E-commerce

Alibaba had several Internet businesses focused on various e-commerce business models. Being one of the first companies to enter the Chinese Internet industry, Alibaba played a major role in bringing about an Internet revolution in China. It was launched with the vision of serving the small and medium enterprises in China and across the world. Alibaba also participate in search engine market and social-networking product. Jack Ma is founder of Alibaba. In 1995, he went to America and it was then that he decided to start an internet business and launch his website. In 1998, he designed a website for MOFTEC. This became the first government website in China. Then, he left and returned to Hangzhou to fulfill his dream of establishing his own e-commerce company. In August 1999, the Chinese Bureau of Industrial and Commercial Administration registered Alibaba as a computer company.

During the late 1990s and early 2000s, the Internet had not yet become too popular in China. By the end of the first year in business, Alibaba had become the largest online global trading website in Asia. In March 2000, when the dotcom bubble 38 burst, a number of dotcom and e-commerce companies filed for bankruptcy. To deal with the dotcom crash, Alibaba reformulated its strategies: “Back to China”, “Back to Central” and “Back to the Coast”. In July 2000, Alibaba started selling its advertising space. Then, Alibaba started offering a customized online marketplace for its members called “Alibabies” for a premium. Additionally, Alibaba began charging its members for its services. Next, Alibaba’s members had touched the one million mark. Alibaba was launched at a time when the Chinese Internet industry was in sunrise. Considering the growth potential of the budding e-commerce market, other players were expected to intensify competition in the emerging B2B market. For gaining a strong foothold in the B2B market, Ma announced that Alibaba would not charge any transaction fees. Ma launched Taobao as a wholly-owned subsidiary of Alibaba. Taobao aimed to create an online trading platform for both B2C and C2C models. Taobao differentiated itself from rival eBay by allowing free listings on its website. The growth in the Chinese e-commerce market was hampered due to the absence of the trust factor between buyers and sellers while trading online. To counter this problem, Alibaba launched an online payment platform called “AliPay” based on the lines of eBay’s payment system in 2004. Taobao advertised itself online by placing ads on the websites and through billboards at major city centers.

All these promotional strategies were ignored by eBay EachNet. In May 2006, Ma announced the launch of B2C services on Taobao. Alibaba’s B2C platform, TMall, was also ahead of all competitors in the Chinese B2C market.Industry observers opined that foreign companies failed to make a mark in China because of Jack’s understanding of the language and culture. Alibaba aimed to enter the Chinese online search market in 2005 and struck a deal to acquire the operations of Yahoo! in China. Alibaba acquired Yahoo! China’s main website and search engines. Ma developed a simple search page in order to make it the number one search engine in China. However, this looked an uphill task as it continued to lose market. Contrary to Ma’s beliefs, this acquisition cannot help Alibaba gain a larger portion of the pie in the web search market since it was already dominated by strong players such as Baidu and Google. In order to gain a strong foothold in the rapidly growing Chinese web search market, Alibaba bought a 16% stake in Sogou.com in August 2010. In October 2011, Alibaba launched an online shopping search engine called eTao. This was a bid to combat competition from Baidu and also to maintain Alibaba’s control in the lucrative B2C market in China.

In October 2007, AJibaba Group’s Chinese website, Alibaba.com, went public on the Hong Kong stock exchange by launching an IPO.In June 2011, Ma expressed his desire to raise an IPO for the Alibaba Group. Alibaba also announced its plans to spin off and raise an IPO for its Internet application service provider, HiChina Group Ltd. With the growth in revenues and paying members, Alibaba was touted to be one of the biggest Internet companies in China in 2011. However, its image took a beating when the company reported a series of frauds that took place through its e-commerce site. As of November 2011, the company was also making efforts to increase the revenue per user by planning to offer value-added services such as extra ways to advertise on the site. Industry experts felt that with the acquisition of 40% of Yahoo! ‘s stake in Alibaba, Ma would take the company forward.

In the world of business, big business continues to thrive in all aspects of growth. While small business must continue to suffer in profit loss, lay offs, bankruptcy, etc small businesses must stay ahead in order to keep out of the shadows and in the mainstream.

More than in any other occupation, starting a business requires considerable lying down of the proper plans and goals. Additionally entrepreneurs must be psychologically and mentally prepared since “success or failure in business is caused more by the mental attitude even than by mental capacities” as Walter Scotts puts it.

A basic understanding that should be in everybody wishing to set up a business is that the entity will exist solely and most importantly to make a profit. All the efforts and energies should be channeled towards achieving profit oriented goals not unless the business has another motive besides that.

In this particular hypothetical situation, the business to be started is a grocery store in a busy neighborhood primarily dealing with household goods and stuffs. The neighborhood is highly populated and inhabited by midlevel income earners with a considerably high purchasing power. This is the most vital part of formulating and implementing a business plan. The success of any person in business sometimes boils down to the choice of business line to specialize in. Capital alone is not the sole determinant of a business line; factors such as the market availability and business environment have to be put into consideration.

Different options should be laid on the table and brainstorming takes place to evaluate on the appropriate income earning activity to be engaged in. The expertise of the business handlers on the specific field to be chosen is also important and will go to a greater extent in influencing the choice of the activity. One might be possessing special skills like tyre retreating that he/she would wish to put into practice and hence his/her choice will have been re-enforced by this knowledge.

It is important to set realistic an achievable goals and objectives. While it is important for business to channel its efforts towards profit maximization, the means to achieve these needs to be clear and defined. A grocery store would be aiming to ensuring that its customer’s base is increased at a rate of more than 10% per month. It might have a goal of emerging as the favorite “mom and pop” shopping facility in the neighborhood by encompassing good and efficient business practice and hoping to introduce additional facilities and services not priorly existing so as to establish itself in the market. With the right goals and proper planning to back them up, any business can excel in America. America has been hailed over time as a land of opportunities.

People of all races, tribes’ gender and religion come to this land to pursue the American dream. However this is not the land of opportunities only. It is full of challenges that ensure to a greater extent that only the best pulls through. Key business knowledge is essential to guarantee a success. This knowledge must be combined with other vital elements. A business to survive and establish itself in the market must have established the proper decorum befitting its nature of activities. The key idea behind business etiquette is in knowing how well to treat the stakeholders in the trade. There would range from the suppliers, creditors and most importantly the customers. They are the most important in the entity and their contribution will be vital in ensuring the success of the business.

Business knowledge equips one with the ability of how to manage these key entities, managing them in a way that will maximize profit and minimize the costs incurred both economic and social. A grocery serving the immediate neighborhood requires a large and four share of effective customer management. This is because it will be patronized by a clientele that in most cases than not will be interacting with the sales persons daily because of the nature of the business. Hence it will require that customer service be maintained at peak levels or risk loosing out altogether.

Knowing the line of business activities to engage in one thing, deciding on the nature of products is another. Different types of business carry out different types of products either service oriented or tangible products. The type of business products traded in two entities but of the same line may differ. Products are shaped and packaged in line with the organizations and customer’s preferences. It is the nature of the market system that dictates the types of products to be rolled out. These are the key issues to consider when developing a business portfolio. An overall business plan has to be laid out properly.

This will dictate different interactions in the business. It will act as the basic guideline on the various aspect of the trade. It will define the scope of the business, stating clearly what the business can or cannot engage on depending on the prevailing circumstances. The idea has already been conceptualized and now the next step will be on how to implement it. Both conceptualization and implementation of the idea are important most ideas however done go beyond the formulation stage. Implementation requires a properly guided and laid out strategy backed by scarce resources such as human and financial wherewithal.

