Category: Forecasting

Introduction to BNP Paribas group

The BNP Paribas had been established in 1999. This was after the merging of Paribas and BNP in which later on, became the longest-serving in Europe’s stock market with a market capitalization of about 80,000 employees. In the year 2000, the company was essentially operating in France despite having various operational sites in more than 80 countries.

BNP Paribus has tremendously evolved in the last ten years due to the technological advancements in the market, highly competitive market environment and also the invention and innovation in the industry. The modification has been done with success as they have been able to seize the various opportunities they come across with the full focus of their strategic goals. The company, in order to realize its strategic goals, has been in dire focus on mitigating the balancing of the business mix, cost-cutting on the various projects undertaken and also the management of various risks involved by the risk management personnel.

In the current years, BNP Paribus has emerged as the largest bank in the eurozone with the largest employee turnover of approximately 200,000, maintaining the top-tier status and also setting the global footprints for other companies and banks to emulate. Currently, BNP Paribas has four domestic markets including Italy, France, Luxembourg and Belgium and this has been inherent in turning the bank into more solid with a magnificent human touch.

In the year 2007, various financial institutions globally had been affected by the economic recession and many of the institutions collapsed. This mitigated the public trust in the various banking institutions and, therefore, the customer turnover declined. Central Banks in various countries had to intercede in order to restore public confidence in the banking institutions. France was among the countries that intervened, and its main intention was to provide the banks with the amount of currency needed in order to prevent credit evaporation. After the crisis had been solved the unemployment and economic deterioration followed in many parts of the continent.

BNP Paribas, during this economic crisis period, focused on its development model which will be aimed at customer satisfaction. The model also focused on risk management techniques, genuine flexibility, and the business portfolio balance. Within these three years BNP Paribas, using the development model, was able to survive the dire economic eventualities and were able to make profits. This enhanced the Group in increasing its market shares in different parts of the world in relevant to cementing its ambitions in Europe in accordance with its strategic goals. Recently the Group has been able to complete the various cross-border dealings by the acquisition of the Fortis Banque and BGL. This acquisition has marked a tremendous increase in the Group’s market share, and also in accomplishing its main objective of helping its clients in realizing their goals.

In accordance with this integration that is the acquisition of BGL and Fortis Banque, the bank now dominates in the European banking sector and is the largest deposit bank in the region. The bank currently has a deposit of EUR 450 billion and has got over 100 Production Centers in more than 25 countries. In the course of 2009, BNP Paribas employees worked tirelessly in order to achieve the desired company potentials. The staff efforts had been realized as they were able to, almost, double the share price of the Group in a year and this had an upper hand in retaining the shareholder’s confidence. This was shown when in October 2009 the share issue was successful, and the Group was able to repay the government funds, and also set up the capital in case of future economic and financial imbalances.

Despite the various economic imbalances in the year 2009, the Group performance was extremely well as it registered a 93% rebound in the net income to an equivalent of EUR 5,832. This was the effect of the dire efforts in which the employees were employed. The Retail Banking Industry was faced with severe hiccups from the effects of the global recession, but it was well managed. The main intent of the strategy deployed by Retail Banking is to team up the various resources and the technological know-how of BNP Paribas in the whole of its retail banking. The BGL and Fortis Banque operations have been well consolidated into the Group without the negative consequences; this has been facilitated by the well-organized Retail Banking sector.

French Retail Banking has been the key factor in ensuring that the Group meets its core commitment of providing French clients with Finance. The sub-sector has utmost 31,000 employees and who enabled the success of the companies operations. This increased the number of loans given to individuals by 5.3% and that to Companies increased by 3%.

In that year, personal finance impeccably demonstrated tremendous flexibility and was able to, wholly, offset the increasing cost of risk management due to the increased gross income. Various emerging markets faced an adverse effect on their operations due to the importunate weak economy of Americans and the consequent economic recession of Ukraine. The BNP Paribas and the BGL BNP Paribas both had a group contribution of EUR 708 million to their net income. This outstanding contribution saw various market groups renewing their sales momentum. For instance, Belgian Retail Banking experience high-client turnover following the launch of new and popular marketing campaigns in the mid of 2009. Luxembourg retail banking faced reasonable growth in both deposits and loans.

In that period of 2009, Investment Solutions increased due to the remarkable global crisis resistance. The net inflows in all the main businesses increased to EUR 25.5 thus bringing up the rate of the asset inflow annually to 5.1%. These were entirely the assets under the Group’s management. On the other hand, Corporate & Investment Banking (CIB) boosted the overall Groups profits due to stability in the market conditions. However, the main incentive deployed by CIB in the realization of its goals is the devoted efforts of the employees in which they were involved in the rescaling of the various risky undertakings, controlling of various inherent costs incurred, and majoring its focus on the company’s product line. These undertakings enabled the CIB to, globally, return to stability and enhance the BNP Paribas’ overall profit to increase. This most achieved performance is well articulated to the diversified operations and the quality of its operations, the clients’ strength and the ease in adaptation to the con-current change in the market conditions.

Although the Group is perceived to be among the banks which was able to endure the economic crisis, various measures to curb future economic imbalances have been put in place by the bank. This positive measure undertaken focuses entirely on the payment basis of its traders. The reforms that have been undertaken incorporate the new and emergent standards, set out by G20 which in turn reveals the inherent compensation strategies for its employees.

The main challenge facing BNP Paribas is the rebuilding of the Banks’ image and rapport which had initially been affected by the economic recession. To curb this, Group is intensifying the regulations but to the limit to which it can finance its clients. The Group is also being involved in convincing customers and shareholders of their role in the economic recovery and also the economic growth.

The Group’s development model has its basis on balancing its various businesses, that is, CIB, Investment Banking and Retail Banking in order to acquire permanent customer satisfaction. This is done by the combination of various cost control policies and risk management techniques. Currently, Retail Banking generates at least EUR 18 billion on its annual revenue and with this, they have an intention of rolling its incorporated model by the diversified knowledge sharing and the joint investments undertaken. The CIB business model is majorly focusing on customer initiatives. It aims at expanding its operations in various countries and also on the leadership positions in various parts of Europe, and also encourages tremendous growth in the Asian market. Finally, Investment Solutions is planning in boosting its cross-selling to various retail branches available domestically and also win new customers in the industry.

The other challenge facing the BNP Paribas is the integration of Fortis Banque as this will increase the scale of its operations as a whole. In essence, the merger will have an impact on the company’s asset management, insurance strategic partnership, other private banking operations, and also the company’s security expansion. They also focus on the penetration of its market to the interior of the Asian market in order to have a wide market or consumer base. This will go along the way in the realization of the company’s strategic goals. The BNP Paribas has had a close relationship with its clients over the past years. This enabled the Group to realize a fair, competitive advantage which was the profound factor in the process of weathering the economic crisis that was impacted in the latter years. The clients’ trust has been well endowed, and this has been built by the inherent quality products and services provided by the company. The Group’s capital outlay has doubled since the time it experienced the economic crisis. This has been facilitated by the company majoring on the expansion of its sales, restoration of public opinion concerning banks and also the creation of the shareholders’ value upon their investment undertakings.

The major strategies in which the company has been deploying are; balancing the business mix, cost-cutting on the various projects undertaken and also the management of various risks involved by the risk management personnel. The company, upon focusing on these strategies will be able to undertake its operations successfully in the future. For instance, as the various new marketing concepts are being effected in the banking sector like the technological advancement, there will be an increased client or customer turnover and, therefore, increase its operations. The increase will have a consequential effect on the risk exposure on the business. This will be easily catered for by the available risk management personnel. Thus, the company will be able to perform various risky undertakings in order to increase its revenue outlay without any fear of running at a loss.

The balancing of business mix will encourage the company to be able to meet its mitigation and also satisfy the various clients with ease. The deployment of various business activities to various parts of the country will encourage the company’s prevalence of maximizing its revenue and, therefore, able to meet its strategic goals with ease. The enhancement of the cost-cutting initiative will provide the company with an efficient base of providing for its clients with ease. For instance, this will go along the way in the minimization of the various inconsequential costs incurred by the company. The company will be able to realize its financial stability and, therefore, combat any financial and economic crisis that it will face in the near future and by doing so it will realize its strategic goals with ease.

