Wednesday, 13 August 2014

THE ROLE OF BANKS IN THE ECONOMY

The leading and fundamental role of banks is to serve as intermediaries in the making of payments. In this regard, banks transform inactive funds into active form, to capital to yield profit. Banks gather all kinds of money revenues and place them at the disposal of the capitalist class. As banking develops and becomes more sophisticated and concentrated in small establishments, they grow from modest intermediaries to powerful monopolies having the whole capital in an economy at their command. This capital belongs to capitalists, small traders, and the better proportion of the means of production and sources of raw materials in one or more countries. Contemporary financial systems contribute to the development of the economy and an improvement in the peoples’ standards of living. This happens through the provision of various services to the economy. These services encompass clearing and settlement systems to buffer trade, controlling financial resources between savers and borrowers, and various products to deal with risk and uncertainty. In this regard, banks as financial middlemen exist as efficient responses to the high cost of information in the financial market. They specialize in evaluating the credit worthiness of borrowers and offering incessant monitoring function to ensure creditors meet their obligations. Banks benefit from the services they offer by the spread between the rates they charge borrowers and the rates they offer to the accumulated pool of savers. On a similar point, banks offer a repository for savings, and then convert them into illiquid assets in the form of mortgages and loans to businesses. Banks are critical institutions in any society since they significantly contribute to the development of an economy through facilitation of trade. They also facilitate the growth of saving plans and are instruments of the monetary strategy of ant government. In addition, banks provide risk management services by allowing businessmen and households to pool their risks from variations in the financial and commodity markets.

Effects of Monetary Policy on the Economy

Monetary policies are formulated by a country’s central bank in order to regulate the flow of money and the performance of the economy. A strict monetary policy makes it hard for the public to access finances hence creating an inflated economy. In such situations, people have difficulties accessing money hence lowering the purchase power. Households and firms become the recipients of the impacts of monetary policy, which affects them either in positive or negative ways. Monetary policy has a vital influence on inflation by inducing changes on the borrowing rates. Monetary policies have a direct influence on borrowing rates making it cheap to borrow finances. The easy access to finances because of low borrowing rates increases the purchasing power by the public. This lowers the levels of inflation as people are able to access basic needs and services. In response to the high demand and spending by the households, firms will hire more workers to increase production. This results in high employment thereby lowering inflation rates. Monetary policy therefore, has a positive effect on the economy by lowering inflation through low borrowing rates. Another effect of monetary policy is the increase in spending by the government because of tax cuts. This results in the increase in the Gross Domestic Product and an overall effect on imports and exports of a country. The demand for imports will increase with an increase in the Gross Domestic Product hence encouraging foreign purchasing. Banks will therefore, have to convert domestic currency into foreign currencies to facilitate importation of goods and services. Because of this, foreigners will partially hold domestic currency and have an influence on transactions of a nation’s financial assets. In conclusion, monetary policy has affects both positive and negative effects on the behavior of an economy. In times of inflation, governments come up with monetary policies to lower the intensity of inflation. Monetary policy may be used to lower the borrowing rates hence encouraging financial borrowing and spending.

Tuesday, 12 August 2014

Strategic Planning

The essence of strategic planning has been underestimated in the modern corporate world. Most executives adopt methods of how to do and implement things without taking into consideration the primary assumptions of those methods. Most organizations abandoned strategic planning following the recent recession. Strategic planning often involved a SWOT analysis, after which a team would define the most likely path for a company’s external environment expansion. This would encompass development of an appropriate strategy to incorporate that vision of the future. However, it all turned out that the future conditions expected for the implementation of the vision could not hold, or would be unfavorable to most organizations. For this reason, inability to predict the future has been regarded as the leading cause of the death of strategic planning in organizations today. Similarly, strategic planning meetings often too much time in the effort to create the mission statements, goals and the objectives in organizations. On a similar note, the de-incentive associated with strategic planning results from the disappointment that befalls the planners, when little of their expectation is achieved. This failure arises due to the lack of the following key components in a typical strategic plan: a prior and clear evaluation of the organization, a well-elaborated vision with embedded measures of progress, a comprehensive program of funds to secure the necessary resources for the implementation of the plans, and a detailed guideline for the implementation and execution of the activities. Again, strategic planning has been bombarded by lack of motivation and excitement on the part of the board and staff. This erodes an organization’s realization of its core purpose and ability to conform to its mission and vision. This discourages enthusiasm, commitment, and ambition.

