When Volume of import export reaches

beyond million then use4 digit quote

Currency declaration form

Passengers are advised to produce this form to a bank authorised to deal in foreign exchange
or money changer at the time of conversion of foreign exchange into Indian rupees or

reconversion of rupees into foreign exchange.

Current Account Convertibility

Currency convertibility refers to the freedom to convert domestic currency into other
internationally accepted currencies and vice versa. Exporters, importers, foreign
investors, domestic investors investing abroad, residents and corporate etc., would like
to convert domestic currency into foreign currency and vice versa to meet their
international engagements.
Current account convertibility means freedom to convert domestic currency into foreign
currency and vice versa for trade in goods and invisibles (services, transfers or income
from investment). Individuals and entities can convert currencies in the foreign
exchange market. 
Current account convertibility is one part of currency convertibility. The other part is
capital account convertibility. Current account and capital account convertibility
indicate the purpose for which currency is converted.
Example
When there is current account convertibility for rupee, an exporter can sell the US
Dollars (or other foreign currency) he obtained from exporting a commodity at the
market determined exchange rate in India. This means that there is no exchange
controls (foreign exchange controls). Similarly, when an importer buys foreign currency
from India’s foreign exchange market by exchanging rupee, it is current account
convertibility.
Introduction of full current account convertibility in India
In India, there is full current account convertibility since August 20, 1993. A  series of
measures were launched then to liberalise exchange controls and the exchange rate
system was shifted to  market- determined exchange rates since March 1993. After that,
on August 20, 1993, the RBI announced that that the rupee became fully convertible on
current account. This was after India  accepted the status and obligations of Article VIII
with the IMF.

3.FDI AND FII

https://aliceblueonline.com/antiq/beginner/difference-between-fdi-and-fpi/

4.Why india should embrace liberalization in 1991?

Economic reforms were introduced in the year 1991 for faster and better
economic growth. It was initiated by the Narasimha Rao Government for the sake
of building people’s trust in the Indian economy.
There were many reasons to bring about such a huge change in our economy,
majorly in order to give our nation a much-needed upgrade during the time. It
was all required in more than one aspect of the country. 

Reasons For Economic Reforms

There were many reasons due to which economic reforms were a necessity in
our country. These were:
 The Industrial Sector’s Poor Performance: Before the 1990s, the
industries were mostly Government-owned. The employees did not feel the
need to be either competitive or effective because their jobs were secure.
The State had the ultimate authority. Thus, the industries were in the red. 

Although there were several disciplinary measures kept in place, still the
vision was always on hold. It was only when the new economic reforms
took place that they helped kick-start the Indian economy in a new and
fresh direction.

 Adverse Balance of Payments: One of the biggest factors that played a

major role in bringing about the economic reforms was the fact that India’s
Balance Of Payments or BOPs were unsustainable. It was also true that
the little foreign exchange there was as resources with the country were
not enough. There was even an unprecedented rise of 11 percent in the
BOPs. 


At this juncture, the only step that would work was to seek external help.
And that was to introduce the LPG formula and bring about a New
Economic Policy or NEP. All of these three were eventually done. As a
result, it was even termed as the foundation for what led to the financial
reforms in India.
 Rise in Fiscal Deficit: India’s current account was bleeding. The Centre
did not have any funds in its hands. The reason for such a deficit was due
to factors that were present both externally and internally. Suffice to say
that the deficit had been a constant since the First Planning Commission’s
tenure which started in 1950.  

By 1991, the rates were unsustainable. It was the time when inflation was
on the rise and could not be curbed. Consequently, the Government of
India took a decision that would lead to the implementation of the NEP.
This was done to bring about the Indian economic reforms. 

 Galloping Inflation: The rate of inflation at the time was immense. Poor
and marginalized people of the society did not have enough access to
food. At a massive 13.88%, this inflation rate could not be borne anymore.
Liquidity had to be poured into the economy and had to be done very
quickly. 
  The First Gulf War: This is regarded as the second-most-important factor
which necessitated the NEP. In 1991, Iraq, under the dictator Saddam
Hussein, invaded Kuwait despite international warnings and an Armada of
American warships asking Hussein not to.
When this happened, the crude oil price skyrocketed. India was already tottering
and this was the straw that broke the camel’s back. Oil was necessary, but India
could not procure it from any source due to the 4 factors mentioned above. 
This led to the First Gulf War. Kuwait’s oil fields would not be serviceable for
several months. The decision for the new NEP was thus taken immediately.
All recent economic reforms in India follow the pattern that started in 1991. 

5.Direct Vs indirect quote

6.Commodity Vs forex market

9.Bid / Ask Spread in forex

10.what is balance of payment?

Balance Of Payment (BOP) is a statement that records all the monetary

transactions made between residents of a country and the rest of the world
during any given period. This statement includes all the transactions made
by/to individuals, corporates and the government and helps in monitoring the
flow of funds to develop the economy.

When all the elements are correctly included in the BOP, it should be zero in a
perfect scenario. This means the inflows and outflows of funds should balance
out. However, this does not ideally happen in most cases. 

