UNCLE SAM HIT THE SUMO !!!!

Due to my academic schedules and my SEM III exams of MBA I could not write the blog. Please find below the continuation of the previous Blog( UNCLE SAM's CHINESE PROBLEM)

During the 1980s due to heavy Japanese exports especially that of automobiles flooded the US markets which led to the outflow of the USDs to Japan leading to surpluses with Japan and deficits with the US, thus US blamed JAPAN’s undervalued Yen for the US deficits.

The long running dispute between the United States and Japan throughout the 1980’s and early 1990’s over the value of the yen ended only when Japan’s economy entered its “lost decades,” which has made the Chinese determined not to repeat the experience.

But, based on Japan’s experience, the Chinese do seem to have good reasons to be wary of US pressure to revalue the renminbi. Indeed, the economists Ronald McKinnon and Kenichi Ohno have singled out US pressure for yen appreciation as a key source of the Japanese economy’s long-term deflation and stagnation – the so-called “lost decade” of economic malaise that is now well into its second.

Chinese officials agonize over the US pressure. If they yield to it, the Chinese economy, they argue, may fall into the same deflationary trap that ensnared Japan after the yen’s appreciation in the 1980’s – under US pressure – inflated a catastrophic asset-price bubble. But if they continue to resist, China may face hot trade disputes with the US, which could be even messier.

Like Japan in the 1980’s, China must defend itself from US claims that the renminbi’s weakness is the source of the imbalances between the two countries. Currency appreciation, Japan argued then and China argues now, is unlikely to result in a significant current-account adjustment, which requires addressing not only China’s high savings rate, but also low savings in the US.

What is the Lost Decade?

The economic miracle ended abruptly at the very start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fuelled a massive wave of speculation by Japanese companies, banks and securities companies. Briefly, a combination of incredibly high land values and incredibly low interest rates led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.

Recognizing that this bubble was unsustainable (resting, as it did, on unrealizable land values - the loans were ultimately secured on land holdings), the Finance Ministry sharply raised interest rates. This popped the bubble in spectacular fashion, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the huge debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks having to be bailed out by the government.

Eventually, many become unsustainable, and a wave of consolidation took place (there are now only four national banks in Japan). Critically for the long-term economic situation, it meant many Japanese firms were lumbered with massive debts, affecting their ability for capital investment. It also meant credit became very difficult to obtain, due to the beleaguered situation of the banks; even now the official interest rate is at 0% and have been for several years, and despite this credit is still difficult to obtain.

Overall, this has led to the phenomenon known as the "lost decade"; economic expansion came to a total halt in Japan during the 1990s. The impact on everyday life has been rather muted, however. Unemployment runs reasonably high, but not at crisis levels (the official figure is a little under 5%, but this is a considerable underestimate - the real level is probably around twice that). This has combined with the traditional Japanese emphasis on frugality and saving (saving money is a cultural habit in Japan) to produce a quite limited impact on the average Japanese family, which continues much as it did in the period of the miracle.

UNCLE SAM’S CHINESE PROBLEM ! ! !

Today after the Subprime Crisis America is blaming CHINA for the high unemployment rate in the whole US.

US is forcing China to appreciate the YUAN as its depreciated value is leading to cheapest exports from China to 

US leading to huge deficits in the US economy as claimed by US

But do you think the depreciated value is the sole reason for the deficits in the US?

The answer is NO because the deficits in the US are structural deficits. The savings rate of US is hardly 1 % which is a major contributor to the deficit because, if the citizens don’t save the money in the domestic banks then it is spent on purchasing goods and services(Chinese) which leads to the outflow.

The cycle goes this way in the following manner

• US employees are highly paid – The basic Wages paid are anywhere between $ 4-8.
• Thus wages are a huge cost to the manufacturers and service providers, which leads to higher prices of Goods and Services.
• But on the macroeconomic level employees of any economy are the consumers also so in the end goods and services in the US become costly for their citizens itself.
• And then the citizens have no other option than to buy Chinese Goods and services which are available at Cheaper rates which leads to the outflow of the currency($) leading to deficits.
• And also the poor sales of the American firms then leads to layoffs which results in Unions putting pressure on politicians which in turn leads to put pressure on China to appreciate YUAN.