In general, the BNP Paribas will be able to deal with the future economic crisis upon the implementation of the various strategic undertakings. This will make the company compatible in the future with any inherent and adverse economic conditions that may prevail in the economy. However, the competitive nature of the Group as a whole will be facilitated by the increased strength in the domestic financial market. This will enhance the implementation of the value-risk pricing model which enhances capital allocation efficiencies and also generate a high revenue growth rate. The implementation of cross-selling value-added products in the Group will provide significant growth in the business sector which will enhance the corporate strategy of trade finance, cash management, fixed income and structured finance.

Financial Values Analysis

The company’s financial performance in its third quarter of the year 2010 was at par, and the performance was by far better than its performance of the previous period that is the year 2008 and 2009. The company’s net profit was reported to be EUR 1.9 billion in the third quarter of 2010. This was an increase of by 46% from the previous year’s third-quarter profits. The performance was majorly articulated to the cohesive work of the employees which saw the company participating actively in the real economy financing. The decline in the cost of risk (by 46.9%) was also a vital incentive that had an upper hand in the high-profit realization; this was due to the active risk management personnel. The Groups’ business model also encourages profit maximization with the intent of high-consumer turnover, which encouraged the revenue increment.

The revenue for the third quarter of 2010 was 10,856 which was high by a margin of 1.8% to that of the previous years’ 2008 was 27376 and 2009 was 40191. Despite the inconsistent in the operations of the three businesses, the fall in the CIBs’ Revenues compared to the previous years’ quarters was offset by the concurrent increase in revenues for Investment Solutions and Rail Banking.

The debt revaluation in this quarter was less negative compared to that of the previous period (-110 and – 308 for the third quarter of 2010 and 2009 respectively). This was due to the impact of restructuring costs on the integration of Fortis and also the costs incurred by CIB, as in the previous year it was not put into consideration, as it was seen as less significant at that period.

The pre-tax income was reported to be EUR 3,151 million which was an increase in the previous period by a margin of 28.9%. This was facilitated by the increase in income for Retail Banking which had the income contribution from the other businesses to balance.

For the analysis of the first nine months up to September this year, the Groups’ revenue rose by 11.4% to EUR 33,560. The gross income for the period rose by 7.7% from the previous years’ nine-month period. This was due to the constant exchange rates and its scope experienced by the company. The cost of risk reduced sharply by 43.7% to a value of EUR 3,640 this also enhanced the increase in the Net Income which is attributable to shareholders by 40.9%. The increase has provided for a solid base for the Groups’ capital outlay and the inherent strength in the capability of generating future capital.

The EPS was EUR 5.1 in the period 2010 compared to EUR3.7 of the previous years; 2.99 in 2008 and 5.20 in 2009, and the annual Return on Equity (ROE) was approximately 15.4%, which was an, increase from 13.2% in 2008 to 6.6 while in 2009 10.8from the previous period. This shows that the company is able to have an increased capital outlay from the issue of its shares, and can finance its undertakings with ease without any financial constraint. This shows how the investors have been fairing in regard to the investment in the BNP Paribas Group this shows the firm’s financial performance.

The merging between the BGL BNP Paribas and the BNP Paribas Fortis for the benefit of the Group is being carried out with ease across the various business functions, units and territories. The business operations are confined under one initiative and, therefore, enhancing the ease in the managerial implications and also the allocation of resources to different undertakings.

In general, the analysis for the cost of risk and the revenue outlay of the financial performance of different business operations in the group is analyzed as follows;

The information is for the third quarter of the year 2010 and the percentage increase or decrease from the third quarter of the year 2009.

The revenue for the other group divisions is analyzed as follows;

The group’s divisions’ revenues increased tremendously for the previous period revenue due to the management competency and the deployment of various competent employees to the various operational units. The investment solutions posed a high-revenue outlay due to the management diversity on the business mix implications. Despite the inherent decline in the quantity of the transactions involved in this division, the asset management revenues stabilized as there were highly efficient performances from the private banking and the resilience of the investment banking. Terry Maness and James Henderson assert that the other implications that had a significant, positive impact on the increased revenue for the division prior to this period are the investor’s risk aversion nature. In essence, the investors were able to reduce the cost of risk tremendously and, therefore, the company’s pre-tax income increased (p.211).

The BancWest reported a negative change in its revenues for the current period prior to the revenue reported in the financial year 2009. The negative imposition was due to the division, the struggle in the business operations, in the new market. The business unit has been re-established in the US and; therefore, it had to incur some additional costs for it to be able to pick up with its operations. For instance, the operating expenses for the business reported an increment of 8.4% and, therefore, have diverse consequences in its revenues. The business operation also experienced a low-mortgage exposure due to the various negligible foreclosures.

Overall, the Group reported an increase in the common equity tier 1 ratio. That is from 8.0% to 9.0% in the year 2010. This implies that the Group strength financially is increasing and, therefore, in the long run, the Group can easily increase its capital outlay from the investments made. The Group’s expertise was put into a test on the integration of the two divisions into the main Group. In essence, the integration was successful and; therefore, the Group employees had much-devoted expertise to the success of the business. On the other hand, the Group’s cost of risk declined and thus the main cause for the increase in the net earnings per share for the shareholders and also the percentage increase in the annualized Return on Investment (ROE). There were also significant increases in the insurance sector on the sale of its General products. This was facilitated by the trust embodied to the Bank by the clients and; therefore, they were assured that their investment will not be taken for granted.

In the social responsibility sector, the Group had strengthened the ties between itself and the APCE and thus provided various incentives to the public in order to meet its social responsibility objective. The Group offered sponsorships to various institutions and also the issuance of awards to performing entities in the society. For instance, in the year 2009, the Group issued an award to the CRA association. This was a French initiative, and it was deemed to encourage the various investors in catapulting the resources they have.

Strategies were deployed in order to curb the 2011 challenges.

The BNP Paribas Group experienced considerable challenges during the years 2009 and 2010. The stiff competition from various upcoming banks worldwide had adverse effects on investment and also the client outlay in the long run. The Group’s financial implications were at bay as various individuals and groups had to open up financial institutions in order to attract more investors.

The Group also faced a financial constraint due to the economic conditions experienced by the whole economy. This was due to the effects left by the economic recession that faced the whole continent. Most financial institutions collapsed while others experienced tough financial constraints which led them to change the mode of their operations. The managerial instinct and its competitiveness enabled the Group to sail through these dire effects of the recession. This enabled the Group to make a profit despite the conditions prevailing. Following these economic conditions and the financial constraint facing the economy at large, various implementations have been put in place in order to curb such situations in the future. There has been advancement in the technological, and various financial instruments have been put in place in order to analyze the various economic trends that are to be followed. Many financial institutions have been established in various geographical regions in order to provide enough funding when the need arises.

The BNP Paribas Group has taken major strategies in the implementation of various policies among them are the Investment strategy, innovation, and economic research in order to come up with an efficient way of dealing with the operations for 2011.

The BNP Paribas Group observed that the financial markets faced varying problems in the year 2010. The main difficulties included the modest growth of the US economy which was more of quantitative easing than qualitative one, the peripheral countries in the eurozone faced debt crisis, and finally the over-reliance of the western economies on the government support to the extent that they could not be able to get along without their support; this condition was realized by the banking system upon the economic recession which sent most of the banks packing. Despite all these inadequacies, most of the asset classes still produce positive results, which in turn, end to reducing their volatility in the financial markets. This situation is perceived to be abnormal but in essence, the results produced by the economy are preferably normal

Concerning 2011, the various investors in the whole world, more so in the Western economies, are faced with a dilemma. The conditions for risk assets are still considerably constructive as the economies are experiencing rather gradual growth in the economy, this means that the corporate earnings will keep rising, and the financial support offered by the Central banks to the economy will enable the financial markets to prosper. This will be done by the government, through Central Banks, injecting the finances into the financial economy.

These conditions provided seem unrealizable if the government with the help of the Central bank comes into full support of the banking systems and the economy at large. Furthermore, it is not an effortless task for any business operations to keep on tranquil when, on the other hand, the business debts are rising swiftly and speculate that the various monetary policies deployed by the Central Bank will have to normalize everything. Investors will, therefore, be trapped in between the panorama of the dominant markets; in which their basics are almost relatively buoyant and those markets which endear to sharp corrections upon prompted by the structural risks in hand. This may lead to a disturbing threat in the long run.