Skills in financial management are a vital resource, this is coupled by the ability to maintain and document proper financial records. Books of accounts are not only important to the debtors and tax department but rather for the management own use. They are meant to indicate the financial status of the business as well as laying out the various business obligations as they fall due. The performances of the entire business can be judged from merely taking a look at the financial statements. This will be an important tool, as it will inform the proprietor of the various aspects that comparatively are doing well and which areas held to be improved.

Budgeting will help the business entity to plan for its future financial obligations and income as well as how that cash is expected to be used towards achieving the business visions and goals. The next step is in implementing the business idea will revolve around the form of business whether to embrace a partnership or to break the ground alone. Each of the above forms of business have their strengths as well as weaknesses. A sole proprietorship is a one-man/woman business. There is a sole financer and a sole decision maker. Keeping this type of business would enable the individual to reap all the rewards (profits) alone. Decision making process is rather fast as one is his/her own boss and does not need to consult outside the box. The management flows on smoothly and is not met with major power struggles and squabbles.

However, this form of business is encountered with a myriad of disadvantages. Businesses strength is measured by the intensity of financial capability. It is rather hard for an individual to pool resources and be able to front a formidable force in terms of financial capital, this means that most often than not the sole proprietorship will be experiencing financial limitations. Being the sole decision maker also will have disadvantages of not combining human resources to emerge with the best alternative. Any business requires well thought out plans and strategies for it to emerge competitive. This maybe lacking in a sole proprietorship. A partnership too has its main weaknesses in that all the subsequent proceeds have to be shared among the members; decision-making process is rather slow, as all partners have to be in agreement on any expected strategy. The procedure of starting a partnership business is also more elaborate than in a sole proprietorship (www.residual-rewards.com).

Agreements and contracts have to be entered in stipulating how the business income is to be shared out, alongside other sensitive issues. It has though several major strengths. The first important advantage emanates from the fact that the business will be able to pool resources from the various angles strengthening its capital base. It will be in a position to undertake more risky and profitable ventures. The pooled resources too put it in a better position to solicit for funding due to the readily available security from the members assets. Decisions too, though slow are made after a thorough brainstorming and hence ensure only the fool proof strategy sails through. The diversified managerial skills of the members are also put into proper use and geared towards accomplishing the firm’s visions and goals. Most businesses prefer the partnership because of the above reasons and strengths in comparison to the sole proprietorship.

The conduct of business is dictated by the laid down ethics. They are the ones that broad line defines the moral issues and practices within a business entity. These may revolve around core values such as integrity, honesty and fairness. Although the major drive in a business is profit maximization, other key factors such as customer satisfaction and employees welfares have also to be put into consideration. A business entity does not exist to exploit the consumers but rather it is there to represent fair exchange of goods and services and in the process reap a reasonable amount of profit (www.management.org).

Honesty and integrity would also dictate the quality of the business products. This is where an entity avoids at all costs to malpractices or for example knowingly selling expired products. The welfare of the customers has to be safeguarded at all times so as to protect and consolidate the clientele. The ethics not only defines the relationship within an organization but it also ensures that a cordial relationship with the public is maintained in line with the company’s objectives and goals. The level of competition in the different aspects of business is an indicator that a business has to be on its feet to try and counter competition from the rival businesses. Effective strategies have to be put in place.

One key way that a business can maintain as competitive edge is though provision of super-quality products and well as being updated in any technological advances. Today’s modern world is seeing tremendous and revolutionary business practices being introduced. One of it is the e-commerce advances in e-commerce is likely to provide a business with a competitive edge unrivalled by no other. This system is revolutionizing trade and business transactions at a phenomenal level. Through e selling, e buying, advertising and e marketing. With such advanced tools being at play in the business field, the players have limited options but to go with the trend and take up the novel initiatives and practices wholeheartedly or risk going under altogether (www.thetimes100.co.uk).

In these days of free market systems where allocation of incomes and resources is dictated by supply and demand, only the best in the business game dare stay afloat. As Sandra M. puts it:

…. only through full and free competition can free markets, free entry into business and opportunities for the expression and growth of personal initiative and individual judgment be assured.(Small business policy and American creed, pg 44)

Small businesses are the major victims, as they have to compete with financially endowed big corporations. A simple grocery has to compete with a large multi chain store next door in the same neighborhood. There are economic as well as political factors that contribute to the unenviable situation of a small business. Big corporation have a lot of economic power due to their perceived economic benefits and contribution to the national income in terms of taxes. Through investing in lobbyists they are able to influence formulation of friendly policies at the expense of the small businesses (www.henrygeorgesf.org).

They have a higher access to credit many folds more than the small businesses next door. They are more attractive to financial institutions as they have strong security for the loans. They are also able to access the state of art technology in addition to the best human resource available in the market. Small businesses cannot afford these luxuries and act merely as training grounds for the big corporations. The future does not look promising either for small business with opinions and attitude having been () by economic theorists, and other critics to mean that large businesses are more effective than small ones.

These are the realities that businesses have to contend with in their day-to-day activities, they are faced with a mountain of a task to ensure that they stay afloat and claim their fair share of market. By combining the marketing tools within their reach they can in one-way or another, they possess a cost effectiveness per space aspect that the big corporations lack in themselves. The continued onslaughts by these corporations have to be fought if the small businesses have to survive. Trends in the market field spell doom to the small business. More and more big corporations one taking up the small space priory patronized by the small businesses.

One of the ways that this competitive edge by businesses can be maintained is through proper customer care and management. The biggest challenge to all businesses both small and big is to find a way to maintain their customer base and level. One of the key ingredients to maintaining the existing clientele is through provision of quality services. Customer psychology studies indicate that most people are critical of the quality services that they receive in business premises. Some will be willing to forego advance to buy at a cheaper price and go quality service (www.managementhelp.org).

Customer loyalty more or less indicates that a certain group of individuals have identified with a particular business and have made it their practice to be making their purchases form those particular premises. To maintain customer loyalty is a big task. It requires good strategies and an efficient customer relation’s team. Royce K. advises:

…loyalty can be regained with good produce, good service and a lot of one to one attention to customers(The Washington times)

Customers are also known to value thoroughness and speed. A business organization has to invest heavily to reduce transactional time, this is the amount of spent form the time a customer has placed an order and to the time it is delivered.

Many people would prefer business organizations that speedily act to meet their needs rather than those that take eternity to serve them. The price of the offered products too have to be put in check, with the above being in place, and the level of competition being high, caution was to be put in place to ensure reasonable prices are put for the available products. High prices even with effective customer service system can drive customers away. The business entity has to put a balance between profit maximizations and customer’s considerations. It should not aim to maximize its profits at the expense of the customer as in the end it might find itself with no customers to serve.

No matter the change in time and context, honesty and integrity remain the most dynamic business principles that have an ability to propel any business to greater heights of professionalism. Trends today are in disfavor of these the key principles. Business organizations are continuously compromising these fundamental doctrines and philosophies in pursuit of profit maximization, throwing all morality to the window and opting for quick bucks.

The major scandals emerging in the big corporations are an attestation to this. The most notorious aspect of business practice is where corporations have been known to manipulate their financed statements to reflect incorrect share earnings especially in cases of mergers and take over. This results to extra-ordinary and skyrocketing share prices when these stocks hit the market eventually. Some business also engages in unfair business practices especially when they have taken and consolidated a large proportion of market share. These unfair practices are at the expense of small and upcoming businesses. Some businesses organizations have been known to enter into unscrupulous and corrupt dealings to ensure that they are awarded tenders and contracts.