A BOP statement of a country indicates whether the country has a surplus or

a deficit of funds, i.e. when a country’s export is more than its import, its BOP
is said to be in surplus. On the other hand, the BOP deficit indicates that its
imports are more than its exports.

Tracking the transactions under BOP is similar to the double-entry accounting

system. All transactions will have a debit entry and a corresponding credit
entry.

For example:
Funds entering a country from a foreign source are booked as credit and
recorded in the BOP. Outflows from a country are recorded as debits in the
BOP. Let’s say Japan exports 100 cars to the U.S. Japan books the export of
the 100 cars as a debit in the BOP, while the U.S. books the imports as a
credit in the BOP.
What is the Formula for Balance of
Payments?
The formula for calculating the balance of payments is current account +
capital account + financial account + balancing item = 0.

Why is the Balance of Payment (BOP)

vital for a country?
A country’s BOP is vital for the following reasons:

 The BOP of a country reveals its financial and economic status.

 A BOP statement can be used to determine whether the country’s

currency value is appreciating or depreciating.

 The BOP statement helps the government to decide on fiscal and trade
policies.

 It provides important information to analyse and understand the

economic dealings with other countries.

By studying its BOP statement and its components closely, one would be able
to identify trends that may be beneficial or harmful to the county’s economy
and, thus, then take appropriate measures.

here are three components of the balance of payment viz current account,
capital account, and financial account. The total of the current account must
balance with the total of capital and financial accounts in ideal situations.
Current Account
The current account monitors the inflow and outflow of goods and services
between countries. This account covers all the receipts and payments made
with respect to raw materials and manufactured goods.

It also includes receipts from engineering, tourism, transportation, business

services, stocks, and royalties from patents and copyrights. When all the
goods and services are combined, they make up a country’s Balance Of
Trade (BOT).

There are various categories of trade and transfers which happen across
countries. It could be visible or invisible trading, unilateral transfers or other
payments/receipts. Trading in goods between countries is referred to as
visible items, and import/export of services (banking, information technology
etc.) are referred to as invisible items.

Unilateral transfers refer to money sent as gifts or donations to residents of

foreign countries. This can also be personal transfers like –  money sent by
relatives to their family located in another country.

Capital Account
All capital transactions between the countries are monitored through the
capital account. Capital transactions include purchasing and selling assets
(non-financial) like land and properties.

The capital account also includes the flow of taxes, purchase and sale of fixed
assets etc., by migrants moving out/into a different country. The deficit or
surplus in the current account is managed through the finance from the capital
account and vice versa. There are three major elements of a capital account:

 Loans and borrowings – It includes all types of loans from the private
and public sectors located in foreign countries.

 Investments – These are funds invested in corporate stocks by non-

residents.

 Foreign exchange reserves – Foreign exchange reserves held by the

country’s central bank to monitor and control the exchange rate do
impact the capital account.

Financial Account
The flow of funds from and to foreign countries through various investments in
real estate, business ventures, foreign direct investments etc., is monitored
through the financial account. This account measures the changes in the
foreign ownership of domestic assets and domestic ownership of foreign
assets. Analysing these changes can be understood if the country is selling or
acquiring more assets (like gold, stocks, equity, etc.).

https://cleartax.in/s/balance-of-payment

11.Balance in capital account

12.What is purchasing Power parity?

The purchasing power parity or PPP is an economic indicator that refers to the purchasing power of the
currencies of various nations of the world against each other.
In other words, the ideology behind the purchasing power parity is that the exchange rate of the
countries should be on par with each other so that it allows a consumer to buy the same amount of
goods and services for the same price across the globe.
For example, a smartphone that costs around ₹3,000 in India would cost around $40 in the USA if the
exchange rate is considered as ₹75 for $1.
The purchasing power parity is one of the most important macroeconomic metrics that is used by
economists in determining the economic productivity and living standards of a country.
PPP is based on the law of one price, which states that identical goods will have the same price.
13.Why indias inflation should be more?

14.Why should rupee always depreceation?

The value of Indian currency or any other currency depends on its demand. If demand
for any currency increases, its value also goes up (it is termed appreciation). And if
the demand for a currency declines, its value also goes down (depreciation).

The demand for Indian currency goes up when more and more foreign investors make
investments in India. That is because when foreign investors or companies invest in
India or buy any products from India, they first convert their currency into rupees as
they can invest only in rupees in Indian markets. As a result, demand for the Indian
currency increases, and its value strengthens against the US dollar and other
currencies.

On the other hand, when Indian individuals and companies import something (like
crude oil, gold, etc.), they have to make the payment in dollars (the de facto global
currency). So Indians sell rupees to buy dollars because the US dollar is the currency
to make payments for international trades. Consequently, demand for the dollar goes
up, and the rupee weakens against the US currency.

Since India has been a net importer (we import more than we export), the rupee has
gradually depreciated over time. 

15.How leads and lags happens in the imperfect market conditions

What Are Leads and Lags?