Since the BNP Paribas Group has realized that these risks cannot pose threats in the short run, the Group has strategies in the investment of these assets, which are risky, for the whole of 2011. The Group will thus focus on only the sort cash and the long assets in the entire period of 2011 as they have been practicing in the current year. Prior to the consolidation of the November (third-quarter financial statements reporting), the Group has reduced its operations in the developed equities and has moved from the negative position to neutral. This does not prevent the Group from being observant of the emerging equities. In the bond market, the impartial position taken on the government securities denotes a more tactical weight posed on the US Treasuries; mainly as an effect of QE and the less weight subjected to the German bonds. The Group focuses on the reduction of holdings in the investment grading to neutral and, therefore, reducing their high-yield debt by a considerable margin. They have also recommended much longer domination in the dollar from the emerging external sovereign debt. On the side of the commodities, the Group focuses entirely on investment in base metals and crude oil and has done away with gold involvement.

Treasurer, CFO and General Manager should deploy innovation strategy. The changing in the market environment due to the advancement in the technological sector has proofed quite inherent for the BNP Paribas Group. This has enabled the various firms and companies to monitor the social networks and changes in the development, as this is the sure way of either increasing or decreasing the company’s future profit yield. The innovation of the BNP Paribas Group enables it to be competitive and also differentiate itself from the other business firms. This will go along the way in protecting the profit margin of the Group (Shim).

The economic research strategy, employed in 2011 by the BNP Paribas Group, will enable them to analyze the market trends and also be able to get acquainted with the changing economies. In essence, the future trend of the industry performance will be easily speculated, and the utmost precautions or developments undertaken in order to meet the Groups’ strategic goal.

References

Maness, Terry, and Henderson James. Financial Analysis and Forecasting: a software system. New York: Prentice-Hall, 1992.

Shim, Jae, and Siegel, Joel. Handbook of Financial Analysis, Forecasting and Modeling. New York: CCH, 2006.

The case of the severe toilet paper shortages during the coronavirus pandemic shows the powerful impact of a sudden imbalance created by supply chain disruptions. The total toilet paper consumption likely remained comparable to the pre-pandemic period. However, the spiking demand combined with insufficient supply stemming from the shipment delays resulted in empty shelves. The customers’ tendency to bulk-buy essential commodities in turbulent times is consistent, understandable, and thus unlikely to change. Therefore, Proctor & Gamble and other TP manufacturers should make their supply chains more resilient to disruptions and unexpectedly high demand.

This goal can be achieved through two logically connected steps. Most importantly, the TP manufacturers should break the manufacturing process down into smaller parts and analyze the costs and timings at each stage. The companies should understand how much time and funds take to purchase raw materials, manufacture goods, and arrange their subsequent packaging, storage, and delivery. The detailed knowledge would make possible forecasting and risk mitigation. Forecasting would allow a TP manufacturer to evaluate which parts of supply chains are more vulnerable and prepare accordingly. For instance, the need to stock up on virgin pulp to meet increased customer expectations would have become evident after the detailed manufacturing and distribution cycle analysis.

Consequently, TP manufacturers should diversify their supply and distribution chains in the aftermath of the pandemic. Potential restrictions imposed on international trade would likely lead to increased delivery times worldwide. As such, TP manufacturers should find domestic suppliers in order to compensate for the potential difficulties in receiving overseas shipments. In addition, the companies should provide the customers with an option of direct shipments. Selling TP directly to customers when possible would lower the pressure on retailers and maximize the number of deliveries. Lastly, manufacturers should remember the pandemic experience and prepare for the sudden shift to consumer-grade TP production. Forecasting would facilitate that process, as the companies now have the necessary data and can predict what would happen in case of another global crisis.

Forecasting future exchange rates is something that economists and investors frequently do to get monetary value out of it. There are varieties of methods for predicting the currency’s exchange rate in the future (Shah et al., 2019). The problem is that practically all of these approaches are laden with complexity, and none of them can profess 100% accuracy in deriving the precise future exchange rate. Forecasts are based on the value of a currency concerning other foreign currencies over a specific period. Brokers and organizations can benefit from using a currency exchange rate prediction to assist them in making well-informed decisions and reducing risks while increasing profits.

The efficient market approach requires that all information relevant to the underlying significance of the exchange rate be integrated into the currency’s value. This approach is used when the present asset costs fully reveal every available and pertinent data. Because of this, there must be homogenous data and sufficient liquidity for the efficient market approach to hold. According to the efficient market method, more trade volumes would result in more significant losses because market participants lack the informational advantages necessary to foresee future exchange rate fluctuations. As a result, an investor cannot profit from trading based on prior pricing (Shah et al., 2019). The Fundamental Approach is a method of forecasting that relies on essential variables about a nation, such as GDP, inflation, output, trade balance, and the joblessness rate. Ultimately, the currency’s value will be realized, which is the underlying idea. This strategy is best suited for long-term financial commitments. The currency rate adjusts based on investor sentiment in the Technical Approach. It uses a graph of the patterns to create predictions. Additionally, this approach uses positioning surveys, trend-seeking trade rules based on moving averages, and consumer flow data from foreign exchange traders.

Reference

Shah, D., Isah, H., & Zulkernine, F. (2019). Stock market analysis: A review and taxonomy of prediction techniques.International Journal of Financial Studies, 7(2), 26-34.

The making of a business plan investment proposal is an important part of the future for a company or a community. For the company, it has to do with its financial wellbeing in the future. Business firms’ objective is to generate more profit they can. A good and successful investment plan can guarantee a bright future for the company. For the communities, the plan is implemented or impacts, its stakeholders, it is a question of the future of their lives. There are certain aspects of the business plan proposal that should not be underestimated and left out.

For the coming five fiscal years the company assumes that the entertainment industry will continue to grow at the present rate and even more. The company expects that the five years sales will exceed the expectations subject to certain risk factors. Another assumption is that nobody else is offering the quality product that this company is offering in that area for the moment. Advertising is also a basic assumption of the business plan discussed. The company expects to increase advertising by 90% at the end of the five-year period and that this will allow it to be on the top preference of consumers thus attracting more clients to the museum complex. The main problem is that the assumptions do not take into consideration adequately of the risks associated with the opening of the entertainment business. In difficult financial times, it is the entertainment industry that suffers first from lack of sales (Taylor, 2006, p. 33). This is because consumers tend to save more and spend only on what they view as more necessities for the moment.

For example, if they were to visit the museum twice a month now it will be once a month and without buying the souvenir.

Thus the predicted very favorable increase in sales in such difficult financial times for the budget of many families is dubious. Also according to the plan the company has designed, the sales of tickets and souvenirs will be the basic sources of funding for the museum. There will be a $100,000 credit line open with Harris Bank but this would be only as a back-up in there is necessity. The selling of LPU’s will serve as a build up for the initial capital. But, as explained above, sales are based entirely on the financial wellbeing of the families which at the moment are suffering from the financial crisis. Thus the cash flow projected to go from $420,000 the first year to $525,000 the second and $628,000 the third is very dubious. Since it will take 2-3 years for the average American family hit by the crisis to re-begin spending again as before on the market (Simon, 2009, p. 1).

Also, in the plan we find the operating expenses to be relative low according to the company. But unfortunately reports show that for the coming two to three years the costs of certain products and services are to increase at an asymmetric rate (Houston, 2009, p. 28). Thus we can expect the cost of repair, utilities and rent to go up more than that predicted on the projected income statement. Also, the cost of advertising can go up since the company would find itself in an uncomfortable position and will have to appeal more to consumers which will be reluctant to spend money from their family budget in these times.

With sales bringing less and less cash and costs rising over the expected rates, the gross and net profit range will decrease even more. The advice is simple in this case. The plan should have included a way of cutting expenses the max possible in times when sales are expected to be hit negatively by a nationwide financial crisis. By cutting the expenses at the min level you assure that the gap with the sales will remain sufficient to have enough liquidity in your company.

Long term strategy

It is strange but when we see the plan carefully we find that the company was aware of these potential risks from the financial crisis. The basic pillar of its long-term strategy is the ongoing campaign during the five year period. Even though one can have doubts on the forecasted results in the plan that it will make possible that this company remains on top sales, still it is the correct strategy to pursue in difficult times. This ongoing advertising campaign will at least create favorable brand recognition among consumers for the museum as an entertainment park worth passing a few hours a week. This brand recognition will in turn ensure the company a good market share (Gomez-Mejia, et al, 2008, p. 4). Furthermore, it will assure the company that when the financial conditions of the consumers will improve, the sales of the company will also improve symmetrically since it already got a positive recognition in their minds. Another positive aspect of the long term strategy of the firm is the open credit line it has ensured with Harris Bank. This open credit line will ensure liquidity if necessary at a present moment of time. The critique aspect is that it has not included in this long term strategy other elements of liquidity insurance like the cutting of expenses that we discussed above.