This is mostly evidenced in the developing world. Big corporations have been known to bribe of corrupt officials in their bid to win big tenders and contracts especially in Africa where procurement procedures have not been harmonized to ensure fair play and also to meet international standards. Lobbying is another by practice that has been found to be unfair to small business. The intensity of these companies financial endowment makes them afford the luxuries of trying to woo contracts. Big corporations finance politicians in America so that they can secure big contracts especially in defense department and other government sectors. Small business cannot afford this and have to contend with the effective ways of coping with constraints in the market.

As times change, so do business practice. The act of trade has undergone major transformations over the years from the days of barter trade to today’s world of e-commerce. Business organizations have also had to undergo these adjustments to be in line with the changing trends. Culture is one factor that is known to affect businesses. Different variations of culture require equally varied approaches in terms of business strategies. Culture has an impact of different aspects of business ranging from within the organization itself and the range of products produced. Most importantly it is able to shape consumers tastes and preferences to these products.

The dynamics of consumer’s tastes are what impacts on business policies regarding the market. Any entity that fails to change with the moving trend risks being surpassed by events. One way that a business can cope with today’s modern trend, and dynamic culture is investing more on appropriate technology. Today’s businesses are conducted over the Internet. To cope with these trend organizations need to invest in tools such as websites and retaining their staffs to cope with these changes. The issue of business cards and social networking as a key to business expansion.

To compete with big corporations, small businesses have to take up diversified measures too to cope with the diversities in the business culture and environment. Business social networking and lobbying can be a great idea towards expanding their market, coupled with modern tools such as e-marketing. A diversified nation like America presents each day with renewed opportunities to cope with the ever-rising dynamites in the market. The free flow of information ensures that opportunities are exploited as they arise. Businesses have to be equipped with the right professional expertise and know how to cope with these diversifications, dynamisms as well as the rising opportunities.

One of the forms of business that is threatened by extinction as new big corporation viciously attack the market are the traditional and everyone’s favorites “mom and pop” stores. As Royce k says:

..big chains arrive like new kids on the block and many small shop owner are having a tough time competing(The Washington times)

This phenomenon is not only in the U.S only but also evidence across the globe. The big chains and banks are not only consuming the market but even the facilities. One the big business set camp in the neighborhood; the rent flares up and the small business are thrown out because they can’t put up with the high prices. At stake, thoughts are thousands of livelihoods that totally depend on these stores for their living. In the end the () that characterized the neighborhood with the cost as national retail storer and big banks more in.

Many have expressed concern and opposition to the growing invasion of the neighborhood. Wal Mart has of late been facing hostile reception whenever it tries putting up businesses. New York City Council has been contemplating lowering taxes for the small businesses to try and level the playing field. This will revive enterpreneurism. It will also help maintain a charming and exciting environment hat we have all been used to.

Conclusion

The neighborhood has been invaded by a formidable onslaught of big corporations. The mom and pop stores, neighborhood banks, drug strives, and gas stations are loosing out in this big fight. But what makes these big businesses thrive so well a shoulder above the small business. They have quick access to financial facilities, economies of scale are on their side, and they have access to state of the art technology and a professional marketing and advertising team small business file in comparison.

Starting any business requires proper arrangement of the tasks to be achieved and setting accomplishable goals. An individual should be equipped with the appropriate business knowledge to help him/her maneuver through the obstacles in business, financial planning and management skills. The decision on how to go into the business has also to be made, either in partnership and pool resources or sole proprietorship and enjoy all the profits alone. Every business organization too has to have a business ethics defining how to conduct the business. Competition has also to be countered through effective customer relations.

 WORKS CITED

Cliff Cobb. Big business eats the apple; small business gets the shaft. Quick silver.12/16/04http://www.henrygeorgesf.org/quicksilver/spring04/bigbusiness.html

Small Business Solutions. Sole proprietorship vs. partnership.12 September 2007<http://www.residual-rewards.com/business-types.html

Business Ethics. Managing Ethics in the Work Place and Social Responsibility. Free management Library, 2007. 12 September 2007 <http://www.managementhelp.org/ethics/ethics.htm

Marketing Basic –Basic. Customer Loyalty. Business town.com.2002.12 September 2007 <http://www.businesstown.com/marketing/customer.asp

Impact of e-Commerce on Business Activity. The Times 100<http://www.thetimes100.co.uk/theory/theory–the-impact-e-commerce-on-business-activity–171.php

McCarty, Michael. “Coping With Change – Yes There Are Options.” EzineArticles 21 August 2007. 12 September 2007 <http://ezinearticles.com/?Coping-With-Change—Yes-There-Are-Options&id=697562

Anglund, Sandra M. Small Business Policy and the American Creed. Westport, CT: Praeger Publishers, 2000. Questia. 12 Sept. 2007 <http://www.questia.com/PM.qst?a=o&d=27268354>.

“Loss of Independents; Mom-and-Pop Gas Stations Are Falling Victim to Big Oil Mergers.” Sarasota Herald Tribune 17 Nov. 2002: D1. Questia. 12 Sept. 2007 <http://www.questia.com/PM.qst?a=o&d=5007395427>.

Royce, Kate. “Big Chains Choke Mom ‘N’ Pops.” The Washington Times 18 June 2001: 8. Questia. 12 Sept. 2007 <http://www.questia.com/PM.qst?a=o&d=5001016085>.

Walter Scott Quotes, Brainy Quotes 12 Sept 2007 www.brainyquote.com/quotes/quotes/w/walterscot131277.html

Telephone and PC Banking

It is atoll enables customers via telephone calls to find out about their position, with their bankers merely dialing the telephone numbers given to them by the banks. In addition, the computers on the phone would require special codes given to the customers as a means of identification of authentic users before they can receive any information they requested. This is a service introduced into the banking balance because of computer telephone technology is being made available.

The technology banking has a universe of possible application limited only by the imagination. These areas include Account balance enquiry; Account statement printing; intra-Banks Account to Account Transfer; inter-banks Account to Account Transfer; Download Account Transaction, etc. (Devamohan, 2002).

Telephone and PC banking brings the bank to the door step of the customer, it does not require the customer to have his premises; interactive Voice Response becomes a regular feature of operations; Text-to-speech capability becomes reality; A uniformed messaging capability become permanent feature of the bank (Vassiliou, 2004)

E-banking challenges in Ethiopia

Banking in Ethiopia faces several challenges to fully adopt and adapt electronic banking operational applications and seize the opportunities presented by ICT applications in general. According to Mohammad MizanurRahman (2008) in Bangladesh, e-banking is now a global phenomenon. Apart from the developed countries, the developing countries are experiencing strong growth in e banking.

The government’s emphasis on setting up ICT park, raising allocation for developing ICT infrastructure, waiving taxes on computer peripherals and other measures including the automation program of banking sector and competition among the scheduled banks in improving customer services have accelerated the prospects of e-banking. In addition, as investigated by Alhaji Ibrahim H. (2009) using exploratory study, the following are among the critical challenges for the adoption of e banking in commercial banks.

• Low level of internet perception and poorly advanced telecommunication infrastructure: Lack of infrastructure for telecommunications, Internet and online payments impede smooth development and improvements in e-commerce in Ethiopia. Most rural areas of the country, where the majority of small and medium businesses are concentrated, have no Internet facilities and these are unable to participate in electronic payments activities.
• Lack of suitable legal and regulatory framework for e-payment: Ethiopian current laws do not accommodate electronic contracts and signatures. Ethiopia has not yet enacted legislation that deals with e-payment concerns including enforceability of the validity of electronic contracts, digital signatures and intellectual copyright and restrict the use of encryption technologies.

