an alternative price while other factors are held constant (Slack, Chambers & Johnston, 2010). This study focuses on two types of demand which are dependent and independent demand.

Dependent demand has its aspects foreseeable or predictable. It depends upon specific factors which are clearly knowledgeable to everyone and can be controlled by the firm (Slack et al, 2010). For example, if a publishing companys previous demand forecast shows that 5000 books are sold each week, then the firms production team is able to produce these books because they are sure that the market demand depends upon their production schedule (Slack et al, 2010).

Independent demand refers to the aspects which the firm is not able to control. It comprises of; government policy, climate change, cultural beliefs and change in tastes and preferences.

For example if a multinational company manufacturing pork may decide to launch new investments in a country where pork consumption is considered a taboo and although this company may be doing a very good job, the cultural beliefs can become a constraint to its operations since the firm has no control over the aspects of culture. Furthermore, the government policy has to be considered especially in cases where a specific commodity is considered to be illegal.

Scheduling of demand enables the firm to be able to predict possible outcomes of results based on the distinct types of demand. The aspects considered in preparing a schedule of demand are the price of the product and the quantity demanded at a given time (Slack et al, 2010). In the case of dependent demand, scheduling acts as an aid in ascertaining the demand needs of the customers in a specific time frame.

Scheduling of demand does not have a significant impact in the case of independent demand because its aspects are unpredictable. For example, a company producing umbrellas cannot predict the weather patterns and hence it is not possible for the company to know when it will rain so that they produce a lot of umbrellas. Therefore, when it comes to the case of independent demand scheduling is not very effective. Thus, the type of demand considered has a very massive impact on the process of demand scheduling.

The bill of material refers to the specific constituents needed to be able to produce a specific commodity and it is essential since the firm cannot meet its demand if the raw materials needed for production are not available (Slack et al, 2010).

The availability of raw materials is of utmost importance to any firm and in most cases many firms launch new investments near regions where raw materials are easily accessible. For example, a sugar processing company will prefer to launch investments in the areas where sugar plantations are available. This will enable the operations of the company to be swift hence the going concern of the company becomes assured.

In addition, in cases where the raw materials needed are located at distant places the firm will have to incur a lot of costs such as transport and storage so as to access the materials. Thus, in the long run these costs end up reducing the profits earned by the firm. More so, the aspects of demand are of utmost importance and if they are ignored the effects become detrimental to the firm.

Reference

Slack, W., Chambers, S., & Johnston, R (2010). Operations Management. Essex, England: Pearson Education Limited.

It is important to deteermine the effects that privatization of banks have on the general public interms of whether it makes banking services better or not. To assess how individuals from different bank sectors, both private and public, view privatization in terms of efficiency of service delivery and employment creation, a sample of 30 active individuals were investigated.

The hypothesized scenario is that privatization is seen as a tool to increase performance/efficiency and create more employment opportunities. There was a need for carrying out a study to test this hypothesis.

Data was collected from the sample obtained so as to test the hypothesis. The data was collected through use of questionnaires which provided all the required information for the test. The data contained four different variables namely privatization (Yes/No), Efficiency (Yes/No), Employment (Yes/No) and Type (Private/Public) (Klugh, 1986).

A regression analysis was carried out to determine if there was any relationship between privatization and efficiency. The test would hence prove whether privatization actually resulted to an increase in the efficiency of services rendered. The regression analysis produced the following output:

Regression Analysis Output from STATA Software

From the results obtained, the correlation coefficient for the test between privatization and efficiency was 3.61e-15 with a p-value of 0.000. at 5% level of significance, the p-value is greater than the critical value, 0.05.

Hence the correlation is significant and so we conclude that there is a significant correlation between privatization and efficiency. This simply means that privatization results to increased efficiency and hence should be embraced if there is a need for improvements in service delivery (Klugh, 1986).

The correlation coefficient for privatization and type of bank is also significant at 5% level of significance since it is less than 0.005. Hence, the type of bank, whether private of public, determines the views pertaining to whether it is important to privatize banks (Triola, 2009).