References

Taylor, W. (2006). Introduction to Management. Ninth Edition. Prentice Hall: New Jersey.

Gomez-Mejia, Luis R.; David B. Balkin and Robert L. Cardy (2008). Management: People, Performance, Change. 3rd edition. New York: McGraw-Hill.

Houston, Ch. (2009) Credit card crisis: resolved? Mays business online. Web.

Simon, H. (2006). Administrative Behavior. 4th edition. Blackwell Publishing: London.

World Economy and France

The recent global financial crisis, also considered as the credit crunch, is a dilemma that almost collapsed the majority of the world’s leading economies. Fears of another Great Depression loomed as financial experts became divided on whether the economy can still regain its momentum or not. Some experts say that the recession that began in 2008 was worse than what happened since the Great Depression of the 1930s when the economies in Europe went stale after the effects of the First World War, affecting even the commerce of the United States. But during the Great Depression, the financial crisis was mainly concentrated on the United States and Europe In the recent financial crisis, however, the recession has affected even the strongest economies like Germany and Japan, sweeping even to the Asian region.

The recent financial crisis is a worldwide phenomenon that almost collapsed the entire financial system. Because the world markets are interconnected with each other via trade partnerships and credit, the collapse of one financial institution would result in a domino effect on other financial systems. Now, the term financial crisis is normally used to describe an event where a financial institution or a set of assets suddenly drop in value. Often, it also refers to the bursting of a bubble, a crisis in currency, a market crash, or a nation that defaults in its foreign debt. A financial crisis leads to difficult economic consequences, but it is manageable if suffered only by a single institution or asset, which, in such a case, can be considered a banking failure. However, in this recent crisis, analysts consider it a systemic financial crisis because the entire financial system is in trouble.

Macroeconomics Indicators- Banks and funds across the world have been negatively impacted by the adversities arising from the sub-prime crisis, primarily because borrowers had bought bonds and risks that were directly linked to sub-prime loans. The collapse of the home market highlighted the weakness in different ways because such debt had been framed, especially in regard to the massive risk associated with inaccurately selected risk assessment. The collapse of the US banks in the year 2008 – beginning especially with the Lehman Brothers bank – had a critical impact in triggering an era of crisis that quickly spread into the other parts of the globe as well. As a result of this crisis inter-banking market across the world has quickly dried out. this was added with the additional factors like subtler and more difficult lending conditions, higher prices of borrowing for companies to accumulate capital assets, expand and/or maintain their existing business volumes and constant collapses suffered by the stock markets. The markets reacted swiftly after the collapse of Lehman Brothers and there was large-scale redemption of asset-backed securities within a week of the collapse. Financial institutions could not provide for the over $2 trillion worth of credit that they had extended, thereby leading to problems of refinancing by wholesale funding institutions. Conventional sources of funding were not available and banks aimed at improving their financial position by reducing lending. Therefore it became very difficult to borrow across the entire world, which further led to the decline of real estate markets.

The slumping confidence of consumers, which is reflected in the business sectors as well, has become a major factor behind the consistently declining rates of Gross Domestic Product (GDP). The net results of these events have been a more than a noticeable decline in the investment areas of the corporate sector in addition to a major restocking and a compressing experience in the world trade segments as also threatening levels of deterioration in the labor markets across the world – this has been particularly true in the case of property industrial workers

Brief History on BNP

BNP is a financial institution with its headquarters in France and among the fifth largest banks in the world. They offer various products and services which include car loans, consumer loans, housing finance, educational loans, credit cards, Retail Banking, Corporate, Investment, Treasury and Wealth Management. These products and services are offered for individuals, corporate institutions and for government entities both locally and internationally. Retail banking includes a comprehensive range of financial products viz. deposit products, residential mortgage loans, credit cards, auto finance, personal loans, consumer durable loans, loans against equity shares, loans from subscribing to Initial Public Offers, debit cards, bill payment services, mutual funds, investment advisory services. These products provide an opportunity for banks to diversify their asset portfolio with high profitability and relatively low NPAs. Today, the most proactive banks have entered the retail banking segment and have identified it as a principal growth driver. They are slowly gaining market share in the retail space. For several years now, banks viewed consumer loans with skepticism. Commercial loans dominated the bank’s portfolio as they generated high net yields with low credit risk. Consumer loans in contrast involved smaller amounts, large staff to handle accounts and high default rates. They were considered substandard by the banks. Even the regulators across the globe have not encouraged consumer finance till very recently. However, over the recent past, fierce competition among the banks lowered the spreads and profitability of commercial loans. With deregulation and an increase in consumer loan rates, the risk-adjusted returns in the retail sector have exceeded the returns on commercial loans.

Competition, securitization, automation and regulation are the major forces that are driving and shaping consumer lending. Net banking, phone banking, mobile banking, ATMs and bill payments are the new facilities that banks are using not only to lure customers but also to help them reduce their total operating costs. For example, if we look at the Indian Retail Banking market, it is dominated by consumer credit. Even nationalized banks, which control more than two-thirds of the banking business in the country, are tapping retail lending with great vigor. The enormous competition has led to innovative retail banking products that are extremely customer–friendly.

The growth in retail banking has been facilitated by the growth in banking technology and automation of banking processes that enable the extension of reach and rationalization of costs. ATMs have emerged as an alternative banking channel, which facilitates low–cost transactions vis-à-vis traditional branches. It also has the advantage of reducing the branch traffic and enabling banks with small networks to offset the traditional disadvantages by increasing their reach and spread.

The retail banking industry is diverse and competitive. In addition to checking and savings account service, banks offer brokerage and insurance capabilities to manage all aspects of a customer’s financial portfolio. Attracting profitable customers from competitors is essential for long-term success. Retail banking has both pros and cons. In the present situation, the bankers have very little option, but to chant the ‘retail mantra’. Banks today face complex challenges on multiple fronts. Customer expectations are higher than ever, with growing demand for more rapid service delivery and more flexible, personalized interaction.

The bank is owned by many shareholders including AXA, SFPI, Grand-Duchy of Luxembourg, employees, corporate officers, treasury shares, retail shareholders, institutional investors, socially responsible shareholders, Europe.

Board of Directors

• Baudouin Prot- Chief Executive Officer
• Michel Pébereau- Chairman
• Claude Bébéar
• Jean-Louis Beffa
• Suzanne Berger
• Patrick Auguste
• Georges Chodron De Courcel- Chief Operating Officer
• Jan-Laurentonaf- Chief Operating Officer
• Miclonczaty- chief K Ffice
• Frédéric Lavenir – head Of Group Human Resources
• François Villeroy De Galhau- head Of French Retail Banking
• Janamon -managing director, Head of compliance and internal Control coordinator
• Philippe Bordenave -Senior Executive Vice-President, Chief Financial Officer

The Competitive position of BNP

The bank’s bank rating is among the best in the banking sector. The bank has many competitors in the international market. In France, the banking sector has been intensely competitive, but the landscape had somehow changed because of the economic problems that hit the world. However, the race is still on for who can offer lower financing, preferred rates and investment services. Because of this, it is imperative that the new executives act on behalf of the customers’ interests because the future of the bank is in the continued patronage of these customers. It is safe to assume that these new managers are aware of their beneficiaries’ expectations because these are the reasons why they have been hired for their new positions. The following is the rating of the bank

Ratio Analysis

Return on Asset- This measures the amount of profit made per value of assets that they own. It gives an idea as to how efficient management is at using its assets to generate earnings. This rate has increased from 2009 due to an increase in the total assets.

Net Interest Margin- Net Interest Margin not only indicates the profitability of the bank but also gives more detailed knowledge about risk management by the bank. The bank would want to keep this ratio high to be able to show they are good risk management. Whereas, Net Interest Margin could be valuable in measuring the success of its risk management in terms of managing people’s money.

Return on Equity- Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The graph shows the performance of the ratio;

Earnings Per Share -The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company’s profitability. The ratio indicates how profitable a company is by comparing its net income to its number of shares outstanding. the performance of this ratio was as shown in the graph below;

Risk Management

Net Interest Margin not only indicates the profitability of the bank but also gives more detailed knowledge about risk management by the bank. The bank would want to keep this ratio high to be able to show they are good risk management. Whereas, Net Interest Margin could be valuable in measuring the success of its risk management in terms of managing people’s money. This ratio is for the bank was decreasing meaning that the risk of the bank was decreasing annually as shown in the excel appendix. The trend curve below shows how the bank was fairing.

