Cross-sector analysis, Financial Management

Assignment Help:

Cross-Sector Analysis:

The growth of a country depends upon how fast a country can adapt to deregulation and internationalization. Deregulation and internationalization put competitive pressures on the producers, who fundamentally change the structure of the economy. With the advent of technological revolution, there has been fierce competition, which has forced the companies to change their focus. There are four major ways in which changes in economy have made business expansions to stay longer and recessions less probable. These are:

Changes in Corporate Behavior: The pace at which the overall channels of production can change with the changes in business environment reflects the degree of resistance of a particular country in terms of declining growth. Countries in recession which are able to act fast according to the situation are likely to be in a better position than the firms which are slow to take up the advantages of the opportunities prevailing with the changes in the business environment. For instance, fierce competition has forced the companies to adopt a pull strategy instead of a push strategy whereby, the consumer needs and preferences are given the top priorities and the producers are price takers rather than price manipulators. In other words, the producers have lost their power to control prices and now the forces of supply and demand freely determine the prices. As a result, the corporates are looking for new tools and mechanisms to cut costs to increase their profit margins. This corrects the problem of oversupply and underemployment. Another important tool for inculcating efficiency with the firm's operating system is the adoption of just-in-time and other management tools that reduces the ratio of inventories to sales and other significant ratios.

Introduction of Temporary Labor: The temporary labor or ad hoc labor also helps in business expansion. Temporary labor mitigates the pressure on the companies in terms of payroll when the business is in slump. The temporary workers can be easily laid-off at the time of slump. Temporary labor also leads to lower wage inflation. Wage compensation costs are made more flexible by linking an increasing proportion of compensation to profits. For example, introduction of Employee Stock Option Plan (ESOP), where the employee wage is dependent on the stock price movement of the firm. The basic purpose of ESOP is to make employee wages more flexible. Ad hoc labor allows the firm to retain valuable workers as the firm need not be required to lay-off its employees at the time of slowdown. The retrenchment of ad hoc employees also provides a buffer against the declining revenues when the business is in slump.

Financial Deregulation: The next important factor is intensifying competition in a country's financial markets through financial deregulation. Financial deregulation means, deregulating interest rates and making them market determined rather than imposing any ceiling on the interest rates offered by certain institutions such as commercial banks, credit unions, etc. For instance, the transformation of US mortgage financing system has made housing transactions more flexible to changes in the interest rates. With this deregulation, housing industry experienced quick changes between booms and busts. This deregulation brought about a marked decline in the cyclical volatility of housing activity and its sensitivity to interest rates. Deregulation of the financial markets also helped the US economy to stabilize by making household net interest receipts more responsive to changes in market interest rates.

International Diversification: Internationalization of a country's economy would also help it to protect from recessions by diversifying both its supply lines and revenue base. When there is a slump in demand locally, global demand might rise which will strengthen the country's economy and will help in recovering the slump in local demand too. Similarly, when there is an increase in demand within the country, then the country's needs can be met by imports from other countries.

 


Related Discussions:- Cross-sector analysis

Explain about routine functions, Q. Explain about Routine Functions? Ro...

Q. Explain about Routine Functions? Routine Functions: - The routine functions are Supervision of cash receipts and payments. Opening Bank Accounts as well as managing them Saf

How to develop career strategy, Q. How to develop career strategy? in t...

Q. How to develop career strategy? in this step employees need to focus on developing the knowledge experience and skills necessary to market self to prospective organizations.

How is finance related to accounting and economics, How is finance related ...

How is finance related to the disciplines of accounting and economics? Financial management is fundamentally a combination of economics and accounting. First financial managers

What is face value and par value, What is Face Value/ Par Value Value o...

What is Face Value/ Par Value Value of security as mentioned on certificate of the security.  Face values and par values are two terms that are used interchangeably.  Corporate

Capital Structure and firm finanacial performance, How do I do an introduct...

How do I do an introductory writing on this topic tto help. Include all salient issues?

Case study, credit limit decision bajaj electronics company

credit limit decision bajaj electronics company

Describes the techniques of work breakdown structure, Due to the complexity...

Due to the complexity of the tasks involved in many projects, communication of responsibility for those tasks is often helped by means of graphical planning techniques.

Bond market innovations, As liberalization is gathering momentum, cor...

As liberalization is gathering momentum, corporate treasures and merchant bankers are in the process of devising new products to suit the needs of investors and c

Explain the term- quality of decisions, Explain the term- quality of decisi...

Explain the term- quality of decisions Performance and business risk This is focussed on " quality of decisions ". The comparison of an organisations performance with t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd