Effectiveness and Efficiency of Distribution Channels In FMCG

Effectiveness and Efficiency of Distribution Channels In FMCG Fast Moving Consumer Goods popularly known FMCG is as the name suggests is the most demanded products in the market. It includes everything from food items like flour, biscuits, ice creams, etc to body products soaps, face creams to cigarettes to beverages, etc. consumers need these things in their everyday life so they invests a good portion of there income in these things. There are so many companies which are dealing in FMCG products like HUL, Dabur, Cavin Care, AMUL dealing in dairy products, etc. By the vary nature of the product the companies are seeing this as a great source of income. As large number of companies are looking this sector as a profitable venture, so for sustaining there position and gain new market they have to bring some thing unique in their products or services to gain position in the market or to sustain there. In modern business distribution network has a great impact on the success of any business. In the FMCG segment the role of a excellent distribution channel becomes even more crucial because the delivery of FMCG Product is confined to day to day basic. Hence in order to survive and thrive in a highly competitive market you have to have a distribution channel which has no problem at any point of the distribution channel. The factor which is of crucial importance to survive in any business is the understanding of the mind of the individual consumers. What are main characteristics which consumer consider while making a purchasing decision regarding FMCG Product. In order to make right decision regarding all these aspects the company requires a complete knowledge of the problems faced in distribution channel and what should be done in order to overcome all these problems. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. Table of Contents Introduction A Distribution Channel is a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision. Functions of Distribution Channel All Use Up Scarce Resources All May Often Be Performed Better Through Specialization All Can Often Be Shifted Among Channel Members Types of Distribution Channel A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers or industrial users. In other words, it is the distribution network through which a producer puts his product in the hands of actual users. The channel of distribution includes the original producer, the final buyer and any middlemen-either wholesaler or retailer. The term middleman refers to any institution or individual in the channel which either acquires title to the goods or negotiates or sells in the capacity of an agent or broker. But facilitating agencies that perform or assist in marketing function are not included as middlemen in the channel of distribution. This is because they neither acquire title to the goods nor negotiate purchase or sale. Such facilitating agencies include banks, railways, roadways, warehouses, insurance companies, advertising agencies, etc. The following diagram (chart) is illustrative of the channel of distribution which may exist in a market: The above chart indicates that the number of middlemen may vary. If there is direct sale by the produce to the consumers then there is no middleman. But that is very rare. As the chart shows the producer may sell goods to retailer who may then sell the same to consumers. The producer may sell goods to wholesalers who may inturn sell to retailers and the retailer may sell to consumers. The fourth alternative channel of distribution is when any agent/dealer intervenes between the producer and retailers and acts as a middlemen. The agent is appointed by the producer for the sale of goods to the retailers. Another alternative channel is there when producers agent sells goods to wholesalers who sell to retailers. Agent/dealer is an independent person/firm buying goods and selling them to retailers. Agent/dealer may also sell to wholesalers who may then sell to retailers and goods are thus made available to consumers. In the channel of distribution there may be more than one agent/dealer and wholesaler. A brief explanation of different channels of distribution is given below: Manufacturer Æ’Â  Customer: This is also known as direct selling because no middlemen are involved. A producer may sell directly through his own retail stores, for example, Bata. This is the simplest and the shortest channel. It is fast and economical. Small producers and producers of perishable commodities also sell directly to the local consumers. Big firms adopt direct selling in order to cut distribution cost and because they have sufficient facilities to sell directly to the consumers. The producer or the entrepreneur himself performs all the marketing activities. Manufacturer Æ’Â  RetailerÆ’Â  Customer: This is one stage distribution channel having one middleman, i.e., retailer. In this channel, the producer sells to big retailers like departmental stores and chain stores who in turn sell to customer. This channel is very popular in the distribution of consumer durables such as refrigerators, T V sets, washing machines, typewriters, etc. This channel of distribution is very popular these days because of emergence of departmental stores, super markets and other big retail stores. The retailers purchase in large quantities from the producer and perform certain marketing activities in order to sell the product to the ultimate consumers. Manufacturer Æ’Â  WholesalerÆ’Â  RetailerÆ’Â  Customer: This is the traditional channel of distribution. There are two middlemen in this channel of distribution, namely, wholesaler and retailer. This channel is most suitable for the products with widely scattered market. It is used in the distribution of consumer products like groceries, drugs, cosmetics, etc. It is quite suitable for small scale producers whose product line is narrow and who require the expert services and promotional support of wholesalers. Selection Criteria of a Distribution Channel While selecting a distribution channel, the entrepreneur should compare the costs, sales volume and profits expected from alternative channels of distribution. In order to select the right channel for distributing his product, a small-scale manufacturer should keep in mind the following considerations: Market Considerations: The nature of the market is a key factor influencing the choice of channels of distribution. The following features of the market should be considered to determine the channels: Consumer or Industrial Market: If the product is meant for industrial users, the channel of distribution will be a short one. This is because industrial users buy in a large quantity and the producer can easily establish a direct contact with them. But in case for goods meant for consumers, retailers may have to be included in the channels of distribution. Number and location of buyers: When the number of