This ratio is important in indicating whether a company has sufficient cash to finance its debt. This ratio is, however, limited in that it does not guarantee that the cash flow from operating activities will increase and this is the main concern for the investor.

From excel it can be observed that the bank is very conservative in nature in dealing with risk. However, that attitude might cost any organization a lot of opportunities in return. Bank manages its credit risk exposure by implementing diversification in every business that they do. Their investments, capital markets, and lending and financing activities are diversified to avoid undue concentrations of risks with individuals or groups of customers in specific locations or businesses. It also obtains collaterals when appropriate. The types of collaterals obtained include cash, treasury bills and bonds, a mortgage over real estate properties and a pledge over shares. The group uses the same credit risk procedures when entering into derivative transactions as it does for traditional lending products. The bank is also involved in hedging foreign exchange risk.

Liquidity is the risk that the group will encounter difficulty in meeting obligations associated w/ its financial liabilities. Repayments, which are subject to notice, are treated as if notice were to be given immediately. The group expects that customers will not request repayment before the contractual repayment date. They maintain a portfolio of highly marketable and diverse assets that could be readily liquidated in the event of an unforeseen interruption to cash flow.

Forecasting the Balance Sheet 2012

The excel file shows the forecasted financial statement of the company:

Forecasting the Income Statement 2012:

Executive summary

Forecasting allows the management of business organizations to identify their chances of making a good profit as well their stands in the market while they assure their stakeholders, including the stockholders, to have the resounding benefit that they were promised to receive upon investing and trusting in the company. The examination of the forecasting models noted that the weighted average Model has been considered a better model.

Through measuring the advantages and the disadvantages that it yields along with the considerable variables needed to calculate its results shall give a better sensible idea as to how this model defines the connection that exists between forecasting and models. The finding from this forecasting is reinforced by the value of each model between the two variables under consideration. The results of the forecasting indicate a close association between the two variables.

Introduction

The process of financial forecasting is an essential component for planning and is also seen as the basis for budgeting activities. Financial forecasting is an essential element in estimating the future financial requirements of a firm or organization. According to Delurgio, (1998), financial forecasting would essentially look at future sales as well as related expenses and then provide the firm with the necessary information to project future external financing needs.

Forecasting sales is important in figuring out future plans of a business. Various analyses are similar in the except factors help determine them. Forecasting is expanded by factor analysis and allows for simple computations of target income sales. Many different kinds of forecasting techniques are available, and no single technique works best in every situation. When selecting a technique for a given situation, the manager or analyst must take a number of factors into consideration (Delurgio, 1998).

The two most important factors are cost and accuracy. The higher the accuracy the higher the cost, so it is important to weigh cost-accuracy trade-offs carefully. The best forecast is not necessarily the most accurate or the least costly; rather, it is some combination of accuracy and cost deemed best by management.

Other factors to consider in selecting a forecasting technique include the availability of data; the availability of computer software; the ability of decision-makers to utilize certain techniques; the time needed to gather and analyze data and to prepare the forecast; and any prior experience with a technique. The forecast horizon is important because some techniques are more suited to long-range forecasts while others work best for the short-range (Chase, 1997).

Analysis

The methods evaluated were multiple regression, seasonal multiplicative, seasonal additive, holts-optimum, linear regression, exponential smoothing, Weighted Moving Average 6-optimum, Weighted Moving Average 5-optimum, Weighted Moving Average 4-optimum, Weighted Moving A3-optimum, Weighted Moving Average 2-optimum, Moving Average 6, Moving Average 5, Moving Average 4, Moving Average 3, Moving Average 2 and naïve.

Looking at the root mean squared error of each unit of each method you will find that

Most of these methods are good in forecasting sales for 2011 but moving averages uses smooth time series data. It forms a series of forecasts. The smoothed data appear smoother in the curve than the original data. The shape of the graph is the same in the three scenarios but the mean of the scenarios is different. The 3 cantered moving averages are higher than the 3 moving averages. The 3 moving averages and the 4 moving averages are not much different.

However, some of the methods such as seasonal multiplicative, seasonal additive and holts- optimum have given a figure which is very high and their Root Mean Squared Error is lower. I will eliminate this method because the amount they have given is very high. Looking at the past trends sales units have not increased drastically as these methods are proposing. That is why these methods are eliminated from those that can forecast sales from this company (Mentzer, 1999).

Moving averages and exponential smoothing are essentially short-range. Techniques, since they produce forecasts for the next period. Trend equations can be used to project over much longer time periods. When using time series data, plotting the data can be very helpful in choosing an appropriate method. Several of the qualitative techniques are selling suited to long-range forecasts because they do not require historical data. The Delphi method and executive opinion methods are often used for long-range planning (Hopp and Mark, 2001).

In some instances, a manager might use more than one forecasting technique to obtain independent forecasts. If the different techniques produced approximately the same predictions that would give increased confidence in the results; disagreement amount the forecasts would indicate that additional analysis may be needed.

The analysis of the statement of sales units is, as the previous case suggests, an important step in forecasting sales units. This case illustrates the range of useful insights drawn from this analysis. An overall analysis of sales units then corroborates or refutes the inferences from the analysis of sales (Rowe and Wright, 1999).

There are useful generalizations we can make about potential inferences from the analysis of the sales units. First, our analysis of the statement of sales units enables us to appraise the quality of management’s decisions over time and their impact on the company results operations and financial position. When our analysis covers a long time period, it can yield insights into management’s success in responding to changing business conditions and their ability to seize opportunities and overcome adversities (Georgoff and Murdick 1986).

Inferences from our analysis of sales units include where management committed its resources, where it reduced investments, where additional cash was derived from, and where claims against the company were reduced. Inferences also pertain to the disposition of earnings and the investment of discretionary sales units. The analysis also enables us to infer the size, composition, patterns, and stability of operating cash flows (Stevenson, 2005).

Sales units are used for labor, material, and overhead. They are also used for long-term assets like plants and equipment where conversion through the product-cost product-cost stream is at a slower rate. Eventually, all uses of cash enter the sales process and are converted into receivables or cash (Georgoff and Murdick, 1986).

Inferences must also include explanations for the variations in sales units’ segmentation. Most view operating sales units as an index of management’s ability to redirect funds away from unprofitable opportunities to those of greater profit potential (Wilson and Barry, 1998).

Forecasting sources and uses of sales units

Accuracy and control of forecasts is vital aspect of forecasting. The complex nature of most real-world variables makes it almost impossible to correctly predict future values of those variables on a regular basis. Consequently, it is important to include an indication of the extent to which the forecast might deviate from the value of the variable that actually occurs. This will provide the forecast used with a better perspective on how far off a forecast might be (Chase, 1997).

Some forecasting applications involve a series of forecasts, whereas others involve a single forecast that will be used for a one-time decision. When making periodic forecasts, it is important to monitor forecast errors to determine if the errors are within reasonable bounds. If they are not, it will be necessary to take corrective action.

Forecast error is the difference between the value that occurs and the value that was predicted for a given time period. Hence, Error = Actual – Forecast:

• e_t = A_t – F_t

Positive errors result when the forecast is too low, negative errors when the forecast is too high.

Conclusion

Among these methods that have been used to estimate the first quarter sales unit naïve Moving Average 2 to moving Average 6 gives an approximate which can be written upon to choose the first quarter’s sales unit. The weighted moving average of 2 to 6 is giving an increasing quote meaning that the weighted moving Average is giving different scenarios in providing the unit that would be sold next year.

The weighted moving average is giving 5 options however, looking at Root Mean Squared Error for each method. In consideration of root mean squared error and the reasonableness of the forecasting method I will choose weighted moving average 5 because the standard error is low as compared to other methods.

Reference List

Chase, C., 1997. Selecting the Appropriate Forecasting Method. Journal of Business Forecasting, 2(4).

Delurgio, S., 1998. Forecasting Principles and Applications. Boston: Irwin/McGraw-Hill.

Georgoff, D. & Murdick. R., 1986. Manager’s Guide to forecasting. Harvard Business Review; 5 (2), pp.110-120

Hopp, W. & Mark L., 2001. Factory Physics. Boston: Irwin/McGraw-Hill.