Inadequate banking system:

• Political instabilities in neighboring countries:
  Political and economic instabilities in all neighboring countries are threatening traits that do not provide a very conducive environment for e banking in Ethiopia. Political instabilities unavoidably disturb smooth operations of business and free flow of goods and services of the countries.
• High rates of illiteracy:
  Low literacy rate is a serious weakness for the adoption of E-Banking in Ethiopia as it hampers the accessibility of banking services. For citizens to fully enjoy the benefits of E-Banking, they should not only know how to read and write but also possess basic ICT literacy.
• High cost of Internet:
  The cost of Internet access relative to per capita income is a critical factor. Compared to the developed countries, there are higher costs of entry into the e-commerce market in Ethiopia. These include high start-up investment costs, high costs of computers and telecommunication and licensing requirements
• Absence of financial networks that links different banks (Banks are not yet automated):
  Most of the banking-transactions currently taking place use credit and debit cards supplied by Visa and MasterCard. For conducting e banking, the use of credit or debit cards is mandatory thus requiring the need for specialized systems, which are not currently available.
• Frequent power interruption:
  Lack of reliable power supply is a key challenge for smoothly running e-banking in Ethiopia.
• Resistance to changes in technology among customers and staff due to:

1. Lack of awareness on the benefits of new technologies,
2. Lack of trained personnel in key organizations,
3. Tendency to be content with the existing structures,
4. People may be resistant to new payment mechanisms

• Cyber security issues: Cyber security is a global challenge that requires global and multi-dimensional response with respect to policy, socio-economic, legal and technological aspects. E-banking applications represent a security challenge as they highly depend on critical ICT systems that create vulnerabilities in financial institutions, businesses and potentially harm banking customers.

It is imperative for banks to understand and address security concerns in order to leverage the potentials of ICTs in delivering E-banking applications. (i.e. the use of ICTs by individuals to commit fraud and other crimes against banking transactions).

Features And Benefits Of E-Payments

All electronic payment methods share a number of common features and characteristics. These are: independence, Interoperability and portability, ease of use, and transaction fees, security, anonymity, divisibility. Independence refers to the ability of e-commerce methods to operate without installing specialized software.

Interoperability and portability refers to the ability of forms of e-commerce to interlink with other enterprise applications and systems. Security is an important consideration that encompasses the safety of the transfer and the chance of the transfer being intercepted. According to C.S.V Murthy, (2004), electronic payment gives a number of benefits to the issuing banks and customers of the bank including:

• Dramatically reduce printing, mailing, and financial handling costs associated with processing transaction.
• Enhance payment security by minimizing theft or loss.
• Prevent fraud through automated controls
• Increase customer satisfaction and enhance service to constituents.
• Ensure continuity of service to cardholders in emergency or disaster situations
• Improve operational efficiency and profitability of the issuing banks

Importance of E-Banking

Understanding e-banking service is important for several stakeholders, since it benefits them to derive advantages from it. Many banks and other financial institutions have already implemented or are planning to implement e banking because of the numerous potential benefits associated with it. Some of these major benefits according to (Shah & Clarke (1997) are briefly described below.
Benefits from the Customers’ side

The main advantages of e banking for corporate customers as per are as follows:

1. Reduced costs in accessing and using the banking services.
2. Increased comfort and timesaving — transactions can make 24 hours a day, without requiring the physical interaction with the bank.
3. Quick and continuous access to information: Corporations will have easier access to information as, they can check on multiple accounts at the click of a button.
4. Better cash management: E-banking facilities speed up cash cycle and increases efficiency of business processes as large variety of cash management instruments are available on internet site.

The main benefits from e-banking for private customers are as per BankAway (2001) are as follows :

a) Decrease costs: This is in terms of the price of available and using the various banking products and services.

b) Suitability: All the banking transactions and communications can be performed from the comfort of the home or office or from the place, a customer wants to gain.

c) Speed: The response of the medium is very fast; therefore, customers can actually wait till the last minute before concluding a fund transfer. Funds management: Customers can download their history of different financial records or accounts and do analysis on their own PC before affecting any transaction on the web. This will lead to better funds management.

Benefits from the Banks Point of View

Cost Reduction: The main economic and financial argument of electronic payment so far has been reduction of overhead costs of other channels such as branches, which require expensive and costly buildings and a staff presence. It also seems that the cost per transaction of e banking often falls more rapidly than that of traditional banks once a critical mass of clients is achieved.

The consensus is that fixed costs of e banking are much greater than variable costs, so the larger the customer base of a bank, the lower the cost per transaction would be. Whilst this implies that cost per transaction for smaller banks would in most cases be greater than that of larger banks, even in small banks it is seen as likely that the cost per transaction will be below that of other banking channels.

Attracting High Value Customers, E-Banking often attracts high profit clients and business with higher than average income and education levels, which helps to increase the size of income streams. For a retail bank, e-banking customers are therefore of particular interest, and such customers are likely to have a higher demand for banking products. Most of them are using online channels regularly for a variety of purposes, and for some there is no need for regular personal contacts with the bank’s branch network, which is an expensive channel for banks to run.

Increased Revenues; Increased revenues or incomes as a result of offering e-channels are often reported, because of possible rising in the number of clients, preservation of existing customers, and cross marketing opportunities. Whether these revenues are enough for reasonable return on investment (ROI) from these channels is an ongoing debate.

It has also allowed banks to diversify their value creation activities. E banking has also resulted in increased credit card lending, as it is a sort of transactional loan that is most easily deliverable over the internet. Electronic bill payment is also on rapid rise (Young, 2007) which suggests that electronic bill payment and other related capabilities of e-banking have a real impact on retail banking practices and rapidly expanded revenue stream

Benefits to General Economy

Electronic Banking as already stated has greatly serviced both the public and the banking industry.

Besides many tangible benefits in the form of discount of cost, reduced delivery time, better efficiency, reduced wastage, banking electronically controlled and thoroughly monitored environment and discourage many illegal and illegitimate practices associated with banking industry like money laundering, frauds and embezzlements.

As e- banking deliver opportunity to banking sector to enlarge their customer base, a consequence to increase the volume of credit creation which results in better economic condition. Besides, E-banking has also helped in documentation of the economic activity of the masses (Mahdi Salehi, 2004)

Emperical Evidence Of The Study

In Ethiopia and beyond, some researches was conduct on the challenges of electronic payment system. The results of those researches created doubt in the minds of different researchers on the challenges of electronic payment system. Some researchers are of the opinion that the power failure and management attitude are the challenges of electronic payment system. To others, illiteracy, political instability and user acceptability

Different researchers in different parts of the world conducted different related studies; however, there are limited numbers of studies conducted in Ethiopia on the adoption of technological innovation. Specifically, (Gardachew2010) conducted research on the opportunities and challenges of E-banking in Ethiopia.

The aim of his study is focus on analyzing the status of electronic banking in Ethiopia and investigates the main challenges and opportunities of implementing E-banking system. The author conducted a survey on the existing operating styles of banks and identifies some challenges of using E-banking system, such as, lack of suitable legal and regulatory frame works for E-commerce and E- payments, political instability in neighboring countries, high rates of illiteracy and absence of financial networks that links different banks.

And conducted research on the opportunities and challenges of E-banking in Ethiopia in addition, found that lack of suitable legal and regulatory frame works for E-commerce and E- payments, political instability in neighboring countries, high rates of illiteracy and absence of financial networks that links different banks are the major challenges. The research output showed Opportunities offered by ICT through e-learning programs and Commitment of the governments on development of ICT infrastructures is considered as drivers of using Ecommerce and E-payment systems.