potential customers is small or the market is geographically located in a limited area, direct selling is easy and economical. In case of large number of customers, use of wholesalers and retailers becomes necessary. Size of order: Direct selling is convenient and economical where customers place order in big lots as in case of industrial goods. But where the product is sold in small quantities, middlemen are used to distribute such products. A manufacturer may use different channels for different types of buyers. He may sell directly to big retail stores and may use wholesalers to sell to small retailers. Customers buying habits: The customer buying habits like the time he is willing to spend, the desire for credit, the preference of personal attention and one stop shopping significantly affect the choice of distribution channels. Product Considerations: The type and nature of the product influence the number and type of middlemen to be chosen for distributing the product. The important factors with respect to the product are as follows: Unit value: Products of low unit value and common use are generally sold through middlemen, as they cannot bear the cost of direct selling. On the other hand, expensive consumer goods and industrial products are sold directly by the producers. Perishability: Perishable products like vegetables, fruits and bakery items have relatively short channels, as they cannot withstand repeated handling. Goods, which are subject to frequent changes in fashion and style, are generally distributed through short channels, as the producer has to maintain close and continuous touch with the market. Bulk and weight: Heavy and bulky products are distributed directly to minimize handling costs. Coal, bricks, stones, etc., are some examples. Standardisation: Custom-made and non-standardised products usually pass through short channels due to the need for direct contact between the producer and the consumers. Standardized and mass-made goods can be distributed through middlemen. Technical nature: Industrial products requiring demonstration, installation and aftersale service are often sold directly. The consumer products of technical nature are generally sold through retailers. Product line: An entrepreneur producing a wide range of products may find it economical to set up its own retail outlets. On the other hand, firms with one or two products find it profitable to distribute through wholesalers and retailers. Age of the product: A new product needs greater promotional effort and few middlemen may like to handle it. As the product gains acceptance in the market, more middlemen may be employed for its distribution. Middlemen Considerations: The cost and efficiency of distribution depend largely upon the nature and type of middlemen as given in the following factors: Availability: When middlemen as desired are not available, an entrepreneur may have to establish his own distribution network. Non-availability of middlemen may arise when they are handling competitive products, as they do not like to handle more brands. Attitudes: Middlemen who do not like a firms marketing policies may refuse to handle its products. For instance, some wholesalers and retailers demand sole selling rights or a guarantee against fall in prices. Services: Use of those middlemen is profitable who provide financing, storage, promotion and aftersale services. Sale Potential: An entrepreneur generally prefers a dealer who offers the greatest potential volume of sales. Costs: Choice of a channel should be made after comparing the costs of distribution through alternative channels. Company Considerations: The nature, size and objectives of the business firm also play an important role in the selection of distribution channel. It includes financial resources, market standing, volume of production, desire for control of channel, services provided by manufacturers, etc. For example a company with substantial financial resources need not rely too much on the middlemen and can afford to reduce the levels of distribution. Similarly a company desiring to exercise greater control over channel will prefer a shorter channel. After deciding the number of middlemen, an entrepreneur has to select the particular dealers through whom he will distribute his products. While selecting a particular wholesaler or retailer, the following factors should be taken into consideration: a. Location of dealers business premises; b. Financial position and credit standing of the dealer; c. Knowledge and experience of the dealer; d. Storage and showroom facilities of the dealer e. Ability of the dealer to secure adequate business and to cover the market; f. Capacity of the dealer to provide aftersale service; g. General reputation of the dealer and his sales force; h. Willingness of the dealer to handle the entrepreneurs products; i. Degree of co-operation and promotion service he is willing to provide; j. Nature of other products, if any handled by the dealer. Need for Distribution Channel Why are all these layers needed in distribution ? Why cant a producer simply sell to a retailer, who sells to a consumer? Its a fair question, and in some cases, that is exactly how it happens. But the fact is that many producers are either too small or too large to handle all the necessary functions themselves to get their products to market. Consider the small, specialty manufacturer who is terrific at making fine leather handbags but may not have the expertise to market its products as well as it makes them, or they may not have the money to hire a team of full-time salespeople to court the customers and secure the orders. An intermediary who works for several small, noncompeting firms can easily handle those functions cost-effectively. An intermediary who specializes in importing and exporting can handle the intricacies of customs paperwork, overseas shipping, and foreign markets, too. Conversely, large companies need intermediaries because they are also in the business of manufacturing, not marketing. Turning out tens of thousands of cases of soft drinks, for instance, do you think Pepsi has time to take and fill individual orders from households? Channel members like wholesalers and retailers are useful because they are best at specific aspects of sales in their markets, leaving the manufacturers to do what they do best-which is turn out the best possible product. Having a distribution channel breaks the whole buying and selling process and all its related negotiations into manageable tasks, each performed by companies that specialize in certain skills. Using an import wholesaler, for example, can be handy because they know the laws and customs of the suppliers nations; and they generally offer their own lines of credit so the retailer wont have to deal with currency exchange or negotiate payment terms with a bank in another country. Another advantage of the distribution channel is its ability to even out the natural ebbs and flows of a supply chain. This comes from the ability of some channel members to store excess goods until they are needed, and to stockpile goods in anticipation of seasonal sales peaks. Depending on how close their relationships, channel members may also work together to purchase goods or services in greater quantity at discounts, passing the savings on to customers. Even for consumers, the distribution chain is handy-beyond handy, in fact! It has become a necessity in our society. What if there were no supermarkets, for instance? Can you imagine how much more time and money you would spend having to buy every item at its source? How practical would it be to run out to the nearest farm to pick up a quart of milk and some salad ingredients on your way home from work? FMCG Sector Overview FMCG is an acronym for  Fast Moving Consumer Goods, which refer to things that we buy from local supermarkets on daily basis, the things that have high turnover and are relatively cheaper. Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. A subset of FMCGs is Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc. These types of goods are required frequently by consumers and so a large part of the monthly salary or income will be spent on buying all the goods listed on the consumers shopping list. New players keep joining the FMCG circles but find the going tough unless they have a well planned strategy along with large cash reserves for their product promotion. A particular FMCG company might be a strong urban market leader, but will still find it tough to enter the rural markets or a new Indian state or area. Although FMCG companies generate a large volume of sales and money, they are always under pressure as they keep facing a lot of competition from their fellow competitors. Due to this, the FMCG companies try to do their level best in maintaining a fine balance in their profits and the product price. Thus they keep facing new challenges on their margins month after month. One of the key factors for an FMCG company to do well is a proper distribution network. If a distribution network of a particular FMCG company is well oiled, then that particular FMCG Company will definitely find the going much easier in the market. But companies have to allot a large chunk of their finances in developing and fine tuning their distribution networks. The promotion of a product of an FMCG company too is considered very crucial for its success. The market has many players. Every FMCG company has to fight for its space and audience in the Indian market. Thus, when a multinational company enters the Indian market, it creates an even bigger challenge to the existing players on the FMCG scene. If the promotion is done well, then the manufacturing of the product can even be outsourced. This can save valuable finance for a company. This in turn will help the company to utilize their energies on other aspects of their product. Some of the top players on the FMCG scene in India are Hindustan Unilever Ltd., ITC (Indian Tobacco Company), Nestlà © India and Dabur India. So, we can say that FMCG are the products which are: Sold quickly at relatively low cost Sold in large quantities Have low absolute profit but high cumulative profit Sector Performance FMCG is one of the few sectors that has been unscratched and has shown consistent growth despite economic recession and this can be proved by some of the leading magazines articles like: According to Business Standard-FMCG resilient to the economic slowdown and dip in consumer sentiment. According to Economic times it is one of the very few sectors undergoing MA in recent times. Economic times also comment that Indian rural market in untapped and unpenetrated. The growth in this sector is also evident from the fact that many FMCG companies are planning to foray into West Asia, South Africa and Egypt. FMCG industry  provides a wide range of consumables and accordingly the amount of money circulated against FMCG products is also very high. The competition among FMCG manufacturers is also growing and as a result of this, investment in FMCG industry is also increasing, specifically in India, where FMCG industry is regarded as the fourth largest sector with total market size of US$13.1 billion. FMCG Sector in India is estimated to grow 60% by 2010. FMCG industry is regarded as the largest sector in New Zealand which accounts for 5% of Gross Domestic Product (GDP). Some of the merits of FMCG industry, which made this industry as a potential one are low operational cost, strong distribution networks, presence of renowned FMCG companies. Population growth is another factor which is responsible behind the success of this industry. Some of the well known FMCG companies are : Sara Lee Nestlà © Reckitt Benckiser Unilever Procter Gamble Coca-Cola Carlsberg Kleenex General Mills Pepsi Mars etc. FMCG industry  creates a wide range of job opportunities. This industry is a stable, diverse, challenging and high profile industry providing a wide range of job categories like sales, supply chain, finance, marketing, operations, purchasing, human resources, product development, and general management. Indian FMCG Sector FMCG is the fourth largest sector in the Indian Economy with a total market size of Rs. 60,000 crores. FMCG sector generates 5% of total factory employment in the country and is creating employment for three million people, especially in small towns and rural India. The FMCG sector in India is a sector which is dominated by a high level competition between all the players. This particular sector includes MNCs as well as local Indian companies. Certain companies are leaders in a particular state or area. While some of the companies are very strong in the rural areas compared to the urban areas. Some of the most powerful companies in the FMCG sector are: Hindustan Unilever Ltd., ITC (Indian Tobacco Company), Nestlà © India, GCMMF (AMUL), Dabur India, Asian Paints (India), Cadbury India, Britannia Industries, Procter Gamble Hygiene and Health Care and Marico Industries. All these companies have a proper distribution network along with proper product promotion tools which have helped them to regularly increase their sales and visibility on the Indian scene. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. Hindustan Unilever Limited has been operating in India from a long time. They are Indias largest FMCG Company and are also one of Indias largest exporters. The list of their popular products is a very large one. Some of their popular products are Lifebuoy, Rexona, Lux, Liril, Lipton Tea, Brooke Bond Tea, Bru Coffee, Pepsodent, Surf, Rin, Wheel Laundry Detergent and Kissan. The company has an excellent research centre which was established in 1958 and has a strong team of highly qualified scientists. Recently they have launched new projects like Ayush Ayurvedic Products Services and Pureit Water Purifiers. ITC which was set up in 1910 in India was earlier known as Imperial Tobacco Company of India Limited. ITC has a vast presence in wide array of products and some of them are greeting cards, cigarettes, paperboards, packaging, branded apparel, foods confectionery and FMCG products. ITC has proved its worth by being one of Indias biggest foreign exchange earners. Although it already has many leading products from a long time, it is recently wooing over successfully new customers in its businesses of branded apparel, packaged foods confectionery and greeting cards stationery. Nestlà © first made its presence in India in 1912. It has always managed to get itself listed in Indias Most Respected Companies. This has been possible due to its practice of producing products of a global standard in India. It has also been able to provide customer satisfaction to the consumers of its products. The success of Gujarat Cooperative Milk Marketing Federation (GCMMF) has proved that a cooperative too can grow into a top class company if it is backed by proper vision, hard work and a quality product. This has helped it to become the largest food product marketing organization in India. Some of its popular products are Amul Ice cream, Amul Milk, Amul Butter, Amul Shrikhand, Amul Milk Powder, Amul Ghee and Amul Cheese. Thus the above four examples show a variety of factors which are responsible for turning a company into a leading FMCG company. The top 10 companies in India are as follows: The FMCG sector can be sub classified into: Personal Care: The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds.   There are 11 HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India. Foods: The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development than the stagnating personal care category. Amul, Indias largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices. Household care: In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitts Mortein at Rs 149 crore. In the shampoo category, HLLs Clinic and Sunsilk make it to the top 100, although PGs Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Herbal care: Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Paint: Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is Indias largest paint company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World Chocolates/Confectionary: Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadburys Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space. Outlook for FMCG Sector: There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumers mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. Its the quality, promotion and innovation of products, which can drive many sectors. Methodology Exploratory research: The exploratory research design is appropriate for any any problems in which a very little knowledge is available. An Exploratory study is in the nature of a preliminary phase and is absolutely essential in order to obtain a proper definition of problem in hand. So it is helpful in breaking broad and vague problems into smaller, more precise sub problem statements, hopefully, in the form of specific hypothesis. In this study the exploratory research has been used to frame structure questionnaires, individuals with knowledge and ideas have been interviewed to get the idea to frame structure questionnaire. A part from books and journals has been used to gather information about the insurance and the insurance industry. Data Collection: In this study internal and external source for data collection had been used. In the internal and external sources of data collection these two types of data comes into picture: Primary Data Secondary Data Primary Data All the primary data for the purpose of the study were obtained by interviewing the retailers with the help of a questionnaire. Questionnaires were framed on the basis of product its competition. The questions were designed in such a way as to elicit maximum information and data. Secondary Data Secondary data has been collected from books and websites. Internet websites: www.google.com, www.Coca-Cola.com, www.wikipedia.com, www.coca-colaindia.com Magazines Business World Management and Technology Questionnaire There can be two types of questionnaire. Questionnaire for Whole sellers: Name: Age: .. Area: . Years in the Business:. .. Date. http://2.bp.blogspot.com/_STNJ3qjC9Nk/SX30qf_Ve3I/AAAAAAAAAcU/P3nV5aXUBdY/s320/Coca-Cola_logo5.jpg Q1. Which coca cola cold drink brand sells the most? Coke b. ThumsUp c.Limca d. Sprite e. Fanta f. Maaza g.Others Q2. Which mineral water sells the most? Kinley b. Aquafina c. Bisleri d. Local brands Q3. What type of package cold drinks sells the most? 300ml bottle b. 600 ml pet bottle c.

Witnessing the Unwitnessable :: Essays Papers

Witnessing the Unwitnessable Against a black canvas glimmer countless particles of light. Some assert themselves as tiny pinpricks while others pool into swirls of color on the ebony backdrop. A cursory glance at these speckles might discern them as nothing but randomness, but a closer examination reveals a certain sense of artistic unity. Their palette is simple – shades of black, white, yellow, blue, red, orange – while their details are elegant. A whirl of gold dances nears a splotch of sapphire; a daub of dainty pink resembles a rose; drops of ivory encircle a void like a pearl necklace; lacy, white tendrils reach toward a spray of amber. These descriptions might hint at a painting, but in this case, the image in question has no artist – it is a photograph of deep space produced by the Hubble Space Telescope known as the Hubble Ultra Deep Field. Taken of a random patch of sky no larger than a grain of sand over a period of three months, this photograph contains an estim ated 10,000 galaxies, each of them billions of years old. This single, tiny frame has captured the profound immensities and beautiful harmony of the universe in an image that defies comprehension. The blackness of the night sky belies the menagerie of color and light hidden from our eyes. Many cosmological objects are too faint to be seen, many emit wavelengths of light our eyes do not know how to respond to, and many (the far side of the moon, for example) are impossible to behold from Earth’s surface. Astrophotography, which will here be broadly defined as â€Å"the capturing of all images of space,† provides a keyhole through which we may view celestial spectacles we would never normally see. Photons, particles of light, are often the only evidence we have of the existence of the vast majority of the objects in the universe. By committing these photons to photographic plates or pixels, astrophotographers capture an imprint testifying that whatever emitted them exists somewhere in the infinity. Seizing photons gives us the power to transform a remote and unimaginable galaxy into a real and tangible photograph. Even more important, viewing astr ophotography raises questions about the fundamental nature of both ourselves and the universe.