Mentzer, J., 1999. The Impact of Forecasting on Return of Shareholder Value. Journal of Business Forecasting, 3(1).

Rowe, G., & Wright. G., 1999. The Delphi Technique as a Forecasting Tool: Issues and Analysis. International Journal of Forecasting, 15(4).

Stevenson, W., 2005. Operations Management. Boston: McGraw-Hill.

Wilson, J., & Barry K., 1998. Business Forecasting. New York; McGraw-Hill.

1. Forecasting is an important process in order to understand the future possibilities for a business. Quantitative forecasting requires historical data to generate the forecast. Therefore, the first condition required for quantitative forecasting is the availability of time series or historical data that can be used to generate a prediction for the future.

Further, for quantitative forecasting to be effective, there must be existing evidence that the historical data available for forecasting is relevant and can be used for forecasting.

Therefore, for appropriateness of quantitative forecasting historical data, that are measurable, must be available and there must be proof that these data is relevant for forecasting. When these conditions are not met, then quantitative forecasting cannot be done.

2. Error in moving average is determined by the difference between the actual value at time period say t and the forecast value at next time period i.e. t+1. As moving average is the arithmetic mean of the data, the most recent values will give a smaller error as the recent forecast would be closer to recent values than values in distant past.

The number of terms is decided on the nature of fluctuations in the series. When more number of data is chosen, lesser weight is given to the recent data and vice versa. However, how many numbers of observations are taken is decided by the nature of the data.

If there are great fluctuations in the time series data then a larger number of data is desirable while if the data shows relatively smooth trend, then a smaller data will also be appropriate for forecasting.

In the former case, the difference in data is large and therefore the error is higher and in the latter case the error is smaller. Therefore with higher error the number of observations taken is higher while when error is smaller, the number of observations taken is smaller while computing moving average.

While making this choice one assumption is made regarding the future i.e. the future too will follow similar trend in fluctuations in the values of the observations as according to their past trend. In other words, when error is large indicating a large seasonal fluctuation in data, it is assumed that similar fluctuation will be seen in future.

3. Seasonal index values can be used for forecast by the following method. First, the seasonal indices of the observations have to be computed for all the years taken for the forecasting. Then the index values have to be ranked from lowest to highest such that there are five values observable under each month.

Then the sum of the three central values of each month are taken which is done by eliminating the first and the last value each month and they added together. The aim of the this step is to eliminate any extreme value from the data .

4. Irregular index is used in forecasting. The irregular index is actually the error component that accounts for the fluctuations in a time series data, which cannot be explained by seasonal variations or trend analysis.

Therefore, the irregular index used in forecasting actually indicates the unaccounted fluctuations in the time series, which are unlike the seasonal fluctuations in the time series. This forms the error variable in the time series data and is used as irregular index for forecasting.

5. While quantitative techniques employ time series data for analysis, qualitative techniques use opinions of expert analysts. Qualitative modeling for forecasting follows the following methods – Delphi technique, jury of executive opinion, sales force composite, and consumer market survey.

In the Delphi model experts located in different locations are asked to make forecasts. The experts used the Delphi model are expert analysts, decision makers, staff, or respondents.

When it is the decision makers, usually 5 to 10 analysts are used while in other cases a detailed survey is done. In case of jury of executive opinion model, forecasting is done after views of high-level management experts are taken, which is usually combined with statistical models.

6. The difference between profit and contribution in an objective function provides the range of optimality of the function. The difference between the profit and the contribution shows the optimal coefficient.

It is important for decision makers to know the coefficients as they present either the upper or the lower limit of the slope of the function indicating the rate of change in the function.

7. Graphical solutions are easier to understand. They present the same quantitative findings in a more understandable format that even a nonprofessional can interpret.

Further, graphical solutions help in identifying the area, which requires attention with ease. Graphical solutions provide easy, professional and relatively accurate findings for a problem. They are best adopted when there are two variable decision problems.

8. When a linear programming problem is infeasible it is essential to look for the reason that makes the problem infeasible. In such a situation, the best possible option is to drop one or more constraints and solve the problem. If after omitting the constraints an optimal solution can be reached, it can be concluded that the constraints that were omitted were the root cause of the infeasibility of the problem.

Unbounded linear programming occurs when the solution to the problem is infinitely large even though none of the constraints are violated in case of a maximization problem, in case of a minimization problem, the solution would be infinitely small in case of unbounded problem.

9. In case of optimality problem, the corners of a feasible plans are called extremes. This is because the corners of a feasible region will always provide the optimal or extreme values. The intersection of the boundary of two or more constraints in the feasibility region actually forms the corner indicating optimality in a linear programming.

This occurs due to the geometrical shape of the problem. Graphically, the feasible regions intersect in a half plane which results in the boundary of the feasible region to either become flat or have a corner that is always pointed outwards.

Therefore, the corners are usually called the extreme points as they possess the characteristics of singularity as in, they do not have a pair of points in the feasible region. Therefore, the lines connecting these points form a corner point.

Thus, the optimal solution in a linear programming is always at the corner of a feasible region as this is formed by the intersection of the geometric representation of two or more constraint functions. This is the reason why corners are considered to be extremes in a linear programming problem.

References

Bozarth, C. C., & Handfield, R. B. (2006). Introduction to Operations and Supply Chain Management. SA: Pearson Education.

Jain, C. L., & Malehorn, J. (2005). Practical guide to business forecasting. New York: Institute of Business Forec.

Render, B., Stair, R. M., Hanna, M. E., & Badri, T. (2009). Quantitative Analysis For Management. New York: Pearson Education.

Introduction

Monsanto Company – SWOT Analysis considers Monsanto’s major business structure and processes, and gives summary analysis of its main income avenues and strategies. Thus in forecasting the internal environmental analysis of the company’s operations it’s essential to look at the SWOT analysis. The report provides a 3 year (2011, 2012 and 2013) forecast about the internal environmental analysis of the company. It emphasis on the strengths and weaknesses the company faces going forward.

Executive Summary

Monsanto Company is a U.S.-based producer and distributor of agricultural products. Monsanto together with its subsidiaries is a worldwide provider of chemical products to farmers and genetically modified crops. Monsanto is among the world’s biggest seed companies, distributing approximately 25 percent of the proprietary seed market.

It monopolize the seed supply for several strategic crops, including 90 percent of U.S. soybeans, 80 percent of both corn and cotton crops. With a market capitalization of $44 billion, sales grew by an annual rate of 18 percent over the past 5 years and it projects that.

The company is involved in production of seed brands such as oilseeds, cotton and corns in large scale, as well as small scale crops such as vegetables. “In addition, the company produces herbicides as well as producing ‘in the seeds’ quality technology. Although that the major market of Monsanto produce is the United States; it has extended its operations globally covering such regions like Asia, Australia Africa, and South and North America” (Langreth & Herper 2)

The company has achieved advancements in production of high quality hybrids which are the Genetically Modified crops which have been accepted and recommended by scientists due to their significant advantages, which include provision of solutions to farmers in production of food for consumption and animal feed.

The company for the last four years and has restructured its internal environment to be able to attain profitability and remain a successful company. In order to achieve this objective the company management embraced the SWOT analysis technique in the management and running of the company. “SWOT analysis focuses on the strength, weakness, opportunities and threats of the organization.”

By use of these four factors, the company has been able to analyze the resources, capabilities, fundamental competencies and the competitive advantage the company enjoys.

2011-2012 forecasts

In its 2011-2013 forecasts Monsanto remains consistent in its objective that global population growth and climate change will need its innovations to meet the demand to feed the world. The company is aware that food security is a major concern and believes countering this concern would stop opposition against to genetically-modified crops. It also embraces the messaging tag of sustainability and plans to launch marketing campaigns under the slogan “Grow Yield Sustainably.”

In coming up with the forecasts several assumptions were made: As the global market recovers, consumer food prices around the globe are expected to shoot faster than general inflation in 2010 up to 2012. In the US retail food prices return to the longer term association of shooting less than the overall inflation rate. Another assumption made is that there are no internal or international upsets that could impact Monsanto’s industry.

Strengths

The company potential and strength lies in applicability and usage of their products, despite the fact that no scientific product can be termed as having zero risk; usage of the Monsanto’s biotechnology globally has not shown any significant problem to either the environment or society. This shows that the risk is associated with ignoring biotechnology, not using this method’s benefits for society and environment as well as ignoring science as a good solution to problems such as malnutrition, hunger and unfavorable areas in farming.