Nwankwo (2013) studied the problems and prospect of electronic payment in cashless economy of Nigeria and found that electronic payment system has great implication on cashless economy of Nigerian but it will lead to significant decrease in deposit mobilization and credit extension by Nigerian deposit money banks.

(Wondwossen and Tsegai 2005) also studied on the challenges and opportunities of electronic payments in Ethiopia; their objective was studying of electronic payment practices in developing countries, Africa and Ethiopia.

The authors employs interview and on site observation to investigate challenges to electronic payment in Ethiopia and found that, the main obstacles to the development of electronic payments are, lack of customers trust in the initiatives, Unavailability of payment laws and regulations particularly for electronic payment, Lack of skilled manpower and Frequent power disturbance.

According to the author, an adequate legal structure and security framework could promote the use of electronic payments, which is contradicting with the finding of the previous study. In addition, they found that the main obstacles to the development of E-payments are lack of customers trust in the initiatives, lack of payment laws and controlling system especially for E-payment, lack of skilled work force and frequent power disruption.

Polatoglu and Ekin (2001) found that E-banking decreases operational costs and it increases customers satisfaction and retention and increase firms overall profile. Similarly Echekoba et al (2011) examined user acceptability and problems of electronic retail payment systems in Nigeria and found that cash usage is still very high in Nigeria despite efforts of CBN(Commercial bank of Nigeria) towards the adoption of electronic payment system.

The study identified challenges such as inadequate power supply, shortage of critical technological infrastructures, lack of socio-cultural support and absence of regulatory framework that are required to operate seamless and effective electronic payment system

Conceptual Framework

To attain the research objective and assess the research, the study will use the Theoretical framework developed by Davis et al. modified with some modifications by consideration of Tornatzky and Fleischer (1990).

Theoretical framework of Technology organization-environment (TOE).The research here below suggested that perceived usefulness, perceived ease of use, perceived risk, organizational factors and environmental factors have influence n adoption of electronic banking service in commercial bank of Ethiopia.

In order for Asda to achieve their aims and objectives successfully, it is vital that the staff co-operate and communicate effectively between each other and with the customers. To achieve the aims and objectives stated in E2, Asda uses various types of communication methods such as the intranet, internal telephone extensions, e-mails, written messages and weekly/daily meetings in order to communicate with each other internally. Furthermore, Asda uses the post, telephones, faxes, video-conferencing and e-mailing for external communications with individuals such as suppliers and customers.

The use of ICT at Asda makes it possible for functional areas to share the same information, and to work collaboratively using this pool of information, and information creating-creating and handling capacity. For example client databases can be used for accounting purposes (e. g. handling and processing customer accounts), marketing purposes, i. e. researching the needs of customers or even administrative purposes such as handling the paperwork related to customers etc. Information sharing has helped Asda brutally improve the performance of its business.

Information sharing has not only made it quicker to process data transactions i. e. credit card details etc but also allowed different departments to view information processed by other departments relevant to them. Without the use of data sharing a decrease in revenue would occur rapidly as the business would not be up to date with modern technology like its rivals. Furthermore it would slow the process of the business management as all the data would have to be processed manually by each department rather than one department typing it and sending it to another. Asda uses several methods of ICT both internally and externally. In terms of Internal methods the organisation uses the local company intranet.

This allows different departments to view notices or special offers etc placed by the ICT department on the intranet. Furthermore the company is able to share data within different departments via networks. All the computers at Asda are linked via a LAN (local area network). This allows different departments within the organisation to view and exchange data which is relevant to them. This is also an advantage for Asda and has a vital impact on the company as all the data does not have to be entered continuously on computers within the different departments at Asda but rather can be sent from one department to another.

This is to say that information processing and data sharing is made a lot faster. Networking also allows managers with more information on which to base their decisions. One of the crucial methods of ICT used by all managers at Asda is management information system. This is a software which has a sentimental impact on the business. MIS allows managers to view trends, areas of concerns and status of employees etc. MIS helps improve the management style of the business as it helps view and improve areas of concern. This is also a method for Asda as to measuring its success. Asda also uses several forms of external communication.

Asda also uses e-commerce as it also sells goods and services on the internet. E-commerce helps the business increase revenue as it simply means selling goods and services over the world wide web. E-commerce allows people to shop at Asda from the very comfort of their own home. Furthermore e-mails are sent by many departments within the organisation everyday to suppliers and customers etc. E-mails allow the company to send mail between terminals through computer linked via a local and wide area network. This has an important impact on the business as it speeds up the processing of data.

However e-mails can also sometimes have a negative impact on Asda, as not all e-mails including important e-mails are delivered on time. Furthermore videoconferencing is used regularly at meetings, in order to keep links with Asda firms worldwide. Video conferencing does not only allow a clearer view of what the person at the receiving end is trying to say but also provides a detailed analysis of what is going on. Asda also uses client/server networks. This involves the use of one, more powerful computer (the server) which is responsible for printing, the maintenance of files and any other peripherals connected to the network.

The less powerful computers connected to the server are called clients. This is an advantage for Asda as each of the computer terminals can access all the network facilities without losing any of its own processing power. Al the data at Asda is backed up at the end of the day by the ICT department using a backup disk. Therefore in terms of security if there is a system crash or the business is in threat of hackers, there is no fear of data being lost as it is all backed up. Asda will also uses passwords and anti virus programs such as firewall in order to prevent unauthorised individuals including hackers from accessing the company’s system.

In this day and age, travelling abroad does not present any restrictions in maintaining effective daily communications between executives, management and staff, no matter where in the world one may be. Facilities such as video-conferencing and e-mailing have ensured that the difference in time and continents does not mean operations come to a standstill for days at a time until senior management come back from their international destination. Communication methods using ICT within the Asda organisation Communication is very important in any business.

However Asda believe that communication does not just happen, it needs to be planned, worked at and always improved upon. This is why Asda spend a lot of time and effort ensuring that everyone knows what is going on inside the company. They do this by using channels such as ‘The Daily Huddle’. This is when all the teams across all the branches get together everyday and discuss important issues such as results, targets or individual work plans. If anyone needs any help they ask for it here and share their workload out.

Later I will state the different internal and external communication methods at Asda and say how the different functional areas use these communication methods and also how they communicate between each other. In order for Asda to meet their aims and objectives it is vital that the four functional areas, stated in part one of this report, communicate between themselves, suppliers and customers using internal and external communication methods. The table below shows when different departments may use different internal or external communication methods between themselves, other companies, customers and banks etc.

The packaging information may need to be altered because of legislation that the government have implemented and that Asda have to abide by, or there maybe changes in the nutritional concepts or advances in cooking or food preservations method. An example of when Asda may use quality assurance to add value to their products is when a product may have its packaging information changed to inform the consumers that it is acceptable to cook or use this product in the microwave. Asda then take the product into their own laboratory.

Then they will place fibre optic probes into the product to check the temperature whilst cooking, in order to make sure that the product reaches high enough temperature for it to be used safely. Quality control tests are conducted on all existing and new products that have been produced by Asda (their own brand products). These tests are conducted in consumer advice centres, Asda’s head office and in Asda’s own laboratory. These include tests on food safety. The consumer advice centres test current and new products that have been produced by Asda.

The consumer panel consists of participants who meet the recruitment procedure (heavy users of that product) and who shop at Asda. If these procedures are met then the participants are selected. In the consumer advice centres researches on behalf of Asda test for customer acceptability. After the participants have tested the product or service they will giver their opinion and will asked what they liked and disliked about the product. Then the researchers will ask how Asda could improve the product. Participants will test products, which have been produced by Asda and maybe one or some by their competitor.