Global Financial Crisis: Causes and Effect Essay

The financial crisis that began in 2007 spread and gathered intensity in 2008, despite the efforts of central banks and regulators to restore calm. By early 2009, the financial system and the global economy appeared to be locked in a descending spiral, and the primary focus of policy became the prevention of a prolonged downturn on the order of the Great Depression. The volume and variety of negative financial news, and the seeming impotence of policy responses, has raised new questions about the origins of financial crises and the market mechanisms by which they are contained or propagated. Just as the economic impact of financial market failures in the 1930s remains an active academic subject, it is likely that the causes of the current crisis will be debated for decades to come. Financial Crisis The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Major causes of Financial Crisis Imprudent Mortgage Lending: Against a backdrop of abundant credit, low interest rates, and rising house prices, lending standards were relaxed to the point that many people were able to buy houses they couldn’t afford. When prices began to fall and loans started going bad, there was a severe shock to the financial system. Housing Bubble: With its easy money policies, the Federal Reserve allowed housing prices to rise to unsustainable levels. The crisis was triggered by the bubble bursting, as it was bound to do. Global Imbalances: Global financial flows have been characterized in recent years by an unsustainable pattern: some countries (China, Japan, and Germany) run large surpluses every year, while others run deficits. The U. S. external deficits have been mirrored by internal deficits in the household and government sectors. U. S. borrowing cannot continue indefinitely; the resulting stress underlies current financial disruptions. Securitization: Securitization fostered the â€Å"originate-to-distribute† model, which reduced lenders’ incentives to be prudent, especially in the face of vast investor demand for subprime loans packaged as AAA bonds. Ownership of mortgage-backed securities was widely dispersed, causing repercussions throughout the global system when subprime loans went bad in 2007. Lack of Transparency and Accountability in Mortgage Finance: Throughout the housing finance value chain, many participants contributed to the creation of bad mortgages and the selling of bad securities, apparently feeling secure that they would not be held accountable for their actions. A lender could sell exotic mortgages to home-owners, apparently without fear of repercussions if those mortgages failed. Similarly, a trader could sell toxic securities to investors, apparently without fear of personal responsibility if those contracts failed. And so it was for brokers, realtors, individuals in rating agencies, and other market participants, each maximizing his or her own gain and passing problems on down the line until the system itself collapsed. Because of the lack of participant accountability, the originate-to distribute model of mortgage finance, with its once great promise of managing risk, became itself a massive generator of risk. † Rating Agencies: The credit rating agencies gave AAA ratings to numerous issues of subprime mortgage-backed securities, many of which were subsequently downgraded to junk status. Critics cite poor economic models, conflicts of interest, and lack of effective regulation as reasons for the rating agencies’ failure. Another factor is the market’s excessive reliance on ratings, which has been reinforced by numerous laws and regulations that use ratings as a criterion for permissible investments or as a factor in required capital levels. Mark-to-market Accounting: FASB standards require institutions to report the fair (or current market) value of securities they hold. Critics of the rule argue that these forces banks to recognize losses based on â€Å"fire sale† prices that prevail in distressed markets, prices believed to be below long-term fundamental values. Those losses undermine market confidence and exacerbate banking system problems. Some propose suspending mark-to-market; EESA requires a study of its impact. Deregulatory Legislation: Laws such as the Gramm-Leach-Bliley Act (GLBA) and the Commodity Futures Modernization Act (CFMA) permitted financial institutions to engage in unregulated risky transactions on a vast scale. The laws were driven by an excessive faith in the robustness of market discipline, or self-regulation. Shadow Banking System: Risky financial activities once confined to regulated banks (use of leverage, borrowing short-term to lend long, etc. ) migrated outside the explicit government safety net provided by deposit insurance and safety and soundness regulation. Mortgage lending, in particular, moved out of banks into unregulated institutions. This unsupervised risk-taking amounted to a financial house of cards. Non-Bank Runs: As institutions outside the banking system built up financial positions built on borrowing short and lending long, they became vulnerable to liquidity risk in the form of non-bank runs. That is, they could fail if markets lost confidence and refused to extend or roll over short-term credit, as happened to Bear Stearns and others. Government-Mandated Subprime Lending: Federal mandates to help low-income borrowers (e. g. , the Community Reinvestment Act (CRA) and Fannie Mae and Freddie Mac’s affordable housing goals) forced banks to engage in imprudent mortgage lending. Excessive Leverage: In the post-2000 period of low interest rates and abundant capital, fixed income yields were low. To compensate, many investors used borrowed funds to boost the return on their capital. Excessive leverage magnified the impact of the housing downturn, and deleveraging caused the interbank credit market to tighten. Financial Crisis & U. S economy In 2008, the United States experienced a major financial crisis which led to the most serious recession since the Second World War. Both the financial crisis and the downturn in the U. S. economy spread to many foreign nations, resulting in a global economic crisis. On September 15, 2008, Lehman Brothers, one of the largest investment banks in the world, failed. Over the next few months, the US stock market plummeted, liquidity dried up, successful companies laid off employees by the thousands, and for the first time there was no longer any doubt a recession was upon the American people. Eleven months after the fall of Lehman Brothers, the U. S. remains in a state of limbo. Proposals for stimulus packages and other bailout plans have provided some relief, but it seems the most effective remedy thus far has been time. The facts are that approximately 6% of all mortgage loans in United States are in default. Historically, defaults were less than one-third of that, i. e. , from 0. 25% to 2%. A huge portion of the increased mortgage loan defaults are what are referred to as ‘sub-prime’ loans. Most of the sub-prime loans have been made to borrowers with poor credit ratings, no down payment on the home financed, and/or no verification of income or assets (Alt-A’s). Close to 25% of sub-prime and Alt-A’s loans are in default. These loans increased dramatically as a 9/30/99 New York Times article explained, â€Å"In a move that could help increase homeownership rates among minorities and low income consumers, the Fannie Mae Corp. is easing the credit requirements on loans that it will purchase from banks and other lenders. † To allow Fannie Mae to make more loans, President Clinton also reduced Fannie Mae’s reserve requirement to 2. 5%. That means it could purchase and/or guarantee $97. 50 in mortgages for every $2. 50 it had in equity to cover possible bad debts. If more than 2. % of the loans go bad, the taxpayers (us) have to pay for them. That is what this bailout is all about. It is not the government paying the banks for the bad loans, it is us!! Principally Senate Democrats demanded that Fannie Mae & Freddie Mac (FM&FM) buy more of these risky loans to help the poor. Since the mortgages purchased and guaranteed by FM&FM are backed by the U. S. government, the loans were re-sold primarily to investment banks which in turn bundled most of them, taking a hefty fee, and sold the mortgages to investors all over the world as virtually risk free. As long as the Federal Reserve (another government created agency) kept interest rates artificially low, monthly mortgage payments were low and housing prices went up. Many home owners got home equity loans to pay their first mortgages and credit card debt. Unfortunately home prices peaked in the winter of 2005-06 and the house of cards started to crumble. People could no longer increase their mortgage debt to pay previous debts. Now, we taxpayers are being told we have to bail out the banks and everyone in the world who bought these highly risky loans. The politicians in Congress (mostly Democrats) do not want you to know they caused the mess. In the 2006 elections, the Democrats took control of the House and Senate. There are plenty of videos on the Internet showing many Democrats including Senate Banking Committee Chairman Democrat Christopher Dodd and House Banking Committee Chairman Barney Frank, responsible with overseeing FM&FM, assuring us that there were no problems with FM&FM right up to their collapse. Not surprisingly, virtually all the investment banks that are in trouble and being bailed out are run by financial supporters of Obama and other Democrats. Secretary of the Treasury Paulsen was head of Goldman Sachs. The new head of the $700 million bailout is also from Goldman Sachs. This is like letting the fox be in charge of hen house security. It was announced that our government will infuse capital into the troubled banks. This gives whoever is in power of our government the ability to force the same kind of abuses that have caused this massive banking crisis in the first place. Barack Obama has received more campaign donations that any other politician in the past three years from Fannie Mae and Wall Street. FM&FC have been virtually private piggy banks of campaign contributions for Democrats for the past 10 years. Yes, a token amount went to some Republicans. And there is plenty of blame to go around in this financial crisis, but the reason it happened was 100% caused by a Democrat run government that forced a liberal policy initiated by President Clinton and reforms primarily blocked by Democrats. One would never know this by watching the news or reading newspapers. Until the majority of our citizens understand whom (government liberals) and what (liberalism/socialism) caused this mess, we will allow our elected officials, through massive inflation, to lower the standard of living of those of us who are financially prudent and give our earnings to those who are not prudent. The big excuse for the bailout is that credit markets have frozen up. But it is not true. There is plenty of credit available for good credit risks. The only way this can be rectified is to allow the people who made the mistakes to take their losses. It is called taking personal responsibility for one’s actions. Already we see that the bailout has had virtually no effect on the markets other than to cause huge sell offs because smart investors see that the U. S. is adopting failed liberal socialist policies. Our government is following in the footsteps of Hoover and Roosevelt. We do not need to have another depression, but the government is taking the steps to make it happen. The taxpayer financed bailout should be reversed immediately as it will only encourage more irresponsible fraudulent behavior. Impacts of Financial Crisis on Global Economy For the developing world, the rise in food prices as well as the knock-on effects from the financial instability and uncertainty in industrialized nations is having a compounding effect. High fuel costs, soaring commodity prices together with fears of global recession are worrying many developing country analysts. Asia & Financial crisis Countries in Asia are increasingly worried about what is happening in the West. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world. India and China are the among the world’s fastest growing nations and after Japan, are the largest economies in Asia. From 2007 to 2008 India’s economy grew by a whopping 9%. Much of it is fueled by its domestic market. However, even that has not been enough to shield it from the effect of the global financial crisis, and it is expected that in data will show that by March 2009 that India’s growth will have slowed quickly to 7. 1%. Although this is a very impressive growth figure even in good times, the speed at which it has dropped—the sharp slowdown—is what is concerning. China similarly has also experienced a sharp slowdown and its growth is expected to slow down to 8% (still a good growth figure in normal conditions). However, China also has a growing crisis of unrest over job losses. Both have poured billions into recovery packages. China has also raised concerns about the world relying on mostly one foreign currency reserve, and called for the dollar to be replaced by a world reserve currency run by the IMF. Of course, the US has defended the dollar as a global currency reserve, which is to be expected given it is one of its main sources of global economic dominance. Whether a change like this would actually happen remains to be seen, but it is likely the US and its allies will be very resistant to the idea. Japan, which has suffered its own crisis in the 1990s also faces trouble now. While their banks seem more secure compared to their Western counterparts, it is very dependent on exports. Japan is so exposed that in January alone, Japan’s industrial production fell by 10%, the biggest monthly drop since their records began. Japan’s output for the first 3 months of 2009 plunged at its quickest pace since records began in 1955, mostly due to falling exports. A rise in industrial output in April was expected, but was positively more than initially estimated. However, with high unemployment and general lack of confidence, optimism for recovery has been dampened. In recent years, there has been more interest in Africa from Asian countries such as China. As the financial crisis is hitting the Western nations the hardest, Africa may yet enjoy increased trade for a while. These earlier hopes for Africa, above, may be short lived, unfortunately. In May 2009, the International Monetary Fund (IMF) warned that Africa’s economic growth will plummet because of the world economic downturn, predicting growth in sub-Saharan Africa will slow to 1. 5% in 2009, below the rate of population growth (revising downward a March 2009 prediction of 3. 25% growth due to the slump in commodity prices and the credit squeeze). Some African countries have already started to cut their health and HIV budgets due to the economic crisis. Their health budgets and resources have been constrained for many years already, so this crisis makes a bad situation worse. Due to its proximity to the US and its close relationship via the NAFTA and other agreements, Mexico is expected to have one of the lowest growth rates for the region next year at 1. 