Supply Chain Management

Today, supply chains are extensively globalized because of the rising effectiveness of transportation and logistics, internationalization of production and consumption and investments in emerging markets. Predictions show that trade will keep on thriving and, as a result, entry areas will increase in number and magnitude. While trade rests high on the global economic plan, the supply chains department, which is vital to the growth of performance, has been left out. Supply chain appears an invisible service that is taken for granted by most people. Supply is vital to any company’s competitive approach, and survival in the market. In the current century, the supply chain management anchors every aspect of the daily operations of today’s companies. 1. Why supply chain management issues have often been ignored by senior management According to Dutton, (2009), “The more successful a company becomes, the less supervisors see the need to address supply chain problems.” Managers in the top level do not see strategies as an essential area in the company. As stated, one of the reasons is the productivity of the company. They base their concern on the advantage edge of the company. Where a company has a greater advantage edge and transport and strategies becomes a minimal price, supervisors hardly dedicate themselves to supply management. They focus on what has greater profits. However, when the company is in difficulty or profits are going down, supervisors will recognize the need of efficient management of the supply chain since every little price will matter. Therefore, when the advantage edge is going down, every possible way of restoring it is sought. Supply chain supervision ranks among the ways that a company can improve its advantage edge through appropriate acquisition and control of stock from purchase to delivery to the customers. Through supply chain and strategies, control price can be stored, thus improving the advantage edge. Normally, supply chain management will merge several functions, stating with purchase, financing, legal rules, distribution, sales and transport. Top managers may not understand the relationship of all this. Thus, lack of expertise or lack of enough information regarding supply chain management may cause their lack of knowledge of supply chain. Thus, there is the need for underscoring the significance of supply chain management to make the top managers appreciate that supply chain management performs an essential part in the performance of the company. Rudski (2008) suggests that the administration disregards the management of supply chain because they are not entirely conscious of its complete prospective in fixing some of the problems that they face. He inquires whether this should be held responsible on the top managers or to the supply chain managers for inability to educate the company administration about the prospective of supply chain management. This is tough to answer, but would vary from one firm to another. Nonetheless, one thing can be held responsible as to the reason why managers will neglect supply management. This can be lack of synchronizations between the top management department of supply chain, as well as, other divisions engaged. 2. Strategy that would be employed to sell senior management on the benefits of focusing more attention on supply chain management To be able to attain the total prospective of supply chain management, there is the need of cooperation between the senior management of the company and the management of the supply chain together with other organizational divisions. There is a need for an incessant flow of information and support among the unit bearing in mind that supply chain will involve most of the divisions. Therefore, a way to include senior managers in collaboration to be able to attain the total potential needs ought to be designed. The technique would mostly consist of promoting the concept that supply chain control will fix some of the problems they are concerned to accomplish. The first step would be lining up supply chain management with some of the objectives the administration desires to accomplish. Some of this consists of, improving the income of the company further than the target, accomplishing growth season after season, minimizing risks to shield income and earnings, improving the return on investment for investors as well as accomplishing competitive advantage (Rudski, 2008). The practice would consist of interpreting how supply chain control would accomplish this. After interpreting the ways through which this can be carried out through supply chain, interacting with the managers to create understanding about its prospective in accomplishing their objectives would be next. This will need conviction to persuade the managers. This would need facts of how supply control can enhance and accomplish some of their objectives such as improving the return on investment. This can be done through cutting costs, which is possible through supply chain and improving revenue through customer care (Dutton, 2009). This improves the profit edge while at the same time decreases costs, which has a remarkable outcome on the business performance. To sell the concept, several other tactics to persuade the management can be used, such as demonstrating the practice of other organizations that have obtained achievements through supply chain control. Showing the managers this difference before such a company applied supply chain control and after applying it within the top management to enhance company performance can help in persuading the managers further to execute the concept. Moreover, the evaluation of the company and its present position compared to such a company showing advantages of supply chain management can actively engage the managers into the implementation of the idea (Dutton, 2009). 3. Benefits that might be gained from working closely with 3PLs, 4PLs, and vendors in promoting supply chain management initiatives to senior management. In an effort to endorse the concept of supply management, it would be valued to use some of the stakeholders that play a leading role in making the chain of supply to be an achievement. These consist of the suppliers and vendors, as well as, operating in conjunction with 4PLs and 3PLs. One advantage of dealing with these stakeholders such as the 4PLs and 3PLs is that they have an extensive experience to different organizations within different sectors (Dutton, 2009). They can help the company in reducing mistakes and tests since they have enormous encounters to offer, as well as, the necessary analytics. Furthermore, bearing in mind they are unbiased to the company, they stand a superior opportunity of convincing those that might be opposed to the utilization of supply chain in advancing business performance (Rudski, 2008). Moreover, considering that supply chain control entails more integration between the company and the suppliers, operating closely with them in selling the concept to the management helps in demonstrating the commitment of the engaged stakeholders. This confirms to the management that what is required is available. According to Dutton (2009), “Vendors are our eyes on the ground, and we work together to improve performance.” Therefore, suppliers are an associate of any supply chain management if achievements are to be obtained. Thus, in selling the concept to the management, suppliers perform an essential part to persuade the managers that the required element for performance is available. References Dutton, G. (2009) Selling the supply chain upwards. World Trade, Troy, 22 (9): 34, 37 Rudski, R. (2008). Supply Management Transformation: A Leader’s Guide. Supply Chain Management Review, New York, 12 (2): 12, 1pgs.