Leads and lags in international business usually refer to the deliberate
acceleration or delaying of payments due in a foreign currency in order to
take advantage of an expected change in currency exchange rates.
Corporations and governments may time payments due in a foreign currency
if they anticipate a change in currency values that is in their favor.

Not all currency-rate events can be forecast, but those that can are often tied
to political events.
If a U.S. company has agreed to buy a Canadian asset it will need to buy
Canadian dollars and sell U.S. dollars to complete the transaction.
If the company believes the Canadian dollar is going to strengthen against
the U.S. dollar. it will accelerate the transaction (lead) before the price of the
asset increases in U.S. dollar terms. If the company believes the Canadian
dollar will weaken, it will hold off payment (lag) in the hope that the bill
becomes cheaper in U.S. dollar terms.
16.Where is wholesale market of forex

17.Self-regulatory organization?( FEDAI FIMMDA)

The Foreign Exchange Dealers Association of India (FEDAI) is an association

of commercial banks that specializes in the foreign exchange (forex) markets
in India. These institutions are also called Authorised Dealers or ADs.

Created in 1958 and incorporated under Indian law, Section 25 of The

Companies Act of 1956, the Association regulates the rules that determine
commissions, fees, and charges that are attached to the interbank foreign
exchange business.1

KEY TAKEAWAYS.

 The FEDAI is a self-regulating organization (SRO) that formulates rules

around Indian interbank forex dealings.
 Some core functions of the FEDAI include advising and supporting
member banks, representing member banks on the Reserve Bank of
India (RBI), and announcing rates to member banks.
 FEDAI also help stabilize markets through its cooperation with the RBI
and the Fixed Income Money Market and Derivatives Association of
India (FIMMDA)

FIMMDA
18.Why govt of india or RBI Have preference to exporters over importer

Exports increase the foreign exchange reserves held in RBI central

bank.6 Foreigners pay for exports either in their own currency or the U.S.
dollar. A country with large reserves can use this to manage its own
currency's value. It has enough foreign currency to flood the market with its
own currency. That lowers the cost of their exports in other countries.
Countries also use currency reserves to manage liquidity. That means they
can better control inflation, which is the result of too much money chasing too
few goods. They use foreign currency to purchase their own currency in an
effort to control inflation. That decreases the money supply, making the local
currency worth more.

19.Factors affecting exchange rates

20.what is cross currency
21.Explain forward contract with option period?
22.Forward contract vs currency future contract

1 The trade is between customers and banks (authorised The contract is between traders
dealers) and the exchange
2 Forward contract is also called OTC and the price is It is called as exchange traded,
negotiable. exchange driven, NO price
negotiation
3 KYC is the responsibility of the bank. KYC is the responsibility of the
 broker attached to the exchange
4 The rate is given by the bank Traders can trade on the screen
Quote.
5 Transparency is less Transparency is more.
6 Contracts are Taylor-made or customizable Futures are standardised as a
result customers may not get a
perfect fit. 1 contract is 1000

8 Forex inflows and outflows can be hedged as per the Forex inflows and outflows arising
requirement of the customer. Even the customers are in between the months cannot be
not aware of the exact date of forex inflows and hedged
outflows, they are permitted to book forward contract
with maximum 30 days option period
9 Forward is not a standalone product for the banks. Futures are standalone products
Forward contracts are given by the banks as extension
of export credit facility or import credit facility.
10 For taking forward contracts underlying exposures such for taking currency futures
as export contract, import contract are to be shown to underlying exposures are not
the bank as evidences. required
11 Forward contracts are more suited for hedging the currency futures are more suited
genuine export and import transactions. for speculative trading.
12 On due date exporters and importers perform the Currency futures are Net settled
contract by delivering the respective documents to B on due date in Rupees by taking
category branch the RBI reference rate
13 The loses arising out of the forward contract will be The loses arising out of currency
adjusted out of the collateral securities given by the futures will be adjusted out of the
customers for availing export and import credit facilities margin kept by the customers
with the exchange
14 Normally positions are not subjected to MTM exercise The positions of the customers
are subjected to daily mark to
market adjustments, profit arising
out of MTM will be credited to
the customer and the loss will be
recovered from the customer
15 Banks normally do not insist for initial margin For taking position in currency
component from the customers because the collateral futures, customers have to
securities given by the customers for availing export and contribute initial margin to the
import credit facilities to take care of the losses arising exchange
out of extending forward contracts.
16 No leverage available under forward contract as Customers are getting very good
exporters and importers can book forward contracts leverage in taking currency
based on genuine export and import transactions futures by contributing a small
initial margin they’re allowed to
take big positions.

23.Procedure of handling export documents

24. Procedure of handling import documents

25.forward vs future

26.Drwabacks of forward contracts

27.Currnecy forward vs currency option

28.Concept of integrated treasury

29.functions f Deaqling room

30.Is treasury is a cost centre orr profit centre?

31.Responsibility of treasy

https://www.economicsdiscussion.net/foreign-exchange-rate-2/4-factors-that-affect-the-foreign-
exchange-rate-in-india/10837

Procedyrea for handling import documents

Procedure for handling export documents

What is the McKinsey 7S Model?