The participants will not know which product is Asda’s and which one is the competitor. The consumer service officer will then ask which product the participants liked and why. Then the consumer service officer will carry out a more technical evaluation of a product or a service. These officers will be specially trained and use technical descriptions. These officers will then evaluate the product and send their results to the head office. Data from the sensory analysis, questionnaires and participants opinions have been collected and sent to the head office.

These will be marked and statistical data will be used to determine whether the product has passed or failed. If the product has failed then the product will be altered according to the participant’s opinions or responses will be retested and will only be sold when or if the product has passed. This process will add value to its product because Asda will take into consideration of want then customer wants to purchase. Quality assurance is implemented at all levels of Asda. All employees are encouraged to give the customer the best shopping experience terms of products and services.

Asda set standards for quality assurance. This is called strengths, weakness, opportunities and threats. (SWOT). SWOT allows Asda to check the quality of their products and services against their competitors. SWOT is used regularly to check the quality for certain products, in evaluating a new range of merchandising or a new process provided by the supplier. Asda also uses more methods to check the quality of their products. These are called Just in time (JIT): this is when Asda order products where they are needed. Products are then prepared and delivered to the store, which requires the products.

This will help save money, storage space required and the number of raw materials kept in stock. This will help to add value to Asda’s products because they will be fresh and the customer will the best value for the product because they will have longer to use the product before it reaches it ‘s sell by date. Machine utilisation control; this system is put in place within Asda before machinery is a vital part of Asda’s production process. So engineers within Asda take a look at machinery frequently to see if they are overloaded and to see if they are functioning smoothly and efficiently.

Stock control: this is where senior employees within the production department check how much raw materials they have in stock and if they need to order more to avoid running out or low on stocks. Quality control: this is where Asda use a machine that is linked to a computer. This machine will be linked to a computer and will test the products at every stage of the production. This will improve the quality of the final product and add value to the product because the product will be checked at every stage of the production. Food additives: Asda also uses food additives. Additives are chemicals, which are natural or specially made.

Additives help to preserve the food and make it last longer and help prevent food poisoning. It also improves taste and appearance. Additives have to be approved by the government and are given E-numbers. Asda label their foods with full additives name to avoid confusion. Here are a few steps which Asda take. Food technologists visit suppliers to make sure the company’s safety procedures and quality standards are being complied with. Quality assurance staff in Asda distribution depots inspects deliveries and have rejected food if it is not up to Asda’s safety and quality standard.

If it doesn’t meet the quality, appearance or temperature then it is sent back. Raw and cooked foods are stored and displayed separately to avoid cross contamination. Food equipment is colour coded so that separate equipment is used for handling raw and cooked foods. Staff check temperature constantly to see is the food is stored at the right temperature. Food labelling doesn’t only warn customers of sell by date and handling and storage information, but a (display until label) tells employees when to take the product off the shelf. It also informs customers of any product ingredients which may cause potential allergies.

Annuities are simply a series of payments or cash flow that occur periodically. Examples include lease and payment of rent. Annuities may be of two main types, ordinary annuity and annuity due. In an ordinary annuity cash flow (periodic payment) occurs at the end of every period, lets say month. Whereas, incase of annuity due, the payment for that particular month would be made at the starting of the period rather than the end. We can convert ordinary annuity into annuity due by multiplying the value of ordinary annuity by interest factor with power one, i. e. (1+i). Mathematically, PVad = PVoa(1+i)

2 How can you convert the future value of an ordinary annuity into the future value of an annuity due. The same rule/formula would apply to the future value of annuity as well. It may be converted from ordinary to due by using the following formula: FVad = FVoa(1+i) Assignment 5. 3 What is an amortization schedule? What are the items that are shown in each row?

An amortization schedule is a table that is used for calculating payments that are to be made in the form of installments. It indicates how much of the payment made contributed to principal, and interest. The items shown in the schedule includes Time of the payments, which may be years or months, depending on when the installments are made. The total payment made and its breakup into interest and principal. And last but not the least, the amount of balance that still remains after the payment is made.

The author gives three examples of sunk cost. Think of an example of sunk cost from your experience and describe it in a paragraph. I went to a picnic a couple of years back. We were supposed to go to a seaside. So we made all the necessary arrangements and left early morning. But upon reaching the shores, we realized that the tides were very high, and the sea was very rough, and so coast guards had temporarily closed the beach. The time and cost incurred during that trip was my sunk cost. Opportunity cost: This is the cost of the foregone alternative.

Such costs are included as incremental cash flows although no actual cash flow takes place. The reason is that there is a potential cash flow that could have taken place were it not for the decision to proceed with the project. Let us consider an example. I am a sports fan and I love watching football. But on the other hand, I also enjoy movies, and Tom Hanks is . Now at the same time, a particular football game is being televised live on a certain channel, and some other channel is playing one of my favorite Tom Hanks movies. Incase I watch one program, I would have to bear losing the other one. This is my opportunity cost.

Service Request SR-kf-013 for Kudler Fine Foods Introduction Kudler Fine Foods put forth a service request for the development of its Frequent Shopper Program. According to Apollo (2004), this program will track purchases of individuals to accumulate loyalty points for redemption by the customer. The loyalty points will be redeemable for gift items, specialty foods and other products or services.

The behavior patterns of customer purchases will directly help Kudler Fine Foods to produce sales events. The following paragraph will focus on the newly proposed electronic commerce website. After laying out the aspects of electronic commerce, the issue of legality will be brought forth. Once the legal aspects of the frequent shopper program are understood, ethics can be brought to the table. Security considerations will be proposed with a financial analysis to justify expenditures with the development of the frequent shopper program.

Finally, weigh the benefits and liabilities for the proposed frequent shopper program. Electronic Commerce Aspects Kudler Fine Foods has proposed creating an electronic sales database of all their products that can be linked to a website. In return this will allow customers to purchase any of his or her items online and have them shipped to his or her homes. With the creation of this electronic commerce, loyalty points can be added to online purchases as well as physical purchases. The loyalty points can also be redeemed for gift items and specialty foods on the website.

Before a customer can purchase products online they must register their name, e-mail address, mailing address and credit card information. After providing the proper information they will be prompted to create a user name and password for future use. When an account is set up for a customer, bonus loyalty points could be given as an incentive to register with Kudler Fine Foods. All customer information will be stored in a database at the La Jolla main office. A link on the website can be connected to partnerships and external companies for a further variety of rewards.

A search utility will be available to help customers find specific items quickly. Kudler Fine Foods electronic commerce website will have a shopping cart function which will take a customer to a check out page which allows the customer to use his or her loyalty points towards the total cost of their purchases. Legal The legal aspects of creating an electronic commerce website are minimal. The minor legalities needed for the website benefits Kudler Fine Foods because According to Apollo (2003), Anne Shousha is Kathy Kudler’s sister-in-law and her only legal counsel.

Anne Shousha is a successful tax attorney and only charges Kathy $100 an hour for formal meetings and nothing for telephone calls. Copyright laws and customer rights are the only parts of law that Anne Shousha will have to investigate to insure legal protection of Kudler Fine Foods. Ethics To the average person purchasing items online and having them delivered to his or her home is convenient. When businesses force customers to give up private information for statistical reasons so that they can buy from them online, their ethics are in question. Some companies require phone numbers even though they are not needed for any reason.