So do you think US should pressurize China to appreciate YUAN??? Or is there any other country on which US had put pressure to in the past to appreciate its currency???  

Find out in my next blog

- By Chintan Dedhia

What Is Freemium?

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Freemium is a business model that works by offering basic Web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features. The word "freemium" is created by combining the two aspects of the business model: "free" and "premium". The business model has gained popularity with Web 2.0companies.

The freemium business model was articulated by venture capitalist Fred Wilson on 23 March 2006.

"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base."

An early example of the freemium model working on the internet was Musicmatch Jukebox, an all-in-one music management tool that was first marketed with a freemium model in 1999. Most users could use the Basic/Free version, but a $19.99 upgrade provided extra features such as supertagging and faster ripping and burning. 

According to the New York Times, freemium is becoming the "most popular business model among Web start-ups." Some of the most popular services, such as Pandora, Flickr, LinkedIn, Spotify and Skype use the freemium model.

§  Feature limited

§  Time Limited

§  Capacity limited

§  Seat limited

§  Customer Class Limited

What is Dodd-Frank Act?

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President Barack Obama's policy architects say they will begin enforcement of a sweeping new set of financial regulations intended to govern risk-taking on Wall Street and offer greater protection to consumers. The goal is to help the U.S. economy return to prosperity even as troubling signs of a global downturn remain.

According to Wharton experts, the Dodd-Frank Wall Street Reform and Consumer Protection Act is a good start toward future financial stability, but they warn that significant concerns remain unaddressed, and stress that the details of implementation must be handled carefully to avoid creating new problems.

 HIGHLIGHTS OF DODD-FRANK ACT

1.    Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

2.    Ends Too Big to Fail Bailouts: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

3.    Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

4.    Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

5.    Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.

6.    Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

7.    Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.

What Is ATL and BTL?

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Above the line (ATL), below the line (BTL), and through the Line (TTL), are advertising techniques.

In a nutshell, while ATL promotions are tailored for a mass audience, BTL promotions are targeted at individuals according to their needs or preferences. While ATL promotions can establish brand identity, BTL can actually lead to a sale. ATL promotions are also difficult to measure well, while BTL promotions are highly measurable, giving marketer’s valuable insights into their return-on-investment.

Promotional activities carried out through mass media, such as television, radio and newspaper, are classed as "above the line" promotion. "Below the line" promotion refers to forms of non-media communication or advertising, and has become increasingly important in the communications mix of many companies, not only those involved in fast moving consumer goods, but also for industrial goods.

"Through the line" refers to an advertising strategy involving both above and below the line communications in which one form of advertising points the target to another form of advertising thereby crossing the "line".

Above the line sales promotion

ATL is a type of advertising through media such as television, cinema, radio, print, web banners and web search engines to promote brands. This type of communication is conventional in nature and is considered impersonal to customers. It differs from BTL advertising, which uses unconventional brand-building strategies, such as direct mail and printed media (and usually involves no motion graphics). It is much more effective when the target group is very large and difficult to define.

Below the line sales promotion

BTL sales promotion is an immediate or delayed incentive to purchase, expressed in cash or in kind, and having short duration. It is efficient and cost-effective for targeting a limited and specific group. It uses less conventional methods than the usual ATL channels of advertising, typically focusing on direct means of communication, most commonly direct mail and e-mail, often using highly targeted lists of names to maximize response rates. BTL services may include those for which a fee is agreed upon and charged up front.

BTL is a common technique used for "touch and feel" products (consumer items where the customer will rely on immediate information rather than previously researched items). BTL techniques ensure recall of the brand while at the same time highlighting the features of the product.

Another BTL technique involves sales personnel deployed at retail stores near targeted products. This technique may be used to generate trials of newly launched products.

What Is Search Engine Marketing?

Search engine marketing, or SEM, is a form of Internet marketing that seeks to promote websites by increasing their visibility in search engine result pages (SERPs) through the use of search engine optimization, paid placement and paid inclusion.