The McKinsey 7S Model refers to a tool that analyzes a company’s

“organizational design.” The goal of the model is to depict how effectiveness
can be achieved in an organization through the interactions of seven key
elements – Structure, Strategy, Skill, System, Shared Values, Style, and Staff.
The focus of the McKinsey 7s Model lies in the interconnectedness of the
elements that are categorized by “Soft Ss” and “Hard Ss” – implying that a
domino effect exists when changing one element in order to maintain an
effective balance. Placing “Shared Values” as the “center” reflects the crucial
nature of the impact of changes in founder values on all other elements.
Structure of the McKinsey 7S Model

Structure, Strategy, and Systems collectively account for the “Hard Ss”
elements, whereas the remaining are considered “Soft Ss.”

1. Structure

Structure is the way in which a company is organized – chain of command and

accountability relationships that form its organizational chart.

2. Strategy

Strategy refers to a well-curated business plan that allows the company to

formulate a plan of action to achieve a sustainable competitive advantage,
reinforced by the company’s mission and values.

3. Systems

Systems entail the business and technical infrastructure of the company that
establishes workflows and the chain of decision-making.

4. Skills

Skills form the capabilities and competencies of a company that enables its
employees to achieve its objectives.

5. Style

The attitude of senior employees in a company establishes a code of

conduct through their ways of interactions and symbolic decision-making,
which forms the management style of its leaders.

This element refers to the management style prevalent in the company that decides the level of
employee productivity and satisfaction.

6. Staff
Staff involves talent management and all human resources related to company
decisions, such as training, recruiting, and rewards systems

7. Shared Values

The mission, objectives, and values form the foundation of every organization

and play an important role in aligning all key elements to maintain an effective
organizational design.

Advantages of the Model

 It enables different parts of a company to act in a coherent and “synced”

manner.
 It allows for the effective tracking of the impact of the changes in key
elements..

Disadvantages of the Model

 It is considered a long-term model.

 It seems to rely on internal factors and processes and may be
disadvantageous in situations where external circumstances influence an
organization.

2.RED OCEAN VS BLUE OCEAN STRATEGY

Blue Ocean And Red Ocean Strategy

 
Companies traditionally work in a red ocean environment, where businesses compete to
grab a bigger piece of the pie. The red ocean strategy aims to make your product
survive in a market full of competitors. To beat the competition, companies try to
differentiate their product from others. It could be through a unique product feature, a
niche target audience, excellent customer service or competitive pricing.
 
Conversely, in a blue ocean, the aim is not to beat competitors but to make them
irrelevant. The strategy is to sail into uncharted waters and discover a new business
where there’s little or no competition, no pricing pressure and a possibility of significant
profits.
 
To better understand the blue ocean and red ocean strategy, let’s look at some
examples.
 
Blue Ocean Strategy

When Apple invented the iPod in 2001, they didn’t just create a successful product, they
created a new category of product. They came out with a new kind of digital music
player that, in Steve Jobs’ words, “Lets you put your entire music collection in your
pocket and listen to it wherever you go.” This made the competition irrelevant.
 
Red Ocean Strategy

McDonald’s is a classic example of successful implementation of the red ocean strategy

in the fiercely competitive fast-food industry characterized by aggressive discounts, new
product variations and high-profile commercials. All McDonald’s did was offer superior-
quality burgers with fresh ingredients in a traditionally styled restaurant and maintain a
low profile. In the food business, where authenticity is paramount, McDonald’s
delivered.
 
As we’ve seen, it’s possible to be highly successful in a saturated red ocean market, but
there are also many examples of struggling startups. So, blue ocean versus red ocean
—which should you explore? To know which strategy is right for you, take a closer look
at the differences between red ocean and blue ocean strategies.
 
Differences Between Blue Ocean And Red Ocean Strategies

 
The key differences between red ocean and blue ocean strategies could be
summarized as:
 
Existing Market Vs. New Market Creation
In the red ocean strategy, there’s no attempt to push beyond the visible boundaries of
the marketplace.
The blue ocean strategy searches for opportunities to create new markets where none
exist. To illustrate, Canon created a new market for small desktop printers by shifting
the target customer from corporate purchasers to actual users — secretaries and
assistants. The large-sized common office copier soon became redundant.
 
Beat Competition Vs. Make Competition Irrelevant
The focus of red ocean strategy is on beating the competition with aggressive
marketing, better pricing and outstanding user experience, as is evident from the jaw-
dropping success of Amazon, the shark in the world of e-commerce.
The blue ocean strategy focuses on creating alternatives, be it products or customers.
For example, Uber did not create a new product, but it transformed the way the cab
industry operates. It eliminated the pain points of the traditional cabs and converted
non-cab users into customers.
 
Capture Existing Demand Vs. Create New Demand
The red ocean strategy tries to make the most of existing demand. A blue ocean
strategy aims to create new demand. For example, Netflix made the strategic move of
converting to a streaming service from a DVD sales and rental business. Now they only
pay for licenses (instead of high rentals for retail outlets) and offer high-quality movies at
an affordable price.
 