9%, compared to a downgraded forecast of 3% for the rest of the region. Europe & Financial crisis In Europe, a number of major financial institutions failed. Others needed rescuing. In Iceland, where the economy was very dependent on the finance sector, economic problems have hit them hard. The banking system virtually collapsed and the government had to borrow from the IMF and other neighbors to try and rescue the economy. In the end, public dissatisfaction at the way the government was handling the crisis meant the Iceland government fell. The EU is also considering spending increases and tax cuts said to be worth â‚ ¬200bn over two years. The plan is supposed to help restore consumer and business confidence, shore up employment, getting the bank’s lending again, and promoting green technologies. Russia’s economy is contracting sharply with many more feared to slide into poverty. One of Russia’s key exports, oil, was a reason for a recent boom, but falling prices have had a big impact and investors are withdrawing from the country. Africa & Financial crisis Perhaps ironically, Africa’s generally weak integration with the rest of the global economy may mean that many African countries will not be affected from the crisis, at least not initially, as suggested by Reuters in September 2008. In recent years, there has been more interest in Africa from Asian countries such as China. As the financial crisis is hitting the Western nations the hardest, Africa may yet enjoy increased trade for a while. These earlier hopes for Africa, above, may be short lived, unfortunately. In May 2009, the International Monetary Fund (IMF) warned that Africa’s economic growth will plummet because of the world economic downturn, predicting growth in sub-Saharan Africa will slow to 1. 5% in 2009, below the rate of population growth (revising downward a March 2009 prediction of 3. 25% growth due to the slump in commodity prices and the credit squeeze) African countries could face increasing pressure for debt repayment, however. As the crisis gets deeper and the international institutions and western banks that have lent money to Africa need to shore up their reserves more, one way could be to demand debt repayment. This could cause further cuts in social services such as health and education, which have already been reduced due to crises and policies from previous eras. The current crisis The housing bubble started to burst in 2006, and the decline accelerated in 2007 and 2008. Housing prices stopped increasing in 2006, started to decrease in 2007, and have fallen about 25 percent from the peak so far. The decline in prices meant that homeowners could no longer refinance when their mortgage rates were reset, which caused delinquencies and defaults of mortgages to increase sharply, especially among subprime borrowers. From the first quarter of 2006 to the third quarter of 2008, the percentage of mortgages in foreclosure tripled, from 1 percent to 3 percent, and the percentage of mortgages in foreclosure or at least thirty days delinquent more than doubled, from 4. 5 percent to 10 percent. These foreclosure and delinquency rates are the highest since the Great Depression; the previous peak for the delinquency rate was 6. 8 percent in 1984 and 2002. And the worst is yet to come. The American dream of owning your own home is turning into an American nightmare for millions of families. Early estimates of the total number of foreclosures that will result from this crisis in the years to come ranged from 3 million to 8 million. So far (as of January 2009), there have already been almost 3 million mortgage foreclosures. Another 1 million mortgages are ninety days delinquent and another 2 million were thirty days delinquent. Therefore, a total of about 6 million mortgages either have already been foreclosed, are in foreclosure, or are close to foreclosure. Six million mortgages are about 12 percent of all the mortgages in the United States. The situation could get a lot worse in the months ahead, due to the worsening recession and lost jobs and income, unless the government adopts stronger policies to reduce foreclosures. Defaults and foreclosures on mortgages mean losses for lenders. Estimates of losses on mortgages keep increasing, and many are now predicting losses of $1 trillion or more. In addition to losses on mortgages, there will also be losses on other types of loans, due to the weakness of the economy, in the months ahead: consumer loans (credit cards, etc. ), commercial real estate, corporate junk bonds, and other types of loans (e. g. redit default swaps). Estimates of losses on these other types of loans range up to another trillion dollars. Therefore, total losses for the financial sector as a whole could be as high as $2 trillion. It is further estimated that banks will suffer about half of the total losses of the financial sector. The rest of the losses will be borne by non-bank financial institutions (hedge funds, pension funds, etc. ). Therefore, dividing the total losses for the financial sector as a whole in the previous paragraph by two, the losses for the banking sector could be as high as $1 trillion. Since the total bank capital in the U.  S. is approximately $1. 5 trillion, losses of this magnitude would wipe out two-thirds of the total capital in U. S. banks! * This would obviously be a severe blow, not just to the banks, but also to the U. S. economy as a whole. The blow to the rest of the economy would happen because the rest of the economy is dependent on banks for loans—businesses for investment loans, and households for mortgages and consumer loans. Bank losses result in a reduction in bank capital, which in turn requires a reduction in bank lending (a credit crunch), in order to maintain acceptable loan to capital ratios. Assuming a loan to capital ratio of 10:1 (this conservative assumption was made in a recent study by Goldman Sachs), every $100 billion loss and reduction of bank capital would normally result in a $1 trillion reduction in bank lending and corresponding reductions in business investment and consumer spending. According to this rule of thumb, even the low estimate of bank losses of $1 trillion would result in a reduction of bank lending of $10 trillion! This would be a severe blow to the economy and would cause a severe recession. Bank losses may be offset to some extent by â€Å"recapitalization,† i. e. by new capital being invested in banks from other sources. If bank capital can be at least partially restored, then the reduction in bank lending does not have to be so significant and traumatic. So far, banks have lost about $500 billion and have raised about $400 billion in new capital, most of it coming from â€Å"sovereign wealth funds† financed by the governments of Asian and Middle Eastern countries. So ironically, U. S. banks may be â€Å"saved† (in part) by increasing foreign ownership. U. S. bankers are now figuratively on their knees before these foreign investors offering discounted prices and pleading or help. It is also an important indication of the decline of U. S. economic hegemony as a result of this crisis. However, it is becoming more difficult for banks to raise new capital from foreign investors, because their prior investments have already suffered significant losses. In addition to the credit crunch, consumer spending will be further depressed in the months ahead due to the following factors: decreasing household wealth; the end of mortgage equity withdrawals and declining jobs and incomes. All in all, it is shaping up to be a very severe recession.