 

In 2008, North American advertisers spent US$13.5 billion on search engine marketing. The largest SEM vendors are Google AdWords, Yahoo! Search Marketing and Microsoft adCenter. As of 2006, SEM was growing much faster than traditional advertising and even other channels of online marketing. Because of the complex technology, a secondary "search marketing agency" market has evolved. Many marketers have difficulty understanding the intricacies of search engine marketing and choose to rely on third party agencies to manage their search marketing.

 

History

As the number of sites on the Web increased in the mid-to-late 90s, search engines started appearing to help people find information quickly. Search engines developed business models to finance their services, such as pay per click programs offered by Open Text in 1996 and then Goto.com in 1998. Goto.com later changed its name to Overture in 2001, and was purchased by Yahoo! in 2003, and now offers paid search opportunities for advertisers through Yahoo! Search Marketing. Google also began to offer advertisements on search results pages in 2000 through the Google AdWords program. By 2007, pay-per-click programs proved to be primary money-makers for search engines. In a market dominated by Google, in 2009 Yahoo! and Microsoft announced the intention to forge an alliance. The Yahoo! & Microsoft Search Alliance eventually received approval from regulators in the US and Europe in February 2010.

What Is Crowd Funding?

Crowd funding describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns and now in Venture Capitals for raising funds.

The crowd funding approach has long precedents in the sphere of charity. It is receiving renewed attention from both commercial and social entrepreneurs now that social media, online communities and micropayment technology make it straightforward to engage and secure donations from a group of potentially interested supporters at very low cost.

An entrepreneur seeking to use crowd funding typically makes use of online communities to solicit pledges of small amounts of money from individuals who are typically not professional financiers.

What is Blue ocean Strategy?

It is a slang term for the uncontested market space for an unknown industry or innovation. Coined by professors W. Chan Kim and Renee Mauborgne in their book "Blue Ocean Strategy: How to Create Uncontested Market Space and the Make Competition Irrelevant" (2005), blue oceans are associated with high potential profits.

In an established industry, companies compete with each other for every piece of available market share. The competition is often so intense that some firms cannot sustain themselves and stop operating. This type of industry describes a red ocean, representing saturated market share, bloodied by competition. 

To avoid costly competition, firms can innovate or expand in the hope of finding a blue ocean. A blue ocean exists where no firms currently operate, leaving the company to expand without competition.

Red Oceans are all the industries in existence today—the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the ocean bloody. Hence, the term red oceans.

Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue Ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.

The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors criticize Michael Porter's idea that successful businesses are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost.

What Is Angel Investing?

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The term "angel" originally comes from Broadway where it was used to describe wealthy individuals who provided money for theatrical productions. In 1978, William Wetzel, then a professor at the University of New Hampshire and founder of its Center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the USA, and he began using the term "angel" to describe the investors that supported them.

An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

Angels typically invest their own funds, unlike venture capitalists, who manage the pooled money of others in a professionally-managed fund. Although typically reflecting the investment judgment of an individual, the actual entity that provides the funding may be a trust, business, limited liability company, investment fund, etc.

Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment. Because a large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition.

Current 'best practices' suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period. After taking into account the need to cover failed investments and the multi-year holding time for even the successful ones, however, the actual effective internal rate of return for a typical successful portfolio of angel investments is, in reality, typically as 'low' as 20-30%.

 While the investor's need for high rates of return on any given investment can thus make angel financing an expensive source of funds, cheaper sources of capital, such as bank financing, are usually not available for most early-stage ventures, which may be too small or young to qualify for traditional loans.

What Is Washroom Marketing?

It sounds weird but it’s true.

As the name suggests, it’s advertising in the washroom, literally. Something like putting the advertisement and pamphlet about a product in the loo.

This is a place our eyes can never miss, 9 out of 10 times its gender specific, and when you are in the loo, you might as well read it.

Most of us have taken newspapers to the loo, which in fact is filled with ads. There have been questions about the privacy issues in the washroom, but one can’t figure out how privacy comes into picture here. There is no camera there in the washroom, unless and until the advertisement is hiding a cam under it.

Just placing something to read there doesn’t lead to invasion of privacy. Moreover it’s a sure shot method of reaching the customer. He/she will read it without any disturbance. And yes for everyone’s information there are companies too for washroom marketing like Positive Media of UK, IN YOUR FACE media corp. and many others. The marketing communication world is getting weirder by the day…