Make Value–Cost Trade-Off Vs. Break Value–Cost Trade-Off
In a red ocean strategy, an organization has to choose between creating more value for
customers and a lower price. In contrast, those who pursue a blue ocean strategy
attempt to achieve both: differentiation and a low cost, opening up a new market space.
For example, Airbnb didn’t buy homes or hotels. They redefined the travel experience
by connecting existing property owners and travelers on a common, easy-to-use
platform

Conclusion:

Value chain analysis is a handy management tool which identifies the

activities that go into creating a superior product or service that is highly
valued by customers. The outcome of creating this highly valued product is
that customers are willing to pay a premium, which exceeds its costs, thereby
delivering higher profit.

Ansoff Matrix

The Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by firms to
analyze and plan their strategies for future growth. The Ansoff matrix is a strategic planning
tool that provides a framework to help executives, senior managers, and
marketers devise strategies for future growth. It is named after Russian American
Igor Ansoff, an applied mathematician and business manager, who created the concept.
he Matrix is used to evaluate the relative attractiveness of growth strategies
that leverage both existing  products and markets vs. new  ones, as well as the
level of risk associated with each.

Each box of the Matrix corresponds to a specific growth strategy. They are:

1. Market Penetration – The concept of increasing sales

of existing  products into an existing  market
2. Market Development – Focuses on selling existing products
into new  markets
3. Product Development – Focuses on introducing new products to
an existing market
4. Diversification – The concept of entering a new  market with
altogether new  products
Market Penetration

The least risky, in relative terms, is market penetration.

When employing a market penetration strategy, management seeks to sell

more of its existing products into markets that they’re familiar with and where
they have existing relationships. Typical execution strategies include:

 Increasing marketing efforts or streamlining distribution processes

 Decreasing prices to attract new customers within the market segment
 Acquiring a competitor in the same market

Consider a consumer packaged goods business that sells into grocery chains.
Management may seek greater penetration by amending pricing for a large
chain in order to secure incremental shelf space not just for packaged food
products but also for several lines of its pet food products, too.

Market Development

A market development strategy is the next least risky because it does not
require significant investment in R&D or product development. Rather, it
allows a management team to leverage existing products and take them to a
different market. Approaches include:
  Catering to a different customer segment
 Entering a new domestic market (regional expansion)
 Entering into a foreign market (international expansion)

An example is Lululemon; management made a decision to aggressively

expand into the Asia Pacific market to sell its already very popular athleisure
products. While building an advertising and logistics infrastructure in a foreign
market inherently presents risks, it’s made less risky by virtue of the fact that
they’re selling a product with a proven roadmap.

Product Development

A business that firmly has the ears of a particular market or target audience
may look to expand its share of wallet from that customer base. Think of it as
a play on brand loyalty, which may be achieved in a variety of ways, including:

In product development strategy, a company tries to create new products and services targeted at its
existing markets to achieve growth. This involves extending the product range available to the firm's
existing markets

 Investing in R&D to develop an altogether new product(s).

 Acquiring the rights to produce and sell another firm’s product(s).
 Creating a new offering by branding a white-label product that’s actually
produced by a third party.

An example might be a beauty brand that produces and sells hair care
products that are popular among women aged 28-35. In an effort to capitalize
on the brand’s popularity and loyalty with this demographic, they invest
heavily in the production of a new line of hair care products, hoping that the
existing target market will adopt it.

Diversification

In relative terms, a diversification strategy is generally the highest risk

endeavor; after all, both product development and market development are
required. While it is the highest risk strategy, it can reap huge rewards – either
by achieving altogether new revenue opportunities or by reducing a firm’s
reliance on a single product/market fit (for whatever reason).
There are generally two types of diversification strategies that a management
team might consider:

1. Related Diversification – Where there are potential synergies that can be

realized between the existing business and the new product/market.

An example is a producer of leather shoes that decides to produce leather car

seats. There are almost certainly synergies to be had in sourcing raw materials,
although the product itself and the production process will require
considerable investment in R&D and production.

2. Unrelated Diversification – Where it’s unlikely that any real synergies will
be realized between the existing business and the new product/market.

Let’s work on the leather shoe producer example again. Consider if

management wanted to reduce its overall reliance on the (highly cyclical)
consumer discretionary high-end shoe business, they might invest heavily in a
consumer packaged goods product in order to diversify.

Porter's Five Forces

Porter's Five Forces is a model that identifies and analyzes five competitive
forces that shape every industry and helps determine an industry's
weaknesses and strengths. Five Forces analysis is frequently used to identify
an industry's structure to determine corporate strategy.

Porter's model can be applied to any segment of the economy to understand

the level of competition within the industry and enhance a company's long-
term profitability. The Five Forces model is named after Harvard Business
School professor, Michael E. Porter.

Porter's 5 forces are:

1. Competition in the industry

 2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

1. Competition in the Industry

The first of the Five Forces refers to the number of competitors and their
ability to undercut a company. The larger the number of competitors, along
with the number of equivalent products and services they offer, the lesser the
power of a company.