In today’s world, people expect to have to create an account with a company when he or she purchases items online. Not every person realizes that all his or her information gets traded with other companies. Kudler Fine Foods should take under consideration the privacy of their customers by limiting the information needed for purchases and never trading customer information with another company. Security Considerations Realizing that customers have to give up private information such as addresses and credit card numbers to make a purchase; Kudler Fine Foods must onsider high security in their budget. A good portion of the $5,000 in the budget section of Apollo (2003), Kudler Fine Foods has set aside for the design and development of their website should go towards an encrypted server. The encrypted server will secure a connection to their website so that a hacker cannot view a customer’s information. By encrypting the server a tiny lock icon will show up in the address bar of a customer’s browser which makes the customer feel safer when purchasing from Kudler Fine Foods website. Conclusion

Kudler Fine Foods has a well thought out plan to create an electronic commerce that customers can earn loyalty points and redeem them by purchasing items online. This website should definitely increase sales and profits for Kudler Fine Foods. They must pay close attention to the design of the website so that it will appeal to customers. Kudler Fine Foods must give attention to the legal and ethical aspects of taking customers information. Finally, they must also make sure that they take into consideration the gains and losses from giving loyalty points out to customers. References Apollo Group, Inc. 2004). Kudler Fine Foods. Marketing Overview. Retrieved September 13, 2009. BSA/310 –Business Systems. https://ecampus. phoenix. edu/secure/aapd/cist/vop/Business/Kudler/Sales/KudlerSM001. htm Apollo Group, Inc. (2003). Kudler Fine Foods. Budgets. Retrieved September 13, 2009. BSA/310 –Business Systems. https://ecampus. phoenix. edu/secure/aapd/cist/vop/Business/Kudler/Finance/KudlerBudget001. htm Apollo Group, Inc. (2003). Kudler Fine Foods. Legal Overview. Retrieved September 13, 2009. BSA/310 –Business Systems. https://ecampus. phoenix. edu/secure/aapd/cist/vop/Business/Kudler/Admin/KudlerAdmin002. htm

It was the year of 1969 when man has taken its first step toward the moon and “Doris and Don Fisher opened the first Gap store in US in San Francisco. ” The fast change in style between teenagers and adult lead to formation of company name called “GAP”. From Justa single store In 1969. our story Doris and Don Fisher opened the first Gap store in 1969. The reason was simple. Don couldnt find a pair of jeans that fit. They never expected to transform retail. But they did. Guided by humility, compassion and a strong desire to win, the Fishers grew their company thoughtfully. ustomers responded.

Today, Gap Inc. Is a leading International specialty retailer with six brands – Gap, Banana Republic, Old Navy, Piperlime, Athleta and INTERMIX – more than 3,500 stores and more than 137. 000 employees. We’re growing globally, and Just within the last few years, we opened our first stores In china and Italy. we’re expanding online shopping to customers, too. Today, customers in about 90 countries can buy our products. While many things have changed since 1969, the principles on which we were founded have stayed the same: creativity, delivering results, doing what’s right and lways thinking of our customers first.

Key Facts Founded: 1969, with a single store in San Francisco The original brand that brought American casual style to the world. Founded In 1909 In San Francisco, cap offers Iconic, yet modern clothing and accessories for adults, kids and babies. Gap gives customers the freedom to express their individual sense of style. Brand Includes Gap, GapKids, babyGap, GapMaternity and Gap30dy. Franchise stores: More than 350 stores in locations across Asia, Australia, Eastern Europe, Latin America, the Middle East and Africa Brands: cap Intermix Old Navvy Piperlime

Athleta Headquarters World HQ: San Francisco Bay Area Product Design: New York City, San Francisco, Los Angeles, London Store Management, distribution and product manufacturing: Worldwide. Stores Total: More than 3,500 stores worldwide Fun Facts The average cost of a pair of Jeans at Gap in 1969? About $7! Gap’s 1988 Individuals of Style campaign was the first time the company specifically hired celebrities as models. In 2004, Banana Republic was among the first sponsors of the Emmy-nominated sleeper hit “Project Runway. ” Gap has about 10 miles of storefront windows around the world. Old Navvy was named after a bar in Paris! Retired New York Times fashion editor Carrie Donovan was tapped to be the “Old Navvy Lady” in 1997 after Joking in one of her columns that she’d be great for TV spots for the brand. After a wildly successful pilot, Gap Factory Outlet was founded and opened its first store in August 1994. Glenn Murphy is our fourth CEO since our founding in 1969. (Bob Fisher served as interim CEO in 2007 before Glenn was hired. ) Celebrity stylist Rachel Zoe can be found on Piperlime. com, where she shares her picks on her favorite fashions from the site. ? Athleta, which has served women thletes since 1998, opened its first full-sized store in 2011. How They Do Business: From the start, Gap Inc. ‘s story wasn’t going to be limited to Just selling Jeans. Doris and Don Fisher made certain that integrity would become a hallmark of their business. As they continue to expand their presence internationally, They’re more aware than ever how their decisions affect the communities in which they do business. And their philosophy is simple: They seek to make a positive, lasting impact on the people and in the places where they operate.

They listen to their customers around the world, and share their expectations. For hey, that means looking deeper into their supply chain to ensure that they take a responsible path throughout the product lifecycle, from the source to their stores. Financial and Strategic Analysis Company Overview The Gap, Inc. (Gap) is a specialty apparel company. The product line of the company consists of casual apparel care products, accessories and fashion apparel. The company distributes its products through its retail stores, internet and catalog stores. The company is also operates wholesale and franchisee businesses.

Gap operates company owned stores in the US, Canada, France, Ireland, Italy, Japan and the I-JK. Financial Performance: The company reported revenues of (U. S. Dollars) USD14,549. OO million during the fiscal year ended January2012, a decrease of 0. 78% from 2011. The operatingprofit of the company was USD 1,438. 00 million duringthe fiscal year 2012, a decrease of 26. 93% from 2011. The net profit of the company was USD 833. 00 millionduring the fiscal year 2012, a decrease of 30. 81% from2011 Share Data THE GAP, INC. , Share Data pnce (USD) as on 01-NOV-2012 35. 5 EPS (USD) Book value per share (USD) 1. 56 5. 68 Shares Outstanding (in million) 533 Performance Chart SWOT Analysts THE GAP, INC. , SWOT Analysts Strengths Weaknesses Strong Liquidity Position Strong Product Portfolio and Brand Recognition Wide Geographic Presence Product Recall Dependency on Third Party Manufacturers Decreasing Comparable Store Sales Opportunities Threats Growing Apparel Market Increasing Online Presence Expansion into New Markets Competitive Environment Changing Consumer Behavior Decreasing Shopping Trips SWOT Analysis – Overview The Gap, Inc. Gap) is a specialty retailer of apparel, footwear and accessories. The I-JK, France, Ireland and Japan. The company also has online and catalog stores. The company’s broad product portfolio and brand recognition and wide geographic resence provide strong foundation for its future growth . However, intense competition and changing consumer behavior are the major areas of concern for the company. THE GAP, INC. – strengths Strength – Strong Liquidity Position The company’s liquidity position strengthen significantly during the fiscal year 2010.

The company recorded current ratio of 2. 19 at the fiscal year ended 2010, as compared to 1. 86 in 2009. Gap had significant increase in its cash and short term investments during the fiscal year 2010. It recorded cash and short term investments of USD 2573. 00 million in 2010, as compared to USD 1715. 0 million during the fiscal year ended 2009. Moreover the company reported a net change in cash of USD 633. 00 million in 2010, as compared to a negative net change in cash of USD 9 million at the fiscal year ended 2009.

This was principally due to increase in cash inflow from operating activities. The company’ cash flow from operating activities increased 36. 54% to USD 1928. 00 during the fiscal year ended 2010. Increasing cash and cash equivalent represents the companys ability to fund its business opportunities, working capital needs, meeting short term obligations and other capital requirements in the future. Strength – Strong Product Portfolio and Brand Recognition The company’s strong product portfolio and brand recognition ensures financial stability through a diversified customer base.