However, since the correlation coefficient for privatization and employment, 0.215, is not signifiocant since it is greater than 0.05 at 5% level of significance, then there is no significant change in employment as a result of privatization of banks. This implies that privatization of banks cannot have a significant effect on the rate of employment.

Generally, the regression analysis has provided enough evidence to prove that the main way in which service delively by banks would be improved would be through privatization of the banks.

Since the private sector is usually characterized by more competition and advancement in technological utilization, then there is no doubt that there is improved efficiency in thquality of services provided. Therefore, it is important for all the stakeholders to seek for more ways of ensuring privatization of banks so as to improve service delivery to customers (Triola, 2009).

List of References

Triola, F.(2009). Elementary Statistics (11th ed). New York, ACM

Klugh, H. (1986). Statistics: The Essentials for Research. London: Academic Press.

Zakat is among the key pillars of Islam. It requires all Muslims to contribute some portions of their wealth, either in cash or in kind, to needy persons. As a result, the government and other several stakeholders have embarked on offering simple methods for many Muslims to pay their Zakat. Specifically, Muslims can contribute from their homes, offices, bank ATMs, or anywhere they are in the world. The system allows even farmers to contribute with their date harvests. This essay monitors the growth, contribution, and disbursement of Zakat Fund.

Zakat Fund is an autonomous federal agency that spearheads and centralizes collection and payout of Zakat throughout the UAE. In order to achieve its mission of fostering the role of Zakat among Muslims, Zakat Fund has developed an online platform, which allows users to calculate and remit payment too. Moreover, the online platform also has a dedicated Zakat Fatwa to assist users with all questions related to Zakat. The online payment option is also available to donors globally. Users can also use their mobile phones to contribute to the Fund or they can make direct deposits into the Funds bank accounts with different Muslim financial institutions. Zakat Fund has embraced social media for communication as it has both Facebook and Twitter accounts for users (@zakatuae).

Zakat Fund is a social welfare fund. As a result, the fund assists needy people in the society. In 2013, Zakat Fund spent over Dh 24 million to assist 10,000 needy people in the UAE within two months (Salem, 2013). In the month of July and August, Zakat Fund officials offered financial help to students, the sick, and other people in debt or with meager earnings among other deprived members of the society. On the same note, Zakat Fund, Abu Dhabi University, and Abu Dhabi Islamic Bank started a fund-raising project to raise money for 300 needy students (Swan, 2013). ADCB Islamic Bank has taken this opportunity to extend its corporate social responsibility by providing an online channel for customers to contribute toward their Zakat and support other charity organizations. The bank has launched this program by collaborating with the Zakat Fund.

Zakat Fund introduced several innovative ways of collecting Zakat. As a result, revenues from Zakat have increased significantly. For instance, by August 2012, Zakat Fund had collected Dh 75.83 million. This represented an increment of six percent relative to a similar period in the previous year. Fund officials have attributed such growth to extended supports from Islamic leaders, rulers, ministers, the UAE Armed Forces, and donors. Zakat Fund also embarked on public education regarding its aim. It distributed 20,000 brochures, sent 16,000 text messages, and used radio advertisement to reach older generation. As a result, the number of people who contributed through Zakat Fund increased. Fund officials also note that payment options are credible, which has led to several contributions.

These efforts have resulted in increased collection of Zakat. Consequently, the numbers of needy people and beneficiaries have also increased. However, Zakat Fund officials must evaluate all cases of potential beneficiaries to ensure that they are genuine. The essay has evaluated Zakat Fund and noted that the organization has grown in terms of revenue collection and disbursement. This has happened due to efforts, which focused on creating awareness about the Fund, educating people, collaborating with donors and Muslims globally, and getting support from leaders. The ease of payment and credibility of payment options have also facilitated contribution to Zakat Fund.

References

Salem, O. (2013). 10,000 benefit in the UAE from Dh24m Zakat Fund payouts. Web.

Swan, M. (2013). Dh15 million Zakat Fund campaign to support 300 needy students. Web.