“By using recognized and risk assessment standards which are globally accepted, the Monsanto Company has been able to produce GM crops and food which promise to continue doing well in the marketplace with no hazard to the surroundings than those produced through customary propagation techniques” (Langreth & Herper 2).

In response to this fact, the company has changed its internal production operations in order to match with the market demand of their products, thus they have adopted new technology and production techniques in order to ensure that the company continues to meet its obligations every time. In addition the organization has invested heavily and still continues to do so by having a human resource that can deliver its obligations under minimum supervision.

Also the company shall be carrying out refresher courses for the employees frequently to ensure that they area at par in their performance. These refresher courses shall make it possible for the innovation and reinvention in the operations and production of goods. This is due to the fact that the refresher courses will allow the employees to master the core competencies that are vital to the organizations operations

In addition due to the organizations determination to continuously embrace new technology, it will be able to counter any competition from related the organizations thereby having a higher competition advantage. This shall be achieved through the production of biotechnology-driven crops which meet the farmer’s approval due to its economic and environmental friendliness.

The results of using the company’s Genetically Modified crops are higher farm level output. This is due to the company’s policy in using technology and production methods that are cheaper while at the same time doing away with issues that factors that unnecessarily increase their overheads for example redundant labor force.

This has been done with the aim of enabling the company policy of being the center stage and monopoly of the seed stock products worldwide. There have been able to achieve this through continuous innovation of their products by embracing new ideas in the operations and later patenting their products to avoid unnecessary completion from other related organizations.

In addition the management is continuously working to reduce all bottlenecks in the sales department that affect the delivery of the products to their global customers, they have done that by getting into agreements with reliable courier services and also having a department that tracks and ensures that the goods are delivered on time and in good conditions.

Another strength that the company enjoys is the healthy relationship it has with the government and regulatory bodies. To achieve and maintain this leverage, the company has always worked to ensure that the company meets all the regulations in its operations.

Therefore all the staff members in the company are accorded respect and dignity as they go by their day to day business; hence despite the fact that the company is a profit oriented, it has ensured that that is achieved in the most human way. In addition the company has ensured that it does not violate the environment and all toxic waste is properly disposed without exposing the environment or the employees to risk. Also the company’s’ management is in a process of implementing a systems resource approach.

This is a system that will focus on the input of the company and ways and means it can acquire resources. Thus it shall focus on getting the best, dynamic and highly trained labor force from the diverse labor market while at the same time offering a high remunerations and rewards schemes to them. By doing so, the morale and productivity of the company shall be increased ( Langreth, & Herper 6)

In addition the company is working hard to ensure that the relationship it enjoys with its labor force will continue to increase overtime. This will be achieved through changing and adopting new policies in the human resource department while at the same time ensuring safety and good working ethics for the staff members. Monsanto will therefore carry out decontamination of the company buildings frequently to get rid of toxic substances while at the same time taking into consideration the views and concerns raised by the employees.

As a result of introducing changes in the organizations human resource through introduction of processes and guidelines, policies and conduction of progressive protection, environmental and market impact assessment it will enhance its products steward through the life cycle production. This will involve observation of the company’s core values and operations stewardship and post – production stewardship.

The former entails reviewing of the technology and project plan, standard operation procedure, best practices and quality control reviews, factors that enhance high quality and safety of the feed, food and environmental products. On the other hand, the later factor involves dealing with issues such as dealing with any concern arising from product launch and termination, licensing the management, fulfilling the settings of registration or the approval of regulatory, and monitoring current research and product centers.

Weaknesses

Monsanto is faced by various environmental weaknesses in achieving its objectives and its equally essential to look into the company’s weaknesses in coming up with the forecasts for the future. First, Monsanto has a weakness in timing and planning for product development.

In many cases it is caught unawares by unexpected growth of foreign market making it hard for the company to effectively run its operations normally. In the 2011 fiscal year, the management plans to invest more resources to research not only on the product development but also on market research to ascertain market developments, especially now that its products are gaining popularity.

Second weakness is tin-ear to consumer concerns. Monsanto has been accused of been unwilling to engage significantly on consumer concerns against of bio-tech foods. The company intends to distance the “New” from the “Old” Monsanto as a means to counter past misconceptions. “Agent Orange, DDT, Aspartame, and rBGH all have substantial evidence showing biotechnology’s adverse affects on humans and the environment.” Monsanto plans to embark on rebranding of its core products under a single brand platform.

Thirdly, poor early messaging; This involves ineffectiveness in showing bio-tech produce net benefits to the consumers, opposition to labeling transparency, western commodity foods were entirely inappropriate for developing nations. In the current fiscal year (2010-2011) and in consequent years, the company plans to invest more than $980M, that is, approximately 9% to 10% of sales annually towards research on new instruments for agriculturalists based on market segmentation.

The company in the next three years it plans to concentrate more on research-and-development on “new biotech traits, elite germ plasm, breeding, new variety and hybrid development, and genomics research.”

Fourthly, Monsanto has an alienated consumer base. It is claimed that the company’s marketing strategies alienated farmers, litigating farmers and unpopular seed brands. In countering this, the company in the three year projects has embarked on a mega-marketing campaign aimed at reclaiming its brands goodwill and recognition.

Work Cited

Langreth, Richard & Herper, Martin. The Planet Versus Monsanto. Forbes, 28 April 2010. Web.

The best alternative

Rajeev Singh faced three different options: store network expansion, indirect and direct global outsourcing or vertical integration. Each of the options had its advantages and disadvantages, but based on the past history, it is possible to forecast the most efficient decision.

His choice of vertical integration that involved shifting to the manufacture of domestic furniture for its own retail sale was certainly his immediate best alternative. The other two options may not have worked out right for varied reasons.

For instance, had he opted for store network expansion, he would only have been trying to re-do a similar venture while leaving his successful chance to fate. He initially founded four branches in different locations; among which, only the Toronto branch seemed to make sufficient amounts of returns to meet the day-to-day costs.

This meant that expansion in an area outside Toronto would prove to be just as futile. Since he did not identify any particular location that would have been fully tested on sales performance, the probability of failure was more than half.

Secondly, the expansion space that results from store network expansion may allow greater inventory capacity but cannot guarantee sales. Formation of CFM resulted from a similar initiative, which is buying in the very large quantities, which appeared to be only disappointing. Though expansion opens into a different form of advertising, none of the competing firms tried the method, thus its success is based on sheer lack.

In addition, the present market presents problems of securing the best sales personnel. Such a market demands products that are self selling and with little competition. However, the furniture market occupied by CFM has many competitors with similar products, some even cheaper. Therefore, increasing inventory of the same product without unique salesmanship may not serve as the best alternative for Singh.

Increasing direct and indirect global sourcing also offers a temporary solution to the product quality and uniqueness issue in the store expansion alternative. This choice will increase the profit margin in the long run while ensuring the customers receive exactly those products which they choose.

Moreover, the reduced costs would allow the company to sell the products better than their competitors would do at cheap and affordable prices. This would help beat the competition.

However, the alternative also has its negative perspectives. It requires significant financial commitment which is not presently available due to the previous business failures. The estimated cash required is $150,000 will result in the monthly warehousing expenses which will be $10000.

Moreover, wrong product-selection may result in a similar case as that with the Chinese customer. This can cause huge losses that the company may not be in a position to recuperate. This coupled with the huge cash demands and a looming sales problem that can also arise makes the alternative rather risky.

Finally, there is the Vertical integration option. This entailed manufacturing various domestic purchase commodities for its sale. Unlike the other two alternatives, Singh has not tried this option before. However, since all the other alternatives had been partially tested and failed in a result, the best choice is to try a new one. Vertical integration had numerous advantages.

First, he would depend on his father’s wealth of experience in the manufacture of similar products to make the appropriate choices. Secondly, the method would give customers the option of specifying product designs thus differentiating their product from that of the competitors.

The alternative would also cut down on costs and delivery time taken. However, the alternative has its disadvantages. The sales are not guaranteed though the company has the option of selling to other retailers. Staffing may also present a challenge in the future. Despite this, the option is still the best alternative, among the three alternatives (Tiffany & Peterson, 2011).

Singh’s future

Despite the turn in the events’ flow, the manufacturing opportunity is still a viable option. Only the occurrences in the few past months presented a challenge. Presently, Singh’s problems are the inability to satisfy the market with the correct design of products, and the lack of sufficient capital to sustain the inventory as well as the lawsuit over one of his branches.