Love for Marriage and Love for Convenience - 3074 Words

â€Å"I can sacrifice myself for my daughter but probably not for my wife.† This was what my college professor said the other day jokingly. He was obviously highlighting the fact that he loves his daughter very much, though, to me, it was an instant shock. I always believed that marital love is eternal and perfect. Doesn’t a marriage start by promising eternal love? Isn’t it even considered as a sin if you break the vow? I have come to think recently that my view on marriage is just an idealised imagination. I always refused to face reality. Looking at our society very carefully, it seems that not all marriage partners share a strong passionate bonding of love, especially those who have grown old together. To be even precise, I cannot even see†¦show more content†¦this desire formed modern marriage of convenience. Wit or irony encompasses the inherent instability of romance, fine-tuned to its late modern peculiarities. Love and marriage clearly were alwa ys ironic. This is, marriage constructed for reasons other than the reasons of love. Such marriage is orchestrated for personal gain or some other sort of strategic purpose. A couple may wed for reasons of citizenship or right of abode, for example, immigration. I started to think that it is not a bad idea to wed for convenience. Historically, marriages in Japan were often arranged between families, called omiai, in order to protect status wealth, title, inheritance, or similar issues of property. Such marriages went forward with little or no consideration of love between the people to be married and this is happening everywhere. A more moderate and flexible procedure known as a modern arranged marriage is gaining in popularity. Parents choose several possible candidates or employ matrimonial sites. The parents will then arrange a meeting with the family of the prospective mate, confining their role to responsible facilitators and well-wishers. Less pressure to agree to the match is exerted by the parents in comparison to a traditional arranged marriage. In some cases, a prospective partner may be selected by the son or daughter instead of by the parents or by a matchmaker. That way, the parents will either disapprove of the match and forbid the marriageShow MoreRelatedJane Austen s Pride And Prejudice1533 Words   |  7 PagesIn today s society, marriage is a significant bond that must be on the basis of love and understanding. Marriage is a relationship described as more for love and emotion rather than convenience or money. Through the experience of Lydia and Wickham, Charlotte and Collins, and Elizabeth and Darcy, Austen criticizes marriages based on infatuation, convenience and money, and emphasizes that marriage can only be successful if they are founded on mutual love. In the novel Pride and Prejudice, AustenRead MoreJane Austen s Pride And Prejudice1304 Words   |  6 PagesPride and Prejudice, Jane Austen portrays themes of love, class, reputation, and marriage. From the beginning it is seen that the question of marriage is very important to the Bennet family. Upon not marrying, the girls cousin Mr. Collins will inherit Longbourn due to the absence of a male heir. This means that the family will become destitute since they won t have any support or a place to live. The only solution for them would be marriage. During this era, since women had to pay dowry, theyRead More Pride And Prejudice: Five Married Couples Essay1116 Words   |  5 Pagescouples. No two are alike. From the pure love which was experienced through Elizabeth and Darcy. To the love and attraction shared by Jane and Bingley. 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Thomas Hardy s novel Jude the Obscure offers a critical portrayalRead MoreComparing Elizabeth Bennet and Charlotte Lucas in Pride and Prejudice1528 Words   |  7 Pagesthat will be compared and contrasted include the relative beauty, age and the characters of Elizabeth Bennet and Charlotte Lucas. The similarities and differences in their families, position in society and their wealth, their differing attitudes to marriage, and finally, who has th e better deal and why, will also be discussed. By the end of this essay, the reader will be able to discern the differences and similarities in both Elizabeth and Charlotte. The physical appearance of Elizabeth BennetRead MoreThe Theme Of Love And Marriage In Pride And Prejudice1000 Words   |  4 PagesIn Jane Austen’s â€Å"Pride and Prejudice†, one of the major themes is love and marriage. Elizabeth is portrayed as a movement towards women’s rights and what is wrong with society and their views of women as material possessions or collateral. Jane Austen seems to do this in a satirical way by bringing light to these issues in a comical romance, hidden in the humor. On the very first page of the novel, you have Mrs. Bennet not only desperately wanting to marry off her five daughters, but also to aRead MoreEssay Pride and Prejudice - Different Attitudes towards Marriage1428 Words   |  6 Pagesmany different attitudes towards marriage that are found in Pride and Prejudice. One of the most obvious attitudes that is shown throughout the book is Mrs Bennets expectations. Her main aim is to get her daughters married to men with fortune. I think her reason for this is because as Mr and Mrs Bennet do not have any sons, their estate will not be entailed onto the daughters, and so Mrs Bennet wants to secure them a good future. She is arranging their marriages to pick someone suitable for themRead MorePride And Prejudice By Jane Austen1568 Words   |  7 Pagesfive different marriages in Pride and Prejudice, and each is very different in the way they come to be, and the reason for the marriage, but they all provide a showing of each character s viewpoint on what love really is. There are lots of aspects of marriage in Pride and Prejudice. We are shown, marriages of love, convenience, physical attraction and money. The marriage between Mr. Wickham and Lydia is due in part to their physical attraction to one another and Mr. Wickham’s love of money. On th eRead More No Love Lost Essay1218 Words   |  5 Pagesa play about marriage A Doll’s House does not have much love in it. All of the characters claim to love each other, but are really concealing other emotions. The expectations of society have forced them into love that they do not feel. This false love is what causes them to fall apart in the end. The play is riddled with marriages that are born out of convenience or expectation rather than love. Every character only loves in ways that they are expected to, and only continue to love for convenience’sRead MoreThe Story Of An Hour By Kate Chopin852 Words   |  4 PagesKate Chopin’s story â€Å"The Story of an Hour† reflects on gender roles and the love that has faded between married couples. The story introduces the main character Louise Mallard, who has heart disease, who receives dreadful news about Brently Mallard’s death. With her husband dead, she grieves, and shortly after locks herself away to meditate. While she isolates herself, something unexpected begins to rise from the back of her mind, and she finds herself believing that her husband’s death is a good