Suppliers and buyers seek out a company's competition if they are able to

offer a better deal or lower prices. Conversely, when competitive rivalry is
low, a company has greater power to charge higher prices and set the terms
of deals to achieve higher sales and profits.

2. Potential of New Entrants Into an Industry

A company's power is also affected by the force of new entrants into its
market. The less time and money it costs for a competitor to enter a
company's market and be an effective competitor, the more an established
company's position could be significantly weakened.

An industry with strong barriers to entry is ideal for existing companies within
that industry since the company would be able to charge higher prices and
negotiate better terms.

3. Power of Suppliers
The next factor in the Porter model addresses how easily suppliers can drive
up the cost of inputs. It is affected by the number of suppliers of key inputs of
a good or service, how unique these inputs are, and how much it would cost
a company to switch to another supplier. The fewer suppliers to an industry,
the more a company would depend on a supplier.

As a result, the supplier has more power and can drive up input costs and
push for other advantages in trade. On the other hand, when there are many
suppliers or low switching costs between rival suppliers, a company can keep
its input costs lower and enhance its profits.

4. Power of Customers
The ability that customers have to drive prices lower or their level of power is
one of the Five Forces. It is affected by how many buyers or customers a
company has, how significant each customer is, and how much it would cost
a company to find new customers or markets for its output.

A smaller and more powerful client base means that each customer has more
power to negotiate for lower prices and better deals. A company that has
many, smaller, independent customers will have an easier time charging
higher prices to increase profitability.

 
The Five Forces model can help businesses boost profits, but they must
continuously monitor any changes in the Five Forces and adjust their
business strategy.

5. Threat of Substitutes
The last of the Five Forces focuses on substitutes. Substitute goods or
services that can be used in place of a company's products or services pose
a threat. Companies that produce goods or services for which there are no
close substitutes will have more power to increase prices and lock in
favorable terms. When close substitutes are available, customers will have
the option to forgo buying a company's product, and a company's power can
be weakened.

Understanding Porter's Five Forces and how they apply to an industry, can
enable a company to adjust its business strategy to better use its resources
to generate higher earnings for its investors.

PESTLE

PESTLE Analysis stands for Political, Economic, Socio-cultural, Technological, Legal and Environmental
Analysis. Some models also extend this to include Ethics and Demographics, thus modifying the acronym
to STEEPLED. This analysis is done more from the perspective of a business which primarily analyses the
external environmental factors that will act as influencers for a business. For Formulating strategies
business should study the pestle analysis.
Political Factors: Countries can have a variety of political structures. Communist countries would have
social objectives above anything else while capitalist ones would not necessarily have all responsibilities
of a welfare state. Stability in legislation and policy, minimal corruption, bureaucracy, communal
tensions and violence coupled with maximum freedom of press, ease of doing business and quick
turnaround time are some of the factors that affects business. Healthy public finances and a consistent
fiscal policy are some other important parameters for investors.

Economic Factors: The economic parameters of a country such as GDP growth and its contributors,
inflation and interest rates, composition of imports and exports, balance of payment and exchange rate
stability, stable monetary and fiscal situation, well developed financial markets, taxation and others, will
define its attractiveness. Whether a country depends upon exports or internal consumption, whether
this internal consumption is driven by imports or domestic manufacturing, whether the country has high
inflation and hence a falling currency etc. are some of the economical factors that influence business
environment. India has seen the worst and the best phases of economies in the last three decades.

Socio-Cultural Factors: The social and cultural aspects of the population of the country, such as the
demographic profile in terms of age, education and skills, health, social values, lifestyle factors, all affect
the choices that people make in what they buy and consume. Cultures affect businesses in multiple
ways. With young population in India, India offers different opportunities and challenges in comparison
to say Japan with aging population. With the change in culture, there is a change in the economic
activity as well. This offers opportunity set for several new businesses in the country.

Technological Factors: No dimension of life can ever be imagined today without technological support.
Technology is playing crucial role in taking businesses and society to the next level. Development of a
scientific temper amongst students leads to an ever technologically evolving society. Countries pushing
R&D activities are bound to be at the forefront of technology. Availability of technology savvy
population and institutions driving technology based initiatives and infrastructure help a country attract
investors.

Legal Factors: Legal architecture of the country and ability of legal system to support and protect
businesses is what businesses look for in a country. Consistency of legal aspects and no arbitrary
changes give comfort to the businesses and investors both. Transparency in the legal environment and
enforcement of laws are things which investors would favour.

Environmental Factors: Developing nations are generally bound to emit environment harming gases in
the atmosphere. A country’s awareness of environmental issues and the policies relating to pollution
control, waste disposal, mining and protection of natural flora and fauna, rehabilitation of displaced
local residents, are all thorny issues, which if not clearly spelt out unambiguously can lead to operational
and legal issues in the future and ultimately loss of time, money and resource for a business

. Evaluating the impact of each factor and its criticality for the business is an important step to follow
Principles of Strategic Management Process
The strategic management process means defining the organization’s strategy. It is also defined as the
process by which managers make a choice of a set of strategies for the organization that will enable it to
achieve better performance.

Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises it’s competitors; and fixes goals to meet all the

present and future competitor’s and then reassesses each strategy.

1. Strategic Objectives and Analysis. The first step is to define the vision, mission, and
values statements of the organization. This is done in combination with the external
analysis of the business environment (PESTEL) and internal analysis of the organization
(SWOT). An organization’s statements may evolve as information is discovered that
affects a company’s ability to operate in the external environment.

2. Strategic Formulation. The information from PESTEL and SWOT analyses should be

used to set clear and realistic goals and objectives based on the strengths and
weaknesses of the company. Identify if the organization needs to find additional resources
and how to obtain them. Formulate targeted plans to achieve the goals. Prioritize the
tactics most important to achieving the objectives. Continue to scan the external
environment for changes that would affect the chances of achieving the strategic goals.

3. Strategic Implementation. Sometimes referred to as strategic execution, this stage is

when the planning stops and the action begins. The best plans won’t make up for sloppy
implementation. Everyone in the organization should be aware of his or her particular
assignments, responsibilities and authority. Management should provide additional
employee training to meet plan objectives during this stage, as well. It should also allocate
resources, including funding. Success in this stage depends upon employees being given
the tools needed to implement the plan and being motivated to make it work.

4. Strategic Evaluation and Control. Because external and internal conditions are always
changing, this stage is extremely important. Performance measurements (determined by
the nature of the goal) will help determine if key milestones are being met. If actual results
vary from the strategic plan, corrective actions will need to be taken. If necessary,
reexamine the goals or the measurement criteria. If it becomes apparent that the strategy
is not working according to plan, then new plans need to be formulated (see Step 2) or
organizational structures adjusted. Personnel may need to be retrained or shifted to other
duties. You may even have to repeat the strategic management process from the
beginning, including the information and knowledge gained from this first attempt.
hierarchy of strategies 

The hierarchy of strategies describes a layout and relations of corporate strategy and sub-

strategies of the organization. Individual strategies are arranged hierarchically and logically
consistent at the level of vision, mission, goals, and metrics.

Sometimes the designation "logical framework" of strategic planning and management is

used.
Methods used in strategic planning: top-down, bottom-up, and bidirectional planning.

The hierarchy of strategies of an organization may look like this:

MAFIHUINMAORGA
The strategic management process consists of three, four, or five steps depending upon
how the different stages are labeled and grouped. But all of the approaches include the
same basic actions in the same order. A brief description of these steps follows:

1. Strategic Objectives and Analysis. The first step is to define the vision, mission, and
values statements of the organization. This is done in combination with the external
analysis of the business environment (PESTEL) and internal analysis of the organization
(SWOT). An organization’s statements may evolve as information is discovered that
affects a company’s ability to operate in the external environment.
2. Strategic Formulation. The information from PESTEL and SWOT analyses should be
used to set clear and realistic goals and objectives based on the strengths and
weaknesses of the company. Identify if the organization needs to find additional resources
and how to obtain them. Formulate targeted plans to achieve the goals. Prioritize the
tactics most important to achieving the objectives. Continue to scan the external
environment for changes that would affect the chances of achieving the strategic goals.
3. Strategic Implementation. Sometimes referred to as strategic execution, this stage is
when the planning stops and the action begins. The best plans won’t make up for sloppy
implementation. Everyone in the organization should be aware of his or her particular
assignments, responsibilities and authority. Management should provide additional
employee training to meet plan objectives during this stage, as well. It should also allocate
resources, including funding. Success in this stage depends upon employees being given
the tools needed to implement the plan and being motivated to make it work.
4. Strategic Evaluation and Control. Because external and internal conditions are always
changing, this stage is extremely important. Performance measurements (determined by
the nature of the goal) will help determine if key milestones are being met. If actual results
vary from the strategic plan, corrective actions will need to be taken. If necessary,
reexamine the goals or the measurement criteria. If it becomes apparent that the strategy
 is not working according to plan, then new plans need to be formulated (see Step 2) or
organizational structures adjusted. Personnel may need to be retrained or shifted to other
duties. You may even have to repeat the strategic management process from the
beginning, including the information and knowledge gained from this first attempt.

https://www.simonesmerilli.com/business/strategy-analysis
 Viability Gap Finance means a grant to support projects that are economically
justified but not financially viable.

Viability gap funding provides financing to projects that are of commercial /social importance but
gets stuck due to financing issues. Such infrastructure projects have long gestation periods and
therefore require a sustained and stable source of financing. Funding under this scheme is
provided on a yearly basis by the government.