By closing the Pickering location, Singh can secure the inventory required to supply the retail company for a particular period (Jennings, 2010). The funds used in the lawsuit could be transferred to the manufacturing business as salary for a knowledgeable and experienced employee who can aid in the development of the complex designs of the domestic products (Gambles, 2009).

In the short run, the company can hire employees based on a basic salary and commission basic on the work production. Though in the initial stages, the company can incur losses, the proceeds form the manufactured products will cover these expenses in the long-run. Hiring an employee with the expertise is a benefit for the company as it ensures that it will succeed in competition since it can supply its retail branch.

The remuneration method adopted ensures the company does not lose its best staff in case of low sales. Any additional proceeds should then be used in opening up other retail joints in potential business locations. Moreover, the two earlier alternatives can then be brought on board for profit maximization (Zeff, 2007).

References

Gambles, I. (2009).Making the Business Case: Proposals That Succeed For Projects That Work: New York,NY: Ashgate.

Jennings, M. M. (2010). Business: Its Legal, Ethical, and Global Environment: Chicago: Cengage Learning.

Tiffany, P., & Peterson, S. D. (2011). Business Plans For Dummies. New York,NY: John Wiley & Sons.

Zeff, J. (2007). Make the Right Choice: Creating a Positive, Innovative and Productive Work Life. New York,NY : John Wiley & Sons.

In the hospitality sector, demand for accommodation rooms fluctuates daily, seasonally and annually. Analysis of these fluctuations in demand produces unreliable forecasts. Effective revenue management realization requires the development of an appropriate forecasting mechanism. Attainment of reliable forecasts is never easy even though the process of forecasting is simple.

Hence, Cross, R. G. (1997) suggested some rules applicable in forecasting. Cross suggested that the prediction must stay at comprehensive level. Detailed predictions contribute significantly to current Hotel Revenue Management Systems.

The second suggestion is that a large amount of information has to be used in the investigation. Additionally, the predictions must be adjusted regularly to potential changes in the business environment.

Precise predictions are vital in improvement of price and availability suggestions for hotel rooms. In addition, precise forecasting improves decisions made on recruitment of workers, purchase of goods and budget preparations.

In contrast, incorrect forecasting results into adoption of inefficient decisions on price and availability suggestions that the revenue management systems produce. Such inefficient decisions affect the revenue of a hotel negatively.

Talluri (2004) identified two forms of revenue management predictions. The first kind is quantify-dependent revenue management prediction. This is mainly used in aviation and hospitality industries. The other type is price-dependent revenue management prediction.

Apart from demand information, quantify-dependent revenue management prediction needs data on the arrival of reservation requests from different types of clients. This data is obtained at the time when clients make orders. This means that the information utilized in lodge demand prediction depends on present reservation activities, past data that relates to every day arrivals or the number of sold rooms.

Furthermore, this kind of prediction requires guess on cancelled reservations and the number of clients who do not show up. A reservation is grouped as “No Show” if the client who made the request does not terminate it before the deadline of the hotel reaches and does not come to claim it.

Prediction used in hotel revenue management should consider two variables that relate to time. These two variables are reservations and consumption times.

There exist other vital issues considered apart from the prediction method chosen. Some of the key issues are the forecast period, aggregation levels and measurement of the prediction’s precision. Weatherford et al (2001) proved that completely disaggregated predictions provide dependable outcomes compared to partially aggregated strategies.

Therefore, it is appropriate for hotels to examine arrivals by the duration customers spend in the facilities and the category of price. One key concern to take into consideration is the method applicable in time division to produce an appropriate basis for prediction. A common practice is to consider a week as a forecast. In this method, each day is considered differently.

For example, predictions for Mondays rely on information collected on other Mondays and so on. Another vital point to consider is the periodic phenomenon, which has significant influence in the hotel industry. Consideration of limited data set limits managers’ ability to capture seasonality. Conversely, the use of many periods may make predictions made unresponsive and rigid.

Managers physically developed predictions through analysis of historical data before the introduction of revenue management systems. They analyzed the length of stay in hotels and the price categories. The process lacked sophistication and consumed a lot of time. Consequently, the manual system is inappropriate in the current business environment due to stiff competition and fast-paced market activities.

Prediction strategies can be grouped into three categories namely historical, advance and combined forecast models. Historical reservation models only take into consideration total rooms booked on earlier nights. It considers the number of rooms booked and arrivals at a hotel. Advance reservation models take into consideration the booking behavior of customers over a given period.

Finally, joint reservation methods consider features of both chronological and advance methods to establish predictions. Weatherford and Kimes, (2003) showed that exponential smoothing, pickup and moving standard forms are the most dependable prediction strategies.

However, the performance of these strategies depends on the data available. Hence, hotel revenue managers must have adequate prediction models. Additionally, they should use unlike strategies at different times and in diverse markets.

Forecast Accuracy

Accuracy is a vital component in prediction since it determines the method selected. Numerous measures of the performance of the predictions made exist. The Mean Absolute Deviation (MAD) is the easiest and popularly used method. It involves determination of the averages of the absolute values of prediction errors made. The Mean Percent Error (MPE) is the mean of the percentage errors made.

The Mean Absolute Percent Error (MAPE) and MPE are similar. However, MAPE averages the total figures of the prediction errors. The Root Mean Square Error (RMSE) takes into consideration the square root of the averages of the squared prediction errors.

MPE and MAPE are appropriate since they provide limitless figures. Nonetheless, they stay unclassified when the total number of reservations is zero. Hence, Thiel’s Inequality Coefficient is used to overcome the disadvantage. The coefficient is denoted by U in which F* and F are exact and predicted reservations.

Pickup Model

Pickup model is a well-known advance reservation strategy that takes advantage of the unique features of booking information. It relies on reservation information instead of reliance on arrival histories to make dependable predictions.

However, it provides variations in the predictions. The model can be further divided into preservative or multiplicative, standard or superior and straightforward or subjective average prediction strategies.

Judgmental Forecasting

Human judgment plays a significant role in revenue management practice. This is despite the ability of a revenue management system to perform multiple tasks in the process. Conventionally, predictions include human opinions. Judgmental prediction involves the inclusion of human opinions. A different research exhibited that opinions can be used to make adjustments in past predictions.

A revenue manager can then supervise the prediction process using the adjustments. Moreover, hotels can make appropriate use of revenue management systems in educating managers. A well-trained revenue manager can know how to analyze data and make appropriate plans. This can result into efficient operations in a hotel. Notably, business people agree that human judgment play a pivotal role in predictions.

Human judgment plays a vital role in generation of accurate predictions. However, human judgment is inclined towards biasness. Individuals may make decisions or predictions that can result into achievement of their personal goals. In addition, the differences in skills and abilities affect people’s judgment. Hence, well-trained people can make appropriate judgment compared to undertrained persons.

In early prediction studies, Hogarth and Makridakis, (1981) examined the effectiveness of human opinions in prediction generation. They concluded that statistical predictions were dependable compared to judgmental forecasts. Their study found that human predictions had biasness and errors. Human judgment involved much control and humans had overconfidence.

Fischhoff, (1988) noted that appropriate forecasts required human judgment in the selection of the model used, determination of parameters and investigation of study outcomes. There are two reasons for need of accuracy in judgmental prediction. Experts have adequate data and are able to acquire information in time.

There exists some features that can assist revenue managers improve their judgment. Revenue management systems are acceptable in prediction generation. The perception of forecasters on revenue management systems affect decisions or forecasts made. Secondly, revenue management systems are easy to manage, and they enable comparison of statistical predictions made.

Hence, they assist revenue managers to determine errors easily. Additionally, revenue management systems provide flexibility in methods used in generation of forecasts. This makes forecasters feel responsible and involved in revenue management. Revenue management systems also make managers employ correct techniques.

Comprehensible assistance and clear methods eliminate confusion and mistakes in generation of predictions. Revenue management systems also support the integration of human judgment and statistical methods in generation of demand forecasts. Reliable revenue management systems produce dependable statistical predictions. They also support judgmental adjustments in generation of demand forecasts.

An income manager can examine the effectiveness of a revenue management system. The manager can examine the usefulness of a database and the appropriateness of statistical techniques. In addition, the manager can compare the error measurement methods used in generation of demand predictions.

Examination of these factors can assist a manager to establish whether a revenue management system can enable development of appropriate forecasts. Integration of the mentioned features assists managers to design revenue management systems that enable development of precise predictions.