Gap through its retail and online stores engaged in providing a wide range of apparel and accessories for men, women and children. The company markets its products under the well known brands, namely Gap, Old Navvy, GapKids, babyGap, GapBody, Banana Republic, and Piperlime. Under the Gap brand, the company provides denim, khakis and T-shirts, fashion apparel, accessories and personal care products. The company also provides a wide collection f apparel and accessories under the brand names GapKids and babyGap.

Under the Old Navvy brand, the company offers apparel, shoes and accessories for both children and adults. The company also provides casual and tailored apparel, shoes and accessories for men and women under its Banana Republic brand. In addition, the company also offers its products through its websites. The company, through its multiple store banners, caters to a wide range of customers across the world. Strength – Wide Geographic Presence The company’s wide geographic presence insulates it from the risk of operating in a single economy. Gap operates 3,082 stores across North America, Europe and Asia.

In products across several geographies. The company’s franchised stores are located in Bahrain, Indonesia, Kuwait, Malaysia, the Philippines, the Oman, Qatar, The Kingdom of Saudi Arabia, Singapore, South Korea, Turkey, the United Arab Emirates, Greece, Romania, Bulgaria, Cyprus and Croatia. The company also operates its online stores through www. gap. com, www. bananarepublic. com, www. oldnavy. com, and www. piperlime. com websites. The company’s global presence enables it to build its brand image and maintain its strong position in the market.

THE GAP, INC. – Weaknesses Weakness – Product Recall The company’s various product recalls not only generate substantial negative publicity about its products and business, but also prevent commercialization of other future product candidates. During April 2010, the company recalled its babyGap Marrakesh and Gap Outlet baby one-piece swimsuits . This recall was mainly due to presence of a halter straps that were manufactured too short causing the plastic ring located at the center of the swimsuit to press against the child’s throat and obstruct the airway.

This poses a strangulation hazard to the child. Weakness – Dependency on Third Party Manufacturers The company is highly dependent on the vendors outside the US, which may adversely affect its ability to meet any urgent requirements. The company purchases private label merchandise from approximately 650 vendors and non-private label merchandise from approximately 350 vendors having facilities in approximately 60 countries. During the fiscal year 2010, approximately 98% of the merchandise was produced outside the US.

These outside vendors require to comply with certain vendor conducts and environmental, labor, health, and safety standards in domestic and international markets. Any noncompliance with the standards might delay the delivery of the goods and significantly affect the company’s reputation. Thus, the company’s high dependence on third party manufacturers may have an adverse affect on its business operations. Weakness – Decreasing Comparable Store Sales The comparable store sales have been decreasing over the past few years, which is adversely affecting the growth of the company.

The stores segment accounts for more than 90% of the company’s total revenue. During the fiscal year ended 2010, the company generated USD 13,079 million as compared to USD 13,496 million in the iscal year ending 2009, a decrease of 3. 18%. Over the past three years, the comparable store sales figures have been declining as demonstrated by a decrease of 9. 17% in the fiscal year 2009 and a decrease of 2. 19 % in the fiscal year 2008. As a result, Gap recorded a negative CAGR of 2. 97% during the period 2006-2010.

The decrease has been primarily due to a decline in net sales in all the brands due to the weakening retail environment and a shift of consumers from department stores to supermarkets and discount stores. THE GAP, INC. – opportunities The performance of the industry is forecasted to accelerate, with an anticipated CAGR rate of 2. 6% during 2006-2011. According to research, the US apparel retailing industry is expected to drive to a value of USD336. 7 billion by the end of 2011. Gap’s stores and direct segments provide branded apparel, footwear and accessories for men, women and children through their retail and online stores.

The company offering state of the art products and solutions through their wide distribution channel is likely to utilize opportunity of the growing apparel industry and thereby boost their top line growth. Opportunity – Increasing Online Presence With the rising trend of e-commerce business, there is huge potential for the ompany to increase its profitability through the direct-to-customer segment. In the fiscal year ending 2009, the direct-to-customer segment accounted for 7. 87% of the total revenue of the company and it increased by 8. 4% as compared to the sales at the end of the fiscal year 2010. The company can increase the contribution of this segment to the revenue by increasing its online presence. According to Forrester, online sales are expected to increase 13% to about USD 176. 9 billion in 2010. The growth is forecast to be 10%, 9% and 8% for 2011, 2012 and 2013, respectively. Moreover according to a report published by U. S. Census Bureau the non-store retail sales for the 10 month period from January to October 2010 increased by 12. 7% from the same period in 2009.

Such web-based store concept provides consumers the convenience of shopping from home, doing away with the time consuming Journey and saving on the transportation cost. Thus, web sales are expected to register substantial growth in the coming years as e-commerce continues to capture market share from physical stores. The company stands to benefit from the growth trend of e-retail, which is supported by rising internet penetration and increasing familiarity o online shopping. Opportunity – Expansion into New Markets The company has taken several initiatives to enter new geographies in recent financial years.

During November 2010, the company opened its firsh Gap store in Italy. This new store is located on Corso Vittorio Emanuele in Milan’s premier shopping district. It also entered into an agreement with Armin Systems Limited to bring Gap stores in Thailand. Moreover during November 2010, the company announced to open its first store in Latin America during the fiscal year 2011. The store will be located in Santiago, Chile. The company also had taken initiatives to launch its Gap, Banana Republic and Old Navvy online brands in Canada, and Gap and Banana Republic online in the UK and nine other European countries.

The company also has renewed interest for a possible foray into India’s specialty clothing market through possible venture with Reliance Retail. The company’s several initiatives to enter new markets may provide significant exposure to more diversified customer base and strengthen its brand image. THE GAP, INC. – Threats Gap operates in a highly competitive specialty apparel retail industry. It faces intense ompetition from local, national, and global department stores, specialty and discount store chains, independent retail stores, and online businesses, which are dealing with similar products.

The company also faces significant competition from the local players in European, Japanese, and Canadian markets. The company’s franchisees also faces competition in the respective markets. Increasing global competition in the apparel retailing market may significantly affect the company’s market share in the future financial years. Threat – Changing Consumer Behavior Owing to recession, consumers in the US are left with lesser disposable incomes. It is showing in their purchase attitude Consumers tend to reduce their discretionary shopping.

According to a consumer survey conducted in the US by Harris Interactive, more than half of adults (54%) say they would reduce discretionary spending during an economic recession and the majority (63%) of adults said they would not make a purchase if there was no deal attached. It clearly states that during an economic recession, consumers would cut budgets, yet will continue to shop when discounts are available. The scenario is a threat to specialty retailers like the company, which ell discretionary products. They will see a decreased footfalls and reduced revenues.

In order to attract customers, these retailers will have to spend more on coupons and discounts, which will reduce their margins. Threat – Decreasing Shopping Trips The business of Gap may significantly affected due to decreasing shopping trips of consumers in the US. The US operations contributed to 82. 1% of the total revenue of the company in the fiscal year ending 2010. According to a study by Nielsen, outlet shopping trips in the US has shown an average monthly decline of 4% from July 2008 o February 2010.

The company has already been recording a decline in comparable store sales over the past few years, which accounts for Change Factors: In the beginning Gap was sell only Levi’s products where they have to depend on that particular brand by and large. Later on when they realized depending too much on a particular product may harm the business in the future, they have changed there course of depending on a single particular product . Gradually they have came up with there own product name and different supplier in order to reduce risks. In 1983 Gap purchased Banana Republic