The government has expanded the provision of financial support by means of

viability gap funding for public-private partnerships (PPPs) in infrastructure
projects to include critical social sector investments

Viability Gap Funding (VGF) Scheme

 The scheme is designed as a Plan Scheme to be administered by the Ministry
of Finance and amount in the budget are made on a year-to-year basis.
 Such a grant under VGF is provided as a capital subsidy to attract the private
sector players to participate in PPP projects that are otherwise financially
unviable.
 Projects may not be commercially viable because of the long gestation period
and small revenue flows in future.
 The VGF scheme was launched in 2004 to support projects that come under
Public-Private Partnerships.
Its’ funding
 Funds for VGF will be provided from the government’s budgetary allocation.
Sometimes it is also provided by the statutory authority who owns the project
asset.
 If the sponsoring Ministry/State Government/ statutory entity aims to provide
assistance over and above the stipulated amount under VGF, it will be
restricted to a further 20% of the total project cost.
VGF grants
 VGF grants will be available only for infrastructure projects where private
sector sponsors are selected through a process of competitive bidding.
 The VGF grant will be disbursed at the construction stage itself but only after
the private sector developer makes the equity contribution required for the
project.
 Now, under this scheme, private sector projects in areas like wastewater
treatment, solid waste management, health, water supply and education,
could get 30% of the total project cost from the Centre.
 Separately, pilot projects in health and education, with at least 50%
operational cost recovery, can get as much as 40% of the total project cost
from the central government.
 The Centre and States would together bear 80% of the capital cost of the
project and 50% of operation and maintenance costs of such projects for the
first five years.

Benefits of Viability Gap Funding

 The initiative will encourage PPPs in social and economic infrastructure, resulting in

more efficient asset creation, proper operation and maintenance, and commercial
viability of economically/socially critical enterprises.
 Energy, transportation, communication, banking, and financial institutions, and other
elements of economic development that aid in the process of production and distribution
are referred to as economic infrastructure.
 All infrastructures and institutions that improve the quality of human capital, such as
educational institutions, hospitals, nursing homes, and housing facilities, are referred to
as social infrastructure.
 The VGF Scheme will be revamped in order to attract more PPP projects and to
facilitate private investment in the social sectors

An important aspect of PPPs is an explicit arrangement for sharing of risks between parties involved. Many
different techniques ranging from rule of thumb (based on past experiences) to sophisticated simulation models
are available for the assessment of different risks in a project.

A risk matrix is developed after assessing risks in quantitative and/or qualitative terms for all possible risk
factors. PPP contracts often include incentives that reward private partners for mitigating risk factors. An
example of a detailed risk matrix is provided in Annex 2 to this course. Though it is set up from the perspective
of the government, it provides an example of how risks can be identified, assessed, and mitigated.

The risk matrix identifies the risks, their magnitudes and possible mitigation measures and serves as a useful
tool for the purpose of sharing risks between the parties. The general principle is that project risks are allocated
to the party that is the best equipped to manage them most cost effectively. For example, political and
regulatory risks are more appropriate to the public sector while construction and operating risks are more suited
to the private sector. The allocation of commercial risks is generally more common to the private sector.
However, in certain cases, a part of the commercial risks due to lower than expected demand for services
produced by the project may be shared by the public sector. In such cases normally a provision is also set to
share any excess revenue if the demand exceeds the expected level. The following table provides an example
of an arrangement for sharing of various risks.

What Is Loan Syndication?

The term "loan syndication" refers to the process of involving a group of
lenders that fund various portions of a loan for a single borrower. Loan
syndication most often occurs when a borrower requires an amount that is
too large for a single lender or when the loan is outside the scope of a
lender's risk exposure levels. Multiple lenders pool together and form
a syndicate to provide the borrower with the requested capital.
KEY TAKEAWAYS

 Loan syndication occurs when two or more lenders come together to

fund one loan for a single borrower.
 Syndicates are created when a loan is too large for one bank or falls
outside the risk tolerance of a bank.
 The banks in a loan syndicate share the risk and are only exposed to
their portion of the loan.
 A loan syndicate always has a syndicate agent, which is the lead bank
that organizes the loan, its terms, and other relevant information.

There is only one loan agreement for the entire syndicate. But each lender's
liability is limited to their respective share of the loan interest. With the
exception of collateral requirements, most terms are generally uniform among
lenders. Collateral assignments are generally assigned to different assets of
the borrower for each lender. The syndicate does allow individual lenders to
provide a large loan while maintaining more prudent and manageable credit
exposure because the associated risks are shared with other lenders.

The agreements between lending parties and loan recipients are often
managed by a corporate risk manager. This reduces any misunderstandings
and helps enforce contractual obligations. The primary lender conducts most
of the due diligence, but lax oversight can increase corporate costs. A
company's legal counsel may also be engaged to enforce loan covenants and
lender obligations.

Loan syndication doesn't affect borrowers any differently than other types of
loans. The borrower generally applies for a loan at one bank. If approved, this
institution approaches others to form a syndicate, which allows them each to
spread the risk. After the loan is advanced, the borrower signs a single
contract, which names every member of the syndicate and their contribution
to the loan. Regular payments are made to the lead bank, which divides it up
among syndicate members.

What Are the Disadvantages of the Loan Syndication Process?

The main drawback to the loan syndication process is the amount of time it
takes to get approved (or denied). That's because it can take a number of
days (even weeks) to get approval and the syndicate togethe